Canada is failing in its anti-money laundering and counter-terrorist financing efforts according to a report published by the country’s Senate Standing Committee on Banking, Trade and Commerce.
The report, entitled “Follow the Money: Is Canada Making Progress in Combatting Money Laundering and Terrorist Financing? Not Really” (the “Report“) makes several findings and recommendations, the chief of which is that the Canadian federal legislation implementing the Financial Action Task Force (“FATF“) 40 Recommendations on combating money laundering and terrorist financing (the “FATF Recommendations“), namely the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the “PCMLTFA“) and its regulations are ineffective and need to be substantively changed.
The material recommendations of the Senate Committee in the Report are as follows:
- That Canada set up a supervisory body whose mandate will be to develop priorities for anti-money laundering (“AML“) and counter-terrorist financing (“CTF“) and ensure that Canada implements only those FATF Recommendations that are appropriate for it;
- That Canada ensure that the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC“) hire AML specialists to assist it in understanding financial crime and AML to fulfill its legislative mandate;
- That CBSA, CRA, CSIS and RCMP be authorized to directly access FINTRAC’s database to obtain personal and other information on Canadians for investigation purposes, including for tax evasion purposes;
- That FINTRAC and the government consult with reporting entities every year to determine how the compliance burden can be minimized for reporting entities;
- That Canada amend the PCMLTFA to allow employees of reporting entities to anonymously report failures to comply with the PCMLTFA by employers and to allow anyone to report anonymously any money laundering or terrorist financing activities;
- That Canada amend the PCMLTFA by placing an emphasis on risk-based analysis and reporting;
- That Canada amend the PCMLTFA to eliminate the $10,000 reporting threshold for international electronic fund transfers; and
- That Canada develop an “awareness” program to educate Canadians about the country’s AML and CTF laws.
Some interesting findings of the Senate Committee in the Report are as follows:
- The Senate Committee found that there is no evidence that Canada’s AML and CTF regime has resulted in the detection or deterrence of money laundering or terrorist financing whatsoever. According to the Report, last year Canada spent $64 million dollars to fund its AML and CTF regime with apparent zero effect;
- The Senate Committee recommended that Parliament immediately cease enacting changes to the PCMLTFA and the regulations promulgated thereunder but nonetheless recommended that the PCMLTFA be amended to implement certain changes that the Senate Committee felt were required, including a completely new structure;
- The Senate Committee was of the view that complying with all of the FATF Recommendations is not required in Canada;
- According to the Senate Committee, last year, there were only 4 convictions for money laundering and only one person has ever been convicted of terrorist financing in Canada;
- The Senate Committee stated that it did not receive any evidence in connection with the costs of complying with the AML and CTF regime from reporting entities in Canada, although several reporting entities did provide the Department of of Finance with an assessment of the financial costs of complying with the regime for the purposes of the Senate Report; and
- The Senate Committee was of the view that the PCMLTFA amendments should be made with a focus on a risk-based approach but should not be an entirely risk-based approach. Rather the Senate Committee suggested that the new AML and CTF regime in Canada be a mix of a risk-based approach and prescriptive elements.