A number of important amendments found in Bill C-25, An Act to amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act came into force on June 30, 2007. The amendments enhance the identity verification requirements of financial entities that enter into a "correspondent banking relationship" with prescribed foreign entities and expand the scope of allowable disclosure of "designated information" by Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).

Correspondent Banking
One of the important amendments that came into force on June 30, 2007 requires certain entities to take specific cautionary measures before entering into a "correspondent banking relationship" with a prescribed foreign entity. "Correspondent banking relationship" is defined in the amended section as a relationship created by an agreement under which one of the specified entities undertakes to provide a prescribed foreign entity with financial services, such as international electronic fund transfers, cash management and cheque clearing. The amendment also prohibits any person or entity from entering into a "correspondent banking relationship" with a shell bank.

Disclosure of Designated Information

The definition of "designated information" was expanded by the amendments that came into force on June 30, 2007 to include "attempted" financial transactions. This is consistent with a general expansion of the "designated information" FINTRAC may disclose in order to enhance Canada’s anti-money laundering and anti-terrorist financing regime. The amendments provide for additional disclosure to law enforcement and security agencies, as well as agencies such as Canada Revenue Agency and Canada Border Services Agency.

Amendments Coming into Force on June 23, 2008

A number of other important amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) will not come into force until June 23, 2008. These amendments will expand the scope of record-keeping, reporting and registration requirements, with the intention of enhancing Canada’s anti-money laundering and anti-terrorist financing regime.

Record-Keeping

As of June 23, 2008, the PCMLTFA’s record-keeping regime will apply to persons and entities authorized under provincial legislation to engage in the business of dealing in any type of financial instrument and not simply those dealing in securities, as it does now. Furthermore, the application of the regime to foreign exchange dealing will extend to all persons remitting or transmitting funds by any means and those issuing or redeeming money orders, traveller’s cheques or other similar instruments.

Attempted Suspicious Transactions
As discussed in the McCarthy Tétrault October 2006 newsletter, Federal Government Introduces Amendments to the Anti-Money Laundering/Terrorist Financing Legislation, reporting entities will be required to report any attempted suspicious transaction to FINTRAC, as well as those actually completed. The amendments that will come into force on June 23, 2008 will also expand the scope of the reporting requirements to include persons or entities required to make a disclosure under the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism.

Identity Verification

A significant aspect of the amendments that will come into force on June 23, 2008 is the enhancement of client identification requirements. No person or entity subject to the PCMLTFA shall open an account for a client without establishing their identity and determining whether the potential client is a "politically exposed foreign person." If a potential client does fall within the definition of "politically exposed foreign person," senior management approval is required before an account can be opened.

For additional information about the definition of "politically exposed foreign person," please refer to the McCarthy Tétrault October 2006 newsletter, Federal Government Introduces Amendments to the Anti-Money Laundering/Terrorist Financing Legislation.

Registration

In order to enhance FINTRAC’s ability to enforce the legislation, the amendments coming into force on June 23, 2008 will institute a federal registration system, under which individuals and entities falling into the categories of money services businesses and foreign exchanges businesses must register with FINTRAC. The amendment will also establish which persons or entities are not eligible for registration and will provide for a system of review, under which an entity can apply for a review of any decision to deny their application or revoke their registration. The review of any application, to be completed by the Director of FINTRAC, may be appealed to the Federal Court.

Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act


On June 30, 2007, several provisions amending certain regulations made under the PCMLTFA came into force. These provisions include amendments to the definitions of "electronic fund transfer," "financial entity," "correspondent banking relationship" and "physical presence," as well as a number of provisions that deal with enhanced reporting requirements relating to "attempted transactions." Furthermore, the amended regulations now require enhanced identification and record-keeping requirements of financial entities entering into correspondent banking relationships with foreign financial institutions. Most of the new provisions amending the regulations made under the PCMLTFA, however, will not come into force until June 23, 2008.



To see a copy of Bill C-25 go to:
http://www2.parl.gc.ca/HousePublications/Publication.aspx?Docid=2613403&file=4

To see a copy of the Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act go to:
http://canadagazette.gc.ca/partII/2007/20070627/html/sor122-e.html

For more information on FINTRAC go to:
http://www.fintrac.gc.ca