A Guide to Anti-Money Laundering for Crypto Firms

Updates to Canada’s AML/ATF Framework

Regulation Knowledge & Training

Money laundering is a billion-dollar business in Canada. Just shy of C$50 billion — C$46.7 billion, to be exact — was estimated to have been laundered through Canada’s economy in 2018, according to a report commissioned by the British Columbian government. The report also admits that their estimate is likely conservative. The seemingly widespread practice of laundering funds through Canada’s economy isn’t new either.

For the past 10-15 years, Canada has been working to overcome its reputation for weak legislation and controls with respect to financial crime. The Financial Action Task Force (FATF), for example, through its mutual evaluation process, found that while significant progress has been made since its first mutual evaluation of the country in 1997, weak areas persist. In particular, there was concern over the quality of financial intelligence provided to law enforcement, as well as the efficiency of the process through which it is produced, evaluated and used.

There are also significant gaps in Canada’s AML/ATF regime with respect to non-banking sectors, such as real estate, money transfer services and casinos. Indeed, Canada is particularly impacted by financial crime involving the use of trade-based money laundering, the real estate sector and casinos. The combined exploitation of the latter two has actually become synonymous with British Columbia (specifically, Vancouver) and is blamed for skyrocketing real estate prices throughout the province.

But there’s not just a significant economic cost to the country’s lack of effective AML controls in this area; there’s a real human cost as well. Human trafficking and the illegal sale of fentanyl and other drugs are among the most important predicate offenses underlying money laundering activities in Canada.

Although financial institutions are central to efforts to combat financial crime, two-thirds of reporting entities are in the real estate sector, and more than half of all suspicious transaction reports are filed by money services businesses, such as money transmitters and currency exchange bureaus. These sectors, therefore, merit additional attention when discussing how to combat money laundering and the financing of terrorism.

In response to the gaps identified in its AML/ATF regime, Canada passed amendments to its primary legislation addressing money laundering and terrorist financing, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its implementing regulations (PCMLTFR). Many of the more significant changes clarify and expand the scope of those who must comply with reporting regulations. In addition, customer due diligence requirements were updated.

These amendments were made final in July 2019, with a few changes going into effect immediately, some coming into effect in June 2020, and the majority coming into effect in June 2021. As their full impact will not be felt until 2021 and beyond, they will be the primary factor driving developments for the next several years.

That new legislation is the subject of our “Anti-Money Laundering in Canada 2020” Report, which you can read in full by clicking here.

Originally published March 5, 2020, updated May 5, 2022

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