Vol. 150, No. 14 — July 13, 2016

Registration

SOR/2016-207 June 30, 2016

PROCEEDS OF CRIME (MONEY LAUNDERING) AND TERRORIST FINANCING ACT

Regulations Amending the Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, 2016

P.C. 2016-667 June 30, 2016

His Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to subsection 73(1) (see footnote a) and paragraphs 73.1(1)(a) (see footnote b) and (b) (see footnote c) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (see footnote d), makes the annexed Regulations Amending the Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, 2016.

Regulations Amending the Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, 2016

Amendments

1 Subsection 68(1) of the Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, 2016 (see footnote 1) is replaced by the following:

68 (1) The portion of subsection 62(1) of the Regulations before paragraph (a) is replaced by the following:

62 (1) Paragraphs 54(a) and (b), 54.1(a), 54.2(a) and 55(a) and (e), subsections 57(1) and 57.1(1) and paragraphs 60(a) and (b) do not apply in respect of

(1.1) The portion of subsection 62(1) of the Regulations before paragraph (a) is replaced by the following:

62 (1) Paragraphs 54(a) and (b), 54.1(a), 54.2(1)(a) and 55(a) and (e), subsections 57(1) and 57.1(1) and paragraphs 60(a) and (b) do not apply in respect of

2 Section 125 of the Regulations is replaced by the following:

125 (1) Subject to subsection (2), these Regulations come into force on June 30, 2016, but if the Regulations Amending the Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, 2016 come into force on a day that is after June 30, 2016, these Regulations come into force on that day.

(2) Subsections 1(1) and (6), sections 2 and 7 to 14, subsections 15(1) and (2), section 16, subsections 22(1), (4) and (5), sections 23 to 26, subsections 27(3) and 28(1), sections 29, 31, 39, 42, 46, 49 and 54, subsections 68(1.1) and (2) and 69(2), sections 75 to 77 and 79, subsections 80(1) and (2) and sections 83, 87 to 98, 108, 109, 111, 113 to 115 and 119 come into force on June 17, 2017.

Coming into Force

3 These Regulations come into force on the day on which they are registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

On June 17, 2016, the Governor in Council made regulatory amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act). These regulations were initially published with a coming into force date one year later than originally intended.

The coming into force for the regulations was inadvertently tied to the Order in Council for the coming into force of the legislative provisions. The result is that stand-alone regulatory provisions that were intended to come into force immediately are inadvertently delayed until June 2017.

Objectives

The objective of this amendment is to remove an additional year delay that is currently written into the Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, 2016. All other impacts mentioned in the June 29, 2016, version of the Regulatory Impact Analysis Statement (RIAS) stand.

Description

This amendment will change the coming-into-force date of the Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, 2016.

Certain provisions need to come into force immediately as they are burden relieving measures and stakeholder groups have been expecting them for some time.

In addition, Canada made a commitment to implement certain Recommendations of the Financial Action Task Force, the international standards to combat money laundering and terrorist financing. Canada’s anti-money laundering and anti-terrorist financing regime was subject to a mutual evaluation by the Financial Action Task Force in 2016. Amending the coming into force provisions would improve compliance with these international standards

This amendment removes a one-year delay that was initially in place. Regulations that were previously set to come into force one year from registration will now come into force on June 30, 2016, or if the amending regulations are registered after, on that later date. Regulations that were set to come into force with a two-year delay will now come into force on June 17, 2017.

For further clarity the chart below outlines a high level description of which regulatory requirements will be coming into force on June 30, 2016, or if the amending regulations are registered after, on that later date, and which will come into force on June 17, 2017.

Regulatory Requirements

Coming-into-force date

Expand the definition of a signature to more broadly include electronic signatures

June 30, 2016, but if the amending regulations are registered after, on that later date

Clarify application of section 63 in the Regulations as it relates to the basis for recognizing an individual

June 30, 2016, but if the amending regulations are registered after, on that later date

Clarify that a reporting entity that relies on an agent to verify client identity on its behalf could use identification measures that were previously undertaken by that agent on behalf of another reporting entity or itself with respect to the same client

June 30, 2016, but if the amending regulations are registered after, on that later date

Expand the designated information that FINTRAC can disclose to disclosure recipients

June 30, 2016, but if the amending regulations are registered after, on that later date

Where a securities dealer is a reporting entity under the Act, any brokers employed by that securities dealer would not be considered reporting entities in their own right

June 30, 2016, but if the amending regulations are registered after, on that later date

Update the circumstances under which an entity is considered to be affiliated with another entity to align with a similar legislative amendment

June 30, 2016, but if the amending regulations are registered after, on that later date

Update the provision dealing with foreign currency conversion to ensure it is done "using" an exchange rate rather than "based" on an exchange rate, to ensure other factors are being considered when converting currency

June 30, 2016, but if the amending regulations are registered after, on that later date

Update the existing list of provisions for which FINTRAC can issue an AMP

June 30, 2016, but if the amending regulations are registered after, on that later date, and delayed one year (varies by provision)

Making a determination for domestic politically exposed person or head of international organization

June 17, 2017

Periodically determine whether existing account-holders are politically exposed foreign persons

June 17, 2017

Extend the time within which a reporting entity must make a determination that a client is a politically exposed foreign person from 14 days to 30 days

June 17, 2017

Clarify the records that must be kept with respect to a client’s credit file

June 17, 2017

Paragraph 71(c) of the Regulations lists the elements that should be considered in a reporting entity’s risk assessment

June 17, 2017

Clarify reporting obligations to improve the financial intelligence that FINTRAC receives

June 17, 2017

Require reporting entities to keep a record of any "reasonable measures" they have taken (as required under the Act)

June 17, 2017

Require reporting entities in a financial conglomerate to, as part of their compliance programs, take into consideration the risks resulting from the activities of their affiliates

June 17, 2017

Update the definition of casino

June 17, 2017

Various technical and consequential amendments

June 17, 2017, and June 30, 2016, but if the amending regulations are registered after, on that later date (varies by measure)

Update the existing list of methods that reporting entities must use to verify the identity of their clients

Transitional (Regulations will now allow the new identification requirements to be used immediately while still allowing the old identification requirements to be utilized for a period of 12 months.)

“One-for-One” Rule

As these amendments only clarify the coming-into-force dates of the regulations as initially intended and do not introduce new or incremental administrative costs, the “One-for-One” Rule does not apply to this amendment.

Small business lens

The small business lens does not apply to this proposal, as there are no costs to small business.

Consultation

Stakeholders commented on the coming-into-force dates on the June 17, 2016, version of the regulations where they were inadvertently set for one year later than planned. These amendments address their concerns by providing clarity and are in line with the original intent.

Stakeholders were extensively consulted with the original set of the regulatory amendments that can be found in the June 29, 2016, publication of the RIAS. This amendment will not result in objections from stakeholders, as the amendment is in line with the original intent of the coming-into-force provisions.

Rationale

This amendment to the Regulations is needed to ensure the Government’s commitments to combating money laundering and terrorist financing are not unduly delayed.

Stakeholders and the international community are expecting these amendments to come into force one year earlier than what was published. There are no additional impacts, costs or burden as a result of this change.

Implementation, enforcement and service standards

The regulatory amendment will be implemented on June 30, 2016, but if the amending regulations are registered after, on that later date. FINTRAC has already issued necessary guidance for some of these measures. Additional measures will contain its originally intended one year delay of coming into force. FINTRAC will be following up with additional guidance.

Contact

Lisa Pezzack
Director
Financial Systems Division
Financial Sector Policy Branch
Department of Finance
90 Elgin Street
Ottawa, Ontario
K1A 0G5
Email: fin.fc-cf.fin@canada.ca