Greetings fellow compliance geeks!

As you may know, Canada’s latest budget bill contains a number of amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). We’ve created a marked up version of the PCMLTFA to help you work through and understand the changes, and you can access it using the link below with this caveat: you are welcome to use and share this markup, but you may not charge money for access to it. Information should be free.

Yes, I get it, give me access!

If you prefer a copy of the markups in Microsoft Word, please contact us.

Analysis Notes

The biggest takeaway from these amendments is related to section 5 (e.1), which adds “trust companies incorporated or formed by or under a provincial Act that are not regulated by a provincial Act” as being federally regulated entities. This has been a loophole in Canadian legislation for a long time, and was called out in Canada’s most recent mutual evaluation by the Financial Action Task Force (FATF). If you’re company falls into this category, it’s time to start thinking about anti money laundering (AML) compliance. If you have business arrangements (clients, suppliers, etc.) that are unregulated provincial trusts, there are a few early steps that you might want to consider:

• Re-assess the AML risk that these provincial trust companies pose;
• Reach out to ask if they have a Compliance Officer and an AML program (in some cases, you will be pleasantly surprised); and
• Consider whether or not additional controls are required to mitigate the risk posed.

The additional information that’s changing includes a lot of items that most us would consider housekeeping, like changing foreign country to foreign state in a number of places, and adding bullet points to what is considered “prescribed information:”

• the name, address, electronic mail address and telephone number of every trustee and every known beneficiary and settlor of a trust referred to in paragraph (a);
• the name, address, electronic mail address and telephone number of each person who owns or controls, directly or indirectly, 25 % or more of an entity referred to in paragraph (a), other than a trust; and
• information respecting the ownership, control and structure of an entity referred to in paragraph (a).

The only piece there that will be new (at least in terms of requirements) is the “electronic mail address” (email) for beneficial owners. If you’re not already collecting this information, it’s time to think about how to get started. If you’re collecting the email address, but its optional, consider making it a required field.

The modifications also give the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) the ability to share information with the Department of National Defence and the Canadian Forces where there are reasonable grounds to believe that there is a threat. Presumably, this would include contexts like a terrorist attack on Canada. It’s somewhat surprising that this was not already in place.

There have also been changes to the things about which “the Governor in Council may, on the recommendation of the Minister, make any regulations that the Governor in Council considers necessary for carrying out the purposes and provisions of this Act, including regulations…” These are interesting in thinking about what may be next in line for additional regulation:

• respecting dealing in virtual currencies;
• respecting the keeping of records referred to in section 6;
• respecting the verification of the identity of persons and entities referred to in section 6.1; (d) respecting the reports to the Centre referred to in section 7 and subsections 7.1(1) and 9(1);
• respecting the determination of whether a person is a person described in any of paragraphs 9.3(1)(a) to (c);
• respecting the measures referred to in subsections 9.3(2) and (2.1);
• respecting the measures referred to in subsection 9.4(1);
• respecting the program referred to in subsection 9.6(1);
• respecting the special measures referred to in subsection 9.6(3);
• respecting the registration referred to in sections 11.1 to 11.2;
• respecting the reports referred to in subsection 12(1); and
• prescribing anything that by this Act is to be prescribed.

The only truly interesting point here is dealing in virtual currency, which also came up in Bill C-31 which passed in 2014. This bill, also called the Economic Action Plan 2014 Act, No. 1, has not been fully implemented. Some of its provisions (including those specifically related to including dealing in virtual currency under the definition of money services businesses) are also being amended. In the markups, these changes are highlighted in blue rather than in yellow to distinguish between the two.

Finally, there is a change to the definition of a head of an international organization. This one seems a bit nitpicky to me, but if you’re in the process of updating your documentation for the changes that are coming into force in June of this year, you might want to consider this as well. Head of an international organization (HIO) means a person who, at a given time, holds — or has held within a prescribed period before that time — the office or position of head of an international organization that is established by the governments of states or the head of an institution of any such organization.

We’re Here To Help

If you have questions about these changes, the changes coming into force in June of this year, or AML compliance in general, please contact us.