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Strengthening Canada’s anti-money laundering regime

Feb 03, 2020 • 6 min

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By Canadian Bankers Association

Canada does not stand alone in its fight against money laundering. Countries the world over are doubling their efforts to combat financial crime and stem the flow of illicit funds in the global economy. Because money laundering is a threat to the good functioning of any country’s financial system, all parts of Canada’s anti-money laundering (AML) regime must work closer together and with shared purpose.

The banking sector’s central role in the Canadian economy gives it hands-on experience and insight into where the financial system can be strengthened to be more effective in the global fight against money laundering. Banks are ready to act, and they support recent actions and ongoing plans by the federal government to strengthen Canada’s AML and anti-terrorist financing (ATF) regime. This includes measures announced in Budget 2019 aimed at:

  • increasing funding to police and the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to expand operational and investigative capacity;
  • developing the Anti-Money Laundering Action, Coordination and Enforcement Team; and
  • expanding public-private partnership projects to improve the overall efficiency and effectiveness of the regime.

Banks in Canada take the fight against money laundering seriously and devote enormous resources into AML and ATF programs and internal controls. The banking sector, as a whole, also works closely with the Department of Finance, FINTRAC, law enforcement agencies and prudential regulators on projects to identify, prevent and punish those who violate AML and ATF rules and benefit from the proceeds of crime.

While Canada’s AML/ATF regime is generally strong and achieves good results in many areas1 , it requires further improvements to be more effective. Outlined below are two areas where improvements can be made to strengthen our country’s ability to intercept the proceeds of crimes and increase the number of convictions.

Improving beneficial ownership transparency

The CBA and its member banks believe more transparency in beneficial ownership is essential. Recent amendments to the Canada Business Corporations Act, which took effect in July 2019, will help improve beneficial ownership recordkeeping requirements and give law enforcement broader access to information relating to shareholders of a corporation. This is a promising step forward and more closely aligns Canada to best practices in other jurisdictions. However, more can be done.

Beneficial ownership registry

The beneficial ownership information contained in a national electronic registry should, at a minimum, align with the information set out by the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations. As regulated entities (REs), financial institutions (FIs) should have access to the registry and we encourage the federal government to include all federal and provincial registered entities so that banks can be better equipped to meet their regulatory obligations. Further, we support the view that beneficial owners of foreign companies that own real estate in Canada should be included in the registry, as well.

Enhanced information sharing

The Canadian banking industry believes that REs, FINTRAC, law enforcement and regulators each play an integral role in combatting money laundering and terrorist financing in Canada. That said, it is essential that these organizations have the requisite authorities and protections under Canadian law to facilitate the sharing of information, including financial intelligence and relevant information related to ongoing investigations.

Improving the flow of information between law enforcement, regulators and REs would greatly enhance Canada’s AML/ATF regime. Opening the doors to broader exchanges of information among key players would facilitate more targeted disruption of illicit activities and expand the scope and depth of the work of law enforcement and intelligence units. The CBA and its members have long advocated for improved sharing of information, both public-to-private and private-to-private.

Public-to-private

There are many benefits from strengthening information sharing between public and private organizations, from immediate feedback loops on the effectiveness of typologies to actionable insight on new trends and developments. In turn, this would enable an adaptable intelligence-led approach with faster response to threats and disruption of money laundering and terrorist financing offences.

Moreover, an arrangement between the financial sector and the applicable government agencies to exchange and analyze strategic and tactical information would allow for better detection, prevention and disruption of money laundering and terrorist financing.

Private-to-private

Equally important is private-to-private information sharing that enables organizations, including FIs, to share information for the purposes of investigating, preventing and reporting potential money laundering and terrorist financing activities. To that end, banks in Canada support recent recommendations by the House of Commons Standing Committee on Finance, and other groups, that the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and Personal Information Protection and Electronic Documents Act (PIPEDA) be amended to allow for a broader range of instances where financial institutions can share information beyond fraud, including money laundering and terrorist financing, while balancing the privacy expectations of law-abiding citizens.

Models from other jurisdictions

While we should consider our uniquely Canadian context, we encourage the federal government to consider adopting a similar model as the United Kingdom’s Joint Money Laundering Intelligence Taskforce (JMLIT), which has gained international approval from the Financial Action Task Force, the international standard-setter for AML. A JMLIT type of model would help create a dynamic and continuous flow of communication among REs, FINTRAC and law enforcement, and would allow for strategic and tactical information sharing thereby creating effective and efficient responses to the threats and disruptions of money laundering and terrorist financing offences.

Safe harbours for sharing

Critical to any information sharing regime, however, is the inclusion of a safe harbour provision in the PCMLTFA. Such a provision could be similar to what is included in relevant legislation in the United States, which provides statutory protection from liability and regulatory enforcement, or fines as it relates to the sharing of information, in good faith. Without such protections, organizations would be much less inclined to share information.

Both the UK’s JMLIT and safe harbour provisions in the U.S. are globally-recognized and effective models of information sharing frameworks. Various elements found within these two models could be tailored to the Canadian context and used to further strengthen our ability to protect Canadians, the integrity of our country’s financial system and our compliance with international standards.

1 FATF (2016), Anti-money laundering and counter-terrorist financing measures - Canada, Fourth Round Mutual Evaluation Report, FATF, Paris www.fatf-gafi.org/publications/mutualevaluations/documents/mer-canada-2016.html

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