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Federal budget measures aim to toughen money laundering rules

Canadian currency is shown in this file photo.

Kip Frasz/The Canadian Press

The federal government is taking steps to clean up Canada's act when it comes to anti-money laundering and terrorist financing laws, though details about the expected changes are scarce.

The federal budget released Wednesday includes a trio of proposed changes to anti-money laundering laws and regulations "to support a resilient financial sector."

In recent years, Canada has received middling to low marks on a series of reports gauging countries' effectiveness at combatting financial crimes such as money laundering and terrorist financing. Varying estimates suggest that as much as billions of dollars – or even tens of billions – may be laundered through Canada each year.

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Last fall, an international evaluation by the Financial Action Task Force (FATF), an intergovernmental body that sets worldwide standards, gave Canada a lukewarm review. The report said Canada had made "significant progress" since 2007, but also raised several concerns about gaps in the country's efforts.

A senior manager in the financial intelligence unit at one of Canada's largest banks said the budget's new measures, "although brief," are "a step in the right direction."

Firstly, the federal government will give the Department of National Defence and Canadian Armed Forces more information to fight crime and detect threats by allowing the country's watchdog for financial transactions – the Financial Transactions and Reports Analysis Centre of Canada, or FinTRAC – to share data with them. But the legislation will set a high bar to access the information.

The government also plans to work with provinces and territories on a national strategy that would make it easier to reveal the beneficial owners of corporations and other legal entities.

And finally, the budget promises unspecified technical changes to strengthen the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, or PCMLTFA, to "ensure the legislation functions as intended."

"That basically is bureaucratic jargon that we may need to start clamping down more on financial institutions because they're not complying with the legislation," said Stephen Schneider, an associate professor of criminology at Saint Mary's University, who studies money laundering.

The latter two measures, to improve transparency around ownership and retool the PCMLTFA "have got to be Parliament's intended response to the findings in the last FATF report," said Bruce McMeekin, a corporate lawyer at J. Bruce McMeekin Law who specializes in anti-money laundering compliance issues.

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Last year, the FATF raised "important concerns" about identifying beneficial ownership, concluding "little is done by [Canadian financial institutions] to verify the accuracy of beneficial ownership information."

It is too soon to know whether the proposed changes will move the needle on enforcement, or make compliance any easier. "Really, the proof is in the pudding. It's really how they flesh out these very broad principles and guidelines that they laid out in the budget," Prof. Schneider said.

Matthew McGuire, an expert in financial crime and advisor at consulting firm The AML Shop, largely dismissed the changes as "window dressing." But he expects that allowing financial intelligence disclosures to Defence and the Armed Forces will "likely lead to expectations on [financial institutions] to pay more attention to threats to the security of Canada beyond terrorist financing and money laundering."

According to Mr. McGuire, Canada's domestic banks collectively spend about $1.3-billion each year to find and combat money laundering.

Canada is also keen to show progress after a 2013 report from Canada's Senate raised serious questions about the country's efforts to combat money laundering. The Senators concluded there was a lack of "clear and compelling" evidence that Canada's regime was detecting and deterring money laundering and terrorist financing.

As recently as 2016, the U.S. State Department pegged Canada as a country "of primary concern" for money laundering – a category that also includes countries such as the U.S., Russia, Iran and the Cayman Islands.

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About the Author
Banking Reporter

James Bradshaw is banking reporter for the Report on Business. He covered media from 2014 to 2016, and higher education from 2010 to 2014. Prior to that, he worked as a cultural reporter for Globe Arts, and has written for both the Toronto section and the editorial page. More

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