On February 13, 2013, the Government of Canada published in the Canada Gazette certain amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (the Regulations). These amendments will come into force one year after their publication (i.e., in February 2014).
The full text of the amendments can be found here. In summary, these amendments (a version of which was previously published in October 2012 for comment) are meant to address certain deficiencies identified by the Financial Action Task Force (FATF) in the customer identification and due diligence provisions of the Regulations. FATF is the international body that sets standards for anti-money laundering and anti-terrorist financing (AML/ATF) activities. Canada is a founding member of the FATF. In its 2008 evaluation of Canada, FATF identified deficiencies in Canada’s requirements relating to customer identification and due diligence, and Canada was found to be non-compliant with FATF Recommendation 5. The stated purposes of the amendments are: to ensure that Canadian reporting entities clearly understand their customer due diligence (CDD) obligations; to improve Canada’s compliance with Recommendation 5; and to promote the continuing strength of Canada’s AML/ATF regime.
The amendments to the Regulations make the following clarifications to the CDD provisions of the Regulations:
The term “business relationship” will now be defined in the Regulations. The Regulations will also be amended to clarify that, in order to meet their obligations to identify and report suspicious transactions, reporting entities should conduct ongoing monitoring of business relationships with clients, using a risk-based approach, and should obtain information concerning the purpose of a business relationship when entering into a business relationship with a client.
The circumstances in which reporting entities should take enhanced CDD measures in respect of high-risk customers, activities or transactions will be clarified to clearly indicate that enhanced measures should be taken in respect of all high-risk clients and activities, and a list of enhanced measures from which reporting entities can choose will be added. The measures include keeping client information up to date and conducting enhanced ongoing monitoring.
The Regulations require certain reporting entities to obtain identification information, in designated circumstances, from all persons who own 25% or more of a corporation or entity. The amendments specifically clarify that those reporting entities should also obtain documentary evidence from the client that confirms the beneficial ownership information that they have obtained.
The Regulations will be amended to clarify that no exceptions exist to reporting entities’ current obligations to conduct CDD measures in respect of any transaction or activity which gives rise to a suspicion of money laundering or terrorist financing.
Before these amendments to the Regulations come into force, the Financial Transactions and Reports Analysis Centre of Canada (Canada’s financial intelligence unit) and the Office of the Superintendent of Financial Institutions (responsible for administering the federal financial institutions statutes in Canada) will provide updated guidance in order to address the comments provided by stakeholders on the previous version of these amendments published in October 2012.