Order Fixing the Days on Which Certain Provisions of Various Acts Come into Force: SI/2025-2

Canada Gazette, Part II, Volume 159, Number 1

Registration

SI/2025-2 January 1, 2025

BUDGET IMPLEMENTATION ACT, 2023, NO. 1
FALL ECONOMIC STATEMENT IMPLEMENTATION ACT, 2023
BUDGET IMPLEMENTATION ACT, 2024, NO. 1

Order Fixing the Days on Which Certain Provisions of Various Acts Come into Force

P.C. 2024-1321 December 16, 2024

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance,

EXPLANATORY NOTE

(This note is not part of the Order.)

Proposal

Objective

The objective of the Order is to bring into force amendments to the Proceeds of Crime (Money Laundering) and Terrorism Financing Act (PCMLTFA) relating to the introduction of a regime for sanctioned property reporting, strengthening the money services (MSB) registration framework by requiring criminal record checks for certain individuals, and expanding anti-money laundering (AML) and anti-terrorist financing (ATF) regulation to acquirers for white-label automatic teller machines (ATMs). Specifically:

Background

Canada’s AML/ATF Regime helps to protect the integrity of Canada’s financial system and the safety and security of Canadians by detecting, deterring, and disrupting money laundering and terrorist financing, as well as helping to disincentivize the predicate criminal offences that generate proceeds of crime.

The PCMLTFA, first implemented in 2000, is a key statute in Canada’s AML/ATF Regime. Its objectives are to: facilitate the deterrence, detection, investigation and prosecution of money laundering and terrorism financing offences; counter organized crime by providing law enforcement officers with the information they need while establishing appropriate privacy safeguards; assist in fulfilling Canada’s international commitments, including under the Financial Action Task Force, to the global fight against transnational financial crime; and to protect Canada’s financial system from misuse. To these ends, the PCMLTFA obligates businesses and professionals regulated by the Act (i.e. “reporting entities”) to develop and implement compliance programs to identify clients, monitor business relationships, keep records, and report certain types of financial transactions. It further establishes FINTRAC as Canada’s AML/ATF regulator and financial intelligence unit. Several regulations support the PCMLTFA.

In recent years, the government has made a series of statutory changes and investments to strengthen and modernize the AML/ATF legislative and regulatory framework, including announcements in Budget 2023, Budget 2024, and the 2023 Fall Economic Statement.

Sanctioned property reporting

Prior to the invasion of Ukraine, sanctions were primarily imposed against individuals, entities, and countries with relatively small economic and financial links to Canada. The situation presented by Russia creates a need to have more robust systems in place to both utilize sanctions and address sanctions evasion, including through clear and effective reporting on sanctioned property in Canada. Budget 2023 announced the imposition of legislative and regulatory changes to create a new sanctioned property report, which reporting entities will need to report to FINTRAC. Previously, reporting entities were required to submit a terrorist property report to FINTRAC when they are required to make a disclosure under the Criminal Code or the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism. The information that will be contained in the new sanctioned property report will closely mirror information that was already being captured under the previous terrorist property reporting requirements (for example, identifying and transactional information). The sanctioned property report also requires reporting for sanctions under the Special Economic Measures Act, the Justice for Victims of Corrupt Foreign Officials Act, and the United Nations Act.

MSB registration framework

Under the PCMLTFA, MSBs are persons or entities that offer one or more of the following services: foreign exchange dealing, remitting, or transmitting funds, issuing or redeeming money orders or other similar instruments, dealing in virtual currency, offering crowdfunding platform services or transporting currency, money orders, traveller’s cheques or other negotiable instruments. The MSB sector is inherently susceptible to money laundering risks due to the array of products and services it offers, its integration with the financial system, and its wide geographic reach across Canada and internationally. This risk is heightened where a criminal actor is able to infiltrate the corporate structure of an MSB. Upon registration with FINTRAC, foreign MSBs are already required to provide FINTRAC with a criminal record check of their chief executive officer, president, directors, and every person who controls directly or indirectly 20% or more of the entity or shares of the entity. To address money laundering risks and support a level playing field, Budget 2023 announced changes to require domestic MSBs to similarly submit criminal record checks of their chief executive officer, president, directors, and every person who controls directly or indirectly 20% or more of the MSB or shares of the MSB to FINTRAC during registration (and re-registration) every two years. These requirements were included in BIA 2023.

In addition, the legislative changes introduced in BIA 2023 also require MSBs to obtain and review criminal record checks of their agents and to submit information related to these criminal record checks upon registration (and re-registration) every two years with FINTRAC. For agents of MSBs that are “entities” (i.e. corporations), the chief executive officer, the president, the directors and any person who owns or controls, directly or indirectly, 20% or more of the entity or the shares of the entity, must also undertake a criminal record check and the MSB must submit information related to these checks to FINTRAC during registration (and re-registration) every two years. All information related to the criminal record checks must have been obtained from the relevant authority within the last 6 months (relative to the time of registration or re-registration), meaning that MSBs need to conduct the obligatory criminal record checks in advance of their registration (and re-registration) every two years.

BIA 2023 also provides definitions related to criminal record checks for MSBs and their agents, prohibits individuals with certain criminal histories from certain investments in, or being engaged in certain functions by, an MSB, contains a general requirement for the submission of a document that sets out the criminal history of certain individuals and investors to FINTRAC in the context of the registration and re-registration of an MSB every two years, establishes requirements related to criminal record documentation, a requirement to retain for a prescribed retention period, verification procedures, and related requirements. In general, the legislation outlines more general requirements, such as that a document setting out an individual’s record of criminal convictions issued by a competent authority must be submitted, and the regulations provide further details of the information that must be on the document, such as the location and name of the competent authority.

The Regulatory Amendments provide further detail in support of the legislative amendments. For example, by requiring: the provision of documents that set out the ownership and structure of the MSB; the submission of contact and other personal information relating to the individuals for which a criminal record check must be undertaken; other information, such as date and location, that must be included when submitting information related to criminal record checks; and records relating to criminal record checks to be kept for five years.

Finally, Budget 2024 announced, and BIA 2024 includes, a technical amendment to add a criminal offence in the PCMLTFA for violations of the requirements related to criminal record checks for MSBs and their agents that were announced in Budget 2023, thereby making it consistent with the other registration-related offences for MSBs (i.e. operating an MSB without registration and the provision of false or misleading information in the registration of an MSB). More specifically, the amendment clarifies that the knowing contravention of the requirement for an MSB to not engage certain individuals with prohibited criminal histories constitutes a criminal offence that is liable: (i) on summary conviction to a fine not more than $250,000 or to imprisonment for a term of not more than two years less a day, or to both; or (ii) on conviction on indictment to a fine of not more than $500,000 or to imprisonment for a term of not more than five years, or to both.

White-label ATMs

The 2023 Fall Economic Statement announced the government’s intention to make acquirers providing services to white-label ATMs reporting entities under the PCMLTFA. White-label ATMs are privately owned and operated cash machines that are highly vulnerable to money laundering. The machines can be loaded with illicit cash, withdrawn by the public, while financial institutions reimburse the machine’s owner with effectively “clean” funds. A 2008 Strategic Intelligence Assessment by the Royal Canadian Mounted Police (RCMP) concluded that organized crime groups had infiltrated the white-label ATM industry and estimated that $315 million a year could be laundered through the machines, and potentially up to $1 billion a year. Acquirers are intermediary companies that connect white-label ATMs to payment networks. Making acquirers reporting entities under the PCMLTFA will allow FINTRAC to gather and analyze information related to white-label ATM transactions and disclose intelligence to law enforcement to address the money laundering risks associated with white-label ATMs. The requirements for acquirers formalize many of the existing practices of the industry.

Implications

The Order brings into force legislation in BIA 2023 regarding the sanctioned property regime for sanctions under the United Nations Act 60 days after the day on which the Order is made. The regime for sanctioned property under the Special Economic Measures Act and the Justice for Victims of Corrupt Foreign Officials Act will be fully implemented on October 1, 2025. The shorter timeline for sanctioned property under the United Nations Act is required to adhere to Canada’s international obligations under the Financial Action Task Force. The amount of sanctioned property, and subsequent sanctioned property reporting under the United Nations Act is expected to be very low and should not necessitate immediate changes to the information technology systems of reporting entities.

This Order also brings into force on October 1, 2025, legislation to realize the strengthened MSB registration regime announced in Budget 2023 and contained in BIA 2023, as well as the related technical amendment included in BIA 2024. The Order also brings into force legislation in FES 2023 Act to implement the regulation of acquirers of white-label ATMs for AML/ATF purposes.

Regulations that provide details needed to realize the policy framework for the legislative measures related to sanctioned property reporting, the MSB registration framework, and white-label ATMs were prepublished in the Canada Gazette, Part I on July 6, 2024, and are published in the Canada Gazette, Part II at the same time as this Order. The Order in Council specifies coming into force dates for the legislative amendments that align with those in the Regulatory Amendments. Specifically, the coming into force for Regulatory Amendments related to reporting on sanctioned property under the United Nations Act is 60 days after registration of the regulations and on October 1, 2025, for sanctioned property under the Special Economic Measures Act and the Justice for Victims of Corrupt Foreign Officials Act. The coming into force of Regulatory Amendments related to the MSB registration framework and regulation of white-label ATMs is October 1, 2025.

FINTRAC is Canada’s financial intelligence unit and AML/ATF regulator. In this role, FINTRAC is responsible for ensuring the compliance and enforcement of the measures related to sanctioned property reporting, the MSB registration framework, and white-label ATMs. FINTRAC’s supervisory function is entirely funded from its assessment of expenses funding model to charge reporting entities for the annual cost of its compliance program. FINTRAC provides guidance and resources for reporting entities on its website: https://fintrac-canafe.canada.ca/guidance-directives/1-eng. This includes both sector-specific guidance, as well as detailed guidance broken down by regulatory requirement. FINTRAC will update this information on its website and raise awareness of the changes with existing reporting entities prior to the coming into force of the legislative and Regulatory Amendments relating to sanctioned property reporting, the MSB registration framework, and white-label ATMs.

FINTRAC will also undertake outreach to white-label ATM acquirers, as they will become new reporting entities, and help them establish typologies to gain a better understanding of their relevant money laundering and terrorist financing risks. New reporting sectors are also able to consult the existing guidance library available on FINTRAC’s website prior to the publication of the new tailored guidance. Once the regulations are brought into force, FINTRAC will conduct ongoing supervisory activities, including assessments to ensure compliance. If non-compliance is identified, FINTRAC can impose administrative monetary penalties or take other enforcement actions, as necessary. FINTRAC’s administrative monetary penalties policy is available on its website.

No specific financial, environmental, economic, or social concerns have been identified. The changes support positive federal-provincial/territorial relations on financial crime. In particular, the 2022 Commission of Inquiry into Money Laundering in British Columbia, known as the “Cullen Commission,” recommended that white-label ATM regulation would be appropriate at the federal level.

Money laundering is a threat to the safety and security of Canadians and the integrity of the financial system. The measures strengthen the AML/ATF Regime, helping to reduce the adverse effects of financial crimes on Canadians, the financial sector, and the economy. Furthermore, combatting money laundering indirectly helps to combat linked criminal offences that generate proceeds of crime (such as human trafficking, drug and weapons smuggling, and fraud). Victims of these linked offences are comprised of various diverse, often vulnerable, groups with different characteristics, among these are women, Indigenous Peoples, black or other racialized/visible minority communities, seniors, and newcomers or immigrants.

Consultation

The Regulatory Amendments were published in the Canada Gazette, Part I, on July 6, 2024, followed by a 30-day comment period that ended on August 5, 2024. The Department of Finance received comments through the Online Regulatory Consultative System (ORCS) and by email. The Department received 16 submissions in total (10 from industry associations and 6 from individuals). The following summarizes the submissions related to sanctioned property reporting, MSB registration framework, and white-label ATMs.

Sanctioned property reporting

The proposed sanctioned property regime was informed by engagement sessions the Department of Finance undertook with Canada’s major banks in May 2023, which focused on the implementation of Canada’s autonomous sanctions. During consultations, Canadian banks expressed challenges regarding ambiguity in the informational reporting requirements for sanctioned property and inconsistencies in the approach to submitting reports on sanctioned property. This feedback informed the proposed amendments, which help to ensure clarity on informational requirements and a basis for more consistent reporting on sanctioned property. The sanctioned property regime was also developed in consultation with FINTRAC, the Royal RCMP, and the Canadian Security Intelligence Service.

Regulatory Amendments related to sanctioned property reporting were published in the Canada Gazette, Part I on July 6, 2024. Two industry associations requested to provide greater flexibility of the coming into force provisions, which led the Department of Finance to extend the coming into force for reporting on the majority of sanctioned property under the Special Economic Measures Act and the Justice for Victims of Corrupt Foreign Officials to October 1, 2025. Small clarifications to the Regulatory Impact Assessment Statement and when necessary, the proposed regulations, were made to respond to comments from industry associations. One industry association also requested FINTRAC guidance, which is forthcoming. Finally, two industry associations requested to eliminate existing reporting related to sanctioned property to the Office of the Superintendent of Financial Institutions, the Canada Security Intelligence Service, and the RCMP. While such streamlining would require legislative amendments, which is not possible in the context, and out of scope, of the Regulatory Impact Analysis Statement and the Regulatory Amendments, the Department of Finance is engaging with these government bodies regarding a possible streamlining of reporting obligations relating to sanctioned property through future legislative changes.

MSB registration framework

The Department of Finance consulted specifically on the issue of further strengthening the MSB registration framework in the public Consultation on Strengthening Canada’s AML/ATF Regime held from June to August 2023. Key stakeholders, including the Canadian MSB Association, responded to this consultation indicating that they concur with the overall objective of deterring undesirable applicants from registering as domestic or foreign MSBs with FINTRAC as it would help to reduce the overall risk profile for the sector. In addition to this specific consultation on strengthening the MSB registration framework, the Department of Finance also regularly engages with the MSB sector on a variety of matters, typically through the Canadian MSB Association.

Regulatory Amendments related to strengthening the MSB registration framework were published in the Canada Gazette, Part I on July 6, 2024. During the consultation, one industry associations requested to exempt federally regulated financial institutions that are also agents of MSBs from the requirement to conduct criminal record checks. Such an exemption would require a legislative change to the PCMLTFA, which is not possible in the context, and out of scope, of the Regulatory Amendments. The Department of Finance will therefore consider the request in coordination with the Office of the Superintendent of Financial Institutions, as part of a possible future legislative change. One industry association also asked that the share ownership threshold for criminal record checks be raised from 20% to 25% to align with beneficial ownership requirements. The Department of Finance considered this request but ultimately determined that the 20% threshold is already as high as possible to limit the administrative burden and accommodate industry practices, while still addressing money laundering and terrorist financing risks in the MSB sector. Finally, one industry association also requested updated FINTRAC guidance, which is forthcoming.

White-label ATMs

From June to August 2023, the government held a public Consultation on Strengthening Canada’s AML/ATF Regime. The consultation posed a specific question regarding whether to expand the AML/ATF framework to white-label ATMs, and if so, what obligations should apply. Most feedback received on white-label ATMs was supportive of expanding Canada’s AML/ATF framework to include the sector. Stakeholders from the white-label ATMs sector, however, were generally opposed to AML/ATF regulation, arguing that the industry already has robust internal requirements and procedures. However, in 2008, the Department of Finance worked with representatives from the Canadian payment networks to develop a set of voluntary and self-enforced industry rules to address money laundering and terrorist financing risks posed by white-label ATMs. Despite these industry rules, the RCMP continues to report that WLATMs are suspected of being associated with criminality.

Following the release of the 2023 Fall Economic Statement, the Department of Finance held bilateral and group engagement sessions with several members of the white-label ATM sector. These engagement sessions focused on introducing the sector to the AML/ATF Regime, the PCMLTFA, and its regulatory framework, followed by more detailed sessions providing an overview of potential AML/ATF requirements under consideration. This approach permitted the Department of Finance to refine its regulatory policy to ensure that it was responsive to the risks posed by the sector as well as responsive to the business practices of acquirers for white-label ATMs. Proposed regulatory Amendments related to white-label ATMs were published in the Canada Gazette, Part I on July 6, 2024. No comments were received on the proposed Amendments relating to white-label ATMs during the 30-day consultation period.

Contact

Erin Hunt
Director General
Financial Crimes and Security Division
Financial Sector Policy Branch
Department of Finance
90 Elgin Street
Ottawa, Ontario
K1A 0G5