On February 20, 2008, amendments to regulations associated with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act) were finalized and published. The federal government described them as necessary steps to bring the Canadian anti-money-laundering and anti-terroristfinancing regime into line with the revised international standards of the Financial Action Task Force.
The newly amended regulations are mostly about new requirements for real estate developers, which will be effective February 20, 2009, and additional requirements for casinos, which will be effective September 28, 2009. They affect obligations including reporting, record keeping, client identification and the implementation of a compliance regime.
The new regulations also contain the latest legislative amendments in a series of changes to the regulatory regime. These changes stem from a consultation paper published by the Department of Finance in response to new money-laundering and terrorist-financing trends and techniques. Many recommendations from the consultation paper were adopted as part of Bill C-25, which received Royal Assent on December 14, 2006. When in full force, Bill C-25 will enhance the Act by expanding its coverage, strengthening its deterrence provisions and broadening the range of information that the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), an enforcement body created by the Act, may include in its financial intelligence disclosures to law enforcement and national security agencies.
Real Estate Developers
The Act creates record-keeping and reporting requirements for various persons or entities including financial entities (banks, loan companies, etc.), life insurance companies, securities dealers, money services businesses, real estate brokers and casinos. Reporting persons and entities must implement a compliance regime, keep certain records, undertake client-identification procedures, and report suspicious and other prescribed transactions to FINTRAC.
FINTRAC receives, analyzes, assesses and discloses financial intelligence on suspected money laundering, terrorist financing and threats to the security of Canada. It also ensures compliance by financial intermediaries and other reporting entities with their obligations under the Act and regulations.
The new regulations extend the coverage of the record-keeping and reporting requirements of the Act and associated regulations to include real estate developers. A “real estate developer” is defined generally as a person or entity who, in a calendar year, has sold to the public, other than in the capacity of a real estate broker or sales representative (i) five or more new houses or condominium units, (ii) one or more new commercial or industrial buildings, or (iii) one or more new multi-unit residential buildings, each of which contains five or more residential units, or two or more new multi-unit residential buildings that together contain five or more residential units.
This mostly means identifying clients who provide funds in the context of a sale to the public, keeping records of such transactions, and reporting large cash transactions ($10,000 or more) and suspicious transactions to FINTRAC. Real estate developers will also have to develop a compliance program.
Reporting entities that do not comply with the Act and its regulations are subject to criminal and financial penalties.
Another key change provided for in the new regulations is the requirement for casinos to report to FINTRAC any disbursements of $10,000 or more and to keep records in respect of these transactions.
For a more detailed discussion of these regulatory changes, see the legal update written by Barbara McIsaac and Patrick Veilleux on the McCarthy Tétrault website.