Canada Gazette, Part I, Volume 158, Number 27: Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Money Services Business Registration)

July 6, 2024

Statutory authority
Proceeds of Crime (Money Laundering) and Terrorist Financing Act

Sponsoring department
Department of Finance

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the regulations.)

Executive summary

Issues

To remain relevant and effective, Canada’s anti-money laundering and anti-terrorist financing (AML/ATF) Regime must continuously monitor and adapt to new risks and threats, which, if left unchecked, can undermine the safety of Canadians, integrity of the financial system, and national security. AML/ATF Regime partners require the appropriate authorities, resources, tools, and expertise to carry out their roles to prevent, detect, and disrupt money laundering and terrorist financing. This can include new measures to amend the suite of AML/ATF requirements applicable to reporting entities, bring new sectors within the scope of AML/ATF regulation, and improve the Financial Transactions and Reports Analysis Centre of Canada’s (FINTRAC’s) operations. Measures to enhance Canada’s AML/ATF legislative framework must also balance the need to address identified AML/ATF risks against the costs and regulatory burden imposed on businesses, which includes applying a risk-based approach wherever possible to maximize Regime effectiveness while minimizing burden.

To support a more effective federal AML/ATF Regime, the Department of Finance has identified the need to make regulatory amendments to implement measures announced in previous budgets and the 2023 Fall Economic Statement, strengthen the AML/ATF legislative and regulatory framework, address recommendations of the last Parliamentary Review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) in 2018, respond to criticisms of the Regime, such as the 2022 Commission of Inquiry into Money Laundering in British Columbia, known as the “Cullen Commission,” and implement international standards under the Financial Action Task Force (FATF), the international AML/ATF standard-setting body, which would situate Canada positively for its next mutual evaluation by the FATF in 2025–26.

Sanctioned property reporting

Prior to the invasion of Ukraine, sanctions were primarily imposed against individuals, entities, and countries with relatively small economic and financial links to Canada. The situation presented by Russia creates a need to have more robust systems in place to both utilize sanctions and address sanctions evasion, including through clear and effective reporting on sanctioned property in Canada. The sanctioned property regime was announced in Budget 2023 and the proposed regulations are needed to operationalize legislative amendments in the Budget Implementation Act, 2023, No. 1 and in Bill C-59, An Act to Implement Certain Provisions of the Fall Economic Statement Tabled in Parliament on November 21, 2023 and Certain Provisions of the Budget tabled in Parliament on March 28, 2023.

In addition to strengthening measures to combat sanctions evasion of Canada’s autonomous sanctions under the Special Economic Measures Act, the Department of Finance has identified the need to make regulatory amendments to respond to international obligations. Pursuant to recommendation 6 on financial sanctions related to terrorism and terrorist financing and recommendation 7 on targeted financial sanctions related to proliferation, the FATF requires that all member countries have legislation or regulations in place to ensure that financial institutions and certain professions are implementing United Nations (UN) mandated lists. Reporting on sanctioned property is an important element of implementing UN mandated sanctions lists, as well as implementing Canada’s other targeted sanctions provisions, as it ensures that reporting entities are implementing and reporting on sanctions effectively. Canada does not currently have a standardized process built into the AML/ATF framework for sanctioned property reporting, and the Department of Finance has assessed that regulatory amendments are needed to close this gap in Canada’s compliance with FATF obligations.

Money services business registration framework

Under the PCMLTFA, money services businesses (MSBs) are persons or entities that offer one or more of the following services: foreign exchange dealing, remitting, or transmitting funds, issuing or redeeming money orders or other similar instruments, dealing in virtual currency, or offering crowdfunding platform services. The Updated Assessment of Inherent Risks of Money Laundering and Terrorist Financing in Canada notes that the MSB sector is inherently susceptible to money laundering risks due to the array of products and services it offers, its integration with the financial system, and its wide geographic reach across Canada and internationally. This risk is heightened where a criminal actor is able to infiltrate the corporate structure of an MSB. Upon registration with FINTRAC, foreign MSBs are required to provide FINTRAC with a criminal record check of their chief executive officer, president, directors, and every person who controls directly or indirectly 20% or more of the entity or shares of the entity. Budget 2023 announced measures to further strengthen the MSB registration framework, including through criminal record checks, to prevent the abuse of MSBs for money laundering purposes. Regulations are needed before the legislative amendments to strengthen the MSB registration framework contained in the Budget Implementation Act, 2023, No. 1 can be brought into force.

White-label ATMs

White-label ATMs (WLATMs) are privately owned and operated cash machines, often located in retail locations. WLATMs connect to payment networks by linking with intermediary companies known as “acquirers.” Canada’s 2023 Updated Assessment of Inherent Risks of Money Laundering and Terrorist Financing in Canada found that WLATMs are highly vulnerable to money laundering and can be owned and operated directly by criminals or by legitimate businesses that may be criminally controlled. A 2008 RCMP Strategic Intelligence Assessment concluded that organized crime groups had infiltrated the WLATM industry and estimated that $315 million a year could be laundered through WLATMs, and potentially up to $1 billion a year. In 2008, the Department of Finance worked with representatives from the Canadian payment networks to develop a set of voluntary and self-enforced industry rules to address money laundering and terrorist financing risks posed by WLATMs. However, the RCMP continues to report that WLATMs are suspected of being associated with criminality. In 2018, the House of Commons Standing Committee on Finance (FINA) recommended WLATMs be subject to regulation under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). In 2022, the Commission of Inquiry into Money Laundering in British Columbia, known as the ’Cullen Commission’, also examined WLATMs, but ultimately recommended against provincial regulation, noting that WLATM regulation would be more appropriate at the federal level by subjecting them to the PCMLTFA. Despite these vulnerabilities and findings, the WLATM sector is currently not subject to formal obligations under the PCMLTFA.

The Government announced its intention to regulate WLATM acquirers under the PCMLTFA in the 2023 Fall Economic Statement. Legislative amendments to regulate WLATM acquirers as MSBs were then introduced in Bill C-59, An Act to Implement Certain Provisions of the Fall Economic Statement Tabled in Parliament on November 21, 2023 and Certain Provisions of the Budget tabled in Parliament on March 28, 2023. Regulations are required to clarify the registration information to be provided to FINTRAC, as well as requirements related to record keeping and identity verification to bring the regulatory framework for WLATMs acquirers into force.

Amendments to the regulations are also required to bring Canada into compliance with FATF standards. FATF Recommendation 1 requires countries to assess their money laundering and terrorist financing risks and to take actions to ensure risks are effectively mitigated. During the last FATF mutual evaluation of Canada in 2016, the FATF highlighted the lack of AML requirements for WLATMs as a gap in Canada’s AML/ATF Regime. The proposed regulatory Amendments are needed to address this gap.

Real estate (title insurers and unrepresented parties)

The Canadian real estate market has been identified as a sector highly vulnerable to money laundering, including by the Cullen Commission, the FATF, and in the 2023 Updated Assessment of Inherent Risks of Money Laundering and Terrorist Financing in Canada.

Title insurers are involved in most residential real estate transactions via insurance policies they offer that protect residential or commercial property owners and/or their lenders against losses related to the property’s title or ownership. Fraud, a well-known predicate crime to money laundering, is on the rise in the real estate sector, with increased reporting of criminals using title fraud to steal ownership of a home to benefit from its value. Successive reviews of Canada’s AML/ATF Regime, including the 2018 Parliamentary Review of the PCMLTFA, have supported title insurers being subject to formal obligations under the PCMLTFA.

Currently, real estate representatives are only required to take “reasonable measures” to identify unrepresented parties. Despite the reasonable measures approach, money laundering risks in the real estate sector continue to increase, as do reports relating to criminal’s use of the real estate sector for money laundering. Given these factors, the “reasonable measures” approach may need to be strengthened to better detect and deter money laundering in the real estate sector.

The proposals relating to title insurers and unrepresented parties were announced in the 2023 Fall Economic Statement. The Department of Finance assessed that only regulatory changes were needed to implement these commitments and thus no legislation to implement the real estate proposals announced in the 2023 Fall Economic Statement were included in Bill C-59, An Act to Implement Certain Provisions of the Fall Economic Statement Tabled in Parliament on November 21, 2023 and Certain Provisions of the Budget tabled in Parliament on March 28, 2023.

These proposals are required for Canada to comply with its international AML/ATF obligations. FATF Recommendation 22 requires all designated non-financial businesses and professions, including real estate professionals, to apply customer due diligence and record-keeping requirements. The FATF notes that real estate professionals include real estate agents as well as those professionals that may carry out or prepare transactions for clients involving the buying and selling of real estate, such as lawyers, real estate developers, title insurers, and other independent legal professionals and accountants.

Casino disbursement reporting

Casinos are a high-risk sector for money laundering and terrorist financing. For this reason, casinos are currently required to report to FINTRAC disbursements that are over $10,000. However, there is not currently a requirement for casinos to report on the ultimate recipient of a disbursement in the event the disbursement is collected by another party. The Department of Finance has identified the need to make regulatory amendments to address this gap in casino disbursement reporting.

FATF recommendations 24 and 25 require countries to assess the risk of the misuse of legal persons and arrangements for money laundering or terrorist financing and take measures to prevent their misuse. Canada’s last mutual evaluation in 2016 as well as FATF’s Follow-Up Report on Canada in 2021 found Canada to be partially compliant with Recommendation 24 and non-compliant with recommendation 25 (non-compliant being the lowest assessment result possible). Increasing transparency regarding the ultimate beneficiary of casino disbursements ensures that this sector is not being misused to obfuscate money laundering or terrorist financing and will support Canada’s adherence to FATF Recommendations 24 and 25.

Background

Money laundering is the process used to conceal or disguise the origin of proceeds of crime to make it appear as if it originated from legitimate sources, which benefits domestic and international criminals and organized crime groups. Terrorist financing is the collection and provision of funds from legitimate or illegitimate sources for terrorist activity. It supports and sustains the activities of domestic and international terrorists that can result in terrorist attacks in Canada or abroad, causing loss of life and destruction.

Money laundering and terrorist financing are serious threats to the safety and security of Canadians, as well as the integrity of Canada’s financial system. These crimes affect our society by supporting, rewarding, and perpetuating broader criminal and terrorist activities. The proceeds of crime being laundered in Canada are often generated at the direct expense of and harm to innocent Canadians, through crimes such as fraud, theft, drug trafficking, human trafficking for sexual exploitation, and online child sexual exploitation. Terrorist financing supports the activities of domestic and international terrorists, including deadly and destructive attacks in Canada or abroad.

Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime

Canada’s Anti-Money Laundering and Anti-Terrorist Financing (AML/ATF) Regime helps to protect the integrity of Canada’s financial system and the safety and security of Canadians by detecting, deterring, and disrupting money laundering and terrorist financing, as well as helping to disincentivize the predicate criminal offences that generate proceeds of crime.

Canada’s AML/ATF Regime consists of 13 federal departments and agencies, each with their respective mandates, led by the Department of Finance. The Regime is established by federal statutes, including the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and the Criminal Code.

The PCMLTFA, first implemented in 2000, is a key statute in Canada’s AML/ATF Regime. Its objectives are to facilitate the deterrence, detection, investigation and prosecution of money laundering and terrorism financing offences; counter organized crime by providing law enforcement officers with the information they need while putting appropriate privacy safeguards in place; assist in fulfilling Canada’s international commitments, including under the FATF, to the global fight against transnational financial crime; and to protect Canada’s financial system from misuse. To these ends, the PCMLTFA obligates businesses and professionals regulated by the Act (i.e. “reporting entities”) to develop and implement compliance programs to identify clients, monitor business relationships, keep records, and report certain types of financial transactions. It further establishes FINTRAC as Canada’s AML/ATF regulator and financial intelligence unit. Several regulations support the PCMLTFA.

In recent years, the government has made a series of statutory changes and investments to strengthen and modernize the AML/ATF legislative and regulatory framework, including announcements in Budget 2022, Budget 2023, and the 2023 Fall Economic Statement. This package of regulations would implement, streamline, and address gaps in policies that were already approved and announced in various vehicles, including previous budgets and the 2023 Fall Economic Statement. More specifically regulations are required to:

• implement the sanctioned property reporting regime announced in Budget 2023 and bring into force associated legislative amendments in the Budget Implementation Act, 2023, No. 1, and An Act to Implement Certain Provisions of the Fall Economic Statement Tabled in Parliament on November 21, 2023 and Certain Provisions of the Budget tabled in Parliament on March 28, 2023,
• implement measures to strengthen the MSB registration framework announced in Budget 2023 and bring into force associated legislative amendments in the Budget Implementation Act, 2023, No. 1;
• implement the regulatory regime for acquirers providing services for WLATMs that was announced in the 2023 Fall Economic Statement with coordinating amendments to bring into force associated legislative provisions in Bill C-59, An Act to Implement Certain Provisions of the Fall Economic Statement Tabled in Parliament on November 21, 2023 and Certain Provisions of the Budget tabled in Parliament on March 28, 2023;
• implement the regulatory regime for title insurers and the requirement for real estate representatives to identify unrepresented parties and third parties in real estate transactions, both of which were announced in the 2023 Fall Economic Statement; and
• close a gap in the casino disbursement reporting regime that was published in the Canada Gazette, Part II, Volume 136: Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PDF).

Objective

The objective of the proposed Amendments is to strengthen Canada’s AML/ATF framework, respond to criticisms of the Cullen Commission, address recommendations from the 2018 Parliamentary Review of the PCMLTFA, and help Canada maintain its current rating in the context of its mutual evaluation by FATF in 2025–26.

Description

Sanctioned property reporting

Proposed regulatory Amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transactions Reporting Regulations under the PCMLTFA would create a new sanctioned property report, which reporting entities will need to report to FINTRAC. Currently the regulations contain provisions that require reporting entities to submit a terrorist property report to FINTRAC when they are required to make a disclosure under the Criminal Code or the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism. The information that will be contained in the report will closely mirror information that was already being captured under the existing terrorist property reporting requirements (for example identifying and transactional information). The specific information that would be required in the new sanctioned property report would be described in an amended schedule under the proposed Amendments. The Amendments would also capture entities listed under the Special Economic Measures Act, the Justice for Victims of Corrupt Foreign Officials Act, and the United Nations Act.

MSB registration framework

Various regulations under the PCMLTFA would be amended to bring into force the strengthened MSB registration framework announced in Budget 2023. Under the PCMLTFA, both foreign and domestic MSBs must register with FINTRAC and renew that registration every two years. Foreign MSBs are already required to submit criminal record checks of their chief executive officer, president, directors, and every person who controls directly or indirectly 20% or more of the entity or shares of the entity in the context of their registration (and reregistration) every two years. The proposed regulatory Amendments would support the legislative framework announced in Budget 2023 to require domestic MSBs to similarly submit criminal record checks of their chief executive officer, president, directors, and every person who controls directly or indirectly 20% or more of the MSB or shares of the MSB to FINTRAC during registration (and reregistration) every two years.

The proposed regulatory Amendments would also require MSBs to obtain and review criminal record checks of their agents and to submit information related to these criminal record checks upon registration (and reregistration) every two years with FINTRAC. In addition, for agents of MSBs that are ‘entities’ (i.e. corporations), the chief executive officer, the president, the directors and any person who owns or controls, directly or indirectly, 20% or more of the entity or the shares of the entity, must also undertake a criminal record check and the MSB must submit information related to these checks to FINTRAC during registration (and reregistration) every two years. All information related to the criminal record checks must have been obtained from the relevant authority within the last six months (relative to the time of registration of reregistration), meaning that MSBs would need to conduct the obligatory criminal record checks in advance of their registration (and reregistration) every two years.

The proposed regulatory Amendments would specify five years as the retention period for associated record-keeping requirements (i.e. for how long MSBs must keep the criminal record checks of their agents on file). Through the submission of these criminal record checks and information related to criminal record checks, the MSB must ensure that the designated individuals do not trigger ineligibility requirements related to past criminal behaviours set out in the PCMLTFA. The Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations would also be amended to prescribe associated penalties.

White-label ATMs (WLATMs)

The proposed Amendments would amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations and the Proceeds of Crime (Money Laundering) and Terrorist Financing Registration Regulations to require acquirers offering cash withdrawal services for WLATMs to meet the following obligations:

• Register with FINTRAC and include information with respect to WLATMs serviced (e.g. information on the owner, lessor and operator of WLATMs; information on the owner of the cash that is loaded into WLATMs; information on the WLATM settlement accounts; information on the WLATM; as well as source and method used to transport cash loaded into a WLATM);
• “Know your client” (e.g. verify the identity of the owner, lessor and operator of WLATMs; owner of the cash that is loaded into WLATMs; and owner of WLATM settlement account);
• Keep records (e.g. information on the owner, lessor and operator of WLATMs; information on the owner of the cash that is loaded into WLATMs; information on the WLATM settlement accounts; information on the WLATM; as well as source and method used to transport cash loaded into a WLATM);
• Develop and maintain a compliance program;
• Report certain transactions (e.g. suspicious transactions) to FINTRAC; and
• Follow ministerial directives, such as requiring reporting entities to apply countermeasures to transactions, or to restrict reporting entities from entering into a financial transaction, coming from or going to designated foreign jurisdictions or entities.

Real estate (title insurers and unrepresented parties)

Proposed Amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations would make title insurers reporting entities under Canada’s AML/ATF Regime. Specifically, title insurers would be required to: develop an AML/ATF compliance program; meet identity verification and record-keeping requirements; submit required reporting to FINTRAC, including suspicious transaction reports and terrorist property reports; determine whether transactions involve politically exposed persons and heads of international organizations; and follow ministerial directives.

In addition, the proposed Amendments would strengthen obligations for real estate representatives to identify unrepresented parties and determine whether third parties are involved in these transactions, and keep the associated information record.

Casino disbursement reporting

The proposed Amendments would clarify that casinos must report on the beneficiary of casino disbursements of $10,000 or more. Currently, there is no requirement for casinos to report if the disbursement is received on behalf of a third party. The reporting would be under a new part in the existing casino disbursement reporting form.

Regulatory development

Consultation

Sanctioned property reporting

The proposed Amendments were informed by engagement sessions the Department of Finance undertook with Canada’s major banks during an outreach visit in May 2023, which focused on the implementation of Canada’s autonomous sanctions. The Amendments were also developed in consultation with FINTRAC, the Royal Canadian Mounted Police (RCMP), and the Canadian Security Intelligence Service. During consultations, Canadian banks expressed challenges regarding ambiguity in the informational reporting requirements for sanctioned property and inconsistencies in the approach to submitting reports on sanctioned property. This feedback informed the proposed amendments, which help to ensure clarity on informational requirements and a basis for more consistent reporting on sanctioned property.

MSB registration framework

The Department of Finance consulted specifically on the issue of further strengthening the MSB registration framework in its Consultation on Strengthening Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime, which was launched in summer 2023. Key stakeholders, including the Canadian MSB Association responded to this consultation indicating that they concur with the overall objective of deterring undesirable applicants from registering as domestic or foreign MSBs with FINTRAC as it would help to reduce the overall risk profile for the sector. In addition to this specific consultation on strengthening the MSB registration framework, the Department of Finance also regularly engages with the MSB sector on a variety of matters, typically through the Canadian MSB Association. The MSB sector is aware of proposed regulatory changes to bring the Budget 2023 legislative Amendments into force. The proposal has also been developed in consultation with FINTRAC.

White-label ATMs (WLATMs)

This proposal was developed in consultation with key AML/ATF Regime partners, including FINTRAC and the RCMP. In June 2023, the government launched a public Consultation on Strengthening Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime. The consultation posed a specific question regarding whether to expand the AML/ATF framework to WLATMs, and if so, what obligations should apply. The consultation received 129 submissions from a wide range of stakeholders. Most feedback received on WLATMs was supportive of expanding Canada’s AML/ATF framework to include the sector. Stakeholders from the WLATM sector, however, were generally opposed to expanding AML/ATF coverage of WLATMs, arguing that the industry already has robust internal requirements and procedures.

Following release of the 2023 Fall Economic Statement, which announced the government’s intention to broaden the PCMLTFA framework to apply to WLATM acquirers, the Department of Finance held bilateral and group engagement sessions with several members of the WLATM acquirer sector. These engagement sessions focused on introducing the sector to the AML/ATF Regime, the PCMLTFA, and its regulatory framework, followed by more detailed sessions providing an overview of potential AML/ATF requirements under consideration. This approach permitted the Department of Finance to refine its regulatory policy to ensure that it was responsive to the risks posed by the sector as well as responsive to the business practices of WLATM acquirers. As a result, the proposed regulatory Amendments would largely formalize existing practices of the industry, including as outlined in Interac’s internal Requirements for White Label ABM Cash Owners.

Real estate (title insurers and unrepresented parties)

The Department of Finance sought stakeholder views on potentially expanding AML/ATF coverage in the real estate sector through its 2023 public Consultation on Strengthening Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime. Most stakeholders that responded to the consultation supported expanding Canada’s AML/ATF framework to include title insurers and to strengthen obligations to identify unrepresented parties in real estate transactions. Title insurers and the Canadian Real Estate Association (CREA) opposed the proposals. The Department of Finance conducted three additional targeted consultations with title insurers (December 2023, then January and March 2024) and one targeted consultation with CREA (December 2023). FINTRAC was also consulted in the development of these two real estate proposals. The proposed regulatory Amendments take into consideration feedback from stakeholders on alignment with industry practices, such as the use of a third party for identity verification and flexibility on the types of records to keep.

Casino disbursement reporting

FINTRAC identified the need for the proposed regulatory Amendment as part of its ongoing review of its reporting forms, including Casino Disbursement Reports. FINTRAC maintains dedicated outreach and engagement with the casino sector on reporting obligations, which were used to raise awareness regarding the need to report on the final beneficiary of casino disbursements and the proposed updated casinos disbursement reporting form. Casino stakeholders did not raise concerns regarding the proposed changes to the reporting form and are being kept up to date of the changes through a dedicated Guidance page on FINTRAC’s website.

Modern treaty obligations and Indigenous engagement and consultation

An assessment of modern treaty implications did not identify any adverse impacts on potential or established Aboriginal or treaty rights, which are recognized and affirmed in section 35 of the Constitution Act, 1982.

Instrument choice

Sanctioned property reporting

In accordance with the PCMLTFA and its regulations, reporting entities are currently submitting terrorist property reports to FINTRAC. Given the existing terrorist property reporting regime, regulatory amendments to expand to a sanctioned property regime would be the simplest, lowest cost, and most effective means for Canada to enhance its use of this important information to combat sanctions evasion and help Canada meet its international obligations under the FATF. Therefore, other instruments were not considered.

The status quo was not considered a viable option since not acting would significantly weaken Canada’s sanctions regime, making it easier for actors to evade sanctions due to incomplete information on sanctioned property. In contrast, the proposed sanctioned property regulations would enhance Canada’s ability to receive and analyze information regarding immobilized sanctioned property. The proposed Amendments would also provide greater clarity to reporting entities regarding the type of information that needs to be reported, enhance understanding and better equip FINTRAC to identify and address sanctions evasion, and enhance Canada’s compliance with its international obligations under the FATF.

MSB registration framework

To address risks associated with the use of MSBs for money laundering and terrorist financing purposes, foreign MSBs are already required to submit criminal record checks to FINTRAC upon registration. To address risks that domestic MSBs could be used by criminals for illicit operations, the proposed Amendments would support extending the obligation to submit a criminal record check upon registration to domestic MSBs, as well as require domestic MSBs to obtain and verify criminal record checks for their agents. The regulatory approach will bring consistency to the AML/ATF regulation of MSBs and is well aligned with the need for supervision to ensure compliance. For these reasons, alternative instruments to regulation were not considered.

White-label ATMs (WLATMs)

The proposal seeks to address money laundering and terrorist financing risks associated with WLATMs. Legislative provisions are included in Bill C-59, An Act to Implement Certain Provisions of the Fall Economic Statement Tabled in Parliament on November 21, 2023 and Certain Provisions of the Budget tabled in Parliament on March 28, 2023, but regulations are required to implement and bring the legislation into force. Given the legislation, non-regulatory instruments were not considered.

Allowing the status quo to continue would compromise the AML/ATF Regime’s effectiveness, increase the likelihood of criminal activity, and compromise the integrity of Canada’s financial system. This has the potential to cause serious reputational harm to Canada’s financial sector and subject Canadian financial institutions to increased regulatory burden when dealing with foreign counterparts or when doing business overseas.

An alternate option could have been to regulate individual WLATMs for AML/ATF purposes similar to the approach in Quebec. The Quebec regime involves provincial licensing of all WLATMs, police checks, and requirements relating to customer identification, record-keeping, and reporting. While this approach can also be effective in addressing AML/ATF risks, the Department of Finance has determined that regulating acquirers that connect WLATMs to a payment network would also be an effective approach to address AML/ATF risks associated with WLATMs given the “gatekeeper” role they play in the sector and the risk that individual WLATMs may also be criminally controlled.

Internationally, addressing risks related to WLATMs is required for Canada to meet its international obligations under the FATF, and the FATF has identified the lack of AML requirements for the WLATM sector as a gap in Canada’s AML/ATF Regime. Given the risks associated with the status quo, and the additional complexity associated with regulating individual WLATMs, it was determined that the proposed approach of regulating acquirers would be the most appropriate instrument.

Real estate (title insurers and unrepresented parties)

The proposed Amendments would address money laundering and terrorist financing risks in the real estate sector.

Under the status quo, known AML/ATF risks in Canada’s real estate sector would remain, which could contribute to increased housing prices. In contrast, regulating title insurers would address money laundering and terrorist financing risks through the collection of information, which could be used by FINTRAC and disclosed to law enforcement officers to help detect and disrupt illicit activities in the real estate sector. Real estate representatives are already required to take reasonable measures to identify unrepresented parties; making this identification an obligation would further ensure agents follow up on suspicious behaviour when they cannot identify unrepresented parties in transactions, which could lead to more suspicious transaction reports to FINTRAC. The current AML/ATF requirements for real estate agents are established in regulations, meaning the existing requirements can only be amended by regulation. Therefore, other instruments were not considered.

In addition to addressing money laundering and terrorist financing risks in the real estate sector, this change would also strengthen Canada’s adherence to its international obligations under the FATF.

Casino disbursement reporting

Given the casino disbursement reporting regime is established by regulations, changes to close gaps and improve the regulations’ effectiveness would necessitate regulatory amendments. Failing to address gaps relating to the final beneficiary of disbursements would undermine the effectiveness of the casino disbursement reporting regime, increasing money laundering and terrorist financing risks in the casino sector. Finally, closing the gap will help Canada meet its international obligations under the FATF.

Regulatory analysis

Benefits and costs

The impacts of the proposed regulatory Amendments have been assessed in accordance with the Treasury Board Secretariat (TBS) Canadian Cost-Benefit Analysis Guide. Benefits and costs associated with the proposed Amendments are determined by comparing the baseline scenario against the regulatory scenario. The baseline scenario depicts what is likely to happen in the future if proposed amendments are not implemented. The regulatory scenario describes the changes that would occur due to the proposed Amendments.

The total present value (TPV) cost of the proposed regulatory Amendments is $16.6 million (or $2.4 million annualized) in 2021 dollars. Unless otherwise stated, all monetary values are expressed in 2021 dollars, discounted to 2024 using a discount rate of 7% over a 10-year period (2024 to 2033). The benefits of the proposed regulatory Amendments are described qualitatively due to the difficulty associated with quantifying the benefits of activities outside the formal and legal economy; primarily the quantification of the benefits to society of proceeds of crime that are not laundered nor used for terrorist financing.

A full cost-benefit report with more details on the methodology and assumptions employed is available upon request.

Baseline and regulatory scenarios

Sanctioned property reporting

If reporting entities maintain their current reporting obligations in a baseline scenario, there will not be any increase in regulatory costs. In the baseline scenario, FINTRAC does not receive sanctioned property reports, which restricts the amount of sanctions evasion related information it can collect, thereby affecting its ability to combat sanctions evasion. In the regulatory scenario, reporting entities would be required to fill out a new sanctioned property report (which expands on the existing terrorist property report) and submit the new sanctioned property reports to FINTRAC. Costs associated with this regulatory change are mitigated by the fact that the regulatory scenario represents an expansion and clarification of existing terrorist property reporting. All reporting entities (i.e. financial entities, MSBs, casinos, accountants, dealers in previous metals and stones, life insurers, real estate brokers or sales representatives and developers, securities dealers, and BC notaries) are required to submit terrorist property reports and all would be required to submit sanctioned property reports. However, due to the nature of the requirement (i.e. holding sanctioned property), most sanctioned property reports are expected to come from large financial entities (i.e. large banks and credit unions).

MSB registration framework

The baseline scenario is that domestic MSBs are not required to submit criminal record checks, nor any information related to the criminal record checks of their agents, during registration (and reregistration) as an MSB. As a result, domestic MSBs and their agents, may not have a valid criminal record check, a gap which exposes MSBs to money laundering and terrorist financing risks. The proposed Amendments would require MSBs to submit criminal record checks of their chief executive officer, president, directors, and every person who controls directly or indirectly 20% or more of the MSB or shares of the MSB, as well as information related to the criminal record checks of their agents, to FINTRAC upon registration (and reregistration) every two years. This would mitigate risks associated with MSBs and their agents using the MSB for money laundering or terrorist financing purposes by ensuring that none of the designated individuals nor agents have a criminal history that would trigger ineligibility requirements related to past criminal behaviours set out in the PCMLTFA. Under the regulatory scenario, MSBs would need to ensure that all information related to the criminal record checks must have been obtained from the relevant authority within the last six months (relative to the time of registration or reregistration), meaning that MSBs would need to conduct the obligatory criminal record checks in advance of their registration (and reregistration) every two years.

White-label ATMs (WLATMs)

Under the baseline scenario, WLATM acquirers would continue to be unsupervised for AML/ATF purposes at the federal level, which would maintain money laundering and terrorist financing risks posed by WLATMs. Under the regulatory scenario, acquirers offering cash withdrawal services for WLATMs would be required to meet general AML/ATF obligations (e.g. register with FINTRAC, develop a compliance program, apply customer due diligence measures, keep records, report suspicious transactions, and follow ministerial directives), as well as to provide to FINTRAC, in the context of the application for registration as an MSB, information with respect to WLATMs serviced (e.g. owner, lessor and operator of the WLATM; cash owner; settlement bank account information; location and model of WLATM; source of cash in WLATM; and method used to transport cash). Regulatory costs are mitigated by the fact that most of the proposed administrative and compliance requirements are already performed by WLATM acquirers as part of Interac’s internal operating procedures.

Real estate (title insurers and unrepresented parties)

Under the baseline scenario, there is no regulation of title insurers for AML/ATF purposes, which means money laundering and terrorist financing risks in the real estate sector, not effectively addressed through the AML/ATF regulation of real estate agents, brokers, sales representatives, and developers, would continue. Under the regulatory scenario, title insurers would be made reporting entities under the PCMLTFA and be subject to general AML/ATF obligations (e.g. develop a compliance program, apply customer due diligence measures, keep records, report suspicious transactions, and follow ministerial directives). The regulatory scenario would help address money laundering and terrorist financing risks in the real estate sector by requiring title insurers to report information to FINTRAC on title insurance and real estate-related transactions, which would be used by FINTRAC and disclosed to law enforcement to help detect and disrupt illicit activities in the real estate sector.

Under the baseline scenario, real estate representatives are required to take “reasonable measures” to identify unrepresented parties in a real estate transaction. Under the regulatory scenario, the “reasonable measures” approach would be replaced with an obligation, mandating real estate representatives to identify unrepresented parties and third parties in real estate transactions. This change would help identify suspicious behaviour when agents cannot identify unrepresented parties in transactions, which could lead to more suspicious transaction reports to FINTRAC. Based on this information, FINTRAC would be better equipped to identify potential money laundering and terrorist financing activities in the real estate sector and disclose that information and analysis to law enforcement officers.

Casino disbursement reporting

Under the baseline scenario, casinos are required to report on disbursements of over $10,000 but are not required to report on the ultimate beneficiary of such a disbursement. This situation undermines the intent of the casino disbursement reporting obligation, which seeks to include the true beneficiary of large casino disbursements for the purposes of detecting and deterring money laundering and terrorist financing risks. Under the regulatory scenario, casinos are required to report the ultimate beneficiary of a casino disbursement above $10,000 and specify if the disbursement is received on behalf of a third party.

Benefits

The benefits of the proposed Amendments while likely significant, are not monetized due to the lack of available or reliable data to accurately measure the changes to the reputation of Canada’s financial system and the reduction in risk that would result from the implementation of the proposed Amendments. In addition, quantification of these benefits would require significant information on both the degree to which these activities are currently occurring, which by their nature is clandestine, and how much the measures would be able to decrease money laundering and terrorist funding activities.

The proposed Amendments would strengthen Canada’s AML/ATF framework and improve its effectiveness by broadening the scope of reporting entities to include WLATM acquirers and title insurers, strengthening Canada’s sanctions regime, addressing AML/ATF risks in the MSB and real estate sectors, addressing gaps in casino disbursement reporting, and more closely aligning the Canadian AML/ATF framework with international standards.

Money laundering and terrorist activity financing have criminal and economic effects and contribute to facilitating and perpetuating criminal activity. Money laundering and terrorist financing harm the integrity and stability of the financial sector and the broader economy and threaten the quality of life of Canadians. Money laundering damages the financial institutions that are critical to economic growth (through internal corruption and reputational damage) and causes economic distortions by impairing legitimate private sector activities. For example, the Expert Panel on Money Laundering appointed by the government of British Columbia estimated that money laundering in BC’s real estate sector raised housing prices by approximately 5% in 2018. It also reduces productivity by diverting resources and encouraging crime and corruption and distorts the economy’s international trade and capital flows (through reputational damage and market distortions) to the detriment of long-term economic development. Finally, money laundering can also reduce tax revenue as it becomes more difficult for municipal, provincial, and federal governments to collect revenue from related transactions that frequently take place in the underground economy.

A strengthened AML/ATF framework helps to combat money laundering and terrorist activity financing threats while protecting Canadians, the integrity of markets and the global financial system, and increases the investment attractiveness and competitiveness of Canada. The proposed Amendments will support the security, stability, utility, and efficiency of the financial sector framework by strengthening the AML/ATF framework to combat financial crime. All Canadians will benefit from a stable, efficient, and competitive financial sector that services and drives economic growth.

The proposed Amendments regarding sanctioned property reporting, WLATMs, real estate, and casino disbursement reporting will improve Canada’s compliance with FATF international standards. Meeting these standards will improve the integrity of the global AML/ATF framework, positively impacting Canada’s international reputation, and may lead to regulatory efficiencies with other countries’ AML/ATF regimes, making it easier for Canadian businesses to operate internationally. Furthermore, meeting these standards will help ensure Canada is not flagged as a jurisdiction of concern by the FATF for lack of action to address key AML/ATF deficiencies and ultimately prevent other countries from levying sanctions on Canada. Such reputational, economic, and national security impacts are important, but difficult to quantify.

Costs

As a result of the proposed Amendments, businesses, government, and individuals are expected to incur an estimated TPV of $15,855,845 in compliance costs and $754,753 in administrative costs for an estimated $16,610,598 TPV in costs over a 10-year period (or $2,364,975 annually). Affected businesses are expected to incur an estimated TPV of $11,937,126 in costs. Affected businesses include approximately 25 604 existing reporting entities (financial entities, MSBs, casinos, accountants, life insurers, real estate brokers or sales representatives and developers, securities dealers, and BC notaries); 9 new reporting entities (4 title insurers and 5 WLATM acquirers); 10 000 corporate owners of WLATMs; and 44 351 corporations purchasing real estate. The only affected government entity is FINTRAC, who is expected to incur an estimated TPV of $3,662,556 in costs over a 10-year period (or $521,466 annually) to administer and ensure compliance with the proposed Amendments. Individuals are expected to incur an estimated $1,010,916 TPV in costs over a 10-year period (or $143,932 annually). Affected individuals include unrepresented parties in real estate transactions and individuals receiving disbursements from a casino for another entity or person. A summary of affected stakeholders by regulatory measure is below.

Table 1: Summary of affected stakeholders by measure

Measure	Stakeholder	Stakeholder type	Number of stakeholders
Sanctioned property reporting	Various table b1 note *	Business	25 604
MSB registration framework	Money services businesses	Business	2 566
White-label ATMs (WLATMs)	Acquirers of WLATMs	Business	5
	WLATM owners that are businesses	Business	10 000
Real estate: title insurers	Title insurers	Business	4
	Real-estate purchasers that are businesses	Business	44 351
Real estate: unrepresented parties	Real estate brokers or sales representatives and developers	Business	7 676
	Unrepresented parties to a real estate transaction	Individual	44 351
Casino disbursement reporting	Casinos	Business	18
	Person who is receiving a casino disbursement over $10,000 for another entity or person	Individual	15 000
All measures	FINTRAC	Government	1
Table b1 note(s) Table b1 note * "Various" includes the following: financial entities (556), money service businesses (2 566), casinos (18), accountants (5 214), dealers in precious metals and stones (4 187), life insurers (3 766), real estate brokers or sales representatives and developers (7 676), security dealers (1 424); and BC notaries (197). Return to table b1 note * referrer

All costs in Table 2 below are undiscounted and are per affected entity per year unless otherwise stated. In general, the assumptions were informed by consultations with the affected industry sectors and FINTRAC, as well as previous Regulatory Impact Analysis Statements. More details on assumptions and sources are included in the full cost-benefit analysis, available on request.

Table 2: Summary of key assumptions measure

Measure	Assumption
Sanctioned property reporting	20 hours for large financial entities, and 30 minutes for all other reporting entities, to update IT systems (one time). 20 hours for large financial entities to familiarize themselves with the new guidance and update any training (ongoing). 6 minutes for large financial entities, and 12 minutes for all other reporting entities, to complete and file a sanctioned property report (ongoing). $104,000 for FINTRAC to administer and ensure compliance (one time).
MSB registration framework	Average fee of $64 for obtaining criminal record checks (ongoing). 15 minutes for obtaining a criminal record check (ongoing). 6 minutes to compile and present information related to a criminal record check of agents to FINTRAC in context of registration (and reregistration) every two years (ongoing). 2 minutes to provide a criminal record check of an MSB’s CEO, president, board of directors, and significant shareholders to FINTRAC in context of registration (and reregistration) every two years (ongoing). 1 minute to save a criminal record check (ongoing). 2 minutes per MSB to supervise and ensure compliance with the new requirements (ongoing).
White-label ATMs (WLATMs) and Real estate: title insurers	20 hours to develop an internal compliance program (one time). 48 hours to maintain the compliance program (ongoing). 15 minutes to complete and send required reports to FINTRAC (ongoing). 4 hours to update client intake forms (one time). 32 hours for large firms, and 16 hours for small and medium firms to set up information technology systems for reporting to FINTRAC (one time). $10,000 for large firms, and $2,500 for small firms, to invest in storage capacity for required record keeping obligations (one time). 32 hours for large firms, and 16 hours for small firms to prepare and comply with FINTRAC assessment (ongoing). 1 hour to save all required documentation (ongoing).
White-label ATMs (WLATMs)	30 minutes to register as an MSB with FINTRAC (ongoing). 5 minutes to submit information related to connecting a WLATM to a payment network to FINTRAC during registration as an MSB (one time). 5 minutes for WLATM owners that are businesses to provide beneficial ownership information to acquirers (one time). $350,000 for FINTRAC to administer and ensure compliance (ongoing).
Real estate: title insurers	5 minutes for real estate purchasers that are businesses to provide beneficial ownership information to acquirers (ongoing). 10% of real estate transactions involve purchasers that are corporations that would need to submit additional information as a result of the proposed regulatory Amendment. $230,000 for FINTRAC to administer and ensure compliance (ongoing)
Real estate: unrepresented parties	15 minutes to complete and send additional reports to FINTRAC (ongoing). 30 minutes for real estate agent/brokerage to familiarize themselves with the new guidance and update any training (one time). 4 minutes for the real estate agent/brokerage to ask for and verify identities of unrepresented parties (ongoing). 4 minutes for unrepresented parties to provide their identity and answer questions (ongoing). 1 minute for real estate agent/brokerage to save the identity of an unrepresented party (ongoing). 10% of real estate transactions are expected to be affected by the new requirement.
Casino disbursement reporting	4 hours to update information technology to process new casino disbursement form (one time). 10 minutes for individuals to complete the new part of the casino disbursement form (ongoing). 4 minutes for the casino to ask for and verify identity of the final beneficiary (ongoing). 4 minutes for the final beneficiary to provide their identity and answer questions (ongoing). 1 minute for the casino to save the identity of an unrepresented party (ongoing). 15 000 casino disbursement reports will be affected (ongoing).

Note: Some of the measures could also lead to costs associated with information technology storage capacity, for example with respect to storing criminal record checks for the MSB registration framework, unrepresented parties, and casino disbursements. Given the record checks and identification would likely be 1–2 page pdf documents and stored electronically, it is assumed that that storage of these documents could be accommodated without additional new investments in information technology storage capacity, such as what would be required for the savings of all compliance related documentation as a result of the imposition of AML/ATF regulation on new sectors (i.e. white-label ATMs and title insurers). Any such costs are expected to be negligible.

In the following five sections, figures may not add up to totals due to rounding.

Sanctioned property reporting

The TPV of costs associated with moving from the existing terrorist property reports to sanctioned property reports is $1,131,689 or $161,127 annualized. Costs arise from the following:

• One-time upfront cost for businesses (i.e. the 25 604 existing reporting entities under the PCMLTFA) to adopt internal information technology and other systems (TPV: $541,486);
• One-time upfront cost for businesses (i.e. the 25 604 existing reporting entities under the PCMLTFA) to familiarize themselves with the form and update related guidance and training (TPV: $484,554);
• Ongoing marginal cost for businesses (i.e. the 25 604 existing reporting entities under the PCMLTFA) of completing and filing the new form with FINTRAC (TPV $1,649); and
• One-time upfront cost to government (i.e. FINTRAC) to support the development, filing, review, and compliance functions relating to the new sanctioned property reports ($104,000).

MSB registration framework

The TPV of costs associated with requiring criminal record checks, and information related to criminal record checks, of MSBs is $8,385,418 or $1,193,895 annualized. Costs arise from the following:

• Ongoing labour costs to MSBs for conducting criminal record checks of agents (including agents that are corporations) every two years (TPV: $655,404);
• Ongoing labour costs to MSBs for conducting criminal record checks of their chief executive officer, president, directors, and every person who controls directly or indirectly 20% or more of the MSB or shares of the MSB (TPV: $365,293);
• Ongoing labour cost of providing information related to criminal checks of agents (including agents that are corporations) to FINTRAC every two years (TPV: $262,161);
• Ongoing labour cost of providing criminal record checks of an MSB’s chief executive officer, president, directors, and every person who controls directly or indirectly 20% or more of the MSB or shares of the MSB to FINTRAC every two years (TPV: $48,657);
• Ongoing cost related to fees for criminal record checks of agents (including agents that are corporations) every two years (TPV: $4,459,293);
• Ongoing cost related to fees for criminal record checks of an MSB’s chief executive officer, president, directors, and every person who controls directly or indirectly 20% or more of the MSB or shares of the MSB to FINTRAC every two years (TPV: $2,499,901);
• Ongoing labour cost to save criminal record checks of agents (including agents that are corporations) (TPV: $43,519);
• Ongoing labour cost to save criminal record checks of an MSB’s chief executive officer, president, directors, and every person who controls directly or indirectly 20% or more of the MSB or shares of the MSB (TPV: $24,255); and
• Ongoing labour cost to FINTRAC of administering and ensuring compliance with criminal record checks (TPV: $26,935).

Note: Since existing Regulations already prohibit the chief executive officer, president, directors, or significant shareholders with certain criminal records from registering an MSB, there would not be any job losses for these individuals attributable to the proposed amendments. However, since the proposed amendments would expand this prohibition to agents (in addition to the criminal check and submission requirement), there could be job losses for agents attributed to the proposed amendments. This is turn could result in transitional costs for affected businesses and for those employees not engaged in prohibited and/or illegal activities (e.g. added costs for businesses to hire/train replacements, added search costs for employees to find alternative employment, wage loss to employees seeking re-employment). It is estimated that there would be 22 886 criminal record checks associated with agents during each two-year re-registration period; however, due to data limitations, the number of job losses that could materialize cannot be estimated.

White-label ATMs (WLATMs)

The TPV of costs associated with imposing AML/ATF obligations on WLATM acquirers is $2,427,891 or $345,677 annualized. Costs arise from the following:

• Upfront cost to WLATM acquirers to develop an internal compliance program (TPV: $5,350);
• Upfront cost to WLATM acquirers of updating client intake forms, for example for identity verification (TPV: $727);
• Upfront cost to WLATM acquirers to set up their information technology systems to report certain transactions to FINTRAC (TPV $4,070);
• Upfront capital cost to WLATM acquirers to store records (TPV: $24,020);
• Ongoing cost to WLATM acquirers to register as an MSB with FINTRAC every two years (TPV: $279);
• Ongoing cost to WLATM acquirers of submitting required reporting to FINTRAC (TPV: $2,415);
• Ongoing cost to WLATM acquirers of preparing and complying with FINTRAC assessments (TPV: $2,499);
• Ongoing cost to WLATM acquirers of maintaining a compliance program (TPV: $89,508);
• Upfront cost of reporting information to FINTRAC related to connecting a WLATM to a payment network (TPV: $140,188);
• Upfront cost to WLATM owners that are businesses of providing additional information related to their beneficial ownership to WLATM acquirers (TPV $26,570);
• Ongoing cost of saving all required documentation relating to the new AML/ATF requirements (TPV: $1,116); and
• Ongoing cost to FINTRAC of administering and ensuring compliance with AML/ATF obligations (TPV: $2,131,151).

Real estate

Title insurers

The TPV of costs associated with imposing AML/ATF obligations on title insurers is $2,349,346 or $334,494 annualized. Costs arise from the following:

• Upfront cost to title insurers to develop an internal compliance program (TPV: $4,280);
• Upfront cost to title insurers of updating client intake forms, for example for identity verification (TPV: $581);
• Upfront cost to title insurers to set up their information technology systems to report certain transactions to FINTRAC (TPV $4,651);
• Upfront capital cost to title insurers to store records (TPV: $34,938);
• Ongoing cost to title insurers of submitting required reporting to FINTRAC (TPV: $4,610);
• Ongoing cost to title insurers of preparing and complying with FINTRAC assessments (TPV: $2,856);
• Ongoing cost to title insurers of maintaining a compliance program (TPV: $71,607);
• Ongoing cost of saving all required documentation relating to the new AML/ATF requirements (TPV: $893);
• Ongoing cost to home purchasers that are businesses of providing additional information related to their beneficial ownership to title insurers (TPV $824,460); and
• Ongoing cost to FINTRAC of ensuring compliance with AML/ATF obligations (TPV: $1,400,470).

Unrepresented parties

The TPV of costs associated with imposing AML/ATF obligations on real estate brokers and sales representatives to verify the identify of unrepresented parties and third parties in real estate transactions arise is $1,322,485 or $188,292 annualized. Costs arise from the following:

• Upfront cost to real estate brokers and sales representatives related to updating existing industry guidance on identity verification of unrepresented parties (TPV: $140,663);
• Ongoing costs to real estate brokers and sales representatives related to incremental increase in suspicious transaction reporting of unrepresented parties in real estate transactions (TPV: $29,394);
• Ongoing costs to real estate brokers and sales representatives related to request and verify identify of unrepresented parties in real estate transactions (TPV: $551,499);
• Ongoing costs to real estate brokers and sales representatives to save identities of unrepresented parties in real estate transactions (TPV: $137,461); and
• Ongoing cost to unrepresented parties in real estate transactions to provide their identity and respond to verifying questions from real estate brokers and/or sales representatives (TPV: $463,468).

FINTRAC has indicated that no marginal costs are associated with administering and ensuring compliance with this proposed regulatory Amendment. This is because the verification of unrepresented parties and third parties in real estate transactions is already required on a “reasonable measures” basis, and FINTRAC believes any additional marginal costs to administer and ensure compliance would be extremely small and included in its ongoing compliance activities.

Note: the analysis has estimated the incremental costs of verifying unrepresented parties. Should there be any instances where entities cannot be identified, such transactions are assumed to be associated with illegal activities, and, as such, as per the TBS Cost-Benefit Analysis Guide, the costs of such activities (i.e. of the transaction not proceeding) would not have standing and are excluded.

Casino disbursement reporting

The TPV of costs associated with imposing an obligation on casinos to identify and report on the final beneficiary of disbursements over $10,000 is $993,774 or $141,491 annualized. Costs arise from the following:

• Upfront cost to casinos related to the updating of internal information management systems to accommodate the new section on the casino disbursement reporting form (TPV: $2,995);
• Ongoing cost to casinos to request and verify the identity of the final beneficiary of casino disbursements over $10,000 (TPV: $354,878);
• Ongoing cost to casinos to save the identity of the final beneficiary of casino disbursements over $10,000 (TPV: $88,453);
• Ongoing cost for individuals receiving a casino disbursement over $10,000 for someone else to complete the new section on the casino disbursement reporting form (TPV: $390,698); and
• Ongoing cost for individuals receiving a casino disbursement over $10,000 for someone else to provide their identity and respond to verification questions (TPV: $156,750).

FINTRAC has indicated that it would not incur marginal costs associated with administering and ensuring compliance with this proposed regulatory Amendment. This is because the verification of unrepresented parties and third parties in real estate transactions is already required on a “reasonable measures” basis, and FINTRAC believes any additional marginal costs to administer and ensure compliance would be extremely small and included in its ongoing compliance activities.

Cost-benefit statement

• Number of years: 10 (2024–2033)
• Price year: 2021
• Present value base year: 2024
• Discount rate: 7%

Table 3: Monetized costs
Annual values for years 1, 2, and 10 are undiscounted. Numbers may not sum perfectly due to rounding.

Impacted stakeholder / measure	Description of cost	Year 1 (2024)	Year 2 (2025)	Year 10 (2033)	Total (present value)	Annualized value
Industry (sanctioned property reporting)	Costs to reporting entities (adopting systems, guidance familiarization, and submitting reports)	$574,022	$735,894	$235,732	$1,027,684	$146,319
Government (sanctioned property reporting)	Costs to FINTRAC to administer and enforce compliance with the new sanctioned property reports	$104,000	$0	$0	$104,000	$14,807
Sub-total - Sanctioned property reporting	All costs	$678,022	$735,894	$235,732	$1,131,684	$161,126
Industry (MSB registration framework)	Costs to MSBs (labour and fess for conducting required criminal labour checks and reporting)	$0	$1,006,016	$1,006,016	$8,358,483	$1,190,060
Government (MSB registration framework)	Costs to FINTRAC to administer and enforce compliance with the new criminal record check requirements	$0	$4,276	$4,276	$26,935	$3,835
Sub-total - MSB registration framework	All costs	$0	$1,010,292	$1,010,292	$8,385,418	$1,193,895
Industry (white-label ATMs [WLATMs])	Costs to acquirers of WLATMs (develop and maintain compliance program, update client intake forms, set up reporting systems, record-keeping, registration, submitting reports, complying with FINTRAC assessment, registering as MSB, providing information related to WLATMs connected to a payment network, and saving all required documentation) Costs to WLATM owners that are businesses of providing information to WLATM acquirers	$0	$240,393	$15,724	$296,740	$42,249
Government (white-label ATMs [WLATMs])	Costs to FINTRAC of ensuring compliance with AML/ATF obligations	$0	$350,000	$350,000	$2,131,151	$303,428
Sub-total - White-label ATMs	All costs	$0	$590,393	$365,724	$2,427,891	$345,677
Industry (real estate: title insurers)	Costs to title insurers (develop and maintain compliance program, update client intake forms, set up reporting systems, record-keeping, submitting reports, complying with FINTRAC assessment, and saving all required documentation) Costs to home purchasers that are businesses of providing information to title insurers	$0	$199,401	$148,510	$948,875	$135,098
Government (real estate: title insurers)	Costs to FINTRAC of ensuring compliance with AML/ATF obligations	$0	$230,000	$230,000	$1,400,470	$199,395
Sub-total - Real estate: Title insurers	All costs	$0	$429,401	$378,510	$2,349,346	$334,494
Industry (real estate: unrepresented parties)	Costs to real estate brokers and sales representatives (updating guidance, increase in reporting, record-keeping)	$240,432	$99,769	$99,769	$859,017	$122,305
Individuals (real estate: unrepresented parties)	Costs to unrepresented parties in real estate transactions (providing their identity to real estate brokers and/or sales representatives and responding to verification questions)	$65,987	$65,987	$65,987	$463,468	$65,987
Sub-total – Real estate: Unrepresented parties	All costs	$306,419	$165,756	$165,756	$1,322,485	$188,292
Industry (casino disbursement reports)	Cost to casinos (updating information technology systems, request, verify, and save identities of final beneficiaries)	$64,007	$61,012	$61,012	$446,326	$63,547
Individuals (casino disbursement reports)	Cost to individuals (filing out new section on form and providing identity and responding to verification questions)	$77,944	$77,944	$77,944	$547,448	$77,944
Sub-total - Casino disbursement reports	All costs	$141,951	$138,956	$138,956	$993,774	$141,491
All stakeholders	Total costs	$1,126,393	$3,070,692	$2,294,971	$16,610,598	$2,364,975

Qualitative impacts

Positive impacts

• A strong and effective AML/ATF Regime acts as a deterrent to crime and therefore improves the safety of Canadians and the integrity of Canada’s financial system. In turn, this increases confidence in Canada’s financial system, making it an attractive place to invest and do business.
• Investors seek investment opportunities in locations that have a relatively low crime environment and that are politically and economically stable, among other factors.
• A strong reputation with regards to an effective AML/ATF Regime helps Canadian financial institutions avoid burdensome regulatory hurdles and additional costs when dealing with their foreign counterparts or doing business internationally.
• The proposed Amendments regarding sanctioned property reporting, WLATMs, real estate, and casino disbursement reporting will improve Canada’s compliance with FATF international standards, positively impacting Canada’s international reputation, and may lead to regulatory efficiencies with other countries’ AML/ATF regimes.

Negative impacts

• Storage costs for certain small documents, such as criminal record checks, are assumed to be accommodated without additional new investments in information technology storage capacity. These costs are expected to be negligible.
• Potential job losses resulting from the new requirements imposed on MSB agents (i.e. presenting information related to criminal record checks to FINTRAC during registration and re-registration as a MSB) could not be estimated due to the lack of information on how many of these agents may have criminal histories that would cause them to lose their jobs.

Sensitivity analysis

Table 4: Summary of sensitivity analysis

Cost scenario	Total (present value)	Annualized value
Low	$10,189,949	$1,450,819
Medium (central case)	$16,610,598	$2,364,975
High	$21,063,941	$2,999,031

Sanctioned property reporting - TPV: $1,131,684

The largest cost associated with this proposal is the one-time upfront cost for reporting entities to adapt their internal information technology systems as a result of moving from terrorist property reporting to sanctioned property reporting. The analysis assumes it will take 20 hours for large financial institutions to update internal systems (i.e. the central case scenario). However, should it take longer to update their internal systems, for example 40 hours instead 20, then the cost would double from a TPV of $541,486 to $1,082,973 (i.e. under the high scenario). Conversely, should it take less time to update internal systems, for example 10 hours instead of 20, the result would be a reduction in costs to a TPV of $270,473 (i.e. under the low scenario).

MSB registration framework - TPV: $8,385,418

The largest cost associated with this proposal is the cost of obtaining criminal record checks, both in terms of labour costs to fill out and request the criminal check and the fee charged to obtain the criminal record. The analysis assumes that it takes 15 minutes (labour cost) to fill out the request for a criminal record check. The 15-minute estimate is based on consultation with the online provincial criminal record check systems. Should it take longer to fill out the form and request the criminal record checks, for example 30 minutes, then the cost would double, from a TPV of $1,020,697 to $2,041,394 (i.e. under the high scenario). Conversely, should it take less time to complete the criminal record check request, for example 7.5 minutes instead of 15 minutes, the result would be a reduction in costs to a TPV of $510,349 (i.e. under the low scenario).

The assumed fee for obtaining a criminal record check is $64, as it is the weighted average (by population) of current provincial fees to obtain a criminal record check for employment purposes. Fees for record checks vary by province, from a high of $80.25 in Quebec to a low of $20 in Newfoundland. Should the number of MSB agents that reside in each province differ from the general population distribution by province, then the fees paid would change. For example, if all MSB agents resided in Quebec, the fees for MSB agents to obtain their criminal record checks in future years would rise from a TPV of $6,959,194 to $8,726,176 (i.e. under the high scenario). Conversely, if all MSB agents resided in Newfoundland, the ongoing fees paid by MSB agents to obtain their criminal record checks in future years would drop from to a TPV of $2,174,748 (i.e. under the low scenario).

White-label ATMs (WLATMs) - TPV: $2,427,891

The largest cost associated with this proposal is the one-time upfront cost to WLATM acquirers of providing information to FINTRAC, in the context of their registration as an MSB, information related to WLATMs that they connect to a payment network. The analysis assumes that it will take WLATM acquirers five minutes to compile and provide this information, per WLATM serviced. However, if it instead took 10 minutes to provide this information, then the costs would double, from a TPV of $140,188 to $280,376 (i.e. under the high scenario). Conversely, should it only take 2.5 minutes to compile this information, then the costs would drop to a TPV of $70,094 (i.e. under the low scenario).

Real estate (title insurers and unrepresented parties) - TPV: $3,671,831

The largest costs associated with these proposals are the cost associated with real estate purchasers that are corporations that need to provide additional information related to their beneficial ownership to title insurers. For the central case scenario, it is assumed that 10% of real estate transactions in Canada involve corporations that would need to submit additional information as a result of the proposed regulatory Amendment. There are currently no statistics regarding the number of real estate transactions that involve corporations in Canada due to the lack of beneficial ownership land registries. Were the number closer to 20%, then the costs associated would double from a TPV of $824,460 to $1,648,920 (i.e. under the high scenario). Conversely, if the number were closer to 5% then the costs would half to a TPV of $412,230 (i.e. under the low scenario).

Casino disbursement reports - TPV: $993,774

The largest cost associated with the proposal is the cost for individuals to complete the new section on the casino disbursement reporting form. For the central case scenario, it is assumed that it would take 10 minutes for each individual to fill out this information, but no additional time for the casino to submit the additional information as there is no increase in the number of casino disbursement forms a casino submits to FINTRAC (there are only differences in the parts of the form that are completed). FINTRAC has indicated that it receives around 300 000 casino disbursement reports each year, and for the central case scenario, it is assumed that 5% of these, or 15 000 forms, would need the additional section to be completed. If it were 10% of forms, then the costs would double from a TPV of $390,698 to $781,396 (i.e. under the high scenario). Conversely, should 2.5% of forms be affected by the proposed regulatory Amendment, then costs would half to a TPV of $195,349.

Distributional analysis

Table 5: Summary of costs for small and medium/large businesses
Numbers may not sum perfectly due to rounding.

Provision	Business size	Total (present value)	Annualized value
Sanctioned property reporting	Small	$984,514	$140,173
	Medium/large	$43,171	$6,147
MSB registration framework	Small	$5,541,242	$788,948
	Medium/large	$2,817,241	$401,112
White-label ATMs	Small	$125,389	$17,853
	Medium/large	$171,352	$24,397
Real estate: title insurers	Small	$824,460	$117,385
	Medium/large	$124,415	$17,714
Real estate: unrepresented parties	Small	$837,994	$119,311
	Medium/large	$21,023	$2,993
Casino disbursement reports	Small	$178,994	$25,485
	Medium/large	$267,333	$38,062
Sub-total — Small businesses	Small	$8,492,591	$1,209,154
Sub-total — Medium/large businesses	Medium/large	$3,444,535	$490,424
Sub-total — All businesses	All businesses	$11,937,126	$1,699,578
Sub-total — Government	All government	$3,662,556	$521,466
Sub-total — Individuals	All individuals	$1,010,916	$143,932
Total	All stakeholders	$16,610,598	$2,364,975

Sanctioned property reports — TPV: $1,131,684

Since reporting entities are already expected to submit terrorist property reports, the move to sanctioned property reports will be incremental. Typically, it could be assumed that small stakeholders must expend extra time and effort to familiarize themselves with the sanctioned property obligations and to update their systems to ensure they are compliant with the reporting requirements. However, FINTRAC has indicated that the majority of sanctioned property reports are likely to come from large financial entities. To reflect these nuances, the analysis provides different cost estimates for large financial entities versus other reporting entities.

MSB registration framework — TPV: $8,385,418

The largest single cost to all businesses relates to the fees for obtaining criminal record checks (TPV: $6,959,194). While large MSBs have more agents than small MSBs, 98% of MSBs are small businesses, which results in a disproportionate burden on small business. While the fees for the record checks are the same for all businesses, the Department of Finance recognizes that MSBs will require time to implement these changes and will therefore provide an extended transition time (i.e. delay in coming into force) for businesses to comply with the new requirements.

White-label ATMs (WLATMs) — TPV: $2,427,891

Initial costs may be greater for small stakeholders as it may take more effort to establish systems to ensure compliance with the new requirements. The Department of Finance recognizes that businesses will require time to implement these changes and will therefore provide an extended transition time (i.e. delay in coming into force) for businesses to comply with the new requirements. Regulatory costs are mitigated by the fact that most of the proposed administrative and compliance requirements are already performed by WLATM acquirers as part of Interac’s internal operating procedures.

Real estate (title insurers and unrepresented parties) — TPV: $3,671,831

While title insurers are large stakeholders, the costs imposed may be passed along to Canadian consumers, making the price of title insurance, and thus home ownership, more expensive. However, this risk pales in comparison to risks related to fraud in the real estate sector, which can put at risk the single greatest purchase most Canadian families make in their lifetime. The costs are also small when compared to the cost of money laundering in the real estate sector. With respect to unrepresented parties, the obligation to identify unrepresented parties would result in a marginal increase in costs since real estate representatives are already required to take “reasonable measures” to do so.

Casino disbursement reporting — TPV: $993,774

FINTRAC is already undertaking the modernization of their forms that would impact the casino sector. Casinos were consulted prior to the modernization and are currently working on updating their forms and including the new section. Therefore, the cost associated with the collection of information under the new part of the casino disbursement reports would be relatively minor. While small casinos may need to exert more effort to update their systems to ensure compliance with the reporting requirements, they are also likely to submit less casino disbursement forms.

Small business lens

Small business lens summary

It is estimated that 89 445 small businesses will be impacted by this regulatory proposal, including

• 24 915 by the new obligations for sanctioned property reporting;
• 2 508 by the new MSB registration requirements;
• 10 003 by the new obligations for WLATM acquirers;
• 44 351 by the new obligations on title insurers;
• 7 658 by the new requirements regarding unrepresented parties in real estate transactions; and
• 10 by the new obligations regarding casino disbursement reporting.

The total incremental costs imposed on small businesses are estimated to be $8,492,591 (TPV) or $1,209,154 annualized, which is equivalent to $13.52 annualized per small business impacted (all annualized per small business figures are derived by dividing the annualized value by the number of affected stakeholders). Costs include (note numbers may not sum perfectly due to rounding):

• TPV of $984,514 or $140,173 annualized in costs for sanctioned property reports, which is equivalent to $5.63 annualized per small business affected. The per small business cost is relatively low as most sanctioned property reports are submitted by 11 large financial entities and few are submitted by the 24 915 small businesses (i.e. other reporting entities), included in the analysis.
• TPV of $5,541,242 or $788,948 annualized in costs for strengthening the MSB registration framework, which is equivalent to $314.57 annualized per small business affected. The per small business affected costs are relatively high mostly due to the $64 average fee charged to obtain a criminal record check. There could also be additional transitional costs for small businesses (i.e. added costs to hire/train replacements) due to potential job losses resulting from prohibiting agents with certain criminal records and the requirement to submit information related to a criminal record check. However, due to data limitations, the number of job losses that could materialize cannot be estimated.
• TPV of $125,389 or $17,853 annualized in costs for imposing AML/ATF requirements on acquirers for white-label ATMs, which is equivalent to $1.78 annualized per small business affected. The per business cost is very low as it takes into account 10 000 WLATM owners that have to provide beneficial ownership information to the WLATM acquirers. Were these stakeholders and associated costs removed, the annualized per small business cost for the three small WLATM acquirers would rise significantly to $4,690, which is a more accurate reflection of the costs of AML/ATF regulation.
• TPV of $824,460 or $117,385 annualized in costs for imposing AML/ATF requirements on title insurers, which is equivalent to $2.65 annualized per small business affected. The per business cost is very low as it reflects only the costs to 44 351 home purchases that are businesses and who have to provide beneficial ownership information to title insurers. Costs to title insurers are excluded from this analysis as the four affected title insurers are not small businesses.
• TPV of $837,994 or $119,311 annualized in costs for requiring real estate representatives to identify unrepresented parties in real estate transactions, which is equivalent to $15.58 annualized per small business affected. Unlike title insurers, the home purchasers taken into account in the cost-benefit analysis are not small businesses; thus, the small business totals refer only to the effects on small real estate agents, brokers, and sales representatives.
• TPV of $178,994 or $25,485 annualized in costs for requiring casinos to identify and report on the final beneficiary of a casino disbursement above $10,000, which is equivalent to $2,548 annualized per small business affected. There are only 10 small casinos taken into account in the small business analysis, which is why the cost per small business affected is relatively high, given the proposed regulatory Amendment involves a change to existing reporting, rather than introducing a totally new requirement.

Alternative compliance options for small businesses would not be possible because the proposed Amendments are intended to close potential openings for the illicit movement of funds. Furthermore, the proposed changes relating to sanctioned property reporting, real estate, WLATM acquirers, and casino disbursement reporting are non-discretionary changes required for Canada to meet its obligations under the FATF. The Department of Finance recognizes that businesses, irrespective of size, will require time to implement these changes and will therefore provide an extended period of transition time for businesses (i.e. delay in coming into force, see section below entitled “Coming into force”) for businesses to comply with new requirements. While this does not constitute a special consideration for small businesses alone, it should be noted that impacts on businesses have been considered and balanced against relevant money laundering and terrorist financing risks, when establishing the compliance requirements for reporting entities generally, and for businesses that would be impacted by the proposed regulatory Amendments specifically through delays in the coming into force for each proposed measure.

• Number of small businesses impacted: 89 445
• Number of years: 10 (2024–2033)
• Price year: 2021
• Present value base year: 2024
• Discount rate: 7%

Table 6: Compliance costs
Numbers may not sum perfectly due to rounding.

Measure	Description of cost	Present value	Annualized value
Sanctioned property reporting	One-time upfront cost to adopt internal information technology and other systems	$518,232	$73,785
	One-time upfront cost to become familiar with the new requirements and update related training and guidance	$465,785	$66,317
	Ongoing marginal cost of completing, filing, and sending the new forms/reports to FINTRAC	$497	$71
Sub-total – Sanctioned property reporting	All compliance costs for small businesses – Sanctioned property reports	$984,514	$140,173
MSB registration framework	Ongoing labour costs to request a criminal record check for an MSB’s CEO, president, directors, and significant shareholders	$357,036	$50,834
	Ongoing labour costs to request a criminal record check of agents	$320,848	$45,681
	Ongoing fee for obtaining criminal record checks of agents	$2,199,055	$313,096
	Ongoing fee for obtaining criminal record checks of an MSB’s CEO, president, directors, and significant shareholders	$2,443,395	$347,884
Sub-total – MSB registration framework	All compliance costs for small businesses – MSB registration framework	$5,320,334	$757,496
White-label ATMs	Upfront cost to develop an internal compliance program	$3,210	$457
	Upfront cost of updating client intake forms	$436	$62
	Upfront costs of setting up information technology systems for AML/ATF regulation	$1,744	$248
	Upfront capital cost to store required records	$6,551	$933
	Ongoing cost of maintaining compliance program	$53,705	$7,646
	Upfront cost for WLATMs that are small businesses of providing additional information to WLATM acquirers	$26,570	$3,783
Sub-total – White-label ATMs	All compliance costs for small businesses – White-label ATMs	$92,215	$13,129
Real estate: title insurers	Ongoing cost to home purchasers that are small businesses to provide beneficial ownership information to title insurers	$824,460	$117,385
Sub-total – Real estate: title insurers	All compliance costs for small businesses – Real estate: title insurers	$824,460	$117,385
Real estate: Unrepresented parties	Ongoing costs related to expected increase in completing, filing, and sending suspicious transaction reports to FINTRAC	$24,641	$3,508
	Ongoing cost to become familiar with the changes and update industry guidance	$140,333	$19,980
	Ongoing cost to real estate agents and sales representatives to ask for and verify identity of unrepresented parties	$538,739	$76,704
Sub-total – Real estate: unrepresented parties	All compliance costs for small businesses – Real estate: unrepresented parties	$703,713	$100,193
Casino disbursement reports	Upfront cost to update information technology for new forms	$1,664	$237
	Ongoing cost to casinos to ask for and verify identity of the final beneficiary of casino disbursements	$141,949	$20,210
Sub-total – Casino disbursement reports	All compliance costs for small businesses – Casino disbursement reporting	$143,613	$20,447
Total	All compliance costs for small businesses	$8,068,849	$1,148,823

Table 7: Administrative costs
Numbers may not sum perfectly due to rounding.

Measure	Description of cost	Present value	Annualized value
MSB registration framework	Ongoing reporting of information related to criminal record checks of agents to FINTRAC	$128,339	$18,273
	Ongoing reporting of information relating to a criminal record check of an MSB’s CEO, president, directors, and significant shareholders	$47,557	$6,771
	Ongoing labour cost to save criminal record checks of agents	$21,304	$3,033
	Ongoing labour cost to save criminal record checks of a MSB’s own CEO, president, directors, and significant shareholders	$23,707	$3,375
Sub-total – MSB registration framework	All administrative costs for small businesses – MSB registration framework	$220,908	$31,452
White-label ATMs	Ongoing cost - Registering as MSB with FINTRAC	$167	$24
	Ongoing cost of submitting required reporting to FINTRAC	$1,033	$147
	Ongoing cost of preparing and complying with FINTRAC assessment	$1,071	$153
	Upfront cost of reporting WLATMs connected to a payment network	$30,232	$4,304
	Ongoing labour cost to WLATM acquirers of saving all required documentation	$669	$95
Sub-total – White-label ATMs	All administrative costs for small businesses – White-label ATMs	$33,173	$4,723
Real estate: Unrepresented parties	Ongoing cost to save identities of unrepresented parties	$134,280	$19,119
Sub-total – Real estate: unrepresented parties	All administrative costs for small businesses – Real estate: unrepresented parties	$134,280	$19,119
Casino disbursement reports	Ongoing cost to save identities of final beneficiaries of casino disbursements	$35,381	$5,037
Sub-total – Casino disbursement reports	All administrative costs for small businesses – Casino disbursement reporting	$35,381	$5,037
Total	All administrative costs for small businesses	$423,742	$60,331

Table 8: Total compliance and administrative costs

Totals	Present value	Annualized value
Total cost (all impacted small businesses)	$8,492,591	$1,209,154
Cost per impacted small business	$94.95	$13.52

One-for-one rule

Two sets of regulations are proposed to be amended as part of this regulatory package:

• Proposed Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Property Reporting, Title Insurers, Private Automated Banking Machines, Unrepresented Parties in Real Property or Immovables Transactions and Casino Disbursement Reporting): these proposed Amendments are estimated to impose $20,439 in annualized administrative costs on businesses. This regulation implements non-discretionary obligations and is exempt from the requirement to offset administrative burden under the one-for-one rule.
• Proposed Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Money Service Business Registration): these proposed Amendments are estimated to impose $20,570 in annualized administrative costs on businesses.

All costing assumptions are explained in the “Cost” section of this Regulatory Analysis chapter. Values reported for the purposes of the one-for-one rule are measured in 2012 price levels; annualized values are discounted to 2012 using a discount rate of 7%, as required by the Red Tape Reduction Regulations. Wages used in the calculation of labour costs are 2021 wages converted to 2012 prices as taken from Statistics Canada: Wages by Occupation, Annual, 1997 to 2022. Specifically, all labour costs are based on wages for “Finance, insurance, and related administrative occupations” (with an additional 25% overhead), except for wages for casino disbursement reports, which are based on wages for “Professional occupations in business and finance” (with an additional 25% overhead).

Proposed Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Property Reporting, Title Insurers, Private Automated Banking Machines, Unrepresented Parties in Real Property or Immovables Transactions and Casino Disbursement Reporting) [Annualized administrative costs: $20,439]

These proposed Amendments implement non-discretionary obligations and are exempt from the requirement to offset administrative burden under the one-for-one rule.

Sanctioned property reporting

This proposal incurs only compliance costs. The one-for-one rule does not apply as there is no incremental change in the administrative burden on business. In addition, the proposed Amendment is non-discretionary, as it is required to bring Canada into compliance with the FATF Standards, which Canada is required to endorse and implement as a member of the FATF. The specific FATF Standards that this proposed Amendment will meet are Recommendation six. Pursuant to FATF recommendation six on financial sanctions related to terrorism and terrorist financing and recommendation seven on targeted financial sanctions related to proliferation, the FATF requires that all member countries have legislation or regulations in place to ensure that financial institutions and certain professions are implementing UN mandated lists. Reporting on sanctioned property is an important element of implementing UN mandated sanctions lists as it ensures that reporting entities are implementing and reporting on sanctions effectively. Canada does not currently have a standardized process built into the AML/ATF framework for sanctioned property reporting, and the Department of Finance has assessed that regulatory amendments are needed to close this gap in Canada’s compliance with FATF obligations.

White-label ATMs (WLATMs)

It is anticipated that the proposed Amendments would result in an annualized increase in administrative costs to WLATM acquirers of $7,960, which is equivalent to $1,592 annualized per business affected. These administrative costs are to WLATM acquirers only, as the 10 000 WLATMs included in the analysis are affected by the proposed regulatory Amendment only in terms of compliance costs.

This proposed Amendment is non-discretionary, as it is required to bring Canada into compliance with the FATF Standards, which Canada is required to endorse and implement as a member of the FATF. The specific FATF Standards that this proposed Amendment will meet are Recommendation one. FATF recommendation one requires countries to assess their money laundering and terrorist financing risks and to take actions to ensure risks are effectively mitigated, including by applying a risk-based approach to ensure measures are commensurate with risks. During the last mutual evaluation of Canada in 2016, the FATF highlighted the lack of AML requirements for WLATMs as a gap in Canada’s AML/ATF Regime. The proposed Amendments would directly address this gap.

In addition to setting the international AML/ATF standards, the FATF also monitors countries’ progress in implementing the standards and will publicly list countries that do not implement the Standards and have strategic deficiencies in their AML/ATF regime (i.e. the FATF grey list). If Canada does not implement these standards, Canada could be at risk of being grey listed, which could have negative economic consequences as well as reputational damage. As such, the proposed Amendment is non-discretionary as it is required for Canada to comply with international obligations.

Real estate (title insurers and unrepresented parties)

These proposed Amendments would implement non-discretionary obligations and are exempt from the requirement to offset administrative burden under the one-for-one rule.

It is anticipated that the proposed Amendments for title insurers would result in an annualized increase in administrative costs of $204, which is equivalent to $51 annualized per business affected. This figure only relates to the four affected title insurers as costs to real estate purchases that are businesses and who would be required to provide beneficial ownership information to title insurers are compliance costs and therefore excluded from the one-for-one rule. The administrative costs to title insurers are lower than those for WLATM acquirers mostly due to the costs associated with reporting information on WLATMs connected to a payment network during registration as an MSB, which is a cost not incurred by title insurers.

It is anticipated that the proposed Amendments for unrepresented parties would result in an annualized increase in administrative costs of $7,469, which is equivalent to $0.97 annualized per business affected.

Taken together, the proposed Amendments for real estate (title insurers and unrepresented parties) would result in an annualized increase in administrative costs of $7,673, which is equivalent to $1.00 annualized per business affected. The per business costs are relatively low as 7 680 businesses are affected by the proposed Amendments regarding real estate, as opposed to only four businesses affected by the changes relating to title insurers.

Similar to the proposed Amendment for obligations related to WLATMs, this proposed Amendment is non-discretionary, as it is required to bring Canada into full compliance with the FATF Standards, which Canada is required to endorse and implement as a member of the FATF. The specific FATF Standards that this proposed Amendment will meet are Recommendation 22. FATF Recommendation 22 requires all designated non-financial businesses and professions, including real estate professionals, to apply customer due diligence and record-keeping requirements. The FATF notes that real estate professionals include real estate agents as well as those professionals that may carry out or prepare for transactions for clients involving the buying and selling of real estate, such as lawyers, real estate developers, title insurers, and other independent legal professionals and accounts.

Casino disbursement reporting

It is anticipated that the proposed Amendments for casino disbursement reporting would result in an annualized increase in administrative costs of $4,806, which is equivalent to $267 annualized per business affected. These costs relate exclusively to casinos saving the identities of final beneficiaries. Although this is a relatively low cost per identity saved, it is assumed that casinos would need to save the identities of 15 000 final beneficiaries as a result of this change, increasing the aggregate costs to casinos.

This proposed Amendment is non-discretionary, as it is required to bring Canada into full compliance with the FATF Standards, which Canada is required to endorse and implement as a member of the FATF. The specific FATF Standards that this proposed Amendment will meet are Recommendations 25 and 26. FATF recommendations 24 and 25 require countries to assess the risk of the misuse of legal persons and arrangements for money laundering or terrorist financing and take measures to prevent their misuse. Canada’s last mutual evaluation in 2016 as well as FATF’s Follow-Up Report on Canada in 2021 found Canada to be partially compliant with Recommendation 24 and non-compliant with recommendation 25 (non-compliant being the lowest assessment result possible). Increasing transparency regarding the ultimate beneficiary of casino disbursements ensures that this sector is not being misused to obfuscate money laundering or terrorist financing and will support Canada’s adherence to FATF Recommendations 24 and 25.

Proposed Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Money Service Business Registration) [annualized administrative costs: $20,570]

MSB registration framework

The one-for-one rule applies since there is an incremental increase in the administrative burden on business, and the proposal is considered burden in under the rule. The proposed Amendments would result in an annualized increase in administrative costs of $20,570, which is equivalent to $8.02 annualized per business affected.

This proposed Amendment is expected to increase the administrative costs for MSBs as a result of new obligations to report to FINTRAC on certain elements of the criminal record checks of MSBs’ agents and MSBs’ chief executive officer, president, directors, and significant shareholders. Administrative costs are also raised by the requirement to save these criminal record checks. Compliance costs associated with obtaining the criminal record checks, including the fee, are not included under the one-for-one rule.

Regulatory cooperation and alignment

The proposal relating to the MSB registration framework is based on international best practices and the FATF Recommendations. The proposals relating to sanctioned property reporting, white-label ATMs, real estate, and casino disbursements would implement non-discretionary international obligations under the FATF. These proposed Amendments would more closely align with over 200 jurisdictions around the world that have also committed to the FATF Recommendations, noting that each country must apply the Recommendations based on their national circumstances.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.

Gender-based analysis plus

No specific gender-based analysis plus (GBA+) impacts have been identified for this proposal. More generally, the proposals seek to strengthen Canada’s AML/ATF framework, which acts as a deterrent to financial crimes, and helps to protect Canadians, and uphold the security, stability, utility, and efficiency of the Canadian and global financial systems to drive economic growth.

This measure benefits all Canadians by combatting money laundering and terrorist financing, which pose threats to Canadians and the economy. This protects the integrity of our financial system, facilitating the flow of funds domestically and internationally. It also indirectly benefits women, young people, 2SLGBTQI+ people, Indigenous people, persons with disabilities, and seniors who are disproportionately victimized by crime that is supported and perpetuated by money laundering. For example, Indigenous people and persons with disabilities experience higher rates of violent victimization compared to other Canadians, and the Canadian Anti-Fraud Centre reports that seniors and vulnerable Canadians are increasingly being targeted for fraud.

Implementation, compliance and enforcement, and service standards

Implementation

In order for the proposed regulatory Amendments to be brought into force, certain amendments to the PCMLTFA made through the Budget Implementation Act, 2023, No. 1 and Bill C-59, An Act to Implement Certain Provisions of the Fall Economic Statement Tabled in Parliament on November 21, 2023 and Certain Provisions of the Budget tabled in Parliament on March 28, 2023 will also need to be brought into force. This would be the subject of a separate Governor in Council decision, which would be proposed to coordinate with the final publication of the proposed regulatory Amendments in the Canada Gazette, Part II.

Coming into force

The proposed Amendments relating to sanctioned property reporting would come into force 60 days after their publication in the Canada Gazette, Part II, for sanctions under the United Nations Act, and eight months after their publication in the Canada Gazette, Part II, for sanctions under the Special Economic Measures Act (SEMA) and the Justice for Victims of Corrupt Foreign Officials Act (JVCFOA). The longer implementation time for sanctions under SEMA and the JVCFOA relate to the much larger number of sanctions that exist under these Acts, and the longer implementation period will provide reporting entities with additional time to implement the sanctioned property requirements for sanctions under these Acts. Both implementation periods reflect the government’s desire to implement these measures as soon as possible to address sanctions evasion and adhere to Canada’s international obligations, including under the FATF.

The proposed regulatory measures relating to strengthening the MSB registration framework, white-label ATMs, and real estate (title insurers) would come into force on October 1, 2025. This would allow businesses impacted by the changes to have sufficient time to adjust to the new requirements and update their systems and processes to comply with the new obligations. It will also provide FINTRAC with sufficient time to update and issue guidance and best practices regarding how reporting entities should meet their obligations, undertake outreach activities, and work with industry to establish typologies that can help new reporting entities gain a better understanding of relevant money laundering and terrorist financing risks.

Finally, the proposed regulatory measures relating to real estate (unrepresented parties) and casino disbursement reports will come into force immediately on publication in the Canada Gazette, Part II. Unlike the measures coming into force later, these regulations do not create new obligations, but rather seek to strengthen (real estate – identification of unrepresented and third parties in transactions) and close gaps (casino disbursement reporting) related to existing requirements. Relevant stakeholders have been consulted, are aware of these changes, and have indicated their readiness to implement the changes. FINTRAC is prepared to implement these changes upon final publication in the Canada Gazette, Part II.

Compliance and enforcement

FINTRAC is Canada’s financial intelligence unit and AML/ATF regulator. In this role, FINTRAC will be responsible for ensuring the compliance and enforcement of the proposed regulatory changes, including for measures that create new obligations and for measures that modify existing obligations. FINTRAC provides guidance and resources for reporting entities on its website: https://fintrac-canafe.canada.ca/guidance-directives/1-eng. FINTRAC will update information on its website and raise awareness of the changes with existing reporting entities. FINTRAC will issue new guidance on its website and undertake outreach to white-label ATMs and title insurers, as these would become new reporting entities under the proposed regulations and help these sectors to establish typologies to gain a better understanding of their relevant money laundering and terrorist financing risks. Once the regulations are brought into force, FINTRAC will conduct ongoing supervisory activities, including assessments to ensure compliance. If non-compliance is identified, FINTRAC can impose administrative monetary penalties or take other enforcement actions, as necessary. FINTRAC’s administrative monetary penalties policy is available on its website.

Contact

Erin Hunt
Director General
Financial Crimes and Security Division
Financial Sector Policy Branch
Department of Finance
90 Elgin Street
Ottawa, Ontario
K1A 0G5
Email: fcs-scf@fin.gc.ca

PROPOSED REGULATORY TEXT

Notice is given that the Governor in Council proposes to make the annexed Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Money Services Business Registration) under subsections 9.93(4)^{footnote a} and 11.12(1)^{footnote b} and paragraphs 73(1)(b)^{footnote c}, (c)^{footnote d}, (e)^{footnote c}, (f)^{footnote c}, (j)^{footnote c} and (l)^{footnote c} and 73.1(1)(a)^{footnote e} and (b)^{footnote e} of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act ^{footnote f}.

Interested persons may make representations concerning the proposed Regulations within 30 days after the date of publication of this notice. They are strongly encouraged to use the online commenting feature that is available on the Canada Gazette website but if they use email, mail or any other means, the representations should cite the Canada Gazette, Part I, and the date of publication of this notice, and be sent to Erin Hunt, Director General, Financial Crimes and Security Division, Financial Sector Policy Branch, Department of Finance Canada, 90 Elgin Street, Ottawa, Ontario K1A 0G5 (email: erin.hunt@fin.gc.ca).

Ottawa, June 21, 2024

Wendy Nixon
Assistant Clerk of the Privy Council

Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Money Services Business Registration)

Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations

1 The Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations ^{footnote 1} are amended by adding the following after section 37:

37.1 (1) The documents referred to in subsection 9.93(2) of the Act must be issued no more than six months before the day on which they are reviewed under subsection 9.93(1) of the Act.

(2) For the purposes of subsection 9.93(4) of the Act, a money services business must retain the documents that it obtains under subsection 9.93(1) of the Act for a period of five years after the day on which the records are obtained.

Proceeds of Crime (Money Laundering) and Terrorist Financing Registration Regulations

2 The Proceeds of Crime (Money Laundering) and Terrorist Financing Registration Regulations ^{footnote 2} are amended by adding the following after section 6.01:

6.02 (1) For the purposes of paragraph 11.12(1)(c.2) of the Act, an applicant that is a corporation must include with its application the following documents:

• (a) a certificate of incorporation or the most recent version of any other record that confirms its existence as a corporation and contains its name and address and the names of its directors; and
• (b) a document that sets out the ownership, control and structure of the corporation.

(2) For the purposes of paragraph 11.12(1)(c.2) of the Act, an applicant that is an entity other than a corporation must include with its application the following documents:

• (a) the partnership agreement, articles of association or the most recent version of any other record that confirms its existence and contains its name and address; and
• (b) a document that sets out the ownership, control and structure of the entity.

6.03 (1) The documents referred to in paragraphs 11.12(1)(b) and (c) of the Act must be issued no more than six months before the application for registration is submitted.

(2) A money services business or foreign money services business must keep the documents referred to in paragraphs 11.12(1)(b) and (c) and subsection 11.12(1.1) of the Act for a period of five years after the day on which it submits to the Centre the application for registration that includes the records or, if the records are submitted with a notification sent under subsection 11.13(1) of the Act, five years after the day on which the notification is sent.

3 Item 8.1 of Part B of Schedule 1 to the Regulations is replaced by the following:

8.1 If applicant is a foreign money services business, telephone number and email address of person who resides in Canada and who is authorized to accept, on applicant’s behalf, notices that are served or caused to be served by the Centre under the Act

8.2 If document that sets out applicant’s record of criminal convictions — or, if applicant is an entity, record of criminal convictions of applicant’s chief executive officer, president and directors and persons who own or control, directly or indirectly, 20% or more of entity or shares of entity — or that states that applicant or those persons do not have record is made in language other than English or French,

• (a) country, political subdivision or territory and city where document issued
• (b) name of authority or entity that issued document
• (c) language in which document made
• (d) name of organization that issued translator’s certification and name of translator

4 Part C of Schedule 1 to the Regulations is amended by adding the following after item 5:

6 Date of issuance of documents obtained and reviewed under subsection 9.93(1) of the Act, country, political subdivision or territory and city where they were issued and name of authority or entity that issued them

7 Date on which applicant is to carry out next review under paragraph 9.93(1)(b) of the Act

8 If agent or mandatary is a person, their date of birth and country and political subdivision or territory of birth and of residence

9 If agent or mandatary is a corporation, name, date of birth and country and political subdivision or territory of birth and of residence of its chief executive officer, its president, each of its directors and every person who owns or controls, directly or indirectly, 20% or more of its shares

10 If agent or mandatary is an entity other than a corporation, name, date of birth and country and political subdivision or territory of birth and of residence of its chief executive officer, its president, each of its directors and every person who owns or controls, directly or indirectly, 20% or more of entity

Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations

5 Part 1 of the schedule to the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations ^{footnote 3} is amended by adding the following after item 14:

Item	Column 1 Provision of Act	Column 2 Classification of Violation
14.1	9.91	Serious
14.2	9.92(a)	Serious
14.3	9.92(b)	Serious
14.4	9.93(1)(a)	Serious
14.5	9.93(1)(b)	Serious
14.6	9.93(3)	Serious
14.7	9.93(4)	Minor

6 Part 1 of the schedule to the Regulations is amended by adding the following after item 16:

Item	Column 1 Provision of Act	Column 2 Classification of Violation
16.1	11.12(1.1)	Serious

Coming Into Force

7 These Regulations come into force on the day on which section 182 of the Budget Implementation Act, 2023, No. 1 comes into force, but if they are registered after that day, they come into force on the day on which they are registered.

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