paper with words anti-money laundering

With the promised creation of a new federal financial crime agency and increased funding for anti-money laundering (AML) authorities, in its latest budget, the federal government is seeking to step up the fight against financial crimes.

In yesterday’s budget, the federal government announced plans to launch a new authority, the Canada Financial Crimes Agency, which it envisions as the future lead law enforcement agency in the fight against financial crime.

To that end, the budget sets aside $2 million to Public Safety Canada in the current fiscal year to, “undertake initial work to develop and design the new agency.”

The government indicated that further details on the initiative will be included in the 2022 fall economic and fiscal update.

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Alongside the launch of a new federal policing unit, the budget also pledged increased funding — $89.9 million over five years, and $8.8 million annually after that — to beef up the existing AML agency, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).

This represents a 24% increase to FINTRAC’s budget, and provisions for a 13% increase in staff.

“This increased capacity will enable FINTRAC to implement new anti-money laundering and anti-terrorist financing requirements for crowdfunding platforms and payment service providers; support the supervision of federally regulated financial institutions; continue to build expertise related to virtual currency; modernize its compliance functions; and update its financial management, human resources, intelligence, and disaster recovery systems,” the government said in the budget.

Additionally, the government indicated that it’s also planning a review of the AML regime, with view to identifying and closing any gaps in the current framework.

It’s also already working on legislative changes to strengthen the existing AML legislation, the Criminal Code, and other legislation, “to enhance the ability of authorities to detect, deter, investigate, and prosecute financial crimes,” the budget said; while also enabling the government to tackle emerging threats that may not be covered under the existing regime.

The government singled out one area where it currently sees a gap in oversight — the risk of money laundering through the mortgage lending sector.

“In recent years, there has been a growth in mortgages issued by lending businesses not regulated under the national anti-money laundering and antiterrorist financing rules that apply to other financial institutions, such as banks,” the government said in the budget document.

To close that gap, the government said that it plans to extend AML requirements, “to all businesses conducting mortgage lending in Canada within the next year.”

“This will limit the exploitation of the real estate market by criminals, which can affect housing affordability across the country,” it said.

Additionally, the government indicated that a new federal beneficial ownership registry will be available by the end of 2023 — two years earlier than initially planned.

The searchable, public registry will cover federally incorporated companies to start, although the government plans to work with the provinces to create a comprehensive national property registry.

The initiative is intended to enhance transparency and to make it tougher for anonymous shell companies to be used to hide assets, engage in money laundering and tax evasion, and to avoid sanctions.