Canada Gazette, Part I, Volume 158, Number 48: Regulations Amending the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations and the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations

November 30, 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 operations of the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). 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, regulatory amendments are needed to implement measures announced in Budget 2022, Budget 2023, Budget 2024 and the 2023 Fall Economic Statement; strengthen the AML/ATF legislative and regulatory framework; address recommendations of the 2018 Parliamentary Review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA); 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.

Trade-based financial crime

Trade-based financial crime (more commonly known as trade-based money laundering [TBML]) is one of the main methods used by criminals to launder the proceeds of crime. TBML is the process of manipulating trade transactions through actions such as misinvoicing or falsely describing goods to disguise the proceeds of crime, move value across borders, and ultimately obscure the illicit origins of money. Financial crime experts estimate that approximately 80% of the movement of illicit financial flows is done through misinvoicing in TBML schemes. TBML schemes also make use of phantom shipments, which occur when no goods are shipped, but payments are made claiming to settle an invoice for a trade and no customs declarations are filed. Bad actors laundering their illicit funds through Canada’s trade system negatively impact Canada’s national security, reputation, economic security, and undermines tax collection. A 2020 CBSA assessment suggested that, at a minimum, hundreds of millions of dollars are laundered through trade to and through Canada each year.

Under existing legislation, the CBSA can assess the admissibility of goods into and out of Canada and ensure that the correct duties and taxes are paid on specified imports. The CBSA is responsible for ensuring that goods that are imported or exported comply with the legal and regulatory requirements set out in the Customs Act and associated regulations. This includes seizing, rejecting, or applying penalties to goods that are being imported or exported if they are not compliant with their legal and regulatory obligations. These powers help to ensure compliance with the Customs Act but do not facilitate the detection, deterrence, and disruption of money laundering, terrorist financing, and sanction evasion. Under this framework, TBML schemes can be structured to be fully compliant with paying necessary duties and taxes as required by the Customs Act but facilitate money laundering nonetheless through misinvoicing. In such cases, even where TBML indicators are present, the CBSA has no legal authority to compel documents or refer cases to law enforcement for investigation as long as the importer or exporter is compliant with customs requirements. For instance, currently, the CBSA can compel records such as receipts, invoices for the purposes of determining compliance with the Customs Act, but they cannot compel these documents for the purposes of detecting and deterring money laundering, terrorist financing and sanctions evasion under the PCMLTFA. This results in a gap that can be exploited by bad actors who, as long as they follow customs laws and regulations, will never be stopped on the goods they are shipping because they are not required to fulfill any sort of reporting obligation that relates to money laundering, terrorist financing, or sanction evasion related to goods. The Proceeds of Crime (Money Laundering) and Terrorist Financing Reporting of Goods Regulations would provide the CBSA with the authority it needs to detect, deter, and disrupt TBML at Canada’s borders.

In Canada’s last FATF evaluation, the FATF identified TBML (“trade fraud”) as a primary money laundering and terrorist financing threat for Canada. FATF Standards require countries to ensure that measures to prevent or mitigate money laundering and terrorist financing are commensurate with the identified risk. In addition to addressing this well-known domestic money laundering and terrorist financing threat, the Proceeds of Crime (Money Laundering) and Terrorist Financing Reporting of Goods Regulations would also improve the effectiveness and technical compliance of the Canada’s AML/ATF Regime.

Information sharing

The emergence of financial technology companies (also known as fintech) and other new market participants to the banking sector has provided consumers with increased options to access financial services. This has also resulted in a move away from traditional financial services and an increase in the use of multiple institutions instead of banking with a single financial institution with a large market share. This phenomenon has been well documented in Canada, as well as internationally by key intergovernmental organizations, such as the FATF.

While consumers benefit from a diversity of choice, this new financial services landscape exposes an ongoing risk to the effectiveness of Canada’s AML/ATF Regime, as private sector entities have a limited ability to share information. Criminals can take advantage of the lack of information-sharing abilities between reporting entities and may attempt to engage multiple institutions at once to facilitate illicit activities and to evade detection, as each institution has a limited and partial view of transactions. Reporting entities are thus limited in their ability to identify and report potential money laundering, terrorist financing, or sanctions-evasion activities.

Information sharing between private entities has been recognized by the FATF as an important tool for disrupting money laundering and terrorist financing. In addition, a made-in-Canada information-sharing framework must take into account both existing privacy legislation, as well as section 8 of the Canadian Charter of Rights and Freedoms, which provides protection against unreasonable search and seizure. To this end, Budget 2024 introduced legislative amendments to the Criminal Code and the PCMLTFA to enhance the ability of reporting entities to share information with each other to detect and deter money laundering, terrorist financing, and sanctions evasion, while maintaining privacy protections for personal information, including an oversight role for the Office of the Privacy Commissioner of Canada (OPC) under regulations. The proposed Amendments are required to operationalize these legislative changes.

Discrepancy reporting

The use of anonymous Canadian shell companies can conceal the true ownership of property, businesses, and other valuable assets. With authorities unable to ascertain their true ownership, these shell companies can become tools for those seeking to launder money, avoid taxes, or evade sanctions. Determining the beneficial owner(s) of a corporate structure can increase transparency and mitigate the financial crime risks posed in these circumstances. Beneficial ownership can differ from legal ownership. A beneficial owner, in this case, is any individual who either directly or indirectly owns or controls 25% or more of a corporation.

The Government has taken action to shed light on the beneficial ownership of corporations operating in Canada. Notably, on January 22, 2024, the federal government launched a public, searchable beneficial ownership registry of federal corporations managed by Corporations Canada. However, the utility of the federal registry is determined by the accuracy of the information that it contains. The Government is thus proposing new regulatory amendments to assist Corporations Canada in maintaining an accurate and reliable beneficial ownership registry that provides good value to users, including law enforcement, FINTRAC, tax authorities, reporting entities, and the public. In order to achieve this objective, the Government is introducing a discrepancy reporting requirement for PCMLTFA-regulated entities to flag discrepancies in beneficial ownership information with the federal registry that they observe in their regular course of business directly to Corporations Canada. This obligation would only apply in cases where reporting entities assess there to be a high risk of money laundering and terrorist financing.

Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, reporting entities are already required to obtain and verify the accuracy of information on the beneficial owners of their corporate clients and undertake enhanced due diligence in cases where they consider there to be a high risk of money laundering and terrorist financing. A discrepancy exists when the beneficial ownership information that a company provides to a reporting entity substantively contradicts what the company disclosed to the public registry.

Factoring companies

Factoring is exclusively a business-to-business financial activity. Factoring companies supply liquidity to a client upfront in exchange for the cash value of a certain amount of the client’s accounts receivable (i.e. invoices) to be collected later by the factor, plus commission and fees. While factoring is the sole line of business for most factoring companies in Canada, several large federally regulated banks also offer factoring services and represent a very large portion of the volume of Canadian factoring transactions.

The report, Updated Assessment of Inherent Risks of Money Laundering and Terrorist Financing in Canada, published in 2023, found that factoring companies are inherently vulnerable to money laundering. Businesses in this sector are associated with the layering phase of money laundering, as well as commercial fraud, and TBML schemes.

The Government announced its intention to regulate factoring companies under the PCMLTFA in Budget 2024. Amendments to the regulations are required to implement this announcement, which would close a regulatory loophole that can be exploited by criminals and create a more level regulatory playing field across businesses in Canada that provide financial services. These amendments are also required to bring Canada into compliance with FATF standards, which require factoring companies to be subject to AML/ATF controls. During the last FATF mutual evaluation of Canada in 2016, the FATF highlighted the lack of requirements for factoring companies as a gap in Canada’s AML/ATF Regime.

Cheque-cashing businesses

Cheque cashing is a financial service that offers clients the ability to cash a cheque immediately and hold free, for a fee. Cheque cashing is a transactional, often face-to-face interaction, that requires clients to provide basic information to facilitate the service. Clients using these businesses tend to be underbanked and members of vulnerable populations (i.e. new Canadians, temporary foreign workers, lower-income Canadians, and those with poor credit).

Businesses that offer cheque cashing frequently combine this activity with other services, such as payday loans and tax rebate discounting. In some cases, these businesses are already registered as money services business with FINTRAC, or serve as agents of a registered money services business, by virtue of the other services they offer; however, cheque cashing as a business line is not currently captured under the Act or its regulations, presenting an inherent vulnerability that can be exploited by criminals. Consultations with industry suggest that many stand-alone cheque-cashing businesses also exist and thus need to be brought under Canada’s AML/ATF framework.

The report, Updated Assessment of Inherent Risks of Money Laundering and Terrorist Financing in Canada, published in 2023, found that cheque-cashing businesses are inherently vulnerable to money laundering. For instance, cheque cashing is vulnerable to fraud and to the layering phase of money laundering, as this service can be used to add distance between illicit proceeds and their criminal source.

The Government announced its intention to regulate cheque-cashing businesses under the PCMLTFA in Budget 2024. Amendments to the regulations are required to implement this announcement, which will close a regulatory loophole that can be exploited by criminals and create a more level regulatory playing field across businesses in Canada that provide financial services. These amendments are also required to bring Canada into compliance with FATF standards, which require cheque-cashing businesses to be subject to AML/ATF controls. During the last FATF mutual evaluation of Canada in 2016, the FATF highlighted the lack of AML requirements for cheque-cashing businesses as a gap in Canada’s AML/ATF Regime.

Financing and leasing entities

The financing and leasing sector in Canada is large and diverse, consisting of both domestic and international lessors and small independent businesses. This sector provides a range of leasing services to individuals and businesses across Canada and internationally. Leasing arrangements can be offered either directly or indirectly through a third-party financial intermediary. Under a direct leasing arrangement, a vendor offers leasing as a financing option and has an internal department that oversees the various aspects of the agreement. Under an indirect leasing arrangement, a financial intermediary purchases an asset from a vendor and allows the lessee to use the asset during the leasing term and after full payment. The lessee deals directly with the financial intermediary. Financing entities can offer a much wider range of services than leasing entities and can also operate directly or indirectly with the client. Both direct and indirect financing and leasing arrangements pose known money laundering risks.

The report, Updated Assessment of Inherent Risks of Money Laundering and Terrorist Financing in Canada, published in 2023,found that financing and leasing arrangements are inherently vulnerable to money laundering. Financing and leasing entities allow a variety of payment methods such as cash, electronic funds transfers, money orders, and cheques, thereby offering opportunities to be used in the placement, layering and integration stages of the money laundering process. Criminals are also known to prefer lease financing because they do not bear a loss if the leased asset is seized by law enforcement.

The assessment also found that the financing and leasing of higher-value products with a high demand, such as automobiles, poses the greatest risk for money laundering amongst the range of services provided by the sector. Conversely, financing and leasing arrangements for lower-value products, such as most other consumer products (i.e. rent to own furniture, electronics), are assessed to pose a low risk of money laundering.

The Government announced its intention to regulate financing and leasing entities under the PCMLTFA in Budget 2024. Amendments to the regulations are required to implement this announcement, which will close a regulatory loophole that can be exploited by criminals and create a more level regulatory playing field across businesses in Canada that provide financial services. These amendments are also required to bring Canada into compliance with FATF standards, which require financing and leasing entities to be subject to AML/ATF controls. During the last FATF mutual evaluation of Canada in 2016, the FATF highlighted the lack of AML requirements for financing and leasing entities as a gap in Canada’s AML/ATF Regime.

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 to 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 AML/ATF Regime

Canada’s 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, led by the Department of Finance, consists of 13 federal departments and agencies, each with their respective mandates. The Regime is established by federal statutes, including the 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.

The Act also establishes FINTRAC as Canada’s AML/ATF regulator and financial intelligence unit and sets out a role for the CBSA to administer and enforce requirements related to the cross-border movement of currency or monetary instruments valued at $10,000 or more and any associated seizures. The CBSA’s mandate under the PCMLTFA was expanded through the 2023 Fall Economic Statement, which introduced Part 2.1 to respond to the risk of TBML. Part 2.1 includes reporting obligations to the CBSA and a scheme for disclosures from the CBSA to law enforcement and regulators, as well as search and seizure powers to help in administering the new reporting requirement. Several regulations support the PCMLTFA.

International obligations and Regime reviews

Canada is a founding member of the FATF, the global AML/AFT watchdog. This intergovernmental body sets international standards that aim to prevent money laundering, terrorist financing, and the proliferation of weapons of mass destruction, as well as the harm these illegal activities cause to society. As a FATF member, Canada has committed to implementing the FATF standards, as well as to undergo regular mutual evaluations that assess Canada’s technical compliance and operational effectiveness. Canada’s last mutual evaluation (in 2016) concluded that Canada had a strong AML/AFT Regime, which achieved good results in some areas but required further improvements to be fully effective.

The FATF will reassess Canada’s Regime in 2025 pursuant to revised FATF standards that capture emerging risks and place greater focus on operational effectiveness. Countries with poor assessment results can be “grey-listed” by the FATF, which can have serious macroeconomic consequences and reputational damages. The proposed regulations would improve Canada’s adherence to FATF standards and help position Canada positively for the next FATF mutual evaluation.

Strengthening Canada’s AML/ATF Regime

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, Budget 2024, and the 2023 Fall Economic Statement. The regulations would implement 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 enhancements to the CBSA’s authorities to combat trade-based financial crime, which were announced in the 2023 Fall Economic Statement, and implement the new PCMLTFA Part 2.1, which sets out the CBSA’s authorities on the reporting of goods announced in the Fall Economic Statement Implementation Act, 2023;
• implement measures to enhance the ability of reporting entities to share information with each other to detect and deter money laundering, terrorist financing, and sanctions evasion, while maintaining privacy protections for personal information, including an oversight role for the Office of the Privacy Commissioner of Canada, as announced in Budget 2024, and bring into force subsections 11.01(1), 11.01(2) and 11.01(3) and paragraph 73(1)(i.1) of the PCMLTFA;
• establish a framework for reporting discrepancies between information provided to reporting entities and the newly created beneficial ownership registry announced in Budget 2022 and Budget 2023, as provided for by the regulatory-making authority under paragraph 73(1)(c) of the PCMLTFA; and
• extend AML/ATF obligations to factoring companies, cheque-cashing businesses and financing and leasing entities, as announced in Budget 2024, and bring into force amendments made to paragraphs 5(h)(iii) and 5(h.1)(iii) of the PCMLTFA through Budget Implementation Act, 2024, No. 1.

Objective

The objective of the proposed Amendments is to strengthen Canada’s AML/ATF framework, respond to findings of the Cullen Commission, address recommendations from the 2018 Parliamentary Review of the PCMLTFA, and improve Canada’s compliance with international standards ahead of Canada’s FATF mutual evaluation in 2025.

Description

Trade-based financial crime

The Proceeds of Crime (Money Laundering) and Terrorist Financing Reporting of Goods Regulations would implement the new PCMLTFA Part 2.1 (Reporting of Goods). This new regulatory title would require traders (e.g. persons and entities) to declare whether their imported or exported goods are proceeds of crime or are related to money laundering, terrorist financing, or sanctions evasion, and to attest that the goods are in fact being imported or exported in order to combat phantom shipments. Traders would also be required to retain records consistent with the records they already have to maintain for customs and tax purposes and truthfully answer questions related to the import or export of goods when asked by a CBSA border services officer. This could include questions related to the nature, origin, quantity, and value of the goods being imported or exported. The new regulations would also outline alternative reporting options (e.g. reporting via telephone) for individuals who are entering Canada where no physical customs office is available.

The Proceeds of Crime (Money Laundering) and Terrorist Financing Reporting of Goods Regulations would also include seizure and forfeiture rules. Under the proposed framework, the CBSA would have powers to seize and forfeit goods when it has reasonable grounds to believe that the goods are proceeds of crime or related to money laundering, terrorist financing, or sanctions evasion.

In addition, the Proceeds of Crime (Money Laundering) and Terrorist Financing Reporting of Goods Regulations would establish an administrative monetary penalty scheme to promote compliance with the PCMLTFA Part 2.1. Under the proposed approach, contraventions related to reporting, duty to answer, record keeping, and the obligation to provide accurate information would be subject to monetary penalties. The range of penalties, where the person or entity has made full disclosure of the facts when they are made aware of the violation and there is no reasonable ground to believe that the violation was intentionally committed, is from $1 to $500. In any other cases, the penalty would be equal to the value of the goods in question, or to the value of the financial transaction purporting to pay for the goods.

The development of these proposed regulations relied on replicating existing portions of the Customs Act and associated regulations. Although the language of the Proceeds of Crime (Money Laundering) and Terrorist Financing Reporting of Goods Regulations for trade-related financial crime has been modernized to reflect current drafting conventions, the meaning and intent of the customs laws and regulations that have been replicated are unchanged.

Information sharing

The proposed Amendments would implement Budget 2024 legislative amendments made to the PCMLTFA and Canada’s privacy legislation, the Personal Information Protection and Electronic Documents Act (PIPEDA), to enhance the ability of reporting entities to share information with each other to detect and deter money laundering, terrorist financing, and sanctions evasion, while maintaining privacy protections. The proposed Amendments would prescribe an oversight role for FINTRAC and the OPC in a proposed information-sharing framework for entities regulated under the PCMLTFA.

The proposed Amendments would set out the processes on how to share information in a manner that provides for the protection of personal information. The ability to share and exchange information for private entities would be voluntary. The proposed Amendments would not direct private entities to share information as a requirement under the PCMLTFA. Reporting entities that choose to make use of the information disclosure exception would be required to develop Codes of Practice explaining how the disclosure exception will be applied. The proposed Amendments would set out what the Codes of Practice must contain, such as the following:

• (a) Participants subject to the Codes;
• (b) Intended use of the information to be disclosed;
• (c) Type of information to be disclosed;
• (d) Manner in which the information would be disclosed;
• (e) Measures concerning the retention of the information;
• (f) An explanation of how the information complies with the disclosure exception as set out in the proposed Amendments, and how the Codes of Practice provide for substantially the same or greater protection of personal information as is provided under PIPEDA, other than is allowed by the PCMLTFA exception; and
• (g) Any information that is necessary for the evaluation of the Codes of Practice by the OPC.

Reporting entities would be required to provide the Codes of Practice to the OPC for approval and to FINTRAC for comment in advance of use. The proposed Amendments would also permit the OPC to request further information from reporting entities as needed to support its assessment of the Code. The OPC would have a prescribed period of 90 days to approve a Code of Practice, notify the applicant in writing of the decision, and, in the case where approval is not granted, reasons for the decision. The OPC would be able to extend the prescribed period by 15 days. If the OPC does not notify the applicant of its decision within the prescribed deadline, the Code of Practice would be deemed to be approved. FINTRAC, upon receiving Codes of Practice from reporting entities, would be able to provide comments to the entities and to the OPC, which must consider the comments in its decision.

The proposed Amendments would also include procedures for reporting entities to modify the Code of Practice, which would recommence the OPC approval and FINTRAC review processes if the changes are material. Reporting entities would be required to resubmit their Codes of Practice to the OPC for approval and to FINTRAC for comment every five years, regardless of whether any changes were made. Information shared under the Code would be subject to existing processes under privacy law (i.e. PIPEDA).

Discrepancy reporting

Under the PCMLTFA, reporting entities are already required to obtain and verify corporate beneficial ownership information when they verify the identity of an entity. For instance, this would be required when a company seeks to open an account or conduct certain transactions, such as large cash or virtual currency transactions, or large electronic funds transfers. The proposed discrepancy reporting obligation would expand on this provision by requiring reporting entities to report any material discrepancies (i.e. missing beneficial owners, not typos or non-substantive errors) between their records and a company’s registry filings with Corporations Canada. This requirement will only apply when a reporting entity determines that there is a high risk of a money laundering or terrorist financing offence, as they are currently required to do under the PCMLTFA. This obligation would be in line with existing enhanced due diligence requirements applicable for reporting entities in high-risk situations under the PCMLTFA.

Corresponding penalties for non-compliance with these obligations would be introduced in the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations. The proposed violation penalties for obligations specific to discrepancy reporting are classified as minor, with a penalty range from $1 to $1,000 per violation.

Factoring companies

The proposed amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations would prescribe factoring companies as reporting entities under Canada’s AML/ATF Regime. Factoring companies would be required to fulfill record keeping, client due diligence, and transaction-reporting requirements, as well as establish a compliance program. Financial entities (e.g. banks) would also be subject to factoring-specific obligations where they are engaged in the business of providing factoring services. These new requirements are intended to better position FINTRAC and law enforcement to effectively identify the clients of factoring companies to combat financial crime, including money laundering, terrorist financing, and sanctions evasion.

Obligations specific to factoring companies would be introduced in the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations. This includes new requirements to verify the identity of every party with which a factoring company enters into a factoring agreement and keep associated records. Factoring companies would also need to keep a record of payment made by the factoring company to a client for the purchase of an invoice and keep a receipt of funds record for each payment of $3,000 or more received from the payer of a factored invoice. The proposed $3,000 threshold triggering these obligations is consistent with the risk-based approach maintained by Canada’s AML/ATF regulatory framework and creates a level playing field within the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations by aligning with the monetary threshold used for functionally similar obligations in the existing regulations that represent a similar money laundering risk. The proposed Amendments would include an exemption from the requirement to verify identity and keep records for invoices paid by very large, publicly traded corporations, given the low money laundering and terrorist financing risks associated with these companies.

Corresponding penalties for non-compliance with these obligations would be introduced in the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations. These violations are categorized by degree of importance, from minor, to serious and very serious, and assign corresponding penalty ranges from a maximum of $1,000 per minor violation, to $500,000 per very serious violation committed by an entity. For example, this would include a very serious violation for the failure to comply with a ministerial directive, or to make a suspicious transaction report to FINTRAC in the case where a factoring company has reasonable grounds to suspect that a transaction is related to the commission or attempted commission of a money laundering offence. The proposed violation penalties for obligations specific to factoring companies, such as requirements to verify identity and keep records for prescribed factoring transactions, are all classified as minor with a penalty range from $1 to $1,000 per violation.

Cheque-cashing businesses

Persons and entities that provide cheque-cashing services would be regulated as money-services businesses under the PCMLTFA and subject to registration requirements as set out in the Proceeds of Crime (Money Laundering) and Terrorist Financing Registration Regulations. The full suite of obligations for money-services businesses would apply to this sector, including requirements to keep prescribed records, conduct client due diligence, report specified transactions, and establish a compliance program. Obligations specific to cheque cashing as a service would be introduced to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations. This would include a new requirement to verify the identity of a client who cashes a cheque valued at $3,000 or more and to keep associated records regarding the transaction. The proposed $3,000 threshold triggering these obligations is consistent with the risk-based approach maintained by Canada’s AML/ATF regulatory framework and creates a level playing field within the regulations by aligning with the monetary threshold used for functionally similar obligations in the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations that represent a similar money-laundering risk.

Corresponding penalties for non-compliance with these obligations would be introduced in the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations. These violations are categorized by degree of importance, from minor, to serious and very serious, and assign corresponding penalty ranges from a maximum of $1,000 per minor violation, to $500,000 per very serious violation committed by an entity. For example, this would include a very serious violation for the failure to comply with a ministerial directive, or to report a suspicious transaction report to FINTRAC in the case where a cheque-cashing business has reasonable grounds to suspect that a transaction is related to the commission or attempted commission of a money-laundering offence. The proposed violation penalties for obligations specific to the activity of cheque cashing, such as requirements to verify client identity and keep records for prescribed cheque-cashing transactions, are all classified as minor with a penalty range from $1 to $1,000 per violation.

Financing and leasing entities

The proposed amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations would prescribe financing and leasing entities as reporting entities under Canada’s AML/ATF Regime. In order to maintain a risk-based approach to the regulation of this sector, obligations would be scoped to exclude financing and leasing services for low-value consumer products (i.e. rent-to-own furniture, personal electronics, etc.) that are assessed as posing a low risk of money laundering. However, financing and leasing arrangements for business purposes, as well as for consumer automobiles and for goods valued above $100,000 would be included given the high money laundering risk in these subsectors. The $100,000 trigger to incorporate high-value consumer products is consistent with the risk-based approach maintained by Canada’s AML/ATF regulatory framework and seeks to mitigate the high money laundering risks associated with the financing and leasing of high value and luxury consumer products. This threshold also reflects feedback from members of the financing and leasing sector which identified $100,000 as a suitable triggering threshold for anti-money laundering and anti-terrorist financing obligations. Financial entities (e.g. banks) that provide similar financing and leasing services would also be subject to financing and leasing specific obligations for these services.

Financing and leasing entities would be required to fulfill record keeping, client due diligence, and transaction reporting requirements, as well as establish a compliance program. These new requirements are intended to better position FINTRAC and law enforcement to effectively identify the clients of financing and leasing entities to combat financial crime, including money laundering, terrorist financing, and sanctions evasion. Obligations specific to financing and leasing entities would be introduced in the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations. This would include new requirements to verify the identity of every party with which a financing and leasing entity enters into a financing or leasing arrangement and keep associated records. Financing and leasing entities would also need to keep a record of every payment received in service of the financing or leasing agreement from a client.

Corresponding penalties for non-compliance with these obligations will be introduced in the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations. These violations are categorized by degree of importance, from minor, to serious and very serious, and assign corresponding penalty ranges from a maximum of $1,000 per minor violation, to $500,000 per very serious violation committed by an entity. For example, this would include a very serious violation for the failure to comply with a ministerial directive, or to report a suspicious transaction report to FINTRAC in the case where a financing and leasing entity has reasonable grounds to suspect that a transaction is related to the commission or attempted commission of a money laundering offence. The proposed violation penalties for obligations specific to financing and leasing entities, such as requirements to verify identity and keep records for prescribed financing and leasing transactions, are all classified as minor with a penalty range from $1 to $1,000 per violation.

The amendments would include an exemption from the requirement to verify identity and keep records for invoices paid by public bodies and very large, publicly traded corporations, given the low money laundering and terrorist financing risks associated with these entities.

Regulatory development

Consultation

Trade-based financial crime

In June 2023, the Department of Finance launched a public Consultation on Strengthening Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime. The topic of the CBSA’s role in addressing trade-based financial crime was included in the public consultation. While no stakeholder provided extensive comments on this portion of the consultation paper, an individual stakeholder expressed general support stating that Canada’s Regime needs to be expansive in its scope to capture and address different risks and to not be siloed in its approach as methods of laundering money and moving value are often layered and complex.

Information sharing

In June 2023, the Department of Finance launched a public Consultation on Strengthening Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime. The consultation posed specific questions on information sharing, including what information would be most valuable to share amongst reporting entities to support Canada’s AML/ATF Regime. This consultation resulted in 38 submissions related to this topic from academia, consulting firms, professionals, and government regulators and agencies, as well as from industry associations representing sectors regulated under the PCMLTFA, such as banks, life insurance companies, securities dealers, credit unions, casinos, and money services businesses. Overall, submissions by reporting entity sectors on this issue supported actions to enhance their ability to share information to better detect and deter financial crimes, while recognizing the need for guardrails to protect privacy. Specifically, submissions advocated for a new legislated authority to share information for AML/ATF purposes without consent from individuals, and with limits to liability for entities sharing this information in good faith (“safe harbour”), and guardrails around the use of the information to protect privacy rights.

The OPC also made a submission highlighting that privacy protection should be treated as foundational to Canada’s AML/ATF Regime, that proportionality and oversight are important, and that Canada can learn from the models in the United States and the United Kingdom.

This regulatory proposal was also developed in consultation with private sector stakeholders, including representatives from the banking and casino sectors, as well as through engagement with the Advisory Committee on Money Laundering and Terrorist Financing, the Government’s public-private discussion forum on AML/ATF issues consisting of representatives from all PCMLTFA regulated sectors. Targeted stakeholder engagement was also undertaken, including meetings with representatives from reporting sectors.

Discrepancy reporting

The Department of Finance sought stakeholder feedback on beneficial ownership transparency through its 2023 Consultation on Strengthening Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime. In response, all stakeholders who commented on corporate transparency, including reporting entity sector representatives, consultants, academics, not-for-profit organizations, and provincial government agencies, expressed support for a public, searchable beneficial ownership registry of corporations. Stakeholders also expressed the view that mechanisms should be in place to ensure that the registry information is adequate, accurate, and up to date.

In addition to taking into account feedback from the 2023 public consultation, the development of this regulatory proposal included direct engagement with private sector stakeholders, including with the Advisory Committee on Money Laundering and Terrorist Financing. Consultation meetings were held with members of this committee, from December 2023 to May 2024, during which options were presented that involved different scopes of reporting and levels of compliance burden.

Factoring companies

The development of this proposal was informed by consultations with Canadian factoring companies, as well as members of the banking sector, between April and July 2024. This included engagement with two industry associations that represent the sector, the Canadian Chapter of the International Factoring Association, as well as the Canadian Lenders Association, which has factoring companies among its membership.

Stakeholders were generally receptive to the extension of AML/ATF regulations to factoring companies and noted AML/ATF requirements are often informally implemented by the sector by virtue of their business dealings with federally regulated banks. Some stakeholders welcomed this proposal as it would mitigate known money laundering and terrorist financing risks posed by the sector and create a more level playing field across the industry. Members of the sector, however, noted the need for government-produced guidance and risk typologies to assist in fulfilling proposed requirements. The sector also noted that a large proportion of the payers of factored invoices are very large, publicly traded corporations. Taking into account stakeholder feedback, the Government is proposing an exemption from the proposed client due diligence and record-keeping requirements for very large corporations, given the low money laundering risks posed by these businesses. This exemption would reduce the regulatory burden for the sector and align with Canada’s risk-based approach to AML/ATF regulation.

Expanding the coverage of the federal AML/ATF framework to factoring companies was also included in the Department of Finance’s 2023 Consultation on Strengthening Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime and 2018 public consultation paper entitled Reviewing Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime. The 2023 consultation received three stakeholder submissions in response to this proposal, including one from a financial sector industry association, one from a large consulting firm, and one from a member of law enforcement. Submissions noted that factoring companies should be brought under the PCMLTFA, potentially as a category of money service business or as a new reporting entity. Another submission suggested that, instead of factoring companies becoming reporting entities under the PCMLTFA, they could be required to register with FINTRAC without reporting obligations. Such an approach could minimize burden while providing screening criteria to prevent the criminal operation of companies operating in this sector. This proposed approach was not pursued as such requirements would not mitigate the specific money laundering and terrorist financing vulnerabilities posed by this sector under Canada’s risk-based regulatory framework.

Six submissions were received from various stakeholders in 2018 regarding a proposal to make factoring, financing and leasing entities reporting entities under the PCMLTFA. This included submissions from members of the banking, credit union, money services business, and financing and leasing sectors. While several stakeholders expressed support or qualified support for the proposal, most did not mention factoring companies specifically, commenting instead on financing and leasing entities. No stakeholders expressed opposition to the proposal.

Cheque-cashing businesses

The development of this proposal was informed by, and in consultation with, Canadian cheque-cashing companies, as well as members of the banking sector, between April and July 2024. This included engagement with the Canadian Money Service Business Association, which represents various businesses regulated under the PCMLTFA for other activities and that also conduct cheque-cashing services, as well as the Canadian Consumer Finance Association. The Canadian Bankers Association was also consulted on this initiative.

While not expressly included in the Department of Finance’s 2023 Consultation on Strengthening Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime, one response submitted by a financial sector industry association suggested that the Government consider adding cheque-cashing business as a new reporting entity type. The submission noted that while the cheque-cashing sector is not currently covered under the PCMLTFA, cheque cashing is considered a money services business activity under provincial legislation in Quebec.

Some stakeholders noted the known money laundering vulnerabilities associated with cheque cashing and welcomed new regulations to help mitigate these risks and to align Canada’s AML/ATF framework with that of other jurisdictions. One stakeholder noted that a registration scheme for this sector would be beneficial. It was also noted that some AML/ATF-related risk controls are already imposed by members of the sector, but that application is uneven. Stakeholders noted that a large proportion of the sector’s clientele includes members from vulnerable populations and that any proposed obligations would need to weigh this as a consideration.

Taking into account stakeholder feedback, the Government is proposing to regulate cheque-cashing services as a money services business activity, which would require registration with FINTRAC as a regulatory requirement. Moreover, identification verification and record-keeping requirements are being proposed for the cashing of cheques valued at $3,000 or above. This threshold would reduce the regulatory burden for the sector and align with Canada’s risk-based approach to AML/ATF regulation by ensuring that obligations are targeted to higher risk, higher-value transactions, rather than the lower risk, lower-value transactions often conducted by members of vulnerable populations.

Financing and leasing entities

The development of this proposal was informed by consultation with Canadian financing and leasing entities, as well as members of the banking sector, between April and July 2024. This included engagement with the two largest industry associations representing the financing and leasing sector, the Canadian Financing and Leasing Association and the Canadian Lenders Association. The Canadian Bankers Association was also consulted.

Stakeholders were generally open to the extension of AML/ATF regulations to this sector. Several stakeholders noted that some AML/ATF-related risk controls are already imposed by members of the sector by virtue of their business dealings with federally regulated banks, but that application is uneven. These stakeholders thus welcomed the introduction of an AML/ATF regulatory scheme for this sector as it would assist in creating a more level playing field across the industry. However, several stakeholders cautioned that the introduction of regulations would have an outsized impact on small and medium businesses and noted that any regulations would need to be mindful of industry-specific features and circumstances.

Taking into account stakeholder feedback, the Government is proposing to target obligations to the highest-risk activities offered by the sector. Proposed obligations would be scoped to exclude financing and leasing services for most consumer products that are assessed as posing a low risk of money laundering. However, coverage of financing and leasing arrangements for consumer automobiles or other consumer products valued at $100,000 or more would be included, given the high money laundering risk in these subsectors in the Canadian context.

Prior to this targeted engagement, more general feedback was solicited from the public on this topic in 2018. The Department of Finance’s 2018 public consultation paper Reviewing Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime included a proposal to make factoring, financing, and leasing entities reporting entities under the PCMLTFA. Six submissions were received in response to this proposal from various stakeholders, including from PCMLTFA regulated businesses, as well as from members of the financing and leasing sectors. Four stakeholders expressed support or qualified support for the proposal, with one stakeholder noting that the financing and leasing of high-value equipment poses a higher risk for money laundering. Other submissions suggested that the sector presents a low risk of money laundering at the placement stage, as cash is not often accepted, and encouraged the Government to engage industry directly prior to introducing regulations. The Government responded to these comments by working directly with the industry to develop the regulatory policy informing this proposal and targeting proposed regulations to the financing and leasing activities of greatest risk to money laundering and terrorist financing.

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 that are recognized and affirmed in section 35 of the Constitution Act, 1982.

Instrument choice

Trade-based financial crime

Regulations are required to prescribe reporting and record-keeping obligations established in Part 2.1 of the PCMLTFA, as well as to establish an administrative monetary penalty scheme to promote compliance. Non-regulatory options were not considered as these regulations are required to operationalize legislation that has received royal assent. To minimize incremental regulatory burden on traders, reporting and record-keeping obligations would be consistent with existing obligations under the Customs Act and Income Tax Act. Under the status quo scenario, traders would still be required to sign customs declarations and retain records under the Customs Act and Income Tax Act.

Information sharing

Regulations are required to operationalize legislation that permits private-to-private information sharing under Canada’s AML/ATF legislative framework and that has received royal assent. Non-regulatory options were therefore not considered. Regulatory tools for private-to-private information sharing would best allow for alignment with evolving privacy statutes. The proposed Amendments prescribe administrative processes to be followed by reporting entities and government entities, including FINTRAC and the OPC.

Discrepancy reporting

The proposed Amendments would provide a mechanism to keep federal beneficial ownership information accurate and up to date. The status quo would deprive Corporations Canada of a useful tool to ensure the accuracy of the beneficial ownership information in the federal registry, which would not be in line with the FATF standard.

The proposed Amendments build on existing regulatory requirements related to the identification of beneficial owners and measures to apply in high-risk situations, and only constitute an incremental increase in requirements for reporting entities. Therefore, non-regulatory options were not considered; however, other regulatory options were considered, including a wider scope of reporting and associated compliance burden. These options were not pursued due to industry concerns about cost and complexity of implementation.

Other jurisdictions that established a beneficial ownership registry, such as the United Kingdom and members of the European Union, have implemented discrepancy reporting requirements through legislation or regulations. This proposal reflects the risk-based approach adopted by the United Kingdom.

Factoring companies, cheque-cashing businesses, and financing and leasing entities

The proposed Amendments would address money laundering and terrorist financing risks associated with companies operating in the factoring, financing and leasing, and cheque-cashing sectors.

Allowing the status quo to continue would compromise the effectiveness of Canada’s AML/ATF Regime, 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.

Internationally, addressing risks related to factoring companies, cheque-cashing businesses, and financing and leasing entities is a non-discretionary requirement set by the FATF. As per the international standard, requirements must be set out in law or enforceable means, such as regulations, include sanctions for non-compliance, and be issued or approved by a competent authority. The legal authority to issue regulations for factoring companies, cheque-cashing businesses, and financing and leasing entities is already set out in the PCMLTFA, though specific requirements for these sectors must be set out in regulations in order to incorporate these sectors under the Canadian AML/ATF framework. The introduction of new regulatory amendments for these sectors is thus required for Canada to meet its international obligations under the FATF. The FATF has identified the lack of AML regulatory requirements for these sectors as a gap in Canada’s AML/ATF Regime. For this reason, no other instruments were considered.

Regulatory analysis

Benefits and costs

The impacts of the proposed 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 the 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 Amendments is $74.3M over a 10-year period (or $10.5M 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 (2025 to 2034). The benefits of the proposed 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 or 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

Trade-based financial crime

Under the baseline scenario, Canada’s trade system continues to be vulnerable to bad actors looking to launder proceeds of crime through manipulating trade transactions, and Canada continues to suffer economic and reputational harm. Under the regulatory scenario, the CBSA can collect data on goods and lawfully share instances of suspected criminality to law enforcement for prosecution and develop improved solutions to safeguard the trade system. Regulatory costs are mitigated as the new regulatory requirements for reporting goods are consistent with reporting processes currently within the Customs Act and record-keeping provisions in the Customs Act and the Income Tax Act.

Information sharing

Under the baseline scenario, reporting entities would not be able to disclose and collect information with each other for the purpose of detecting and deterring money laundering, terrorist financing, and sanctions evasion. As a result, reporting entities would face more difficulty assessing customer risks and potential suspicious activity. Under the regulatory scenario, reporting entities would be able to use information disclosed to them by other reporting entities under the PCMLTFA exception to identify these risks. This would allow for higher quality reporting to FINTRAC, and a reduction in the volume of low-value reporting. Regulatory costs are mitigated by the fact that it is voluntary for reporting entities to make use of the information-sharing exception. Further, many of the proposed administrative requirements would likely be undertaken by reporting entities in the absence of a specific AML/ATF regulatory requirement, in order for them to be able to demonstrate compliance with existing privacy law. The requirements with respect to oversight by the OPC and FINTRAC are considered to be necessary guardrails for privacy protection.

Discrepancy reporting

Under the baseline scenario, reporting entities would not be required to report discrepancies in beneficial ownership information to the federal registry. While Corporations Canada would have some tools to support the accuracy of the beneficial ownership registry information, they would be missing the contribution that reporting entities can bring given the knowledge of their corporate clients. Under the regulatory scenario, reporting entities would be required to report discrepancies in cases where there is a high risk of money laundering and terrorist financing. Such reporting would further support Corporation Canada’s registry information validation efforts. Regulatory costs are mitigated by the fact that the proposed requirements build on exiting obligations to obtain beneficial ownership information and to apply enhanced risk-based due diligence measures.

Factoring companies, cheque-cashing businesses, and financing and leasing entities

Under the baseline scenario, factoring companies, cheque-cashing businesses, and financing and leasing entities would continue to be unsupervised for AML/ATF purposes, and the money laundering and terrorist financing vulnerabilities faced by these sectors would continue to be unmitigated. Under the regulatory scenario, factoring companies, cheque-cashing businesses, and financing and leasing entities would be required to fulfill AML/ATF obligations (e.g. develop a compliance program, apply customer due diligence measures, keep records, report specified transactions, including suspicious transactions, and follow ministerial directives). Cheque-cashing businesses would also be required to register with FINTRAC as money services businesses. Regulatory costs are mitigated by the fact that many of the proposed administrative and compliance requirements are already performed by companies operating in these sectors in the course of their regular business practices.

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 financing activities.

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. 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 which 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 would 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 would strengthen Canada’s AML/ATF framework and improve its effectiveness by addressing trade-based money laundering risks, facilitating information sharing among regulated private sector entities to better inform their risk assessments and PCMLTFA compliance, improving corporate beneficial ownership transparency, and broadening the scope of reporting entities to include factoring companies, cheque-cashing businesses, and financing and leasing entities.

The proposed Amendments regarding trade-related financial crimes, information sharing, discrepancy reporting, financing and leasing entities, factoring companies, and cheque-cashing businesses 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.

More specifically, the proposed Amendments would result in the following qualitative benefits:

Trade-based financial crime: The additional attestation that will be added to existing customs forms will allow the CBSA to gather and analyze customs and trade data for the purpose of detecting and deterring money laundering, terrorist financing, and sanctions evasion. These amendments will allow the CBSA to act on that intelligence by investigating instances of regulatory non-compliance by asking questions, compelling records, and sharing instances of criminality with law enforcement. These amendments will allow Canada to address a longstanding gap in the regime identified by both the FATF and the Cullen Commission and protect Canada’s economy and trade system from bad actors.

Information sharing: Proposed Amendments allowing private sector entities to share information would help better detect, deter, and disrupt money laundering and terrorist financing, while maintaining appropriate privacy protections for the disclosure of personal information. Currently, criminals can take advantage of a lack of information sharing between reporting entities and may attempt to engage with multiple institutions to facilitate illicit activities, where each institution only has a limited and partial view of transactions. Reporting entities are thus limited in their ability to identify and report potential money laundering or terrorist financing activities. Enhanced private-to-private information sharing can help reporting entities more accurately assess customer risks or identify potential suspicious activity.

Discrepancy reporting: Proposed Amendments requiring discrepancy reporting would help ensure the accuracy of the information available in the federal corporate beneficial ownership registry. This will ensure that law enforcement and other competent authorities have access to reliable information on the beneficial owners of corporations, mitigating the money laundering and terrorist financing risks associated with the use of corporations to conduct these criminal activities.

Factoring companies, cheque-cashing businesses, and financing and leasing entities: Expanding the federal AML/ATF regulatory regime to include factoring companies, cheque-cashing businesses, and financing and leasing entities would mitigate known money laundering risks that can be exploited by criminals and create a more level regulatory playing field across businesses in Canada that provide financial services. These proposed Amendments would also bring Canada into compliance with FATF standards, which require each of these sectors to be subject to AML/ATF controls.

Costs

As a result of the proposed Amendments, businesses and the Government are expected to bear an estimated total present value (TPV) of $74.3M over 10 years (or $10.5M annualized). This includes an estimated TPV of $52.3M in compliance costs and $22M in administrative costs for an estimated total of $74.3M in costs over a 10-year period (or $10.5M annually) to be incurred by businesses and the Government.

Affected businesses include approximately 25 497 existing reporting entities (financial entities, money services businesses, casinos, accountants, life insurers, real estate brokers or sales representatives and real estate developers, securities dealers, and British Columbia notaries); 865 new reporting entities (including members of the factoring, cheque-cashing, and financing and leasing sectors; and 272 060 importers and exporters, customs service providers and carriers).

Impacted government entities include the CBSA, FINTRAC, Corporations Canada, and the OPC. The CBSA is expected to incur an estimated TPV of $505K in costs over a 10-year period (or $72K annually) to administer and ensure compliance with the proposed Amendments. FINTRAC is expected to incur an estimated TPV of $3.3M in costs over a 10-year period (or $475K annually) to administer and ensure compliance with the proposed Amendments. Corporations Canada is expected to incur an estimated $2.7M over a 10-year period (or $388K annualized). The OPC is expected to incur an estimated TPV of $3K in costs over a 10-year period (or $445 annually). A summary of affected stakeholders by the regulatory measure is below.

Table 1: Summary of affected stakeholders by measure

Measure	Stakeholder	Stakeholder type	Number of stakeholders
Trade-based financial crime	Traders, carriers, sufferance warehouses and customs service providers	Business	272 060
	CBSA	Government	1
Information sharing	Various table b1 note a	Business	25 831
	Office of the Privacy Commissioner of Canada, FINTRAC	Government	2
Discrepancy reporting	Various table b1 note a	Business	25 831
	Corporations Canada	Government	1
Factoring companies	Factoring companies	Business	65
Cheque-cashing businesses	Cheque-cashing businesses	Business	600
Financing and leasing entities	Financing and leasing entities	Business	200
Information sharing, discrepancy reporting, factoring, cheque cashing, financing and leasing	FINTRAC	Government	1
Table b1 note(s) Table b1 note a "Various" includes the following approximate breakdown: 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 real estate developers (7 676), security dealers (1 424), and British Columbia notaries (197). Return to table b1 note a referrer

The costs set out in this Regulatory Impact Analysis Statement are informed by a series of assumptions regarding the ongoing and upfront capital and labour costs associated with implementing each proposed regulatory measure. In general, the assumptions were informed by consultations with the affected industry sectors and implicated government agencies, including the CBSA, FINTRAC, and Corporations Canada, as well as previous Regulatory Impact Analysis Statements. Additional details on assumptions and sources are included in the full cost-benefit analysis, available on request.

Table 2: Summary of key assumptions per measure

Measure	Assumption
Trade-based financial crime	Less than 1% of stakeholders impacted by the trade-based financial crime regulations are required to provide records to the CBSA over the course of 5–10 years. This assumption is informed by how often the CBSA currently requests records for customs purposes (ongoing). 30 seconds for traders, carriers, and customs service providers to read the required section for compliance under the PCMLTFA (ongoing). $0 additional cost to maintain records as the requirement is consistent with existing Customs Act and Income Tax Act obligations (ongoing). $254,000 to train CBSA agents affected by the new requirement (one time). $200,000 for the CBSA to update IT equipment (one time). $20,000 for the CBSA to maintain IT equipment (ongoing). 40 hours over the course of one year for the CBSA to develop and guidance for stakeholders (one time). 80 hours for the CBSA to complete internal consultations to inform IT system updates (one time). Assume that the majority of carriers and sufferance warehouses meet small business definition, with plans to request input from stakeholders during prepublication.
Information sharing	Assume that only three reporting entity sectors will participate in the information-sharing framework in the 10-year costing period, as it is voluntary. This assumption is reflected by referring to Reporting Sectors 1, 2, and 3. Assume that Reporting Sectors 1, 2 and 3 will participate in the information-sharing framework with other reporting entities operating in the same sector, and that groups of participants will join the framework at different times. Assume that Reporting Sectors 1, 2 and 3, respectively, develop and update Codes of Practice for their members electing to participate in the information-sharing framework. 100 hours for Reporting Sector 1 to develop a Code of Practice (one time). 100 hours for Reporting Sector 2 to develop a Code of Practice (one time). 100 hours for Reporting Sector 3 to develop a Code of Practice (one time). 10 hours for Reporting Sector 1 to review the Code of Practice (one time). 5 hours for Reporting Sector 2 to review the Code of Practice (ongoing). 30 minutes for Reporting Sector 3 to review the Code of Practice (ongoing). 5–10 minutes for participating reporting entities to submit their Codes of Practice to FINTRAC and the Office of the Privacy Commissioner. 25 hours for FINTRAC to review the Codes of Practice (one time). 50 hours for the Office of the Privacy Commissioner to review and approve the Codes of Practice (one time). $100,000 for Reporting Sectors 1, 2 and 3, respectively, to build IT infrastructure required to engage in code-compliant information sharing (one time). $10,000 for Reporting Sectors 1, 2 and 3, respectively, to maintain IT infrastructure, including for record keeping (ongoing).
	15 minutes for participating reporting entities to request and provide information under the voluntary information-sharing framework (ongoing). 30 minutes for participating reporting entities to keep information-sharing records (ongoing). 15 minutes for participating reporting entities to save records (ongoing). 10 hours for participating reporting sectors to make changes to their Codes of Practice, as necessary (ongoing). 5–10 minutes for participating reporting sectors to submit changes to their Codes of Practice to the Office of the Privacy Commissioner and FINTRAC (ongoing). 1 hour for FINTRAC to review changes to the Code of Practice (ongoing). 1 hour for the Office of the Privacy Commissioner to review changes to the Code of Practice (ongoing). 5–10 minutes for a reporting sector, to resubmit their Codes of Practice to FINTRAC and the Office of the Privacy Commissioner for review every five years (ongoing). 10 hours for a reporting sector to review its Codes of Practice prior to submitting them for the five-year review (ongoing). 3 hours for the Office of the Privacy Commissioner and FINTRAC to review the Code of Practice as required every 5 years (ongoing).
Discrepancy reporting	75 hours for reporting entities to modify the compliance program for medium and large businesses (one time). 5 hours for reporting entities to modify their compliance program (one time). $500 to maintain and store receipts for medium and large businesses (ongoing). $50 to maintain and store receipts for small businesses (ongoing). 6 minutes to save records related to discrepancy reporting (ongoing). 75 hours for IT set-up to submit reports to Corporations Canada for medium and large businesses (one time). 5 hours for IT set-up to submit reports to Corporations Canada for small businesses (one time). $550,000 for IT set-up for Corporations Canada (one time). $33,347 for Corporations Canada for maintaining IT infrastructure (ongoing). 15 minutes for submitting discrepancy reports for small, medium and large businesses (ongoing). 4 hours for audit preparation for FINTRAC for medium and large businesses (ongoing). 2 hours for audit preparation for FINTRAC small businesses (ongoing). 32 hours for new employees at Corporations Canada to address new discrepancy reports (ongoing).
Factoring companies, cheque-cashing businesses, and financing and leasing entities	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 medium and large firms and 16 hours for small firms to set up IT systems for reporting to FINTRAC (one time). $10,000 for large businesses, and $2,500 for small businesses to invest in storage capacity required for record keeping (one time). 32 hours for large businesses, and 16 hours for small businesses to prepare and comply with FINTRAC audit (ongoing). $134,000 for FINTRAC to administer and ensure compliance for financing and leasing entities and factoring companies (ongoing). 1 hour to save all required documentation (ongoing).
Cheque-cashing businesses	30 minutes to register as a money service business with FINTRAC (including re-registration every two years) (ongoing). $296,000 for FINTRAC to administer and ensure compliance for cheque-cashing companies (ongoing).

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

Trade-based financial crime

The TPV of costs associated with implementing the new regulations on reporting of goods is $11.1M over 10 years (or $1.5M annualized). Costs arise from the following:

• Ongoing cost for traders, carriers, and customs service providers to attest to PCMLTFA compliance (TPV: $0)
• One-time upfront updates to IT equipment for the CBSA (TPV: $168,474)
• One-time upfront internal consultations for IT updates within the CBSA (TPV: $3,741)
• Ongoing costs for maintaining IT equipment for the CBSA (TPV: $118,329)
• Upfront costs for training CBSA staff on new regulatory authorities (TPV: $213,962)
• Ongoing cost of providing records to the CBSA upon request (TPV: $10,683,777)
• Upfront cost for the CBSA to develop guidance for stakeholders on their new reporting obligations (i.e. developing departmental memoranda) [TPV: $1,340]
• The ongoing cost of maintaining records related to goods (TPV: $0)

Information sharing

The TPV of costs associated with implementing the voluntary information-sharing framework for reporting entities is $2M over 10 years or ($281,164 annualized). Costs arise from the following:

• One-time upfront cost to Reporting Sectors 1, 2, and 3 to develop a Code of Practice (TPV: $10,367)
• One-time upfront cost to Reporting Sector 1 to review the Code of Practice development (TPV: $16,647)
• One-time upfront cost to review the Code of Practice by FINTRAC (TPV: $1,169)
• One-time upfront cost to review and approve of the Code of Practice by the OPC (TPV: $2,338)
• One-time upfront cost to build the IT infrastructure required to engage in code-compliant information sharing for Reporting Sectors 1, 2 and 3: (TPV: $204,357)
• Ongoing costs for maintaining information-sharing IT infrastructure for Reporting Sectors 1, 2, and 3 (TPV: $108,416)
• Ongoing costs for Reporting Sector 1 potentially participating in information sharing (TPV: $471,661)
• Ongoing cost for FINTRAC in the event that they have to review any updates to a Code of Practice made by a reporting entity or reporting sector (TPV: $738)
• Ongoing costs for OPC in the event that they have to review any updates to a Code of Practice made by a reporting entity or reporting sector (TPV: $738)
• Ongoing costs if Reporting Sector 2 participates in information sharing (TPV: $69,685)
• Ongoing costs if Reporting Sector 3 participates in information sharing (TPV: $165,825)
• One-time upfront costs for Reporting Sector 3 to review the Code of Practice (TPV: $10,547)
• One-time upfront costs for Reporting Sector 2 to review the Code of Practice (TPV: $4,432)
• Ongoing costs for Reporting Sectors 1, 2 and 3 for record keeping (TPV: $762,167)
• Ongoing costs for Reporting Sectors 1, 2, and 3 for the process of saving records (TPV: $146,463)
• Ongoing costs for Reporting Sectors 1, 2 and 3 if they provide updates to the regulator on the Code of Practice (TPV: $2,418)
• Ongoing costs to Reporting Sectors 1, 2, and 3 when they submit changes to the OPC (TPV: $24)
• Ongoing costs to Reporting Sectors 1, 2, and 3 when they submit changes to FINTRAC (TPV: $24)
• Ongoing costs for Reporting Sectors developing input for mandatory resubmission to OPC and FINTRAC for 5-year review (TPV: $948)
• Ongoing cost for FINTRAC to review the Code of Practice every 5 years (TPV: $52)
• Ongoing cost for OPC to review and approval the Code of Practice every 5 years (TPV: $52)
• Ongoing cost for Reporting Sectors 1, 2 and 3 to submit the Code of Practice for review to the OPC and FINTRAC every 5 years (TPV: $9)

Discrepancy reporting

The TPV of costs associated with implementing the new obligations on discrepancy reporting is $40M over 10 years or $5.6M annualized. Costs arise from the following:

• One-time upfront cost for all reporting entities under the PCMLTFA to modify compliance program for Discrepancy Reporting (TPV: $7,322,670)
• Ongoing cost for maintaining and storing discrepancy reporting receipts (TPV: $9,505,089)
• Ongoing cost for saving records related to discrepancy reporting (TPV: $6,146,080)
• One-time upfront cost to build IT infrastructure to submit reports to Corporations Canada (TPV: $7,322,670)
• Ongoing cost to maintaining IT infrastructure for Corporations Canada (TPV: $197,296)
• One-time upfront cost for Corporations Canada IT set up (TPV: $463,304)
• Ongoing cost for submitting discrepancy reports to Corporations Canada (TPV: $6,146.080)
• Ongoing cost for all reporting entities under the PCMLTFA for FINTRAC audit preparation (TPV: $740,020)
• Ongoing cost for additional employees at Corporations Canada to address discrepancy reports (TPV: $2M).

Factoring companies, cheque-cashing businesses, and financing and leasing companies

The TPV of costs associated with implementing the new obligations for factoring companies, cheque-cashing businesses, and financing and leasing companies is $21.2M over 10 years or $3M annualized. Costs arise from the following:

• One-time upfront cost for factoring companies, cheque-cashing businesses, and financing and leasing companies to develop an internal compliance program (TPV: $711,079)
• Ongoing cost for factoring companies, cheque-cashing businesses, and financing and leasing companies for maintaining a compliance program, including training (TPV: $11,986,363)
• Ongoing cost for factoring companies, cheque-cashing businesses, and financing and leasing companies to complete and send required reports to FINTRAC (TPV: $577,644)
• Ongoing cost for factoring companies, cheque-cashing businesses, and financing and leasing companies to update client forms (TPV: $998,864)
• One-time upfront cost for factoring companies, cheque-cashing businesses, and financing and leasing companies to set up IT infrastructure to submit reports to FINTRAC (TPV: $637,258)
• Upfront cost for factoring companies, cheque-cashing businesses, and financing and leasing companies to purchase storage capacity for record keeping (TPV: $2,478,676)
• Ongoing cost for factoring companies, cheque-cashing businesses, and financing and leasing companies for preparation for FINTRAC audit (TPV: $216,224)
• Ongoing cost, every two years for cheque-cashing businesses to register with FINTRAC (TPV: $41,839)
• Ongoing cost for FINTRAC to administer and ensure compliance (TPV: $3,336,883)
• Ongoing cost to save all required documentation relating to new AML/ATF requirements (TPV: $249,716)

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 discrepancy reporting, factoring companies, cheque-cashing businesses, and financing and leasing companies 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.
• The proposed amendments regarding trade-based financial crime will close a longstanding gap in Canada’s AML/ATF regime identified by the FATF and the Cullen Commission. Addressing trade-based financial crime will safeguard Canada’s economy and trade system from bad actors and enhance Canada’s international reputation.
• The proposed amendments regarding private-to-private information sharing will improve risk mitigation by reporting entities, promote higher-quality reporting to FINTRAC, and allow for better intelligence in support of investigations and prosecutions.

Negative impacts

• Storage costs for certain small documents, such as transaction records, are assumed to be accommodated without additional new investments in information technology storage capacity. These costs are expected to be negligible.

Distributional analysis

Businesses are by far the stakeholders most affected by the proposed regulatory Amendments, accounting for approximately 91% of all costs (TPV of costs for businesses is $67.7M; TPV of costs for all stakeholders is $74.3M). The distributional analysis focuses on the different impacts on all stakeholders.

Table 3: Summary of costs for impacted stakeholders
Figures may not add up to totals due to rounding.

Provision	Group	Total (present value)	Annualized value
Trade-related financial crime	Traders	$8,470,642	$1,206,029
	Customs service providers	$124,564	$17,735
	Carriers	$2,051,932	$292,149
	Sufferance warehouses	$36,639	$5,217
	CBSA	$506,377	$72,097
Information sharing	Reporting Sector 1	$1,241,008	$176,692
	Reporting Sector 2	$149,187	$21,241
	Reporting Sector 3	$252,933	$36,012
	FINTRAC	$1,960	$279
	Office of the Privacy Commissioner	$3,129	$445
	Reporting Sector Body 1	$148,442	$21,277
	Reporting Sector Body 2	$88,807	$12,644
	Reporting Sector Body 3	$88,316	$12,574
Discrepancy reporting	All PCMLTFA reporting entities	$37,182,609	$5,293,967
	Corporations Canada	$2,731,172	$388,857
	FINTRAC	$0	$0
New sectors	Cheque-cashing businesses	$11,882,230	$1,691,762
	Factoring companies	$1,312,937	$186,933
	Finance and leasing companies	$4,702,495	$669,529
	FINTRAC	$3,340,226	$475,573
Subtotal — All businesses	All businesses	$67,733,741	$9,643,761
Subtotal — Government	All Government	$6,582,864	$937,251
Total	All stakeholders	$74.3M	$10.5M

Uncertainty and sensitivity analysis

The cost-benefit analysis relies on a number of assumptions, including assumptions regarding the labour cost and/or time it takes to complete certain required activities, as well as the number of incidents of certain requirements. These assumptions are based on consultations with industry and implicated government agencies, including FINTRAC, the CBSA, and Corporations Canada; previous cost-benefit analyses on AML/ATF measures; and other sources. The sensitivity analysis takes the assumptions related to the highest cost for each measure and then determines what the impact would be were these assumptions halved (i.e. “low scenario”) or doubled (i.e. “high scenario”). The specific assumptions subject to sensitivity analysis are as follows:

• The frequency with which persons and entities that import or export goods, or that cause goods to be imported or exported, provide records to the CBSA upon request;
• The percentage of stakeholders that maintains and keeps records for the purposes of information sharing;
• The hours it takes for reporting entities to modify their compliance program for medium and large businesses (one-time) for discrepancy reporting; and
• The hours it takes to maintain the compliance program (ongoing) for cheque-cashing companies, factoring companies and financing and leasing companies.

The requirement to provide records to the CBSA upon request represents the single greatest cost to stakeholders captured under the proposed Regulations for trade-related financial crime. Under the low scenario, it is assumed that 2% of regulated entities will have to provide documents every seven years, and under the high scenario, it is assumed that 2% of regulated entities will have to provide documents every two years. The medium (most likely) scenario is that 2% of importers, exporters, carriers and customs service providers will have to provide documents to the CBSA every five years.

For information sharing, should a reporting entity decide to partake in the policy, the greatest cost is estimated to be record keeping. Under the low scenario, as the proposed information-sharing framework would be voluntary, it is assumed that no stakeholders will partake in the information-sharing option; therefore, they would have no record keeping to undertake, so the cost would be zero. The medium (most likely) scenario estimates that 50% of Reporting Sector 1, 100% of Reporting Sector 2, and 2% of Reporting Sector 3 would participate in the information-sharing framework and be subject to record-keeping costs. Because these assumptions account for full participation from Reporting Sector 2, there is no change in the numbers for Reporting Sector 2 in the high scenario. The values for Reporting Sector 2 are the same in the high scenario as in the medium (most likely) scenario. Under the high scenario for reporting sectors 1 and 3, it is assumed that twice as many reporting entities in the sample sign up to partake in the information-sharing framework (i.e. instead of 50% for Reporting Sector 1, 100% participate in information sharing; and instead of 2% for Reporting Sector 3, 4% participate in information sharing).

In discrepancy reporting, the time estimated for medium and large reporting entities to modify their compliance program to account for this new proposed requirement represents the greatest cost. Under the low scenario, it is assumed that all impacted businesses would take 37.5 hours to modify their compliance program. Under the medium (most likely) scenario, it is assumed that it will take reporting entities 75 hours to modify their compliance program. Under the high scenario, it is assumed that all impacted businesses will take 150 hours to modify their compliance program.

For factoring companies, cheque-cashing businesses, and financing and leasing companies, the time estimated for these new reporting entities to maintain their ongoing compliance program for FINTRAC represents the greatest cost. Under the low scenario, it is assumed that impacted businesses will take approximately 24 hours annually to maintain their compliance program. Under the medium (most likely) scenario, it is assumed that it will take impacted businesses 48 hours to maintain their compliance program. Under the high scenario, it is assumed that impacted businesses will take 96 hours to maintain their compliance program.

Table 4: Summary of sensitivity analysis — Combined total of initiatives

Cost scenario for all initiatives	Total (present value)	Annualized value
Low	$61,189,833	$8,712,055
Medium (actual case)	$74,312,731	$10,580,460
High	$105,479,406	$15,397,656

Small business lens

It is estimated that 134 363 small businesses would be impacted by this regulatory proposal, including

• 105 877 by the new obligations for trade-based financial crime;
• 2 594 by the new obligations for information sharing;
• 25 131 by the new obligations for discrepancy reporting;
• 600 by the new obligations for cheque-cashing businesses;
• 61 by the new obligations for factoring companies; and
• 100 by the new obligations for financing and leasing companies.

The total incremental cost imposed on small businesses is estimated to be $51M (TPV) or $7.2M annualized, which is equivalent to $3,077 annualized per small business impacted (all figures annualized per small business are derived by dividing the annualized value by the number of affected stakeholders). Costs include the following (note that figures may not add up to totals due to rounding):

• TPV of $4.1M or $600K annualized in costs for trade-based financial crime Regulations, which is equivalent to $6 annualized per small business affected;
• TPV of $1.4M or $211K annualized in costs for the voluntary information-sharing framework, which is equivalent to $81 annualized per small business affected;
• TPV of $30.4M or $4.3M annualized in costs for discrepancy-reporting requirements, which is equivalent to $172 annualized per small business affected; and
• TPV of $15M or $2.1M annualized in costs for AML/ATF requirements on factoring, cheque-cashing, and financing and leasing businesses, which is equivalent to $2,818 annualized per small business affected.

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. The new Amendments related to information sharing represent a voluntary framework that would not be required of businesses of any size. Furthermore, the proposed changes relating to discrepancy reporting, factoring companies, cheque-cashing businesses, and financing and leasing companies 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. The Department will therefore provide an extended period of transition time for businesses (i.e. staggered coming into force, as described in the section titled “Coming into force”) to comply with new requirements. While staggering the coming into force does not constitute a special consideration for small businesses alone, it should be noted that impacts on businesses were considered and balanced against the relevant money laundering and terrorist financing risks when the compliance requirements for reporting entities generally, and for businesses that would be impacted by the proposed regulatory Amendments specifically because of the staggered approach of the coming into force for each proposed measure were established.

Small business lens summary

• Number of small businesses impacted: 134 363
• Number of years: 10 (2025 to 2034)
• Price year: 2021
• Present value base year: 2024
• Discount rate: 7%

Table 5: Compliance costs
Figures may not add up to totals due to rounding.

Measure	Description of cost	Present value	Annualized value
Information sharing	Reporting Sector 1 participating in information-sharing framework	$436,723	$62,180
	Reporting Sector 2 participating in information-sharing framework	$40,344	$5,744
	Reporting Sector 3 participating in information-sharing framework	$162,077	$23,076
	Reporting Sector 1 reviewing the Code of Practice	$15,414	$2,195
	Reporting Sector 2 reviewing the Code of Practice	$1,830	$260
	Reporting Sector 3 reviewing the Code of Practice	$7,350	$1,046
	Record keeping	$684,818	$97,503
	Saving records (all reporting sectors)	$134,114	$19,095
Discrepancy reporting	Maintaining and storing receipts of discrepancy reports	$7,434,328	$1,058,481
	IT Set up to submit reports to Corporations Canada	$5,164,773	$735,347
	Submitting a discrepancy report	$5,979,526	$851,350
Factoring, cheque cashing, financing and leasing	Developing internal compliance program	$625,585	$89,069
	Maintaining compliance program — Training included	$10,545,228	$1,501,403
	Complete reports for submission to FINTRAC	$271,219	$38,615
	Client update forms	$878,769	$125,117
	Setting up IT for reporting to FINTRAC	$500,468	$71,255
	Storage capacity for record keeping	$1,602,610	$228,176
Total	All compliance costs for small businesses	$39,485,176	$4,909,912

Table 6: Administrative costs
Figures may not add up to totals due to rounding.

Measure	Description of cost	Present value	Annualized value
Trade-based financial crime	Providing records to CBSA upon request	$4,157,782	$591,975
Discrepancy reporting	Saving records related to discrepancy reporting	$5,979,526	$851,350
	Audit preparation for FINTRAC	$700,970	$99,802
Factoring, cheque cashing, financing and leasing	Preparation for FINTRAC audit	$169,810	$24,177
Cheque cashing	Registering with FINTRAC	$41,839	$5,957
Factoring, cheque cashing, financing and leasing	Saving records	$219,692	$31,279
	Submit reports to FINTRAC	$204,181	$29,071
Total	All administrative costs for small businesses	$11,473,800	$1,633,611

Table 7: Total compliance and administrative costs for small businesses

Totals	Present value	Annualized value
Total cost (all impacted small businesses)	$51,123,749	$7,278,870
Cost per impacted small business	$21,611	$3,077

One-for-one rule

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

• Proposed Proceeds of Crime (Money Laundering) and Terrorist Financing Reporting of Goods Regulations; and
• Proposed Regulations Amending the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations and the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations.

All costing assumptions are explained in the “Costs” section of this Regulatory Impact Analysis Statement. 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: (ARCHIVED) Employee wages by occupation, annual, 1997 to 2022, inactive. Specifically, all labour costs are based on wages for “finance, insurance, and related administrative occupations” (with an additional 25% overhead), except for wages related to the trade-based financial crimes requirements, which are based on wages for “traders, transport and equipment operators and related occupations” (with an additional 25% overhead), and wages-related information sharing between Reporting Sector 2, which are based on wages for “technical occupations related to natural and applied sciences” (with an additional 25% overhead).

These proposed Amendments implement non-discretionary obligations required for all FATF members and are therefore exempt from the requirement to offset administrative burden under the one-for-one rule. 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). Canada’s AML/ATF Regime will be subject to a FATF mutual evaluation beginning in 2025. In reviewing the regime against the FATF Recommendations for technical compliance, the assessment team will look at the 11 immediate outcomes (IOs) of the Methodology for Assessing Compliance with the FATF Recommendations and the Effectiveness of AML/CFT Systems (PDF), to determine how effective a country’s efforts are in addressing their unique risks. 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. Therefore, the proposed Amendments are non-discretionary, as they are required for Canada to comply with international obligations.

Trade-based financial crime

It is anticipated that the proposed Regulations to implement the requirements to report on goods would result in an annualized increase in administrative costs to all reporting entities of $591,975, which is equivalent to $6 annualized per business affected.

The specific FATF effectiveness standards that the proposed Amendments relate to are IOs 6, 7 and 8. IO 6 requires countries to ensure that financial intelligence and all other relevant information are appropriately used by competent authorities for money laundering and terrorist financing investigations. The CBSA is the most competent authority to detect and deter TBML. The CBSA has produced intelligence on the threat of money laundering through trade and estimated that, at minimum, hundreds of millions of dollars are laundered to and through Canada’s trade system every year. IO 7 requires money laundering offences and activities be investigated, and offenders be prosecuted and subject to effective, proportionate and dissuasive sanctions. These Amendments will allow the CBSA to act on that intelligence by investigating instances of regulatory non-compliance by asking questions, compelling records, and sharing instances of criminality with law enforcement. The Proceeds of Crime (Money Laundering) and Terrorist Financing Reporting of Goods Regulations also allow the CBSA to administer administrative monetary penalties to enforce compliance. IO 8 requires that proceeds and instrumentalities of crime are confiscated. These proposed Regulations allow the CBSA to seize and forfeit goods that are proceeds of crime. The Department of Finance has therefore assessed that regulatory amendments are needed to close this gap in Canada’s compliance with FATF obligations.

Information sharing

It is anticipated that the proposed Amendments to implement a private-to-private information sharing framework do not meet the definition of “administrative burden” on business in the Red Tape Reduction Act.

Discrepancy reporting

It is anticipated that the proposed Amendments to implement a discrepancy reporting framework would result in an annualized increase in administrative costs to all reporting entities of $4.3M, which is equivalent to $172 annualized per business affected.

The specific FATF Standard that these proposed Amendments relate to is Recommendation 24. FATF Recommendation 24 requires countries to ensure that there is adequate, accurate, and up-to-date information on the beneficial ownership and control of legal persons that can be obtained or accessed rapidly and efficiently by competent authorities, through either a register of beneficial ownership or an alternative mechanism. While Canada has recently established a federal beneficial ownership registry, it does not currently have a standardized process built into the AML/ATF framework to ensure that the registry remains accurate and up to date.

These proposed Amendments also support Canada’s adherence to FATF’s IO 5, which requires effective measures to ensure that legal persons and arrangements are prevented from misuse. These proposed Amendments support this objective by ensuring the integrity of the beneficial ownership registry in Canada by requiring reporting entities to report material discrepancies in high-risk situations, ensuring that the information in the registry is accurate.

The Department of Finance has therefore assessed that regulatory amendments are needed to close this gap in Canada’s compliance with FATF obligations.

Factoring companies, cheque-cashing businesses, and financing and leasing companies

It is anticipated that the proposed Amendments would result in an annualized increase in administrative costs to factoring companies, cheque-cashing businesses, and financing and leasing companies of $2.1M, which is equivalent to $2,818 annualized per business affected.

The proposed Amendments to regulate factoring companies, cheque-cashing businesses, and financing and leasing companies under the PCMLTFA are non-discretionary, as they are required to bring Canada into compliance with the FATF Standards as they apply to financial institutions. Among other things, the FATF definition of financial institution applies to entities engaged in the business of factoring (with or without recourse), financial leasing, trading in cheques, and money or value transfer services (MVTS).

There are a number of specific FATF Recommendations which prescribe legislative and regulatory requirements, that these proposed Amendments would meet. These Amendments also relate to obligations under FATF IO 3, which, among other things, assesses how effectively financial institutions implement preventive measures and understand money laundering and terrorist financing risks.

Importantly, FATF Recommendation 1 requires countries to have obligations in place for financial institutions and designed non-financial businesses and professions. These obligations are to require these entities to assess their money laundering and terrorist financing risks and to take action to ensure risks are effectively mitigated, including by applying a risk-based approach to ensure measures are commensurate with risks. Other FATF recommendations related to requirements regarding suspicious transaction reporting, customer due diligence, and record keeping (among others).

During the last mutual evaluation of Canada in 2016, the FATF highlighted the lack of AML/ATF requirements for factoring companies, cheque-cashing businesses, and financing and leasing companies as a gap in Canada’s AML/ATF Regime and deficiency in meeting the FATF recommendations referenced above. The proposed Amendments would directly address this gap and deficiencies.

Regulatory cooperation and alignment

Each of the regulatory proposals included in this RIAS is related to international best practices and non-discretionary international obligations under the FATF. These proposed Amendments would more closely align with over 200 jurisdictions that have also committed to the FATF Recommendations, noting that each country must apply the Recommendations based on their national circumstances. These jurisdictions include Canada’s major trading partners, such as members of the European Union and the United States.

Effects on the environment

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, Fall Economic Statement Implementation Act, 2023, and Budget Implementation Act 2024, No. 1 will also need to be brought into force. This includes PCMLTFA amendments made through Budget Implementation Act, 2024, No. 1 to incorporate the issuing and redeeming of personal cheques as a money service business activity, and amendments that allow for information sharing between reporting entities. It also includes PCMLTFA amendments made through Fall Economic Statement Implementation Act, 2023 to create new Part 2.1 on reporting of goods. These would be the subject of separate Governor in Council decisions, which would be proposed to coordinate with final publication of the proposed regulatory Amendments in the Canada Gazette, Part II.

Coming into force

The proposed regulations related to trade-based financial crime, and the proposed Amendments related to discrepancy reporting, factoring companies, cheque-cashing businesses, and financing and leasing companies 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. This timeline would also provide the relevant government agencies and departments with sufficient time to implement each requirement. For instance, this timeline would provide CBSA with sufficient time to update their internal guidance and issue information on its website to provide importers and exporters with additional information regarding their new obligations. It would 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. It would also allow Corporations Canada to build the reporting systems needed to implement the discrepancy reporting framework.

The proposed Amendments related to information sharing would come into force immediately on publication in the Canada Gazette, Part II. Unlike measures coming into force later, these Amendments do not create new obligations, but create a voluntary information sharing framework that PCMLTFA reporting entities can make use of at their own discretion. Relevant stakeholders, including PCMLTA reporting entities, FINTRAC and the OPC, have been consulted, are aware of these changes, and have indicated their readiness to implement the required framework and to make use of these regulatory changes, where desirable. FINTRAC and the OPC are prepared to ensure compliance with these changes upon final publication in the Canada Gazette, Part II.

Compliance and enforcement

The CBSA is the agency responsible for providing integrated border services that support national security and public safety priorities and facilitate the free flow of persons and goods. In fulfilling this role, the CBSA is responsible for the administration of Part 2 of the PCMLTFA, which requires reporting on the cross-border movement of currency or monetary instruments valued at $10,000 or more and any associated seizures. The CBSA will also be responsible for the new Part 2.1 of the PCMLTFA related to the reporting of goods. In this role, the CBSA will be responsible for ensuring the compliance and enforcement of the proposed Proceeds of Crime (Money Laundering) and Terrorist Financing Reporting of Goods Regulations related to trade-based financial crime. CBSA publishes departmental memoranda on its website that outline the legislation, regulations, policies and procedures that the agency uses to administer its customs and travel operations and provide the public with guidelines: Departmental memoranda. The CBSA will update information on its website by September 1, 2025, and raise awareness of the changes with importers and exporters in advance of the coming into force date of the regulations. Once the Proceeds of Crime (Money Laundering) and Terrorist Financing Reporting of Goods Regulations are brought into force, the CBSA will enforce regulatory compliance related to these provisions at ports of entry. If non-compliance is identified, the CBSA would be able to exercise various enforcement tools, including the issuance of administrative monetary penalties.

The OPC oversees compliance with the Personal Information Protection and Electronic Documents Act (PIPEDA), Canada’s federal private-sector privacy law. Once the proposed amendments related to the voluntary information sharing framework are brought into force, the OPC will review the Codes of Practice developed by the reporting entities that chose to make use of the framework. If the Code is deemed deficient in terms of privacy protections, the OPC will provide written deficiencies to reporting entities so the Codes can be modified appropriately and resubmitted for approval.

Corporations Canada, which administers the federal beneficial ownership registry, would be the government entity receiving the discrepancy reports once the proposed amendments come into force. Reporting entities would be able to submit discrepancy reports directly on Corporation Canada’s website, which would include information and instructions on how to report. Once a report is submitted, Corporations Canada would provide reporting entities with an electronic receipt. Upon receiving a discrepancy report on a specific corporation, Corporations Canada will have the power to follow up directly with the corporation to resolve the discrepancy, including by having the registry information corrected if necessary. Corporations Canada has received funding for this purpose and will be ready to implement this reporting requirement upon coming into force.

FINTRAC is Canada’s financial intelligence unit and AML/ATF regulator. In this role, FINTRAC would be responsible for ensuring the compliance and enforcement of the proposed regulatory changes related to information sharing, discrepancy reporting, factoring companies, cheque-cashing businesses, and financing and leasing companies. FINTRAC’s supervisory function is entirely funded from its assessment of expenses funding model to charge reporting entities for the annual cost of its compliance program. FINTRAC provides guidance and resources for reporting entities on its website. This includes both sector-specific guidance, as well as detailed guidance broken down by regulatory requirement. FINTRAC would update this information on its website and raise awareness of the changes with existing reporting entities prior to the new Amendments coming into force. FINTRAC would issue new guidance on its website and undertake outreach to factoring companies, cheque-cashing businesses, and financing and leasing companies, as these would become new reporting entities under the proposed Regulations Amending the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations and the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations and help these sectors to establish typologies to gain a better understanding of their relevant money laundering and terrorist financing risks. New reporting sectors would also be able to consult the existing guidance library available on FINTRAC’s website prior to the publication of the new tailored guidance. Once the Regulations Amending the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations and the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations are brought into force, FINTRAC would 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 the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations and the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations under subsections 73(1)^{footnote a} and 73.1(1)^{footnote b} of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act ^{footnote c}.

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: fcs-scf@fin.gc.ca).

Ottawa, November 21, 2024

Wendy Nixon
Assistant Clerk of the Privy Council

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

Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations

1 Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations ^{footnote 1} is amended by adding the following in alphabetical order:

factor

means a person or entity that is engaged in the business of factoring, with or without recourse against the assignor. (affactureur)

financing or leasing entity

means a person or entity that is engaged in the business of financing or leasing of

• (a) property, other than real property or immovables, for business purposes;
• (b) passenger vehicles in Canada; or
• (c) property, other than real property or immovables, that is valued at $100,000 or more. (entité de financement ou de bail)

passenger vehicle

means a motor vehicle — other than an ambulance, a hearse, a motor vehicle that is clearly marked for policing activities, a motor vehicle that is clearly marked and equipped for emergency medical response activities or emergency fire response activities or a utility truck — that is designed or adapted primarily to carry no more than 10 individuals on highways and streets. (véhicule de tourisme)

2 Paragraph 4.1(c) of the Regulations is replaced by the following:

• (c) if the person or entity is a financing or leasing entity, a real estate broker or sales representative or a real estate developer, the first time that the person or entity is required to verify the identity of the client under these Regulations,

3 The Regulations are amended by adding the following after section 24:

Factors

24.1 A factor is engaged in a business or profession for the purposes of paragraph 5(i) of the Act.

24.11 (1) A factor shall report the following transactions and information to the Centre:

• (a) the receipt from a person or entity of an amount of $10,000 or more in cash in a single transaction, together with the information set out in Schedule 1; and
• (b) the receipt from a person or entity of an amount of $10,000 or more in virtual currency in a single transaction, together with the information set out in Schedule 4.

(2) A factor is not required to report the transaction and information under paragraph (1)(a) if the amount is received from a financial entity or public body or from a person who is acting on behalf of a client that is a financial entity or public body.

24.12 A factor shall keep a large cash transaction record in respect of every amount of $10,000 or more in cash that it receives from a person or entity in a single transaction, unless the amount is received from a financial entity or public body or from a person who is acting on behalf of a client that is a financial entity or public body.

24.13 A factor shall keep a large virtual currency transaction record in respect of every amount of $10,000 or more in virtual currency that it receives from a person or entity in a single transaction, unless the amount is received from a financial entity or public body or from a person who is acting on behalf of a client that is a financial entity or public body.

24.14 A factor shall keep the following records in respect of every factoring agreement that it enters into:

• (a) an information record in respect of the person or entity with whom it enters into the agreement;
• (b) if the information record is in respect of an entity, a record of the name, address and date of birth of every person who enters into the agreement on behalf of the entity and the nature of the person’s principal business or their occupation;
• (c) if the information record is in respect of a corporation, a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation in respect of transactions with the factor;
• (d) a record of the financial capacity of the person or entity with which it enters into the agreement and the terms of the agreement;
• (e) for any payment it makes, a record of
  • (i) the date of the payment,
  • (ii) if the payment is in funds, the type and amount of each type of funds involved,
  • (iii) if the payment is not in funds, the type of payment and its value,
  • (iv) the method by which the payment is made,
  • (v) the name of every person or entity involved in the payment, and
  • (vi) every account number or other equivalent reference number connected to the payment; and
• (f) a receipt of funds record in respect of every amount of $3,000 or more that it receives, unless the amount is received from a financial entity or public body or from a person who is acting on behalf of a client that is a financial entity or public body.

Financing or Leasing Entities

24.15 A financing or leasing entity is engaged in a business or profession for the purposes of paragraph 5(i) of the Act.

24.16 (1) A financing or leasing entity shall report the following transactions and information to the Centre:

• (a) the receipt from a person or entity of an amount of $10,000 or more in cash in a single transaction, together with the information set out in Schedule 1; and
• (b) the receipt from a person or entity of an amount of $10,000 or more in virtual currency in a single transaction, together with the information set out in Schedule 4.

(2) A financing or leasing entity is not required to report the transaction and information under paragraph (1)(a) if the amount is received from a financial entity or public body or from a person who is acting on behalf of a client that is a financial entity or public body.

24.17 A financing or leasing entity shall keep a large cash transaction record in respect of every amount of $10,000 or more in cash that it receives in a single transaction from a person or entity, unless the amount is received from a financial entity or public body or from a person who is acting on behalf of a client that is a financial entity or public body.

24.18 A financing or leasing entity shall keep a large virtual currency transaction record in respect of every amount of $10,000 or more in virtual currency that it receives in a single transaction from a person or entity, unless the amount is received from a financial entity or public body or from a person who is acting on behalf of a client that is a financial entity or public body.

24.19 A financing or leasing entity shall keep the following records in respect of every financing or leasing arrangement that it enters into:

• (a) an information record in respect of the person or entity with which it enters into the arrangement;
• (b) if the information record is in respect of an entity, a record of the name, address and date of birth of every person who enters into the arrangement on behalf of the entity and the nature of the person’s principal business or their occupation;
• (c) if the information record is in respect of a corporation, a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation in respect of transactions with the financial leasing entity;
• (d) a record of the financial capacity of the person or entity with which it enters into the arrangement and the terms of the arrangement; and
• (e) in respect of every payment that it receives under the arrangement, other than a payment received from a financial entity or public body or from a person who is acting on behalf of a client that is a financial entity or public body, a record of
  • (i) the date of the payment,
  • (ii) the name of the person or entity that makes the payment,
  • (iii) the amount of the payment and of any part of it that is made in cash, and
  • (iv) the method by which the payment is made.

4 Section 29.1 of the Regulations is replaced by the following:

29.1 For the purposes of subparagraphs 5(h)(v) and (h.1)(v) of the Act, crowdfunding platform services and cheque-cashing services are prescribed services.

5 Section 36 of the Regulations is amended by adding the following after paragraph (b):

• (b.1) if they cash one or more cheques that total $3,000 or more at the request of a person or entity, a record of
  • (i) the date when each cheque is cashed,
  • (ii) the person’s or entity’s name and address, the nature of their principal business or their occupation and, in the case of a person, their date of birth,
  • (iii) the total amount of the cheque or cheques,
  • (iv) the name of the issuer of each cheque,
  • (v) the number of every account that is affected by the cashing of the cheque or cheques, the type of account and the name of each account holder,
  • (vi) every reference number that is connected to the cashing of the cheque or cheques and that has a function equivalent to that of an account number, and
  • (vii) if the cashing of the cheque or cheques involves virtual currency, every transaction identifier, including the sending and receiving addresses;

6 The Regulations are amended by adding the following after section 93:

Factors

93.1 (1) A factor shall verify,

• (a) in accordance with section 105, the identity of a person in respect of whom it is required to keep a record under section 24.14;
• (b) in accordance with section 109, the identity of a corporation in respect of which it is required to keep a record under section 24.14; and
• (c) in accordance with section 112, the identity of an entity, other than a corporation, in respect of which it is required to keep a record under section 24.14.

(2) Paragraphs (1)(b) and (c) do not apply if the entity is

• (a) a public body;
• (b) a corporation or trust that has minimum net assets of $75 million on its last audited balance sheet, whose shares or units are traded on a Canadian stock exchange or a stock exchange designated under subsection 262(1) of the Income Tax Act and that operates in a country that is a member of the Financial Action Task Force; or
• (c) a subsidiary of a public body referred to in paragraph (a) or a corporation or trust referred to in paragraph (b), whose financial statements are consolidated with the financial statements of the public body, corporation or trust.

Financing or Leasing Entity

93.2 (1) A financing or leasing entity shall verify

• (a) in accordance with section 105, the identity of a person in respect of whom it is required to keep a record under section 24.19;
• (b) in accordance with section 109, the identity of a corporation in respect of which it is required to keep a record under section 24.19; and
• (c) in accordance with section 112, verify the identity of an entity, other than a corporation, in respect of which it is required to keep a record under section 24.19.

(2) Paragraphs (1)(b) and (c) do not apply if the entity is

• (a) a public body;
• (b) a corporation or trust that has minimum net assets of $75 million on its last audited balance sheet, whose shares or units are traded on a Canadian stock exchange or a stock exchange designated under subsection 262(1) of the Income Tax Act and that operates in a country that is a member of the Financial Action Task Force; or
• (c) a subsidiary of a public body referred to in paragraph (a) or a corporation or trust referred to in paragraph (b), whose financial statements are consolidated with the financial statements of the public body, corporation or trust.

7 (1) Subsection 95(1) of the Regulations is amended by adding the following after paragraph (a.1):

• (a.2) requests that they cash one or more cheques that total $3,000 or more;

(2) Subsection 95(3) of the Regulations is amended by striking out “or” at the end of paragraph (b), by adding “or” at the end of paragraph (c) and by adding the following after paragraph (c):

• (d) that requests that they cash one or more cheques that total $3,000 or more.

(3) Subsection 95(4) of the Regulations is amended by striking out “or” at the end of paragraph (b), by adding “or” at the end of paragraph (c) and by adding the following after paragraph (c):

• (d) that requests that they cash one or more cheques that total $3,000 or more.

8 Subsection 105(7) of the Regulations is amended by adding following after paragraph (h):

• (h.001) in the cases referred to in paragraphs 93.1(1)(a) and 93.2(1)(a), at the time the record is created;

9 Subsection 109(4) of the Regulations is amended by adding the following after paragraph (g):

• (g.1) in the cases referred to in paragraphs 93.1(1)(b) and 93.2(1)(b), at the time the record is created;

10 Subsection 112(3) of the Regulations is amended by adding the following after paragraph (g):

• (g.1) in the cases referred to in paragraphs 93.1(1)(c) and 93.2(1)(c), at the time the record is created;

11 Section 120.1 of the Regulations is replaced by the following:

120.1 (1) The following persons and entities shall take reasonable measures to determine whether a person with whom they enter into a business relationship is a politically exposed foreign person, a politically exposed domestic person, a head of an international organization, a family member — referred to in subsection 2(1) — of one of those persons or a person who is closely associated with a politically exposed foreign person:

• (a) a factor;
• (b) a financing and leasing company;
• (c) a British Columbia notary public;
• (d) a British Columbia notary corporation;
• (e) an accountant;
• (f) an accounting firm;
• (g) a real estate broker or sales representative;
• (h) a real estate developer;
• (i) a mortgage administrator;
• (j) a mortgage broker;
• (k) a mortgage lender;
• (l) a dealer in precious metals and precious stones; and
• (m) a department or an agent of His Majesty in right of Canada or an agent or mandatary of His Majesty in right of a province.

(2) A person or entity referred to in any of paragraphs (1)(a) to (m) shall periodically take reasonable measures to determine whether a person with whom they have a business relationship is a politically exposed foreign person, a politically exposed domestic person, a head of an international organization, a family member — referred to in subsection 2(1) — of one of those persons or a person who is closely associated with a politically exposed foreign person.

(3) A person or entity referred to in any of paragraphs (1)(a) to (m) shall take reasonable measures to determine whether a person from whom they receive an amount of $100,000 or more, in cash or in virtual currency, is a politically exposed foreign person, a politically exposed domestic person or a head of an international organization, or a family member — referred to in subsection 2(1) — of, or a person who is closely associated with, one of those persons.

(4) If a person or entity referred to in any of paragraphs (1)(a) to (m) — or any of their employees or officers — detects a fact that constitutes reasonable grounds to suspect that a person with whom they have a business relationship is a politically exposed foreign person, a politically exposed domestic person or a head of an international organization, or a family member — referred to in subsection 2(1) — of, or a person who is closely associated with, one of those persons, the person or entity shall take reasonable measures to determine whether they are such a person.

12 Subsection 131(3) of the Regulations is replaced by the following:

(3) For greater certainty, although items in Schedules 1 to 7 are described in the singular, a person or entity shall report all known information that falls within an item.

13 Subsection 138(2) of the Regulations is replaced by the following:

(2) Every person or entity that is subject to subsection (1) shall take reasonable measures to confirm the accuracy of the information when it is first obtained under that subsection and in the course of ongoing monitoring of business relationships. In the case of information that is related to a corporation incorporated under the Canada Business Corporations Act, the person or entity shall consult information that is made available to the public under section 21.303 of that Act if they consider, based on a risk assessment referred to in subsection 9.6(2) of the Act, that there is a high risk of a money laundering offence or terrorist activity financing offence.

14 The Regulations are amended by adding the following after section 138:

138.1 (1) Every person or entity that identifies a material discrepancy between the information that they obtain under paragraphs 138(1)(a) and (d) and the information that they consult in accordance with subsection 138(2) shall

• (a) report the discrepancy to the Director appointed under section 260 of the Canada Business Corporations Act within 15 days after the day on which the discrepancy is identified, together with the information set out in Schedule 7; and
• (b) keep a copy of any acknowledgement of receipt of the report.

(2) A person or entity is not required to report under paragraph (1)(a) if the material discrepancy is resolved within 15 days after the day on which it is identified.

(3) For the purposes of this section, a material discrepancy does not include a discrepancy that arises from

• (a) an error in spelling or a minor variation in a name or address;
• (b) the use of a service address in one information source and a residential address in another;
• (c) the fact that information is not available to the public due to an exception or exemption under subsection 21.303(2) or (3) of the Canada Business Corporations Act; or
• (d) the fact that information that is made available to the public under section 21.303 of the Canada Business Corporations Act is about persons who are not referred to in paragraph 138(1)(a) of these Regulations, or vice versa.

15 (1) Subsection 152(1) of the Regulations is replaced by the following:

152 (1) The requirement to report information set out in any of Schedules 1 to 7 does not apply in respect of information set out in an item of that Schedule that is not marked with an asterisk if, after taking reasonable measures to do so, the person or entity is unable to obtain the information.

(2) Subsection 152(3) of the Regulations is replaced by the following:

(3) For greater certainty, a person or entity is not required to report information set out in any item of Schedules 1 to 7 that is not applicable in the circumstances.

16 The portion of subsection 154(2) of the Regulations before paragraph (a) is replaced by the following:

(2) Sections 12 to 14, 22, 24.14, 24.19, 29, 43, 45 and 52, subsection 58(1), sections 64, 74, 82, 86 to 89, 92, 94, 96, 97 and 100, subsection 101(1) and sections 102 to 104, 116, 117, 119 to 120.2 and 123 do not apply in respect of

17 The Regulations are amended by adding the following after Part 7:

PART 8
Disclosure, Collection and Use of Personal Information

Definition of Commissioner

158 In this Part, Commissioner means the Privacy Commissioner appointed under section 53 of the Privacy Act.

Code of practice

159 For the purposes of section 11.01 of the Act, a person or entity referred to in that section shall

• (a) establish and implement a code of practice for the disclosure, collection and use of personal information that has been approved by the Commissioner under section 164; and
• (b) ensure that the disclosure, collection and use of personal information is carried out in accordance with the approved code of practice.

Complaints

160 Any person or entity who believes that a person or entity referred to in section 5 of the Act has not complied with an approved code of practice in the disclosure, collection or use of personal information may file a complaint with the Commissioner under Division 2 of Part 1 of the Personal Information Protection and Electronic Documents Act.

Requirements

161 A code of practice shall meet the following requirements:

• (a) it identifies the persons or entities referred to in section 5 of the Act that are subject to the code;
• (b) it describes the types of personal information of an individual that may be disclosed, collected or used without their knowledge or consent;
• (c) it describes the purposes for which an individual’s personal information may be disclosed, collected or used without their knowledge or consent;
• (d) it describes the manner in which an individual’s personal information may be disclosed, collected or used without their knowledge or consent;
• (e) it describes the measures to be taken to ensure the protection of personal information, including measures concerning the retention of such information and the keeping of records;
• (f) it includes information demonstrating that the code complies with the requirements of the Act and provides for substantially the same or greater protection of personal information as that provided under the Personal Information Protection and Electronic Documents Act; and
• (g) it includes any other information necessary for the assessment of the code by the Commissioner.

Application for approval

162 (1) Any person or entity referred to in section 5 of the Act, or any person or entity acting on behalf of persons or entities referred to in that section, may apply to the Commissioner for approval of a code of practice.

Acknowledgement

(2) If the application for approval is made by or on behalf of two or more persons or entities, it shall include an acknowledgement that each of those persons or entities has approved the code and has consented to its submission to the Commissioner.

Additional information

(3) If the information provided by the applicant is insufficient to permit the Commissioner to decide whether the code of practice meets the requirements set out in section 161, the Commissioner may request from the applicant any additional information necessary to make that decision and may suspend the processing of the application until that information is provided.

Code provided to Centre

(4) The applicant shall, no later than the day on which the application for approval is made, notify the Centre of the application and provide it with a copy of the code of practice.

Comments from Centre

(5) The Centre may provide comments on the code of practice to the applicant or the Commissioner, or to both.

Time limit for comments

(6) The Commissioner shall consider the comments provided by the Centre in making a decision with respect to the code of practice, unless the comments are provided more than 60 days after the day on which the application for approval is made.

Time limit for decision

163 (1) The Commissioner shall notify the applicant of their decision no later than 90 days after the day on which an application for approval of a code of practice is made under section 162 and, if the application is refused, shall provide their reasons in writing.

Extension of time limit

(2) The Commissioner may extend the period referred to in subsection (1) by no more than 15 days and, in that case, the Commissioner shall notify the applicant of the extension.

Excluded period

(3) The calculation of the periods referred to in subsections (1) and (2) shall exclude any period during which the processing of the application is suspended by the Commissioner under subsection 162(3).

Approval

164 (1) The Commissioner shall approve the code of practice if the Commissioner is satisfied that it meets the requirements set out in section 161.

Deemed approval

(2) If the Commissioner does not notify the applicant of their decision before the end of the period referred to in subsection 163(1) or, in the case of an extension, the extended period referred to in subsection 163(2), the code of practice is deemed to be approved as of the end of that period.

Notice to Centre

165 The Commissioner shall notify the Centre of any decision to approve a code of practice or refuse an application for approval and of any deemed approval of a code.

Revision to code

166 (1) A person or entity referred to in section 5 of the Act that makes any revision to an approved code of practice shall, as soon as feasible, notify the Commissioner and the Centre of the revision and provide them with a copy of the revised code of practice.

Revision considered significant

(2) The Commissioner may, no later than 30 days after receiving notice of a revision to a code of practice, notify the person or entity that the Commissioner considers the revision to be significant and direct the person or entity to apply for approval of the revised code under section 162.

No revision notice

(3) If the Commissioner has reasonable grounds to believe that a person or entity has revised an approved code of practice but has failed to notify the Commissioner, the Commissioner may direct the person or entity to apply for approval of the revised code under section 162.

Suspension

(4) If a person or entity fails to comply with the Commissioner’s direction, the Commissioner may suspend the approval previously given under section 164 with respect to the code of practice.

Code of practice in effect

167 A person or entity that has revised an approved code of practice shall continue to follow the code as it read when it was previously approved by the Commissioner until

• (a) the Commissioner notifies the person or entity that the revised code meets the requirements set out in section 161, if the person or entity has been directed by the Commissioner to apply for approval of the revised code; or
• (b) the 30-day period referred to in subsection 166(2) ends, if the Commissioner has not notified the person or entity that the revision is considered to be significant.

Renewal of approval every five years

168 A person or entity referred to in section 5 of the Act with respect to whom a code of practice has been approved shall, every five years after the day of the most recent approval of the code, reapply for approval of the code under section 162.

18 Schedule 1 to the Regulations is amended by replacing the references after the heading “SCHEDULE 1” with the following:

(Paragraph 7(1)(a), section 18, paragraphs 24.11(1)(a) and 24.16(1)(a), section 25, paragraphs 30(1)(a) and 33(1)(a), sections 39, 48, 54, 60, 64.2 and 66, paragraph 70(1)(a), section 78, subsection 131(3) and section 152)

19 Schedule 4 to the Regulations is amended by replacing the references after the heading “SCHEDULE 4” with the following:

(Paragraph 7(1)(d), section 19, paragraphs 24.11(1)(b) and 24.16(1)(b), section 26, paragraphs 30(1)(f) and 33(1)(f), sections 40, 49, 55, 61, 64.3 and 67, paragraph 70(1)(d), section 79, subsection 131(3) and section 152)

20 The Regulations are amended by adding, after Schedule 6, the Schedule 7 set out in the schedule to these Regulations.

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

21 (1) Part 2 of the schedule to the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations ^{footnote 2} is amended by adding the following after item 24:

Item	Column 1 Provision of Act	Column 2 Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations	Column 3 Classification of Violation
24.1	9(1)	24.11(1)(a)	Minor
24.11	9(1)	24.11(1)(b)	Minor
24.12	6	24.12	Minor
24.13	6	24.13	Minor
24.14	6	24.14	Minor
24.15	9(1)	24.16(1)(a)	Minor
24.16	9(1)	24.16(1)(b)	Minor
24.17	6	24.17	Minor
24.18	6	24.18	Minor
24.19	6	24.19	Minor

(2) Part 2 of the schedule to the Regulations is amended by adding the following after item 95:

Item	Column 1 Provision of Act	Column 2 Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations	Column 3 Classification of Violation
95.1		93.1	Minor
95.2		93.2	Minor

(3) Part 2 of the schedule to the Regulations is amended by adding the following after item 189:

Item	Column 1 Provision of Act	Column 2 Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations	Column 3 Classification of Violation
189.1		138.1(1)(a)	Minor
189.2		138.1(1)(b)	Minor

Coming into Force

22 (1) Subject to subsection (2), these Regulations come into force on October 1, 2025, but if they are registered after that day, they come into force on the day on which they are registered.

(2) Section 17 comes into force on the day on which section 344 of the Budget Implementation Act, 2024, No. 1, chapter 17 of the Statutes of Canada, 2024, comes into force, but if these Regulations are registered after that day, section 17 comes into force on the day on which these Regulations are registered.

SCHEDULE

(section 20)

SCHEDULE 7

(subsection 131(3), paragraph 138.1(1)(a) and subsections 152(1) and (3))

Report with Respect to Discrepancies in Information on Beneficial Ownership or Control

PART A
Information with Respect to Reporting Person or Entity and Place of Business Where Material Discrepancy Is Identified

• 1* Person’s or entity’s name
• 2* Type of person or entity, as described in any of paragraphs 5(a) to (h.1) and (k) of the Act, or, if person or entity is referred to in paragraph 5(i), (j) or (l) of the Act, type of prescribed business, profession or activity referred to in that paragraph
• 3* Identification number assigned to person or entity by Centre
• 4* Number that identifies place of business
• 5* Address of place of business
• 6* Contact person’s name
• 7 Contact person’s email address
• 8* Contact person’s telephone number

PART B
Information with Respect to Material Discrepancy

• 1* Name of reported company and identifying number on its certificate of incorporation, amalgamation or continuance
• 2* Date on which discrepancy was identified
• 3* Description of discrepancy

Terms of use and Privacy notice

Terms of use

It is your responsibility to ensure that the comments you provide do not:

• contain personal information
• contain protected or classified information of the Government of Canada
• express or incite discrimination on the basis of race, sex, religion, sexual orientation or against any other group protected under the Canadian Human Rights Act or the Canadian Charter of Rights and Freedoms
• contain hateful, defamatory, or obscene language
• contain threatening, violent, intimidating or harassing language
• contain language contrary to any federal, provincial or territorial laws of Canada
• constitute impersonation, advertising or spam
• encourage or incite any criminal activity
• contain external links
• contain a language other than English or French
• otherwise violate this notice

The federal institution managing the proposed regulatory change retains the right to review and remove personal information, hate speech, or other information deemed inappropriate for public posting as listed above.

Confidential Business Information should only be posted in the specific Confidential Business Information text box. In general, Confidential Business Information includes information that (i) is not publicly available, (ii) is treated in a confidential manner by the person to whose business the information relates, and (iii) has actual or potential economic value to the person or their competitors because it is not publicly available and whose disclosure would result in financial loss to the person or a material gain to their competitors. Comments that you provide in the Confidential Business Information section that satisfy this description will not be made publicly available. The federal institution managing the proposed regulatory change retains the right to post the comment publicly if it is not deemed to be Confidential Business Information.

Your comments will be posted on the Canada Gazette website for public review. However, you have the right to submit your comments anonymously. If you choose to remain anonymous, your comments will be made public and attributed to an anonymous individual. No other information about you will be made publicly available.

Comments will remain posted on the Canada Gazette website for at least 10 years.

Please note that communication by email is not secure, if the attachment you wish to send contains sensitive information, please contact the departmental email to discuss ways in which you can transmit sensitive information.

Privacy notice

The information you provide is collected under the authority of the Financial Administration Act, the Department of Public Works and Government Services Act, the Canada–United States–Mexico Agreement Implementation Act,and applicable regulators’ enabling statutes for the purpose of collecting comments related to the proposed regulatory changes. Your comments and documents are collected for the purpose of increasing transparency in the regulatory process and making Government more accessible to Canadians.

Personal information submitted is collected, used, disclosed, retained, and protected from unauthorized persons and/or agencies pursuant to the provisions of the Privacy Act and the Privacy Regulations. Individual names that are submitted will not be posted online but will be kept for contact if needed. The names of organizations that submit comments will be posted online.

Submitted information, including personal information, will be accessible to Public Services and Procurement Canada, who is responsible for the Canada Gazette webpage, and the federal institution managing the proposed regulatory change.

You have the right of access to and correction of your personal information. To seek access or correction of your personal information, contact the Access to Information and Privacy (ATIP) Office of the federal institution managing the proposed regulatory change.

You have the right to file a complaint to the Privacy Commission of Canada regarding any federal institution’s handling of your personal information.

The personal information provided is included in Personal Information Bank PSU 938 Outreach Activities. Individuals requesting access to their personal information under the Privacy Act should submit their request to the appropriate regulator with sufficient information for that federal institution to retrieve their personal information. For individuals who choose to submit comments anonymously, requests for their information may not be reasonably retrievable by the government institution.