Ontario police forces worked together on Project Blackhawk, targeting drug trafficking and money laundering.
The federal government wants banks and other financial institutions to apply a lot more scrutiny to their customers to ferret out terrorists and money launderers.
The Finance Department is proposing stricter laws to halt money laundering that would bolster the amount of effort that banks must put into learning about, and monitoring, their customers. Canada's laws have been criticized by international authorities for being too lax, and the government says failing to bolster the regulations could undermine the stability of the country's financial system.
The Canadian Bankers Association said it is too early for it to comment on the proposal, which was released Monday, but experts expect the industry to put up a fight.
"This seems to indicate a much higher obligation to conduct ongoing monitoring, and that level of scrutiny is certainly not what's going on now on a regular account-by-account basis," said Prema Thiele, a partner at law firm Borden Ladner Gervais LLP in Toronto.
"The [banks']systems and infrastructure and compliance procedures are not currently set up for this kind of ongoing monitoring," she said.
The Finance Department is seeking input until Dec. 16 on its proposals, which would alter the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations that deal with establishing the identity of customers.
The department says the strength of any regulations to battle money laundering and terrorist financing hinges in large part on the ability of financial institutions to know their customers, to understand their activities, and to identify potentially suspicious transactions that might be related to money laundering or terrorist financing.
When the global ant-money-laundering agency, the Financial Action Task Force, graded Canada's system in 2008, it said the country was not complying with this basic tenet. The country has made improvements since then, including requiring banks to ensure that documents and information collected under the customer due diligence process are kept up to date. But those changes haven't been enough to earn Canada a compliant rating.
The consultation paper released by the Finance Department Monday said this could hurt Canadian banks overseas if they are seen to be at higher risk of being used by money launderers and terrorists than banks in Europe and other jurisdictions.
Banks in Canada are already required to keep close tabs on certain types of customers. Canada adopted new rules in 2008, requiring banks to monitor customers who are "politically exposed persons," including foreign officials and their families. The rationale was that politicians, ambassadors and heads of state-owned companies have more opportunities than the average customer to engage in corrupt activities.
Banks have also been required to closely watch transactions above certain dollar amounts. But experts say that the new proposals appear to vastly expand the scope of such monitoring, to include regular customers and smaller amounts.
The moves are in keeping with a trend that is seeing regulators place more requirements on financial institutions to monitor their customers, including efforts in the securities industry to ensure that brokerages stay on top of their clients' risk appetites, Ms. Thiele said.
"That sounds all well and good in theory, but to comply in practice is very, very onerous," she said.