New AML regulations in Canada

ELI Canada

Canadian AML controls a practice used to hide the origin of funds or assets obtained through unlawful means. The complete regs modifying the Proceeds of Crime (Money Laundering and Terrorist Financing Act) Regulations were just made public by FINTRAC. Given the size and depth of the Regulations’ modifications, regulated entities (REs) will have to completely rewrite their monitoring and implementation processes and policies.

Canadian aml regulating regime changes

Canadian aml legislation shows that authorities are adjusting to the financial services sector’s growing dynamic nature, particularly in light of the introduction of new technologies like electronic money and electronic payment remittance systems.

The following are some key conclusions from the Regulations’ legislative changes:

  • Money Service Businesses

As was to be expected, the rules governing MSB have been changed by explicitly distinguishing between domestic and international MSBs.  The term “MSB”  also uses to refer to businesses that trade in virtual currencies in addition to its more traditional meaning. This covers people who run digital currency platforms, offer digital wallets, and offer transfer services related to digital currency. These individuals must now register with FINTRAC and follow specific MSB requirements.

  • Beneficial Ownership

The range of circumstances when an MSB is needed to ascertain beneficial ownership has been expanded. This covers ongoing contracts for international electronic funds transfers as well as service contracts for money order redemption. Additionally, reasonable steps must be taken to verify the veracity of beneficial ownership data both at the time the data is originally obtained and through continuous monitoring. This adjustment was made as a result of FINTRAC’s considerations. This clause is intended to cover situations in which, as a result of continued monitoring, it becomes apparent that the beneficial ownership data has changed throughout a relationship with the client.

  • Trusts

The exclusions to document holding and proof of identity currently are now also applicable to public trusts. For widely owned or publicly traded trusts, particularly, the Regulations mandate that a RE acquire the names of all trustees as well as the identities and addresses of anybody who either directly or indirectly owns or controls 25% and more of the trust’s units.

  • Prepaid Payment Products

The issuance of prepaid cards by banking firms and life insurance organizations is currently governed. These documents must contain information on the account owner and users, the nature of their business, account requests, item receipts, and company documents.

  • Virtual Money

Electronic money is described as “a digital form of value that may be utilized for commercial uses and can be easily exchanged for money or for other digital money that can easily be exchanged for finances” or keys. The second portion of the term now contains the term “private keys,” which presumably includes those that hold e-wallets. The new term now covers indications of value for “investment purposes,” which could include specific kinds of ICOs.

  • Reporting Suspicious Transactions

Following the new Canadian aml regulations, REs must inform FINTRAC of suspicious transactions “as soon as practically possible” after determining whether there are good reasons to believe that a transfer or attempted transaction relates to money laundering or terrorism financing. As of right now, the Laws dictate that a RE submit an STR no later than 30 days after establishing a substantial basis to believe that a transfer or attempted transaction relates to money laundering or terrorist financing. The distinction is that, to better understand how REs react in these situations, FINTRAC will decide what “as quickly as practically practicable” means for each case.

  • Transfers of Funds Online

The term “electronic funds transfer” (or “EFT”) is defined to cover instructions sent and collected by the same individual or organization. The sending of the order to move cash is all that is necessary, as in the current interpretation, for a trade to qualify as an EFT rather than the real transfer of money.

  • Cards

Instead of what was formerly referred to as “customers,” credit card providers are now obligated to gather information about “account holders.” For currency conversion activities about the account, some REs will now need to keep track of foreign transaction receipts. For foreign EFTs in association with credit cards, REs must additionally keep EFT records.

  • Rule of One Transaction

There is presently an obligation to record big money transfers and EFTs if the operation is for more than $10,000 Canadian or if there have been many smaller payments for the same individual or company throughout 24 hours totalling $10,000 Canadian or more. Such transfers will be treated as a single transaction.

  • Verifying Identity

The Law no longer demands that an identity document be “original,” which is a welcome change. A RE will be required to rely on an ID that is “valid, legitimate, and current” instead.

To know more about business and AML in Canada, we advise you to contact our specialists’ team.

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