On July 5, 2024, the Department of Finance released draft regulations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), which, among other things, implement some of the changes outlined in the Fall Economic Statement of 2023 (see our Blakes Bulletin Key Updates: Open Banking and Canadian Mortgage Charter in Fall Economic Statement).

A high-level summary of these provisions is as follows:

1. Reporting on Sanctioned Property

The regulatory impact analysis statement accompanying the draft regulations (Draft Regulations) notes that Canada does not currently have a standardized process built into the anti-money laundering and anti-terrorist funding framework for sanctioned property reporting. The changes proposed to the Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations (STR Regulations) attempt to address that gap by expanding the current terrorist property reporting requirement to a broader sanctioned property reporting requirement. Specifically, the Draft Regulations expand the definition of a listed person or entity so that it now captures individuals and entities listed under almost all Canadian sanctions legislation, including those designated under the Special Economic Measures Act, the United Nations Act, and the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law), in addition to the terrorist-related lists included in the Criminal Code and suppression of terrorism regulations. As such, reporting obligations to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) by regulated entities will be expanded to include circumstances where a regulated entity holds not only terrorist property but also the property of persons sanctioned under Canada’s sanctions legislation more broadly. This is a significant expansion of FINTRAC reporting obligations and would provide FINTRAC a greater role in assessing sanctions compliance by regulated entities. 

Corresponding changes have been made to Schedule 2 to the STR Draft Regulations to capture detailed information in respect of sanctions list matches, including a requirement to describe transactions involving the property of a listed person that have occurred within the previous six months. This will require IT changes by regulated entities and enhanced training in AML procedures to deal with sanctions. As a result of these and other changes being made to the PCMLTFA (including the requirement to report “sanctions evasion offences” as STRs), it is clear that FINTRAC will have a much greater focus on sanctions compliance by regulated entities going forward.

2. Money Services Businesses (MSB)

Some of the more significant changes proposed by the Draft Regulations are concerning money services businesses to address, among other things, deficiencies that were noted in the Cullen Commission Report. As outlined in our Blakes Bulletin More Changes to Canadian Anti-Money Laundering Legislation, when an MSB registers with FINTRAC, it will now be required to submit the following documentation as part of its application.

For corporations:

• A record that confirms its existence as a corporation, which contains the name and address of its directors
• A document that sets out the ownership, control and structure of the corporation

For entities:

• A partnership agreement, articles of association or any other record that confirms the existence of the entity and contains its name and address
• A document that sets out the ownership and control structure of the entity

In addition to the foregoing, as is the case with foreign MSBs, domestic MSBs will also be required to submit criminal record checks when registering with FINTRAC covering the CEO, president and directors as well as every person who owns or controls 20% or more of the MSB (Controlling Persons). These criminal record checks must also be updated every two years as part of the renewal process. For MSBs that utilize agents, criminal record checks will also be required for individual agents. For agents that are entities, criminal record checks will be required regarding Controlling Persons (as part of both the application and renewal process).  Criminal record checks must be current (no more than six months old).

3. White-label ATMs

Unlike the Quebec Money Services Businesses Act, the PCMLTFA does not currently regulate white-label ATM acquirers. The Draft Regulations change that by requiring those that provide acquiring services to white-label ATMs to register with FINTRAC as money services businesses and implement a full AML compliance regime. In addition to the requirement to report suspicious transactions to FINTRAC, white-label ATM operators will also be required to keep extensive records in respect of their business including:

• Information in respect of the owner, lessor and operator of the ATM machine
• Information in respect of the owner of the cash that is loaded into the ATM machine
• Information on the settlement account for ATM transactions as well as information in respect of each account holder
• Specific information in respect of ATM machines, including the brand, model and serial number and the number of bills that the machine can contain
• The source of cash that is loaded into the machine
• Information regarding the business relationship between the owner of the cash, the owner of the machine and the owner of the place of business where the machine is located

An ATM acquirer is also required to verify the identity of those who own, lease or operate the ATM, those who load cash into the ATM, as well as the owner of the settlement account used for ATM transactions.

4. Title Insurers

As discussed in the Department of Finance’s Consultation on Strengthening Canada's Anti-Money Laundering and Anti-Terrorist Financing Regime (see our Blakes Bulletin 2023 Federal Budget: Impact on Canada’s Anti-Money Laundering Regime), the Draft Regulations now bring those that provide title insurance services within the scope of the PCMLTFA. A “title insurer” is defined in the Draft Regulations as a person or entity that is engaged in the business of providing title insurance, as defined in the schedule of the Insurance Companies Act, which contains a very broad definition. Title insurers are subject to the PCMLTFA when they provide a title insurance policy to the purchaser of real property.

When the PCMLTFA is implicated, title insurers are required to keep detailed records, including records in respect of:

• The purchase price of the property
• The source of funds used for the purchase
• If known, the amount and term of any mortgage loan and the name and address of the lender
• The name and address of any lien holder on the property

Title insurers also have identity verification requirements as well as politically exposed person (PEP) determination requirements. It should be noted that whenever a title insurer issues a title insurance policy, they will effectively be deemed to have entered into a business relationship with the purchaser, which triggers the ongoing monitoring requirement.

5. Unrepresented Parties in Real Estate Transactions

As announced in the fall economic statement, the PCMLTFA will now require real estate brokers and sales representatives to identify the party or parties not represented in real estate transactions.  

The Draft Regulations are open for comment for a 30-day period until August 4, 2024. Parties affected by these amendments should review them carefully to determine if any comments are in order.