Canada to regulate digital currencies and online casinos under its anti-money laundering and counter-terrorist financing laws

Federal government to regulate digital currencies and digital financial transactions

As was widely anticipated, the federal government announced today that it will amend federal legislation to require the regulation of digital currencies, like Bitcoin, in order to eliminate the potential risks of digital currencies being used for terrorist financing and money laundering.

Interestingly, the proposed legislation will aim at eliminating, rather than reducing the financial crime risks, which suggests that businesses involved in the exchange of digital currencies will become “reporting entities” under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the “PCMLTFA“), similar to money services businesses, and accordingly, will be required to be registered by the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC“) and comply with the reporting requirements under the PCMLTFA by, inter alia, monitoring and reporting suspicious transactions and implementing compliance regimes based on site specific risk assessments.

The announcement was made as part of Canada’s 2014 federal budget released today. Bitcoin and other digital currencies were identified as “emerging risks that threaten” anti-money laundering and counter terrorist financing efforts in Canada.

Although few details have been provided, Canada said it would remove the anonymity associated with digital currency transactions that have any connection to Canada.

Greater scrutiny of all electronic payment systems including PayPal

And related to this, the government also intends to regulate all electronic payments generally, including PayPal, by amending the Canadian Payments Act to have oversight authority over the Canadian Payments Association and to authorize the Bank of Canada to oversee electronic payments pursuant to the Payment Clearing and Settlement Act.

Internet charities and the regulation of online gambling sites by FINTRAC

The government also announced proposed changes to the Criminal Code of Canada to permit charities to operate lottery schemes through or on a computer (i.e., become i-gaming operators for charitable purposes).

It also announced additional changes to the gambling regime in Canada with amendments to the definition of a “casino” in the PCMLTFA to require the registration with FINTRAC of i-gaming or Internet gambling companies operating in Canada.