Question Period Note: Combatting Money Laundering

• Canada’s progress has been recognized internationally. In 2021, the Financial Action Task Force (FATF) recognized that we had made progress in addressing strategic anti-money laundering and Countering The Financing Of Terrorism (AML/CFT) deficiencies and elevated our international standing in compliance with FATF Recommendations and Standards.

• Our Government has provided nearly $320 million since 2019 to support concrete anti-money laundering efforts, including:

o The creation of new Integrated Money Laundering Investigative Teams in British Columbia, Alberta, Ontario, and Quebec to undertake complex money laundering operations;

o Creating a Trade Fraud and Trade-Based Money Laundering Centre of Expertise at the Canada Border Services Agency (CBSA).

o Providing funding to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to modernize its intelligence and compliance tools and enhance its capacity to respond to new and evolving vectors for money laundering;

• In addition, our Government has also taken action to strengthen the investigative, enforcement, and information sharing tools to combat money laundering and financial crimes.

• Building on these important investments, the Government of Canada has proposed through Budget 2024 to:

o Provide $29.9 million over five years for the CBSA to support the implementation of its new authorities under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) to combat financial crime and strengthen efforts to combat international financial crime with our allies.

o Introduce amendments to the Criminal Code to strengthen our laws as it relates to Anti-Money Laundering (AML).

• Our Government will remain focused on enhancing Canada’s capacity to combat money laundering and other financial crimes, in partnership with provinces, territories and other national and international stakeholders.

Canada’s Anti-Money Laundering Regime (AML) was established in 2000 with the enactment of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). The Regime’s legislative framework is complemented by other legislation, including the Criminal Code, the Customs Act, and the United Nations Act. The Anti-Money Laundering and Anti-Terrorist Financing (AML/ATF) Regime is led by Department of Finance and includes 13 federal departments and agencies, including Public Safety Canada (PS) and PS Portfolio agencies, such as the Royale Canadian Mounted Police (RCMP), CBSA and Canadian Security Intelligence Service (CSIS).

On May 15, 2019, British Columbia (B.C.) Premier John Horgan announced the establishment of a Commission of Inquiry into Money Laundering in the province, to be led by B.C. Supreme Court Justice Austin Cullen. The objective of the Commission was to examine the money laundering challenges facing B.C., report on its findings and make recommendations. The Commission had a mandate to examine the full scope of money laundering in B.C., including activity in real estate, gaming, financial institutions, luxury goods, and the corporate and professional services sectors, through both study and hearing components. The Commission was also mandated to review the acts and/or omissions of regulatory authorities or individuals responsible for regulating these sectors in order to determine whether those acts or omissions have contributed to money laundering in the province or amount to corruption.

The Government of Canada was a voluntary participant with standing in the Commission, and federal AML/ATF officials from twelve departments and agencies have provided expert interviews and appeared as witnesses for Commission hearings. In total, the Government facilitated presentations and interviews with 53 federal officials; 32 of which testified to the Commission, and produced 1,800 documents to the Commission. The Commission’s final report is expected to be submitted to the province of British Columbia by May 20, 2022.

In recent years, the Government has taken concrete action to strengthen Canada’s AML/ATF Regime. For instance, Budget 2019 proposed a number of measures to modernize Canada’s AML framework, including the launch of Public Safety’s Financial Crime Coordination Centre (FC3). FC3 provides coordination and support to increase Canada’s enforcement capacity to combat money laundering and financial crime. Funding was also established for the creation of a Trade Fraud and Trade-Based Money Laundering (TBML) Centre of Expertise to strengthen capacity at CBSA.

In November 2020, the RCMP received funding of $98.9 million over five years to enhance its operational capacity and modernize its technology, including $19.8 million to create Integrated Money Laundering Investigative Teams (IMLITs) in British Columbia, Alberta, Ontario, and Quebec. RCMP staffing processes for the IMLITs have been finalized, and the teams are undertaking investigations. Work is ongoing to bring in partners from the AML/ATF Regime to enhance the integration of the teams. CRA has committed resources for each of these teams but engagement differs between provinces. The Forensic Accounting Management Group has committed resources and discussions are underway to finalize participation.

In addition to ongoing domestic-focused work, the Government of Canada is also actively involved in international AML and ATF efforts. The Regime engages with the Financial Action Task Force (FATF), which is an intergovernmental body that aims to maintain the integrity of the global financial system by, among other things, setting global AML/ATF standards. FATF’s 2016 Mutual Evaluation Report of Canada found that, while Canada was deemed to have strong AML/ATF legislation and regulations, there were some challenges identified, including the absence of AML/ATF regulation of the legal profession, the need for improved access to accurate and up-to-date beneficial ownership information, better use of financial intelligence and increased efforts to investigate and prosecute complex money laundering cases and recover assets.

Since the adoption of its Mutual Evaluation Report in 2016, Canada has conducted regular reporting back to the FATF on the actions it has taken to strengthen its AML/CFT Regime. In Canada’s most recent follow-up report, published on October 1, 2021, the FATF recognized the improvements Canada has made to its AML/ATF Regime. Notable enhancements include: capturing businesses dealing in virtual currency under the AML/ATF Regime; improving customer due diligence measures; and requiring suspicious transaction reports to be submitted promptly to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), Canada’s financial intelligence unit. In recognition that many previous deficiencies have been addressed or largely addressed, the FATF elevated Canada’s international standing in compliance with the FATF standards.

Building on these commitments, Budget 2022 announced a series of measures and investments intended to strengthen Canada’s AML/ATF Regime. This included the provision of $89.9 million over five years, and $8.8 million ongoing, in order to support the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to:
• implement new anti-money laundering and anti-terrorist financing requirements for crowdfunding platforms and payment service providers;
• support the supervision of federally regulated financial institutions;
• continue to build expertise related to virtual currency;
• modernize its compliance functions; and
• update its financial management, human resources, intelligence, and disaster recovery systems.

Other measures in Budget 2022 aimed at strengthening Canada’s AML/ATF Regime include a commitment to clarify the ability of the Minister of Foreign Affairs to cause the forfeiture and disposal of assets held by sanctioned individuals and entities. This action will also support Canada’s participation in the Russian Elites, Proxies, and Oligarchs (REPO) Taskforce for sanctions on Russia. The government also announced their intention to launch a financial sector legislative review focused on the digitalization of money and maintaining financial sector stability and security. The first phase of the review will be directed at digital currencies, including cryptocurrencies and stablecoins, with $17.7 million over five years (starting in 2022-23) provided to the Department of Finance to lead the review. Finally, the federal government announced their intention to extend AML/ATF requirements to all businesses conducting mortgage lending in Canada within the next year in order to limit the exploitation of the real estate market by criminals, which can affect housing affordability across the country.

Budget 2023 announced the government's intention to introduce legislative amendments to the Criminal Code and PCMLTFA to strengthen the investigative, enforcement, and information sharing tools of Canada's AML/ATF Regime. These changes included:

• Giving law enforcement the ability to freeze and seize virtual assets with suspected links to crime;
• Improving financial intelligence information sharing between law enforcement and the Canada Revenue Agency (CRA), and law enforcement and the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC);
• Introducing a new offence for structuring financial transactions to avoid FINTRAC reporting;
• Strengthening the registration framework, including through criminal record checks, for currency dealers and other money services businesses to prevent their abuse;
• Criminalizing the operation of unregistered money services businesses;
• Establishing powers for FINTRAC to disseminate strategic analysis related to the financing of threats to the safety of Canada;
• Providing whistleblowing protections for employees who report information to FINTRAC;
• Broadening the use of non-compliance reports by FINTRAC in criminal investigations; and,
• Setting up obligations for the financial sector to report sanctions-related information to FINTRAC.

Finally, Budget 2024 announced further measures to complement previous investments and changes to the legislative regime, including:

• Providing $29.9 million over five years for the CBSA to support the implementation of its new authorities under the PCMLTFA to combat financial crime and strengthen efforts to combat international financial crime with our allies.
• Providing $1.7 million over two years to the Department of Finance to finalize the design and legal framework for the Canada Financial Crimes Agency (CFCA).

Budget 2024 also proposed the amendments to the PCMLTFA, Criminal Code, and Excise Tax Act. Proposed amendments to the PCMLTFA would:
• Enhance the ability of reporting entities under the PCMLTFA to share information with each other to detect and deter money laundering, terrorist financing, and sanctions evasion, while maintaining privacy protections for personal information, including an oversight role for the Office of the Privacy Commissioner under regulations;
• Permit the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to disclose financial intelligence to provincial and territorial civil forfeiture offices to support efforts to seize property linked to unlawful activity; and, Immigration, Refugees and Citizenship Canada to strengthen the integrity of Canada's citizenship process;

Proposed amendments to the Criminal Code would:
• Allow courts to issue an order to require a financial institution to keep an account open to assist in the investigation of a suspected criminal offence; and,
• Allow courts to issue a repeating production order to authorize law enforcement to obtain ongoing, specified information on activity in an account or multiple accounts connected to a person of interest in a criminal investigation.

Proposed amendments to the Income Tax Act and Excise Tax Act would:
• Ensure Canada Revenue Agency officials who carry out criminal investigations are authorized to seek general warrants through court applications, thereby modernizing and simplifying evidence gathering processes and helping to fight tax evasion and other financial crimes.

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