paper with words anti-money laundering

The Investment Industry Association of Canada (IIAC) is pushing back on some of the proposed changes to anti-money laundering (AML) rules, including the panned approach to the emerging world of virtual currencies.

In a letter to the Department of Finance Canada published Friday, the Michelle Alexander, IIAC vice president, states the proposed changes to the AML rules pose certain operational and implementation challenges for the securities industry.

Among other things, the IIAC questions the expanded record-keeping requirements proposed in the rules, the requirement for “frequent and extensive” monitoring of high-risk clients, and the approach to identity verification.

The letter also spells out the IIAC’s concerns with the provisions in the new rules dealing with virtual currencies, including the definition of the concept that’s used in the rules. “The IIAC encourages the department to consider providing more clarity to the definition of ‘virtual currency’ by defining what in fact a ‘digital currency’ is; as opposed to what it is not,” the letter states.

The IIAC also has concerns with the requirement for a securities dealer participating in an initial coin offering to register as a money services business under the AML legislation, saying that this is inconsistent with the approach being taken by FINTRAC.

Additionally, the IIAC questions the requirement for dealers to maintain records on “every known detail” of their clients’ transactions and activities. “In our view, the approach of requiring regulated entities to obtain and maintain excessive amounts of data pays inadequate attention to risk and is not in keeping with a risk based approach,” the letter states. “We believe that the focus of the proposed regulations should not be on gathering every piece of data that comes into the possession of a regulated entity, but rather, should focus on the quality and the relevancy of data.”

“From a policy and a privacy perspective, consideration must be given to proportionality when requesting vast amounts of personal data from clients,” the letter states, and this goes beyond preventing money laundering, and “need to be seriously re-examined.”