Proceeds of Crime Legislation Amendments Expected from Federal Budget 2017
By Bruce McMeekin
In the budget released on March 20th, 2017, the federal government announced its intention to introduce amendments to the proceeds of crime legislation (the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, or “PCMLTFA”) to:
- Expand the list of disclosure recipients that can receive financial intelligence related to threats to the security of Canada to include the Department of National Defence and the Canadian Armed Forces;
- Support more effective intelligence on beneficial owners of legal entities, such as corporations and trusts; and,
(3) Make various technical and other changes to strengthen the framework, support compliance, improve the ability of reporting entities to operationalize legislation and ensure the legislation functions as intended.
That sounds ambitious, but, presently, there is no publicly available information from the government that puts some flesh on these vague plans. Some clues of what to expect can be found in two reports released in 2016 that were critical of Canada’s effectiveness in the international fight against money laundering and terrorist financing.
The U.S. State Department continued to list Canada as “Country of Primary Concern”, meaning that it is a major money laundering country, joining Russia and Iran that share the same moniker.1
In September of 2016, the Financial Action Task Force (“FATF”) – an independent inter-governmental organization that develops and promotes policies to protect the global financial system against money laundering and terrorist financing – released its evaluation of Canada.2 One of its many critical findings was that, with the exception of financial institutions, including the big six banks, other regulated entities like real estate brokers and money-services businesses do not have a good understanding of their risks and obligations. This translates into inadequate reporting of reportable transactions to the FINTRAC, the federal agency that oversees the PCMLTFA.
The FATF also expressed its concern with legislative deficiencies that impact determining the beneficial ownership of corporations. Ownership is a cornerstone in the regulated entity’s assessment of the risk in acting for an institutional client. The FATF found that financial institutions are required to do little to verify the accuracy of beneficial ownership information, while other regulated entities such as money-service businesses are not required to identify beneficial ownership.
The first category of amendments to the PCMLTFA is likely an acknowledgment of the growing role of the Department of National Defence in the fight against terrorism arising from its assistance to Iraq in its campaign against Daesh (also known as the Islamic State).
The second and third categories are likely intended to address at least some of the FATF criticisms. Introducing legislation to require greater diligence in identifying beneficial ownership could be complicated. The federal and provincial governments share jurisdiction over the incorporation of legal entities and their reporting requirements. Legislative progress may require inter-governmental co-operation and co-ordination.
Whatever the new amendments may be, many of the FATF’s concerns are about compliance. The legislation is already there, but too many regulated entities are not meeting their obligations. That speaks more to the need for effective enforcement and less to tinkering with the legislation.
Bruce McMeekin (www.jbrucemcmeekinlaw.com)
J. Bruce McMeekin is a Toronto-based lawyer specializing in environmental law, corporate law, workplace safety, and FINTRAC reporting.
- International Narcotics Control Strategy Report, Volume II Money Laundering and Financial Crimes, United States Department of State Bureau for International Narcotics and Law Enforcement Affairs, March 2016, at www.state.gov/documents/organization/253983.pdf | ↩
- Anti-money laundering and counter-terrorist financing measures Canada, Mutual Evaluation Report, 2016, at http://www.fatf-gafi.org/media/fatf/documents/reports/mer4/MER-Canada-2016.pdf. | ↩