Countries/Jurisdictions of Primary Concern - Canada
Money laundering activities in Canada are primarily a product of illegal drug trafficking and financial crimes, such as credit card and securities fraud, and fraudulent mass-marketing. The criminal proceeds laundered in Canada derive predominantly from domestic activity controlled by drug trafficking organizations and organized crime.
The money laundering methods used in Canada have remained relatively consistent in recent years. They include smuggling; money service businesses and currency exchanges; casinos; the purchase of real estate; wire transfers; establishment of offshore corporations; use of credit cards,
stored value cards, and new payment methods; use of nominees; use of foreign bank accounts; and the use of professional services such as lawyers and accountants.
Canada does not have a significant black market for illicit goods. Cigarettes are the most commonly smuggled good in the country. There are indications that trade-based money laundering occurs; and underground financial systems are used within the immigrant community. Some human trafficking organizations have engaged in money laundering. There is no indication this activity is tied to terrorism financing.
For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: http://www.state.gov/j/ct/rls/crt/
Do FINANCIAL INSTITUTIONs engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or illegal drug sales that otherwise significantly affect the U.S.: No
CRIMINALIZATION OF money laundering:
“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes
Are legal persons covered: criminally: YES civilly: YES
Know-your-customer (KYC) rules:
Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES
KYC covered entities: Banks and credit unions; life insurance companies, brokers, and agents; securities dealers; casinos; real estate brokers and agents; agents of the Crown (certain government agencies); money services businesses (MSBs); accountants and accounting firms; lawyers; dealers in precious metals and stones; and notaries in Quebec and British Columbia
Number of STRs received and time frame: 81,735: April 1, 2013 - March 31, 2014
Number of CTRs received and time frame: 8,313,098: April 1, 2013 - March 31, 2014
STR covered entities: Banks and credit unions; life insurance companies, brokers, and agents; securities dealers; casinos; real estate brokers and agents; agents of the Crown; MSBs; accountants and accounting firms; dealers in precious metals and stones; and notaries in British Columbia and Quebec
money laundering criminal Prosecutions/convictions:
Prosecutions: Not available
Convictions: Not available
Records exchange mechanism:
With U.S.: MLAT: YES Other mechanism: YES
With other governments/jurisdictions: YES
Canada is a member of the FATF and the Asia/Pacific Group on Money Laundering (APG), a FATF-style regional body. Its most recent mutual evaluation can be found at: http://www.fatf-gafi.org/media/fatf/documents/reports/mer/MER%20Canada%20full.pdf.
Enforcement and implementation issues and comments:
The possession of proceeds of crime (PPOC) is a criminal offense under the criminal code and is considered money laundering. The same penalties apply to both money laundering convictions and convictions for PPOC involving more than $5,000. As such, PPOC is not considered to be a lesser offense and is equally effective in pursuing criminals and forfeiting their illicit assets. Investigators regularly make large cash seizures of Canadian and U.S. currency and seize assets purchased with cash, such as real property, vehicles, personal property (jewelry, furniture, and appliances), collectibles (antiques, coins, stamps), and other assets. Bulk cash smuggling is widespread.
Canada has a rigorous detection and monitoring process in place to identify money laundering and terrorism financing activities, but should further enhance its enforcement and conviction capability. In addition to STRs and CTRs, Canada’s financial intelligence unit, the Financial Transaction Reports Analysis Center of Canada (FINTRAC) receives reports on casino disbursements, international wire transfers, and cross-border currency movements. FINTRAC made 1,143 disclosures to law enforcement and other government agencies from April 1, 2013 to March 31, 2014. Of these, 845 disclosures were money laundering related, 234 were terrorism financing or security threat related, and 64 were both money laundering and terrorism financing or security related. Obstacles to successful enforcement include privacy rules that prevent FINTRAC from freely sharing information with law enforcement; complex investigations that can take understaffed police agencies years to finish; and overworked Crown Prosecutors. Though the legislative framework does not allow law enforcement agencies direct access to FINTRAC’s databases, FINTRAC may disclose actionable financial intelligence to assist money laundering (ML), terrorist financing (TF), and threats to the security of Canada investigations. When FINTRAC has determined reasonable grounds exist to suspect information would be relevant to an investigation or prosecution of an ML/TF offense, they are required to disclose financial intelligence to the appropriate authorities.
In June 2014, Canada became one of the first countries to implement comprehensive legislation regulating virtual currencies, such as bitcoin. The new regulations include provisions that subject digital currencies to the same reporting requirements as MSBs, including the requirement that all digital currency exchanges register with FINTRAC. Digital currency exchanges also will be subject to verification, registration, and record-keeping requirements, including the obligations to report suspicious transactions, implement compliance programs, and determine if any of their customers are politically exposed persons (PEPs). The new legislation also covers foreign companies that have a place of business in Canada and those directing services at Canadians. Financial institutions will be prohibited from establishing and maintaining bank accounts for customers involved with virtual currency businesses that are not registered under FINTRAC.
In January 2013 the Government of Canada amended the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations to require reporting entities to better identify customers and understand the nature of their business, monitor business relationships using a risk-based approach, and identify beneficial owners of corporations and trusts, consequently enabling the reporting entities to identify transactions and activities that are at greater risk of ML/TF activity. The regulations went into effect on February 1, 2014.
As part of a package of amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) introduced in 2014 under the Economic Action Plan Act 2014, No. 1, the provisions of the PCMLTFA pertaining to politically exposed persons (PEPs) were amended to include politically exposed domestic persons (PEDP) and heads of international organizations. The bill was enacted on June 19th, 2014. The PCMLTFA now requires reporting entities to determine whether a client is a politically exposed foreign person (PEFP), a PEDP, a head of an international organization, or a close associate or prescribed family member of any such person. The definition of a PEDP includes persons holding a specified political office at a national, provincial, or territorial level, as well as mayors at the municipal level. The definition of ‘head of an international organization’ refers to persons who are heads of international organizations founded by treaty, and not non-governmental organizations. The circumstances under which a reporting entity must make such a determination, and the measures to be taken as a result, are to be set out in regulation. The legislative and regulatory amendments would come into force at the same time.
Canada is currently undertaking a broader ML/TF risk assessment. On June 18, 2013, Canada published its Action Plan on Transparency of Corporations and Trusts. Canada’s Action Plan commits to developing a new ML/TF risk assessment framework and conducting a formal assessment of these risks domestically to better inform the development and implementation of effective policies and operational approaches to mitigate risks. An interdepartmental Risk Assessment Working Group led by the Department of Finance has been established, the Terms of Reference were approved in spring 2013, and work is proceeding on the scheduled timeline.
As part of Budget 2014, Canada’s Action Plan on Transparency of Corporations and Trusts, the Canadian Government will consider options to further improve corporate transparency, taking into account the results of Industry Canada’s current consultations on corporate transparency issues in the context of the Canada Business Corporations Act. The government also committed to consider the option of an explicit ban on bearer instruments.
Budget 2014 also announces the government’s intention to introduce legislative amendments and regulations to strengthen Canada’s AML/CFT regime. A package of almost 40 legislative amendments to the PCMLTFA was put forward through the Economic Action Plan 2014 Act, enacted on June 19th, 2014. In general, amendments that are internal to government came into force immediately and those that have an impact on the private sector will come into force in June 2015 or when enacting regulations are introduced.
Canada’s Integrated Criminal Courts Survey, which includes the specific data relative to money laundering prosecutions and convictions, was recently released for the year 2011-12; the actual data for those years will be available in 2015. Data for more recent years are not available.
Canada should continue its work to strengthen its AML/CFT regime and ensure its privacy laws do not excessively prohibit providing information to domestic and foreign law enforcement that might lead to prosecutions and convictions.