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Canadian Anti-Money Laundering Regulations:

A guide to recent amendments to the PCMLTFA

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Background:

Regulators around the globe are increasingly vigilant about money laundering and terrorist financing. The growing influence in society of socially conscious investors and focus on Environmental Social Governance (ESG) principles further intensifies the scrutiny on illicit financial transactions.

Unfortunately, Canada, and more specifically our major financial centres like Vancouver, Toronto, and Montreal, are known to be havens for illicit financial activity. We even have our own name for laundering money, “snow washing.” Professional criminals have been exploiting Canada's weaknesses, using mainly real estate and casinos to clean money. In fact, it's estimated that money laundering accounted for $5.3 billion in real estate transactions in B.C. in 2018 alone. To learn more about where Canada falls short in its fight against money laundering, read our article here.

Anti-money laundering in Canada: Understanding Canada’s updated regulations and ...

In an effort to fight money laundering, Canada recently updated its regulations. Learn why Canada is a haven for illicit financial activity and how to remain compliant with the evolving regulatory landscape.

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Canada's amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) came into effect in June 2021. These amendments are designed to bolster Canada's anti-money laundering (AML) regime as well as align with leading international standards. Canadian businesses need to be vigilant and armed with AML solutions that comply with the updated Act. Even businesses with established AML controls should carefully review the new amendments to identify any gaps and ensure compliance.

The regulatory amendments to the PCMLTFA are extensive and complex. This guide provides a high-level overview of the new sectors impacted by the update, as well as of some of the more noteworthy changes to reporting and know your client (KYC) requirements. Reaching out to a BDO advisor is recommended to help you determine if your business is impacted and how to remain compliant.

What new sectors are impacted by the amendments?

Some industries and businesses that were not previously subject to the PCMLTFA regulations are now considered reporting entities (REs) and subject to the reporting rules. The new sectors and products impacted include:

  • Businesses involved with virtual currency (VC) transactions
  • Foreign money services businesses (MSBs)
  • Life insurance providers (that provide loan and mortgage products)
  • Prepaid credit card issuers

If it's determined that your business provides these services or products you will be subject to PCMLTFA requirements and will be required to:

  • Register with Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)
  • Develop and implement a compliance program
  • Establish a risk assessment, to assess risks with your clients and your business as a whole
  • Perform customer and client due diligence
  • Develop a system to track, review, and report transactions–in alignment with the specific reporting requirements for that sector or product.

Important amendments to the PCMLTFA:

To facilitate client identification, financial entity and securities dealer REs are now permitted to rely upon verification information gathered by other Canadian reporting entities and trustworthy foreign entities (with reasonable efforts to assess the credibility of the source).

All REs now have requirements to identify PEP and Heads of International Organizations (HIO). In addition to the existing PEP definition, the new amendments explicitly require PEP determinations for individuals who:
  • Make a payment of $100,000 or more to a prepaid payment product,
  • Request a transfer of $100,000 or more in virtual currency, or
  • Receive $100,000 or more in virtual currency.

REs are now required to continuously assess the accuracy of new information regarding beneficial ownership. Businesses are required to keep records, take reasonable measures to confirm the accuracy of any new information obtained, and maintain up-to-date information on an ongoing basis. REs are also required to obtain “most recent” proof of corporate existence.

Businesses that send or receive EFTs, or are intermediaries in a transaction, will be required to keep records of information about the transaction, including beneficiary information for outgoing EFTs.

All REs are required to keep records and file reports for amounts received of $10,000 or more in virtual currency in a single transaction or across multiple transactions within a span of 24-hours. Information such as the identity of the party, date, amount, type of VC, and exchange rate, is required for reporting purposes. In addition, REs must also take reasonable measures to determine whether the transaction was made on behalf of a third party and, if so, the identity of the third party.

Confirms that multiple transactions, totalling $10,000 or more, by an individual within a 24-hour period are considered a single transaction for reporting purposes.

How BDO can help

BDO can help your organization navigate complex regulatory requirements and avoid being an unwitting participant in money laundering schemes. BDO provides tailored AML solutions that suit your unique requirements, including:

Design and implementation of AML compliance programs and policies

  • AML risk assessments
  • Pre-inspection (readiness) reviews
  • Independent AML program testing
  • AML training & workshops
  • AML advisory
    • AML systems vendor selection assistance
    • AML program remediation
    • AML compliance reviews pursuant to M&A transactions
    • On-call AML advisory
  • Independent investigations
  • Litigation support (expert witness)

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