Canada Gazette, Part I, Volume 152, Number 23: Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, 2018

June 9, 2018

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: In 2015–16, the Financial Action Task Force (FATF) evaluated Canada’s Anti-Money Laundering and Anti-Terrorist Financing (AML/ATF) Regime for compliance with its standards, and identified a number of deficiencies that Canada needs to address. In addition, in 2014 and 2017, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act) was amended through the Economic Action Plan 2014 Act, No. 1 and the Budget Implementation Act, 2017, No. 1 to strengthen the AML/ATF Regime. Regulatory changesfootnote1 are needed to operationalize some of the legislative changes, strengthen Canada’s AML/ATF Regime, and ensure its measures are aligned with the FATF standards. Description: The proposed amendments to the regulations would strengthen Canada’s AML/ATF Regime by updating customer due diligence requirements and beneficial ownership reporting requirements; regulating businesses dealing in virtual currency; updating the schedules to the regulations; including foreign money service businesses (MSB) in Canada’s AML/ATF Regime; clarifying a number of existing requirements; and making minor technical amendments. Cost-benefit statement: The proposed amendments would result in an estimated $1,867,698 (present value [PV]) in benefits and $61,132,622 (PV) in costs, for a net cost of $59,264,925 (PV) over a 10-year period in 2012 dollars. There are substantial qualitative benefits associated with the amendments that cannot be monetized. The proposed amendments would strengthen Canada’s AML/ATF Regime and improve compliance with the FATF international standards. Meeting these standards improves the integrity of the global AML/ATF framework. Furthermore, the amendments positively impact Canada’s international reputation, and would lead to regulatory efficiencies with other countries’ anti-money laundering and anti-terrorist financing regimes, making it easier for Canadian businesses to operate internationally. “One-for-One” Rule and small business lens: The proposed amendments would result in a total annualized administrative cost increase on businesses, estimated at $463,098. The annualized administrative cost increase per affected business is estimated at approximately $20. However, the proposal is exempt from the requirement to offset under the “One-for-One” Rule, as it implements non-discretionary obligations. The proposed amendments would have nationwide impacts of $1 million or more, and impact small businesses; therefore, the small business lens applies. Domestic and international coordination and cooperation: The proposed amendments would enhance the quality and scope of Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)’s disclosures of financial intelligence to law enforcement and other disclosure recipients, which would better assist them in their investigations. Canada’s AML/ATF Regime is largely consistent with international standards set by the FATF. Although the standards set by the FATF are not legally binding, as a member, Canada is obligated to implement them and to submit to a peer evaluation of their effective implementation. Canada’s last mutual evaluation took place in 2015–16. The FATF’s report outlined a number of deficiencies, which the proposed amendments help to address.

Background

Canada’s AML/ATF Regime

The core elements of Canada’s AML/ATF Regime are set out in the Act. The Act applies to designated financial and non-financial entities (known as “reporting entities” footnote2) that provide access to the financial system and may therefore be susceptible to abuse by criminals seeking to integrate the proceeds of their crimes into the legitimate economy.

The Act sets out obligations that broadly fall into the following four categories: record keeping; verification of the identity of designated persons and entities (e.g. clients with whom the reporting entities conduct business); reporting of suspicious and other prescribed financial transactions (e.g. large cash transactions); and the establishment and implementation of an internal compliance program. The Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (the Regulations) set out how reporting entities are to fulfill these obligations.

FATF

Canada is a founding member of the FATF, an intergovernmental body that sets standards and promotes effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist activity financing and other related threats to the integrity of the international financial system. Although the standards set by the FATF are not legally binding, as a member, Canada is obligated to implement them and to submit to a peer evaluation of their effective implementation.

Not meeting this commitment could lead to a number of sanctions, from enhanced scrutiny measures to public listing and, in the extreme, suspension of membership from the FATF. Furthermore, non-compliance could 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.

In 2012, FATF took steps to enhance its standards. Canada’s last mutual evaluation took place in 2015–16. Although Canada’s AML/ATF Regime is largely consistent with FATF’s standards, the evaluation report outlined a number of deficiencies that Canada needs to address. One of the deficiencies raised by FATF evaluators was compliance with “customer due diligence” requirements (e.g. no requirement to check the source of wealth, or to identify the beneficiary of a life insurance payout).

Customer due diligence measures require that a reporting entity verify the identity of their client, understand the nature of the business relationship, and conduct ongoing monitoring. Strong due diligence measures allow for more effective ongoing monitoring of clients, and help reporting entities to be satisfied that the transactions and/or activities are in line with what they know about their clients. Reporting entities who know their clients and their activities are better able to assess the money laundering and terrorist activity financing risk level of those clients, and to identify and report any suspicious transactions conducted by those clients.

Other deficiencies identified by the FATF include not having a requirement to assess new technologies before their launch, no coverage of open loop prepaid cards, of foreign MSBs, or of businesses dealing in virtual currency.

The outcome of this evaluation was that Canada became subject to what is referred to as the “enhanced follow-up process.” This FATF process exists for countries with significant deficiencies in their AML/ATF regimes. Currently, Canada is required to report annually on its progress toward addressing the deficiencies identified in the 2015–16 mutual evaluation. A number of these deficiencies stem from Canada’s AML/ATF Regime not reflecting the ongoing modernization of the financial sector.

Modernization of the financial sector

Financial technology, or “FinTech,” refers to companies using technology to make financial services more effective and efficient. The various business models used to support or deliver new payment method services (e.g. prepaid cards, Internet and mobile payment services) have the advantage of helping people withdraw and convert funds more quickly than through traditional channels, including conducting international transactions in real time. While providing benefits to consumers, the new business models can complicate monitoring as well as make it difficult for authorities to follow the money trail. Also, transactions conducted through the Internet allow a certain degree of anonymity that can potentially be exploited by money launderers or terrorist activity financiers.

The Act and the associated regulations were originally intended for traditionally offered financial services, and “bricks and mortar” institutions. With the financial industry increasingly moving to the digital world, it is necessary to update the legal framework to ensure no loopholes emerge (e.g. prepaid cards, virtual currency, foreign MSBs) that could be exploited by criminals without stifling innovation in the financial sector.

Prepaid cards

Open-loop prepaid cards (i.e. cards that run on a payment card network and are not restricted for use only at a particular merchant or a group of merchants, such as a shopping centre gift card) provide access to funds that are paid in advance by the cardholder or a third party. These cards are not necessarily connected to a bank account, and the verification of cardholder identity varies from one financial institution to another. The wide variety of funding options also means that the origins of funds are difficult to trace and it is difficult to ascertain whether or not the money is from a legitimate source (e.g. some cards can be anonymously loaded with cash at a third party reseller location, such as a Canada Post office).

Virtual currency

The evolving financial services landscape is further influenced by virtual currencies, especially decentralized digital payment systems, like Bitcoin, that operate outside the traditional financial system. A virtual currency is a medium of exchange that allows for value to be held and exchanged in an electronic, non-physical manner, is not a fiat currency (i.e. the official currency of a country), has the intended purpose of being exchanged for real and virtual goods and services, and allows peer-to-peer transfers.

Virtual currencies can be “centralized,” in that they are issued and controlled by a single company or entity, or “decentralized,” in that there is no central authority that creates or manages it (e.g. Bitcoin). Rather, these tasks are managed collectively by the network of some virtual currency users.

In addition, virtual currencies can be “convertible” or “non-convertible,” depending on whether they can be exchanged for funds. Convertible virtual currencies are vulnerable to abuse for money laundering and terrorist activity financing purposes because they allow greater levels of anonymity, or in some cases complete anonymity, when compared to traditional non-cash payment methods. Virtual currencies can be accessed globally via online or mobile systems. They allow for the rapid transfer of funds within or across borders, oftentimes without any intermediary, are generally characterized by non-face-to-face customer relationships, and can circumvent the physical “brick and mortar” financial system entirely. Due to these characteristics, virtual currencies are increasingly being used to facilitate fraud and cybercrime, and to purchase illicit goods and services on the dark Web.

Foreign MSBs

The Internet and new payment methods provide an opportunity for foreign entities without a place of business in Canada to offer MSB services in Canada. These businesses are at risk of being exploited by money launderers and/or terrorist financiers, but the current AML/ATF framework was not envisioned to capture transactions conducted using non-traditional, Internet-based methods. This represents a gap in Canada’s legal framework and an uneven playing field for Canadian domestic competitors, who are required to abide by the Act.

Issues

First established in 2000–01, Canada’s AML/ATF Regime must regularly adapt and evolve to changes in its operating environment (e.g. to account for technological advancements like virtual currency or in response to ongoing modernization of the financial sector).

The Act was amended through the Economic Action Plan 2014 Act, No. 1 and the Budget Implementation Act, 2017, No. 1, to strengthen the AML/ATF Regime and align it with international standards. In 2015–16, the FATF evaluated Canada’s AML/ATF Regime, and identified a number of deficiencies.

Regulatory changes are needed to operationalize some of the legislative changes, close loopholes in Canada’s AML/ATF Regime, and address a number of the deficiencies outlined by the FATF.

Objectives

The proposed amendments would

strengthen Canada’s ability to combat money laundering and terrorist activity financing activities;

operationalize changes to the Act and close gaps in Canada’s AML/ATF Regime;

help improve reporting entities’ compliance with regulatory requirements;

help improve the monitoring and enforcement efforts of the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC);

improve Canada’s compliance with international standards; and

adopt minor technical changes.

Description

The proposed amendments make the following changes.

The proposed regulatory amendments would update the requirements for reporting entities to perform customer due diligence and help bring them in line with FATF recommendations.

Currently, reporting entities may conduct their own customer due diligence or rely on information collected by an agent, an affiliate or a subsidiary. This provision would be expanded to allow a reporting entity to rely on customer identification that has already been performed by other entities.

To rely on information from a third party, a reporting entity would have to be able to request and obtain information on the method of identity verification immediately or within three days of a request being made.

A reporting entity would also be able to rely on identity verification information from a foreign affiliate. To do so, the reporting entity would be required to assess the level of risk associated with the country where the third party operates (e.g. is it a member of the FATF, or does the country have a similar AML/ATF regime in place). These measures would increase flexibility for reporting entities when carrying out customer identity verification and decrease duplication of efforts.

To rely on information from a third party, a reporting entity would have to be able to request and obtain information on the method of identity verification immediately or within three days of a request being made. A reporting entity would also be able to rely on identity verification information from a foreign affiliate. To do so, the reporting entity would be required to assess the level of risk associated with the country where the third party operates (e.g. is it a member of the FATF, or does the country have a similar AML/ATF regime in place). These measures would increase flexibility for reporting entities when carrying out customer identity verification and decrease duplication of efforts. The life insurance sector has entered into a new line of business: the issuance of loans (e.g. mortgages, loans against the amount of an insurance policy). Currently, this sector is not subject to the same record-keeping, reporting, and customer due diligence requirements with respect to this line of business as other financial entities (e.g. the requirement to keep client information records or records related to customer due diligence). The proposed amendments would now require the life insurance sector to follow these requirements, and ensure that the life insurance sector is treated the same as other reporting entities under Canada’s AML/ATF Regime.

Currently, if a reporting entity conducts business with a corporation it must request proof of the corporation’s existence (e.g. it would need to verify the company’s certificate of corporate status), as part of the customer due diligence requirements. However, the Regulations do not currently set any parameters on the date of issuance for the documents used to demonstrate the corporation’s existence.

The proposed amendments would require that documents used to establish proof of corporate existence of a client be no more than one year old for the certificate of corporate status and “most recent” for other permissible documents (e.g. annual audited financial statements). This change would help ensure that corporations exist at the time they open an account or conduct a financial transaction.

The proposed amendments would require that documents used to establish proof of corporate existence of a client be no more than one year old for the certificate of corporate status and for other permissible documents (e.g. annual audited financial statements). This change would help ensure that corporations exist at the time they open an account or conduct a financial transaction. Anonymity of ownership and control can facilitate money laundering and terrorist activity financing, as well as complicate the seizure of the proceeds of crime during investigations. Beneficial owners are the natural persons who directly or indirectly own or control 25% or more of a company. However, the legal owners of a company or trust may not be the actual persons who own or control the company or trust (i.e. it might be necessary to search through several layers of information to uncover the ultimate owners).

The collection and verification of beneficial ownership information by reporting entities is an important step in mitigating the risk of money laundering and terrorist activity financing and ultimately in protecting the integrity of Canada’s financial system. Currently, when a company wants to open an account, the Regulations require reporting entities to obtain its beneficial ownership information; to take reasonable measures to confirm the accuracy of this information; and to keep the information up to date on an ongoing basis. However, the Regulations do not explicitly state that reporting entities must take steps to confirm the accuracy of new information as it comes in or as it is updated over time. The Regulations would be amended to make this requirement explicit.

The collection and verification of beneficial ownership information by reporting entities is an important step in mitigating the risk of money laundering and terrorist activity financing and ultimately in protecting the integrity of Canada’s financial system. Currently, when a company wants to open an account, the Regulations require reporting entities to obtain its beneficial ownership information; to take reasonable measures to confirm the accuracy of this information; and to keep the information up to date on an ongoing basis. However, the Regulations do not explicitly state that reporting entities must take steps to confirm the accuracy of new information as it comes in or as it is updated over time. The Regulations would be amended to make this requirement explicit. The amendments are needed to exempt reporting entities from the requirement to conduct customer due diligence for certain low-risk customers (e.g. large companies that are listed on the Toronto Stock Exchange). For example, the reporting entity would not have to confirm that the company exists, as long as they are satisfied that the corporation exists (i.e. it is common knowledge) and the reporting entity is confident that every person who deals with them on behalf of the corporation is actually authorized to do so. However, all other requirements would apply, including record keeping, ongoing monitoring and reporting.

In June 2016, the Regulations were amended to require reporting entities to keep a record of any “reasonable measures” they have taken in cases where they were unsuccessful in meeting certain obligations. The Act and the Regulations explicitly state when reasonable measures must be taken to meet an obligation. For example, when a reporting entity asks a client if they are conducting a large cash transaction on behalf of a third party and they refuse to answer, the reporting entity must record that the client was asked, the date the question was asked and that the client refused to answer. These actions represent the “reasonable measures taken.”

Following the coming into force of these new reporting requirements in June 2017, it was determined (through stakeholder feedback) that this measure is too onerous, and imposes a significant administrative burden on reporting entities. This amendment would repeal the requirement to keep a record of the unsuccessful reasonable measures taken.

they have taken in cases where they were unsuccessful in meeting certain obligations. The Act and the Regulations explicitly state when reasonable measures must be taken to meet an obligation. For example, when a reporting entity asks a client if they are conducting a large cash transaction on behalf of a third party and they refuse to answer, the reporting entity must record that the client was asked, the date the question was asked and that the client refused to answer. These actions represent the Following the coming into force of these new reporting requirements in June 2017, it was determined (through stakeholder feedback) that this measure is too onerous, and imposes a significant administrative burden on reporting entities. This amendment would repeal the requirement to keep a record of the unsuccessful reasonable measures taken. The Regulations currently require that documents used to verify customer identity be “original, valid and current” and must not include a scanned or photocopied document. The prohibition on the use of scanned/photocopied documents would be repealed, and the requirement for an original document would be amended to require instead an “authentic, valid and current” document.

and must not include a scanned or photocopied document. The prohibition on the use of scanned/photocopied documents would be repealed, and the requirement for an original document would be amended to require instead an document. Life insurance companies can act as a facilitator between two other life insurance companies (or more). These entities are referred to as managing general agents (MGAs), where they act as facilitators between brokers and insurers, typically offering underwriting services and subcontracting to regional insurance brokers. MGAs do not act on their own accord. Currently, when a life insurance company is acting on behalf of another life insurance company, it is captured as a reporting entity that is subject to the requirements of the Act and its Regulations. The Regulations would be amended to clarify that when a life insurance company is acting in this capacity, it is not a reporting entity.

The proposed amendments would help address and close the gaps that exist in Canada’s AML/ATF Regime, including regulating new business models and technologies, and address new emerging risks.

Persons and entities that are “dealing in virtual currency” would be financial entities or other entities deemed domestic or foreign MSBs, as the case may be. These “dealing in” activities include virtual currency exchange services and value transfer services. As required of all MSBs, persons and entities dealing in virtual currencies would need to implement a full compliance program and register with FINTRAC. In addition, all reporting entities that receive $10,000 or more in virtual currency (e.g. deposits, any form of payment) would have record-keeping and reporting obligations.

These amendments serve to mitigate the money laundering and terrorist activity financing vulnerabilities of virtual currency in a way that is consistent with the existing legal framework, while not unduly hindering innovation. For this reason, the amendments are targeted at persons or entities engaged in the business of dealing in virtual currencies, and not virtual currencies themselves.

would be financial entities or other entities deemed domestic or foreign MSBs, as the case may be. These activities include virtual currency exchange services and value transfer services. As required of all MSBs, persons and entities dealing in virtual currencies would need to implement a full compliance program and register with FINTRAC. In addition, all reporting entities that receive $10,000 or more in virtual currency (e.g. deposits, any form of payment) would have record-keeping and reporting obligations. These amendments serve to mitigate the money laundering and terrorist activity financing vulnerabilities of virtual currency in a way that is consistent with the existing legal framework, while not unduly hindering innovation. For this reason, the amendments are targeted at persons or entities engaged in the business of dealing in virtual currencies, and not virtual currencies themselves. Prepaid access products (e.g. prepaid credit cards) would be treated as bank accounts for the purposes of the regulations. Therefore, reporting entities issuing prepaid access products would be subject to the same customer due diligence requirements as those imposed on these reporting entities who offer bank accounts (e.g. verifying the identity of their clients, keeping records, and reporting suspicious transactions related to a prepaid payment product account). The amendment would not apply to issuers of products restricted to use at a particular merchant or group of merchants, such as a shopping-centre gift card.

Domestic MSBs (i.e. a business in Canada that offers the following services to the public: foreign exchange dealing, money transferring and/or cashing or selling money orders, traveller’s cheques or anything similar) are captured as reporting entities by the Act and its regulations. However, similar foreign businesses that offer money services directly to people located in Canada are not currently subject to obligations under the Act or regulations. The Regulations would be amended to capture foreign businesses that provide services to people located in Canada but that do not have a place of business in Canada, such as those offering such services through the Internet.

This change would ensure that domestic and foreign MSBs are required to fulfill the same obligations (e.g. register with FINTRAC, exercise customer due diligence, make a report, and keep records) for the same activities.

Furthermore, an amendment would be made to ensure that if a foreign MSB is found to be non-compliant with the requirements of the Act and its regulations; is issued an administrative monetary penalty (AMP); and does not pay the penalty associated with that AMP, then its registration can be revoked, thus making it ineligible to do business in Canada. Financial entities would be prohibited from opening or maintaining an account for, or having a correspondent banking relationship with, an unregistered foreign MSB.

As part of their compliance program, reporting entities are required to conduct a risk assessment of their vulnerability to money laundering and terrorist financing activities. The criteria (e.g. an entity’s business relationships, products, delivery channels or geographic locations) that must be considered in this risk assessment are listed in the Regulations. This list would be amended to make it clear that the assessment of products and their delivery channels must be included in an assessment of the risks associated with the use of new technologies prior to their launch.

This change would ensure that domestic and foreign MSBs are required to fulfill the same obligations (e.g. register with FINTRAC, exercise customer due diligence, make a report, and keep records) for the same activities. Furthermore, an amendment would be made to ensure that if a foreign MSB is found to be non-compliant with the requirements of the Act and its regulations; is issued an administrative monetary penalty (AMP); and does not pay the penalty associated with that AMP, then its registration can be revoked, thus making it ineligible to do business in Canada. Financial entities would be prohibited from opening or maintaining an account for, or having a correspondent banking relationship with, an unregistered foreign MSB. As part of their compliance program, reporting entities are required to conduct a risk assessment of their vulnerability to money laundering and terrorist financing activities. The criteria (e.g. an entity’s business relationships, products, delivery channels or geographic locations) that must be considered in this risk assessment are listed in the Regulations. This list would be amended to make it clear that the assessment of products and their delivery channels must be included in an assessment of the risks associated with the use of new technologies prior to their launch. Currently, low-risk activities for dealers in precious metals and stones, such as manufacturing jewellery, are exempt from reporting obligations. This exemption would be expanded to capture other types of manufacturing processes that may also involve the use or consumption of precious metals and stones (e.g. diamonds used to manufacture drill bits), consistent with the original policy intent.

Accountants are captured by the Act’s record-keeping and identity verification requirements when they undertake certain activities on behalf of their clients. The types of activities (e.g. receiving or paying funds; purchasing or selling securities, real properties or business assets) that trigger these requirements are listed in the Regulations. The Regulations would be amended to clarify that accountants who only act as a trustee in bankruptcy services or as an insolvency practitioner would not be subject to the requirements of the Act.

The Regulations require that reporting entities treat multiple transactions performed by an individual within a 24-hour period as a single transaction for reporting purposes when they total $10,000 or more. However, the existing regulatory provision specifies that only transactions that are less than $10,000 be included in this aggregation. This has resulted in complex transaction monitoring to exclude transactions of $10,000 or more.

The proposed amendments clarify that multiple transactions performed by an individual within a 24-hour period are considered a single transaction for reporting purposes when they total $10,000 or more, and that only one report should be submitted to capture all transactions within a 24-hour period that collectively meet or surpass this threshold. The new formula would simplify the way reporting entities submit reports under the 24-hour rule.

The proposed amendments would also ensure that the 24-hour rule also applies to beneficiaries of multiple cash transactions (i.e. where deposits or transfers of money are received by the same person and the aggregate amount over a 24-hour period is $10,000 or more). In addition, these amendments would clarify that any cash transactions that a reporting entity receives in the aggregate amount of $10,000 or more, regardless of its corporate structure, must be reported.

The proposed amendments clarify that multiple transactions performed by an individual within a 24-hour period are considered a single transaction for reporting purposes when they total $10,000 or more, and that only one report should be submitted to capture all transactions within a 24-hour period that collectively meet or surpass this threshold. The new formula would simplify the way reporting entities submit reports under the 24-hour rule. The proposed amendments would also ensure that the 24-hour rule also applies to beneficiaries of multiple cash transactions (i.e. where deposits or transfers of money are received by the same person and the aggregate amount over a 24-hour period is $10,000 or more). In addition, these amendments would clarify that any cash transactions that a reporting entity receives in the aggregate amount of $10,000 or more, regardless of its corporate structure, must be reported. An amendment would require reporting entities to take reasonable measures to determine the sources of a politically exposed person’s wealth. footnote 3 The amount of a client’s accumulated funds or wealth should appear to be reasonable and consistent with the information provided, and doubts about the origin of such funds or wealth would have to be satisfied before a reporting entity proceeds with the relationship or permits transactions to occur.

The amount of a client’s accumulated funds or wealth should appear to be reasonable and consistent with the information provided, and doubts about the origin of such funds or wealth would have to be satisfied before a reporting entity proceeds with the relationship or permits transactions to occur. Currently, when a reporting entity has reasonable grounds to suspect that a financial transaction is related to the commission or attempted commission of a money laundering or terrorist activity financing offence, it has 30 days to file a suspicious transaction report with FINTRAC. “Reasonable grounds to suspect” are determined by what is reasonable in that particular reporting entity’s circumstances, including normal business practices and systems within their industry.

The Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations would be modified to clarify the policy intent for this requirement and align it with international standards. After taking certain measures (such as conducting an assessment of the transaction) to be able to establish that there are reasonable grounds to suspect that the transaction is related to the commission or attempted commission of a money laundering or terrorist activity financing offence, the reporting entity would now have to file a suspicious transaction report to FINTRAC within three days. In practice, this means that the report would be filed three days after completion of the analysis that establishes reasonable grounds for suspicion. This is already the current standard practice for many reporting entities; however, it must be clarified in the regulatory text for legal certainty and to clarify the expectation that suspicious transaction reports must be submitted promptly.

are determined by what is reasonable in that particular reporting entity’s circumstances, including normal business practices and systems within their industry. The Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations would be modified to clarify the policy intent for this requirement and align it with international standards. After taking certain measures (such as conducting an assessment of the transaction) to be able to establish that there are reasonable grounds to suspect that the transaction is related to the commission or attempted commission of a money laundering or terrorist activity financing offence, the reporting entity would now have to file a suspicious transaction report to FINTRAC within three days. In practice, this means that the report would be filed three days after completion of the analysis that establishes reasonable grounds for suspicion. This is already the current standard practice for many reporting entities; however, it must be clarified in the regulatory text for legal certainty and to clarify the expectation that suspicious transaction reports must be submitted promptly. Currently, the Regulations only require that the reporting entities send a wire transfer to document information about the transaction. As proposed, reporting entities that are intermediaries in a transaction or that send or receive a wire transfer would be required to identify, keep records of, and include information about the transaction. This change would help ensure this information remains with the wire transfer throughout the payment chain, and ensure that reporting entities have all of the relevant transaction information to detect and report suspicious transactions.

The proposed amendments would improve compliance, monitoring and enforcement efforts.

There are eight schedules to the Regulations that set out the types of information that reporting entities have to provide to FINTRAC. With the widespread prevalence of online financial transactions between consumers and financial intermediaries, and the emergence of new technologies that facilitate online transactions, there is a need to update these schedules to require reporting entities to submit information that reflects current practices (e.g. online identifiers and email addresses).

MSBs must renew their registration with FINTRAC every two years, on the anniversary of the original registration, and provide supporting documentation to support the renewal. The Proceeds of Crime (Money Laundering) and Terrorist Financing Registration Regulations would be amended to provide flexibility for when the registration renewal is to take place during the two years and reduce the type of information that needs to be submitted (e.g. fax number).

Finally, the following technical amendments would also be adopted:

repealing and replacing obsolete references in the regulatory text;

improving the organization of the text, making it easier for regulatees to find and understand the requirements that apply to them;

updating the schedules to the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations to reflect new and updated obligations (e.g. to include businesses dealing in virtual currency); and

updating the reference to the “Canadian Institute of Chartered Accountants” in the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations and the Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations to “Chartered Professional Accountants of Canada,” in light of the recent process of unification of the accounting profession.

Regulatory and non-regulatory options considered

Maintain status quo

Maintaining the status quo was determined not to be viable, given that without these regulatory changes, deficiencies in Canada’s AML/ATF Regime would remain in place. This would compromise the integrity of Canada’s financial system and the security and safety of Canadians at home and abroad. Furthermore, not addressing deficiencies in compliance with FATF standards would have significant adverse consequences for Canada.

Non-regulatory options

Canada’s AML/ATF Regime is set in legislation and regulations. To close loopholes and address the deficiencies identified by the FATF, there is no other option available but to amend the regulations.

Benefits and costs

Costs, Benefits and Distribution 10-Year PV Total

2019–2028

(2012 Price Year) Annualized Average A. Quantified impacts Benefits Measures Simplified customer due diligence $277,998 $39,581 Repeal of requirement to document reasonable measures taken $1,413,701 $201,279 Low-risk customer due diligence for dealers in precious metals and stones and accountants $175,999 $25,058 Total benefits $1,867,698 $265,918 Costs Measures 24-hour rule $8,285,547 $1,179,676 Verifying beneficial ownership information accuracy $453,728 $64,601 CDD for life insurance companies with regard to loans $1,051,261 $149,676 Assessing the risk of new developments before launch $6,198,170 $882,480 Source of wealth of politically exposed persons $2,183,778 $310,921 Customer due diligence for prepaid cards $2,778,903 $395,653 Updated reporting schedules $39,911,124 $5,682,446 Requirements for businesses dealing in virtual currency $270,112 $38,458 Total costs $61,132,623 $8,703,911 Net costs $59,264,925 $8,437,993 B. Qualitative impacts Negative impacts An analysis is currently underway to determine the extent of additional funding required to adapt FINTRAC’s IT systems. 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. The willingness of businesses and individuals to invest in Canada could be negatively affected if Canada were viewed as weak on combating terrorist financing or if Canada were to have a reputation for being a safe haven for raising terrorist funds. 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 overseas.

Costs

As a result of the proposed amendments, reporting entities are expected to carry an estimated $54 million (PV) in compliance costs and $7.1 million (PV) in administrative costs for an estimated $61.1 million (PV) in total costs over a 10-year period (or $8.7 million annually). There are approximately 30 000 reporting entities, all of which are businesses.

These costs stem from internal IM/IT systems changes that would be required to support the implementation of the proposed amendments (e.g. to account for the changes to the 24-hour rule); the associated updates that would be required to reporting entities’ internal policies and procedures (e.g. to improve the accuracy of beneficial ownership information); and the provision of additional documents to FINTRAC if asked in a compliance examination (e.g. to fulfill the changes being made to the schedules to the Regulations).

Resource implications for the Government of Canada

It is anticipated that additional costs will be incurred by FINTRAC to operationalize and enforce the proposed amendments in order to adapt FINTRAC’s IT systems. Costing data is not available at this time; however, an analysis is currently underway to determine whether there will be incremental resource implications.

Benefits

Finance Canada has estimated that the proposed amendments would introduce $1.9 million (PV) in total administrative cost savings over 10 years to business. The majority of other benefits, however, cannot be quantified. These include reputational, economic and national security benefits.

The proposed amendments would strengthen Canada’s AML/ATF Regime and enhance its effectiveness by improving customer due diligence standards; closing loopholes; improving compliance, monitoring and enforcement; and strengthening information sharing. The amendments would also enhance the quality and scope of FINTRAC disclosures of financial intelligence to law enforcement and disclosure recipients, which should better assist them in their investigations. Strong AML/ATF policies help to deter and detect money laundering and terrorist activity financing offences.

The proposed amendments would also improve compliance with the FATF international standards and help Canada meet the necessary requirements to exit the enhanced follow-up process. Meeting these standards improves the integrity of the global AML/ATF framework, positively impacts Canada’s international reputation, and can lead to regulatory efficiencies with other countries’ AML/ATF regimes, making it easier for Canadian businesses to operate internationally. The methodology and assumptions used to calculate the costing estimates are available upon request.

“One-for-One” Rule

Canada’s obligations to meet the FATF’s international standards are non-discretionary in nature (due to the potential for punitive consequences in the event Canada fails to meet them). Other jurisdictions’ perception of Canada has tangible impacts on Canadian businesses. If Canada is not aligned with the FATF standards or is perceived by its international peers as making insufficient progress on its AML/ATF Regime generally, there could be negative reputational consequences for Canada’s financial sector, as well as increased costs for Canadian financial institutions.

By its nature, including the need to be aligned with FATF standards and effectively detecting and deterring crimes, Canada’s legislative and regulatory framework for combating money laundering and terrorist activity financing imposes an unavoidable burden on reporting entities.

The total net annualized administrative cost increase for regulated businesses is estimated at $463,098. The annualized administrative cost increase per affected business is estimated to be $20. Because Canada is required to make the proposed amendments in order to comply with FATF standards, they are considered non-discretionary in nature and are therefore exempt from the requirement to offset under the “One-for-One” Rule. This means that an equal amount of administrative burden would not have to be offset two years after these amendments are made.

These costs were estimated by using the Treasury Board Secretariat’s Regulatory Cost Calculator and the relevant monetization parameters for “One-for-One” Rule reporting.

Small business lens

The proposed amendments would have nationwide impacts of $1 million or more and would impact small businesses; therefore, the small business lens applies. It is assumed that roughly 24 000 small businesses are impacted by this proposal. The total incremental administrative and compliance costs imposed on small businesses are estimated at $54,071,262 ([PV], $7,698,532 annualized average), which is equivalent to $325 per small business impacted.

These costs stem from internal IM/IT systems changes required to support the implementation of the proposed amendments; the associated updates to reporting entities’ internal policies and procedures; and the additional reporting of information and provision of documents to FINTRAC.

Finance Canada is not able to provide a flexibility analysis for small businesses because the amendments are being made to comply with FATF standards, which, while not legally binding, Canada is obligated to follow. Finance Canada recognizes that businesses, irrespective of size, will require time to implement these changes and will therefore provide 12 months of transition to comply with the new requirements. While this does not constitute a special consideration for small businesses alone, it should be noted that impacts on business, of which small businesses constitute approximately 90%, have been considered in establishing compliance requirements.

Furthermore, a number of amendments are being introduced to reduce regulatory burden on all businesses. Only a fraction of the burden relief has been quantified, as most of the burden being offset stems from requirements that are in the Act and not directly in the regulations.

The repeal of the requirement to keep a record of the unsuccessful reasonable measures taken would decrease the number of records a reporting entity must produce and retain.

The flexibility for when an MSB must renew its registration and the reduction in the amount of information that needs to be submitted would greatly simplify the registration process, as MSBs would no longer have to follow a formula to determine the registration timeline.

The expansion of the exemption for low-risk activities for dealers in precious metals and stones to capture additional types of manufacturing processes involving the use or consumption of precious metals and stones would decrease the number of records and reports these entities must produce and submit.

The exemption for accountants who only act as a trustee in bankruptcy services or as an insolvency practitioner from being subject to the requirements of the Act, thus eliminating the need for them to produce records and submit reports, among other requirements.

The ability for a reporting entity to rely on customer identification that has already been performed by other unaffiliated entities would decrease duplication of efforts, and speed up the customer due diligence process.

The exemption for reporting entities from the requirement to conduct customer due diligence for certain low-risk customers would decrease the number of records and reports that must be produced and/or submitted, and speed up the customer due diligence process.

The repeal of the prohibition on the use of scanned or photocopied documents would address the challenge of identifying clients in an online, or non-face-to-face, context. The Regulations currently prohibit the use of scanned or photocopied documents, which, as reporting entities have informed Finance Canada, greatly complicates the on-boarding of customers in an online environment.

The exemption of MGAs from the requirements of the Act would eliminate the need for them to produce records and submit reports, among other requirements.

Consultation

In December 2011, Finance Canada released a formal consultation paper on its website. The paper covered a wide range of proposed measures that serve to strengthen Canada’s AML/ATF framework, and was open for public comment for a period of 71 days. Over 50 submissions were received from a wide range of reporting sectors and industry associations representing financial entities (banks, credit unions and trust companies), life insurance companies, securities dealers, MSBs, accountants, lawyers, casinos, real estate agents and dealers in precious metals and stones. A large majority of the submissions were supportive of the proposed measures, and some submissions included additional proposals. Finance Canada had follow-up meetings with private sector representatives to discuss their submissions.

Due to the high volume of measures proposed in the consultation paper, implementation of the required changes was divided into two sets of regulatory amendments. The first set of amendments was made to the regulations in 2016, and was published in the Canada Gazette, Part II, on June 29, 2016. This proposal represents the second set of amendments to the regulations.

From 2013 to 2015, Finance Canada implemented a targeted consultation strategy on both sets of the proposed amendments, which was supported by the use of discussion papers and informal discussions with key reporting entities (e.g. financial entities) impacted by the proposed amendments. In 2015–16, additional consultations were undertaken with financial institutions regarding virtual currency regulatory policy proposals.

Finally, the proposed amendments were also broadly discussed at the Advisory Committee on Money Laundering and Terrorist Financing.footnote4

While reporting entities have expressed concern with the implementation costs associated with the proposed amendments (e.g. those associated with updating their procedures, policies and systems and training their staff), overall, they are supportive of the intent and need for these changes.

Rationale

Money laundering and terrorist activity financing are a threat to the integrity of Canada’s financial system and the security and safety of Canadians at home and abroad. Money laundering supports and perpetuates criminal activity by legitimizing the proceeds of crime. It can help criminals to harness more economic and social power, creating the right incentives for criminals to engage in more criminal activity.

Terrorist activity financing can pose a serious threat to Canada’s national security and to Canada’s domestic and international interests. Terrorist activity financing supports and sustains the activities of domestic and international terrorists that can result in terrorist attacks in Canada or abroad, causing destruction and loss of life. Furthermore, the economic consequences to Canada of terrorist activity financing can be significant if the funds raised are used to carry out a terrorist attack in Canada or against Canada’s interests abroad.

A robust legislative and regulatory framework helps to prevent and deter money laundering and terrorist activity financing by ensuring that entities that provide access to the financial system know their customers and are vigilant. For example, the records that are kept by reporting entities, as required by the Act and its regulations, are available to police forces (upon procurement of a proper warrant) when investigating money laundering offences or to police forces and law enforcement and national security agencies when investigating terrorist activity financing offences. Such information could assist in the investigation, apprehension, and prosecution of money launderers and terrorist financiers.

The proposed amendments would strengthen Canada’s AML/ATF Regime by aligning it with international standards, closing loopholes and ensuring it reflects ongoing changes in the operating environment (i.e. in response to FinTech and the ongoing modernization of the financial sector). They would also help to address the deficiencies identified by the FATF.

Implementation, enforcement and service standards

Under the Act, FINTRAC is designated as Canada’s financial intelligence unit and the regulator responsible for administering and enforcing the Act and regulations.

FINTRAC’s responsibilities include the overall supervision of reporting entities to determine compliance with the Act and regulations. Under the Act, reporting entities are required to comply with FINTRAC’s information demands and to give all reasonable assistance when FINTRAC carries out its compliance responsibilities.

Once the proposed amendments are approved, FINTRAC would update its guidance to set out its expectations for how obligations are to be met as well as undertake possible outreach activities to ensure reporting entities are aware of the new obligations. FINTRAC would be responsible for enforcing the obligations and would scope them into their compliance examinations and processes. Should non-compliance be identified, FINTRAC could impose AMPs or take other enforcement actions.

The proposed amendments would come into force 12 months after their registration.

Contact

Lynn Hemmings

Acting Director General

Financial Systems Division

Financial Sector Policy Branch

Department of Finance

90 Elgin Street

Ottawa, Ontario

K1A 0G5

Email: fin.fc-cf.fin@canada.ca

PROPOSED REGULATORY TEXT

Notice is given that the Governor in Council, pursuant to subsection 73(1)footnotea and paragraphs 73.1(1)(a) to (c)footnoteb of the Proceeds of Crime (Money Laundering) and Terrorist Financing Actfootnotec, proposes to make the annexed Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, 2018.

Interested persons may make representations concerning the proposed Regulations within 90 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Lisa Pezzack, Director General, Financial Systems Division, Financial Sector Policy Branch, Department of Finance, 90 Elgin Street, Ottawa, Ontario K1A 0G5 (email: fin.fc-cf.fin@canada.ca).

Ottawa, May 31, 2018

Jurica Čapkun

Assistant Clerk of the Privy Council

Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, 2018

Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations

1 (1) The definitions CICA Handbook, electronic funds transfer, financial entity, precious metal, SWIFT and trust company in subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulationsfootnote5 are repealed.

(2) The definitions bijou and pierre précieuse in subsection 1(2) of the French version of the Regulations are repealed.

(3) The definitions accountant, British Columbia notary corporation, dealer in precious metals and stones, funds, life insurance broker or agent and real estate broker or sales representative in subsection 1(2) of the Regulations are replaced by the following:

accountant means a chartered accountant, a certified general accountant, a certified management accountant or, if applicable, a chartered professional accountant. (comptable)

British Columbia notary corporation means an entity that carries on the business of providing notary services to the public in British Columbia in accordance with the Notaries Act, R.S.B.C. 1996, c. 334. (société de notaires de la Colombie-Britannique)

dealer in precious metals and precious stones means a person or entity that, in the course of their business activities, buys or sells precious metals, precious stones or jewellery. It includes a department or an agent or mandatary of Her Majesty in right of Canada or of a province when the department or the agent or mandatary carries out the activity, referred to in section 5, of selling precious metals to the public. (négociant en métaux précieux et pierres précieuses)

funds means

(a) cash and other fiat currencies, and securities, negotiable instruments or other financial instruments that indicate a title or right to or interest in them; or

cash and other fiat currencies, and securities, negotiable instruments or other financial instruments that indicate a title or right to or interest in them; or (b) information that enables a person or entity to have access to a fiat currency other than cash.

For greater certainty, it does not include virtual currency. (fonds)

life insurance broker or agent means a person or entity that is authorized under provincial legislation to carry on the business of arranging contracts of life insurance. (représentant d’assurance-vie)

real estate broker or sales representative means a person or entity that is authorized under provincial legislation to act as an agent or mandatary for purchasers or vendors in respect of the purchase or sale of real property or immovables. (courtier ou agent immobilier)

(4) The definition cabinet d’expertise comptable in subsection 1(2) of the French version of the Regulations is replaced by the following:

cabinet d’expertise comptable Entité qui exploite une entreprise qui fournit des services d’expertise comptable au public et qui compte au moins un comptable parmi ses associés, ses employés ou ses gestionnaires. (accounting firm)

(5) The definition cash in subsection 1(2) of the English version of the Regulations is replaced by the following:

cash means coins referred to in section 7 of the Currency Act, notes issued by the Bank of Canada under the Bank of Canada Act that are intended for circulation in Canada or coins or bank notes of countries other than Canada. (espèces)

(6) The portion of the definition real estate developer in subsection 1(2) of the Regulations before paragraph (a) is replaced by the following:

real estate developer means, on any given day in a calendar year, a person or entity that, in that calendar year and before that day or in any previous calendar year after 2007, has sold to the public, other than in the capacity of a real estate broker or sales representative,

(7) Subsection 1(2) of the Regulations is amended by adding the following in alphabetical order:

fiat currency means a currency that is issued by a country and is designated as legal tender in that country. (monnaie fiduciaire)

precious metals means gold, silver, palladium and platinum in the form of coins, bars, ingots or granules or in a similar form. (métaux précieux)

virtual currency means

(a) a digital currency that is not a fiat currency and that can be readily exchanged for funds or for another virtual currency that can be readily exchanged for funds; or

a digital currency that is not a fiat currency and that can be readily exchanged for funds or for another virtual currency that can be readily exchanged for funds; or (b) information that enables a person or entity to have access to a digital currency referred to in paragraph (a). ( monnaie virtuelle )

(8) Subsection 1(2) of the French version of the Regulations is amended by adding the following in alphabetical order:

bijoux Objets faits d’or, d’argent, de palladium, de platine, de perles ou de pierres précieuses et destinés à être portés comme parure personnelle. (jewellery)

pierres précieuses Diamant, saphir, émeraude, tanzanite, rubis ou alexandrite. (precious stones)

2 Sections 1.2 to 3 of the Regulations are replaced by the following:

1.2 For the purposes of paragraph 5(l) of the Act, the prescribed precious metals are those defined as precious metals in subsection 1(2).

Persons and Entities Referred to in Section 5 of the Act

2.1 (1) A financial services cooperative is engaged in a business or profession for the purposes of paragraph 5(i) of the Act.

(2) A credit union central is engaged in a business or profession for the purposes of paragraph 5(j) of the Act when it offers financial services to a person, or to an entity that is not a member of that credit union central.

3 (1) A life insurance broker or agent is engaged in a business or profession for the purposes of paragraph 5(i) of the Act.

(2) Subsection (1) does not apply to a life insurance broker or agent when, under the terms of an agreement or arrangement with a life insurance company, they offer the products or services of that company exclusively to other life insurance brokers or agents.

3 (1) Subsection 4(1) of the Regulations before paragraph (c) is replaced by the following:

4 (1) A British Columbia notary public or British Columbia notary corporation is engaged in a business or profession for the purposes of paragraph 5(j) of the Act when, on behalf of a person or entity, they

(a) receive or pay funds, other than in respect of professional fees, disbursements, expenses or bail;

receive or pay funds, other than in respect of professional fees, disbursements, expenses or bail; (b) purchase or sell securities, real property or immovables or business assets or entities;

(2) Paragraph 4(1)(c) of the English version of the Regulations is replaced by the following:

(c) transfer funds or securities by any means; or

(3) Subsection 4(1) of the Regulations is amended by adding the following after paragraph (c):

(d) give instructions in connection with an activity referred to in any of paragraphs (a) to (c).

(4) Subsection 4(2) of the Regulations is replaced by the following:

(2) Subsection (1) does not apply to a British Columbia notary public who is acting in the capacity of an employee.

4 Sections 5 to 7 of the Regulations are replaced by the following:

5 (1) A dealer in precious metals and precious stones, other than a department or an agent or mandatary of Her Majesty in right of Canada or of a province, that buys or sells precious metals, precious stones or jewellery for an amount of $10,000 or more is engaged in an activity for the purposes of paragraph 5(i) of the Act. A department or an agent or mandatary of Her Majesty in right of Canada or of a province carries out an activity for the purposes of paragraph 5(l) of the Act when they sell precious metals to the public for an amount of $10,000 or more.

(2) The activities referred to in subsection (1) do not include a purchase or sale that is carried out in the course of or in connection with manufacturing a product that contains precious metals or precious stones, extracting precious metals or precious stones from a mine or polishing or cutting precious stones.

(3) For greater certainty, the activities referred to in subsection (1) include the sale of precious metals, precious stones or jewellery that are left on consignment with a dealer in precious metals and precious stones. Goods left with an auctioneer for sale at auction are not considered to be left on consignment.

6 (1) An accountant or accounting firm is engaged in a business or profession for the purposes of paragraph 5(j) of the Act when, on behalf of a person or entity, they

(a) receive or pay funds;

receive or pay funds; (b) purchase or sell securities, real property or immovables or business assets or entities;

purchase or sell securities, real property or immovables or business assets or entities; (c) transfer funds or securities by any means; or

transfer funds or securities by any means; or (d) give instructions in connection with an activity referred to in any of paragraphs (a) to (c).

(2) For greater certainty, the activities referred to in subsection (1) do not include activities that are carried out in the course of an audit, a review or a compilation engagement within the meaning of the CPA Canada Handbook that is prepared and published by the Chartered Professional Accountants of Canada, as amended from time to time.

(3) Subsection (1) does not apply to an accountant who is acting in the capacity of an employee or of a person who either is authorized by law to carry on the business, or to monitor the business or financial affairs, of an insolvent or bankrupt person or entity or is authorized to act under a security agreement.

7 A real estate broker or sales representative is engaged in a business or profession for the purposes of paragraph 5(j) of the Act when they act as an agent or mandatary for a purchaser or vendor in respect of the purchase or sale of real property or immovables.

5 Subsection 7.1(1) of the Regulations is replaced by the following:

7.1 (1) A real estate developer is engaged in a business or profession for the purposes of paragraph 5(j) of the Act when the real estate developer

(a) is a person, or an entity other than a corporation, that sells a new house, new condominium unit, new commercial or industrial building or new multi-unit residential building to the public; or

is a person, or an entity other than a corporation, that sells a new house, new condominium unit, new commercial or industrial building or new multi-unit residential building to the public; or (b) is a corporation that sells a new house, new condominium unit, new commercial or industrial building or new multi-unit residential building to the public on its own behalf or on behalf of a subsidiary or affiliate.

6 Section 8 of the Regulations is replaced by the following:

8 A department or an agent or mandatary of Her Majesty in right of Canada or of a province carries out an activity for the purposes of paragraph 5(l) of the Act when, in the course of providing financial services to the public, they accept deposit liabilities or issue, sell or redeem money orders.

Report Made Under Section 7 of the Act

7 (1) Subsection 9(1) of the English version of the Regulations is replaced by the following:

9 (1) Subject to section 11, a report made under section 7 of the Act concerning a financial transaction or attempted financial transaction in respect of which there are reasonable grounds to suspect that the transaction or attempted transaction is related to the commission of a money laundering offence or terrorist activity financing offence shall contain the information set out in Schedule 1.

(2) Subsection 9(2) of the Regulations is replaced by the following:

(2) The person or entity shall send the report to the Centre within three days after the day on which measures taken by them enable them to establish that there are reasonable grounds to suspect that the transaction or attempted transaction is related to the commission of a money laundering offence or a terrorist activity financing offence.

8 The heading before section 10 and sections 10 to 12.3 of the Regulations are replaced by the following:

Report Made Under Section 7.1 of the Act

10 (1) Subject to section 11, a report made under section 7.1 of the Act shall contain the information set out in Schedule 2.

(2) The person or entity shall send the report to the Centre within three days after the day on which they make a disclosure under subsection 83.1(1) of the Criminal Code or subsection 8(1) of the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism.

Reports

11 (1) The requirement to report information set out in Schedule 1 or 2 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) In the case of an attempted transaction, the requirement to report information set out in Schedule 1 does not apply in respect of information set out in an item of that Schedule that is marked with an asterisk if, after taking reasonable measures to do so, the person or entity is unable to obtain the information.

(3) The requirement to report information set out in Schedule 1 or 2 does not apply if the person or entity believes that taking the reasonable measures to obtain the information would inform a person or entity that conducts or attempts or proposes to conduct a transaction with them that the transaction and related information will be reported under section 7 or 7.1 of the Act.

(4) For greater certainty, although items in Schedules 1 and 2 are described in the singular, a person or entity shall report all known information that falls within an item.

(5) For greater certainty, a person or entity is not required to report information set out in any item of Schedule 1 or 2 that is not applicable in the circumstances.

12 A report shall be sent electronically in accordance with guidelines that are prepared by the Centre, if the sender has the technical capabilities to do so. The report shall be sent in paper format in accordance with guidelines that are prepared by the Centre, if the sender does not have the technical capabilities to send the report electronically.

12.1 (1) A person or entity that sends a report to the Centre shall keep a copy of the report for a period of at least five years after the day on which the report is sent.

(2) The copy of the report may be kept in a machine-readable or electronic form if a paper copy can be readily produced from it.

(3) For greater certainty, if the copy is the property of a person’s employer or of a person or entity with which the person is in a contractual relationship, the person is not required to keep it after the end of their employment or the contractual relationship.

9 The heading before section 13 of the English version of the Regulations is replaced by the following:

Designated Information

10 (1) The portion of section 13 of the English version of the Regulations before paragraph (a) is replaced by the following:

13 The information that is prescribed as designated information for the purposes of paragraphs 55(7)(f), 55.1(3)(f) and 56.1(5)(f) of the Act is

(2) The portion of paragraph 13(a) of the Regulations before subparagraph (vii) is replaced by the following:

(a) the following information concerning the person or entity that is involved in the transaction, attempted transaction, importation or exportation or a person or entity acting on their behalf: (i) in the case of a person, their alias, date of birth and citizenship, (iii) their address, telephone number and email address, (v) the number of an identification document issued to them by the federal government or a provincial government or by a foreign government that is not a municipal government, other than a document that contains their social insurance number, the issuing authority and, if available, the jurisdiction and country of issue and expiry date of the identification document, (vi) in the case of an entity that is involved in the transaction, attempted transaction, importation or exportation, the nature of its principal business, the date of its registration or incorporation, its registration or incorporation number and the jurisdiction and country of issue of that number,

the following information concerning the person or entity that is involved in the transaction, attempted transaction, importation or exportation or a person or entity acting on their behalf:

(3) Paragraph 13(a) of the Regulations is amended by adding “and” at the end of subparagraph (vii), by striking out “and” at the end of subparagraph (viii) and by repealing subparagraph (ix).

(4) The portion of paragraph 13(b) of the English version of the Regulations before subparagraph (i) is replaced by the following:

(b) in the case of a financial transaction or attempted financial transaction, the following information:

(5) Subparagraphs 13(b)(i) to (iii) of the Regulations are replaced by the following:

(i) every account number and transit number that is involved,

every account number and transit number that is involved, (ii) the name of each account holder,

the name of each account holder, (iii) the number of the transaction or attempted transaction and every other reference number that is connected to the transaction or attempted transaction,

(6) Subparagraphs 13(b)(iv) to (vi) of the English version of the Regulations are replaced by the following:

(iv) the time of the transaction or attempted transaction,

the time of the transaction or attempted transaction, (v) the type of transaction or attempted transaction,

the type of transaction or attempted transaction, (vi) the names of the parties to the transaction or attempted transaction,

(7) Subparagraphs 13(b)(viii) and (ix) of the Regulations are replaced by the following:

(viii) the name and address of each person who is authorized to act in respect of the account, and

the name and address of each person who is authorized to act in respect of the account, and (ix) the type of report, as listed in paragraph 54(1)(a) of the Act, from which the information disclosed is compiled; and

(8) Paragraph 13(c) of the Regulations is replaced by the following:

(c) in the case of an importation or exportation of fiat currency or monetary instruments, the country from which they are being imported or the country to which they are being exported.

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

(Subsection 9(1) and section 11)

12 Part A of Schedule 1 to the Regulations is replaced by the following:

PART A

Information with Respect to Reporting Person or Entity and Place of Business Where Transaction Is Conducted or Attempted

1* Person’s or entity’s name

2* Type of person or entity, as described in any of paragraphs 5(a) to (h.1), (k) and (m) 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 Person’s or entity’s email address

4* Identification number assigned to person or entity by Centre

5 Person’s or entity’s URL

6* Number that identifies place of business

7* Address of place of business

8* Contact person’s name

9 Contact person’s email address

10* Contact person’s telephone number

13 The heading of Part B of Schedule 1 to the Regulations is replaced by the following:

Information with Respect to Transaction or Attempted Transaction

14 Items 3 to 9 of Part B of Schedule 1 to the Regulations are replaced by the following:

3 Posting date, if different from date of transaction or attempted transaction

4* Type and amount of funds or other assets involved, other than virtual currency

5* Type and amount of each fiat currency or virtual currency involved

6* Method by which transaction or attempted transaction is conducted

7* Exchange rate used and source of exchange rate

8* Every other known detail that identifies transaction or attempted transaction

9* Indication of whether transaction completed

10* If transaction not completed, reason why not completed

11 Purpose of transaction or attempted transaction

12 Details of sources of funds or virtual currency involved, if known: (a) name, identifying number and account number or policy number of every person or entity that is a source of funds or virtual currency (b) every other detail that identifies sources of funds or virtual currency

13* Details of remittance of, or in exchange for, funds or virtual currency received: (a) method of remittance (b) if remittance is in funds, type and amount of each of the funds involved (c) if remittance is in virtual currency, type and amount of each virtual currency involved (d) if remittance is not in funds or virtual currency, type of remittance, and its value if different from amount of funds or virtual currency received (e) name, identifying number and account number or policy number of every person or entity that is involved in remittance (f) every other known detail that identifies remittance

14* Identification number of every other report made by reporting person or entity to Centre under the Act with respect to transaction or attempted transaction

15 Parts C to F of Schedule 1 to the Regulations are replaced by the following:

PART C

Account and Reference Number Information

1* Every account number and reference number involved in transaction or attempted transaction

2* Type of account

3* Indication of what reference number represents

4* Branch number, institution number and similar numbers connected to account or reference number

5* Name of each account holder

6* Type of fiat currency or virtual currency of account

7 Date account opened

8 Date account closed

9* Status of account

PART D

Information with Respect to Person or Entity That Conducts or Attempts To Conduct Transaction

1 Person’s or entity’s name

2 Person’s or entity’s address

3 Person’s or entity’s email address

4 Person’s or entity’s telephone number

5 Nature of person’s or entity’s principal business or their occupation

6 Identification number assigned to person or entity by reporting person or entity

7 Type of document or other information used to identify person or entity, or to verify their identity under the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, and number of document or number associated with information

8 Jurisdiction and country of issue of document or other information

9 Type of device used by person or entity that conducts or attempts to conduct transaction online

10 Number that identifies device

11* Internet Protocol address used by device

12 Person’s or entity’s user name

13* Date and time of person’s or entity’s online session in which transaction is conducted or attempted

14 In the case of a person, (a) their alias (b) their date of birth (c) their country of residence (d) their citizenship (e) their employer’s name (f) their employer’s business address (g) their employer’s business telephone number

15 In the case of an entity, (a) name of each person — up to three — who is authorized to bind entity or to act with respect to account (b) its URL (c) its registration or incorporation number and jurisdiction and country of issue of that number (d) information respecting ownership, control and structure of entity (e) name of each person who directly or indirectly owns or controls 25% or more of entity or of shares of corporation or trust (f) name of each director, in the case of a corporation or trust (g) address of each director (h) email address of each director (i) telephone number of each director (j) name of each trustee, in the case of a trust (k) address of each trustee (l) email address of each trustee (m) telephone number of each trustee (n) name of each settlor of trust (o) address of each settlor of trust (p) email address of each settlor of trust (q) telephone number of each settlor of trust (r) name of each beneficiary of trust (s) address of each beneficiary of trust (t) email address of each beneficiary of trust (u) telephone number of each beneficiary of trust



PART E

Information with Respect to Person or Entity on Whose Behalf Transaction Is Conducted or Attempted

1 Person’s or entity’s name

2 Person’s or entity’s address

3 Person’s or entity’s email address

4 Person’s or entity’s telephone number

5 Nature of person’s or entity’s principal business or their occupation

6 Identification number assigned to person or entity by reporting person or entity

7 Type of document or other information used to identify person or entity, or to verify their identity under the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, and number of document or number associated with information

8 Jurisdiction and country of issue of document or other information

9 Relationship of person or entity to person or entity conducting or attempting to conduct transaction

10 In the case of a person, (a) their alias (b) their date of birth (c) their country of residence (d) their citizenship (e) their employer’s name (f) their employer’s business address (g) their employer’s business telephone number

11 In the case of an entity, (a) name of each person — up to three — who is authorized to bind entity or to act with respect to account (b) its URL (c) its registration or incorporation number and jurisdiction and country of issue of that number (d) information respecting ownership, control and structure of entity (e) name of each person who directly or indirectly owns or controls 25% or more of entity or of shares of corporation or trust (f) name of each director, in the case of a corporation or trust (g) address of each director (h) email address of each director (i) telephone number of each director (j) name of each trustee, in the case of a trust (k) address of each trustee (l) email address of each trustee (m) telephone number of each trustee (n) name of each settlor of trust (o) address of each settlor of trust (p) email address of each settlor of trust (q) telephone number of each settlor of trust (r) name of each beneficiary of trust (s) address of each beneficiary of trust (t) email address of each beneficiary of trust (u) telephone number of each beneficiary of trust



16 Item 1 of Part G of Schedule 1 to the Regulations is replaced by the following:

1* Detailed description of grounds to suspect that transaction or attempted transaction is related to commission or attempted commission of money laundering offence or terrorist activity financing offence

17 The heading of Part H to Schedule 1 to the Regulations is replaced by the following:

Action Taken

18 Schedule 2 to the Regulations is amended by replacing the references after the heading “SCHEDULE 2” with the following:

(Subsections 10(1) and 11(1)and (3) to (5))

19 Part A of Schedule 2 to the Regulations is replaced by the following:

PART A

Information With Respect to Reporting Person or Entity and Place of Business Where Transaction Is Conducted or Proposed To Be Conducted

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 Person’s or entity’s email address

4 Identification number assigned to person or entity by Centre

5 Person’s or entity’s URL

6* Number that identifies place of business

7* Address of place of business

8* Contact person’s name

9 Contact person’s email address

10* Contact person’s telephone number

20 The heading of Part B of Schedule 2 to the English version of the Regulations is replaced by the following:

Reason for Filing Report

21 Item 1 of Part B of Schedule 2 to the English version of the Regulations is replaced by the following:

1* Reason for filing report

22 Items 2 to 8 of Part B of Schedule 2 to the Regulations are replaced by the following:

2* Indication of how reporting person or entity came to know that property in question is owned or controlled by or on behalf of a terrorist group or listed person

2.1* Indication of how reporting person or entity identified terrorist group or listed person

3* Name of terrorist group or listed person

4 Address of terrorist group or listed person

5 Telephone number of terrorist group or listed person

6* Name of person or entity that owns or controls the property on behalf of terrorist group or listed person

7* Person’s or entity’s address

8 Person’s or entity’s email address

9 Person’s or entity’s telephone number

10 Person’s or entity’s URL

23 The heading of Part C of Schedule 2 to the Regulations is replaced by the following:

Information with Respect to Property

24 Items 2 and 3 of Part C of Schedule 2 to the Regulations are replaced by the following:

2* Means used to identify property and every number of, or associated with, that property

25 Parts D to H of Schedule 2 to the Regulations are replaced by the following:

PART D

Information with Respect to Transaction or Proposed Transaction

1* Date of transaction or proposed transaction or night deposit indicator

2* Time of transaction or proposed transaction

3 Posting date, if different from date of transaction or proposed transaction

4* Type and amount or value of funds or other assets involved, other than virtual currency

5* Type and amount of each fiat currency or virtual currency involved

6* Method by which transaction is conducted or proposed to be conducted

7* Exchange rate used and source of exchange rate

8* Every other known detail that identifies transaction or proposed transaction

9* Purpose of transaction or proposed transaction

10 Details of sources of funds, virtual currency or other assets involved, if known: (a) name, identifying number and account number or policy number of every person or entity that is a source of funds, virtual currency or other assets (b) every other detail that identifies sources of funds, virtual currency or other assets

11* Details of remittance of, or in exchange for, funds, virtual currency or other assets received: (a) method of remittance (b) if remittance is in funds, type and amount of each of the funds involved (c) if remittance is in virtual currency, type and amount of each virtual currency involved (d) if remittance is not in funds or virtual currency, type of remittance, and its value if different from amount of funds, virtual currency or other assets received (e) name, identifying number and account number or policy number of every person or entity that is involved in remittance (f) every other known detail that identifies remittance

12* Identification number of every other report made by reporting person or entity to Centre under the Act with respect to transaction or proposed transaction

PART E

Account and Reference Number Information

1* Every account number and reference number involved in transaction or proposed transaction

2* Type of account

3* Indication of what reference number represents

4* Branch number, institution number and similar numbers connected to account or reference number

5* Name of each account holder

6* Type of fiat currency or virtual currency of account

7 Date account opened

8 Date account closed

9* Status of account

PART F

Information with Respect to Person or Entity That Conducts or Proposes To Conduct Transaction

1 Person’s or entity’s name

2 Person’s or entity’s address

3 Person’s or entity’s email address

4 Person’s or entity’s telephone number

5 Nature of person’s or entity’s principal business or their occupation

6 Identification number assigned to person or entity by reporting person or entity

7 Type of document or other information used to identify person or entity, or to verify their identity under the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, and number of document or number associated with information

8 Jurisdiction and country of issue of document or other information

9 Type of device used by person or entity that conducts transaction online

10 Number that identifies device

11* Internet Protocol address used by device

12 Person’s or entity’s user name

13* Date and time of person’s or entity’s online session in which transaction is conducted

14 In the case of a person, (a) their alias (b) their date of birth (c) their country of residence (d) their citizenship (e) their employer’s name (f) their employer’s business address (g) their employer’s business telephone number

15 In the case of an entity, (a) name of each person — up to three — who is authorized to bind entity or to act with respect to account (b) its URL (c) its registration or incorporation number and jurisdiction and country of issue of that number (d) information respecting ownership, control and structure of entity (e) name of each person who directly or indirectly owns or controls 25% or more of entity or of shares of corporation or trust (f) name of each director, in the case of a corporation or trust (g) address of each director (h) email address of each director (i) telephone number of each director (j) name of each trustee, in the case of a trust (k) address of each trustee (l) email address of each trustee (m) telephone number of each trustee (n) name of each settlor of trust (o) address of each settlor of trust (p) email address of each settlor of trust (q) telephone number of each settlor of trust (r) name of each beneficiary of trust (s) address of each beneficiary of trust (t) email address of each beneficiary of trust (u) telephone number of each beneficiary of trust



PART G

Information with Respect to Person or Entity on Whose Behalf Transaction Is Conducted or Proposed To Be Conducted

1 Person’s or entity’s name

2 Person’s or entity’s address

3 Person’s or entity’s email address

4 Person’s or entity’s telephone number

5 Nature of person’s or entity’s principal business or their occupation

6 Identification number assigned to person or entity by reporting person or entity

7 Type of document or other information used to identify person or entity, or to verify their identity under the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, and number of document or number associated with information

8 Jurisdiction and country of issue of document or other information

9 Relationship of person or entity to person or entity conducting or proposing to conduct transaction

10 In the case of a person, (a) their alias (b) their date of birth (c) their country of residence (d) their citizenship (e) their employer’s name (f) their employer’s business address (g) their employer’s business telephone number

11 In the case of an entity, (a) name of each person — up to three — who is authorized to bind entity or to act with respect to account (b) its URL (c) its registration or incorporation number and jurisdiction and country of issue of that number (d) information respecting ownership, control and structure of entity (e) name of each person who directly or indirectly owns or controls 25% or more of entity or of shares of corporation or trust (f) name of each director, in the case of a corporation or trust (g) address of each director (h) email address of each director (i) telephone number of each director (j) name of each trustee, in the case of a trust (k) address of each trustee (l) email address of each trustee (m) telephone number of each trustee (n) name of each settlor of trust (o) address of each settlor of trust (p) email address of each settlor of trust (q) telephone number of each settlor of trust (r) name of each beneficiary of trust (s) address of each beneficiary of trust (t) email address of each beneficiary of trust (u) telephone number of each beneficiary of trust



Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations

26 (1) Subsection 1(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations footnote 6 is replaced by the following:

1 (1) In the Act and in these Regulations, shell bank means a foreign financial institution that

(a) does not have a place of business that (i) is located at a fixed address — where it employs one or more persons on a full-time basis and maintains operating records related to its banking activities — in a country in which it is authorized to conduct banking activities, and (ii) is subject to inspection by the regulatory authority that licensed it to conduct banking activities; and

does not have a place of business that (b) is not controlled by, or under common control with, a depository institution, credit union or foreign financial institution that maintains a place of business referred to in paragraph (a) in Canada or in a foreign country.

(2) The definitions CICA Handbook, client information record, physical presence, precious metal and transaction ticket in subsection 1(2) of the Regulations are repealed.

(3) The definitions bijou and pierre précieuse in subsection 1(2) of the French version of the Regulations are repealed.

(4) The definitions accountant, British Columbia notary corporation, dealer in precious metals and stones, deposit slip, electronic funds transfer, financial entity, funds, large cash transaction record, life insurance broker or agent, real estate broker or sales representative, receipt of funds record and trust company in subsection 1(2) of the Regulations are replaced by the following:

accountant means a chartered accountant, a certified general accountant, a certified management accountant or, if applicable, a chartered professional accountant. (comptable)

British Columbia notary corporation means an entity that carries on the business of providing notary services to the public in British Columbia in accordance with the Notaries Act, R.S.B.C. 1996, c. 334. (société de notaires de la Colombie-Britannique)

dealer in precious metals and precious stones means a person or entity that, in the course of their business activities, buys or sells precious metals, precious stones or jewellery. It includes a department or an agent or mandatary of Her Majesty in right of Canada or of a province when the department or the agent or mandatary carries out the activity, referred to in subsection 65(1), of selling precious metals to the public. (négociant en métaux précieux et pierres précieuses)

deposit slip means a record that sets out

(a) the date of the deposit;

the date of the deposit; (b) the name of the person or entity that makes the deposit;

the name of the person or entity that makes the deposit; (c) the amount of the deposit and of any part of it that is made in cash;

the amount of the deposit and of any part of it that is made in cash; (d) the method by which the deposit is made;

the method by which the deposit is made; (e) the number of the account into which the deposit is made and the name of each account holder; and

the number of the account into which the deposit is made and the name of each account holder; and (f) every other known detail that identifies the deposit. ( relevé de dépôt )

electronic funds transfer means the transmission — by any electronic, magnetic or optical means — of instructions for the transfer of funds, including a transmission of instructions that is initiated and finally received by the same person or entity. It excludes a transmission of instructions for the transfer of funds

(a) that is carried out by means of a credit or debit card or a prepaid payment product if the beneficiary has an agreement with the payment service provider that permits payment by that means for the provision of goods and services;

that is carried out by means of a credit or debit card or a prepaid payment product if the beneficiary has an agreement with the payment service provider that permits payment by that means for the provision of goods and services; (b) when a beneficiary that is physically located in Canada withdraws cash from their account that is held with a person or entity that is referred to in any of paragraphs 5(a) to (f) and (k) to (k.3) of the Act;

when a beneficiary that is physically located in Canada withdraws cash from their account that is held with a person or entity that is referred to in any of paragraphs 5(a) to (f) and (k) to (k.3) of the Act; (c) that is carried out by means of a direct deposit or a pre-authorized debit;

that is carried out by means of a direct deposit or a pre-authorized debit; (d) that is carried out by cheque imaging and presentment; or

that is carried out by cheque imaging and presentment; or (e) when both the persons or entities that initiate and receive the transmission are acting to clear or settle payment obligations. ( télévirement )

financial entity means

(a) an entity that is referred to in any of paragraphs 5(a), (b) and (d) to (f) of the Act;

an entity that is referred to in any of paragraphs 5(a), (b) and (d) to (f) of the Act; (b) a financial services cooperative;

a financial services cooperative; (c) a life insurance company, or an entity that is a life insurance broker or agent, when it offers loans or prepaid payment products to the public or maintains accounts with respect to those loans or prepaid payment products;

a life insurance company, or an entity that is a life insurance broker or agent, when it offers loans or prepaid payment products to the public or maintains accounts with respect to those loans or prepaid payment products; (d) a credit union central when it offers financial services to a person, or to an entity that is not a member of that credit union central; and

a credit union central when it offers financial services to a person, or to an entity that is not a member of that credit union central; and (e) a department, or an entity that is an agent or mandatary of Her Majesty in right of Canada or of a province, when it carries out an activity referred to in section 76. ( entité financière )

funds means

(a) cash and other fiat currencies, and securities, negotiable instruments or other financial instruments that indicate a title or right to or interest in them; or

cash and other fiat currencies, and securities, negotiable instruments or other financial instruments that indicate a title or right to or interest in them; or (b) information that enables a person or entity to have access to a fiat currency other than cash.

For greater certainty, it does not include virtual currency. (fonds)

large cash transaction record means a record that indicates the receipt of an amount of $10,000 or more in cash in a single transaction and that contains the following information:

(a) the date of the receipt;

the date of the receipt; (b) if the amount is received for deposit into an account, the name of each account holder and the time of the deposit or an indication that the deposit is made in a night deposit box outside the recipient’s normal business hours;

if the amount is received for deposit into an account, the name of each account holder and the time of the deposit or an indication that the deposit is made in a night deposit box outside the recipient’s normal business hours; (c) the name, address and telephone number of every other person or entity that is involved in the transaction, the nature of their principal business or their occupation and, in the case of a person, their date of birth;

the name, address and telephone number of every other person or entity that is involved in the transaction, the nature of their principal business or their occupation and, in the case of a person, their date of birth; (d) the type and amount of each fiat currency involved in the receipt;

the type and amount of each fiat currency involved in the receipt; (e) if applicable, the exchange rate used and the source of the exchange rate;

if applicable, the exchange rate used and the source of the exchange rate; (f) the number of every other account that is affected by the transaction, the type of account and the name of each account holder;

the number of every other account that is affected by the transaction, the type of account and the name of each account holder; (g) every reference number that is connected to the transaction;

every reference number that is connected to the transaction; (h) every other known detail that identifies the receipt;

every other known detail that identifies the receipt; (i