In June 2018, we reported that the Canadian Government had proposed amendments (2018 Proposals) to the regulations for Canada’s anti-money laundering and anti-terrorist financing (AML/ATF) regime. On July 10, 2019, the final regulations (Regulations) were published. They will be phased in over the next two years.
The Regulations have been tweaked to account for feedback receiving during the consultation period, as well as the Financial Action Task Force’s recent publication of Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers (FATF Guidance). We think the following differences between the 2018 Proposals and the final Regulation may be of interest to our clients:
- Confirming corporate clients' identity:The proposed requirement that documents used to establish "proof" of a corporate client’s existence be less than a year old has been dropped in favour of a requirement that allows reporting entities to rely on "authentic, valid and current” documents. Also, the government dropped the requirement for reporting entities to "prove” the existence of the corporation being identified in favour of a requirement to "confirm” the corporation’s existence.
- Good and bad news about suspicious transaction report (STR) deadlines:
- Currently, a reporting entity has 30 days to file an STR, measured from the day it detects a fact about a financial transaction or attempted financial transaction that constitutes reasonable grounds for suspicion that the transaction is related to the commission or attempted commission of a money laundering or terrorist financing offence.
- The 2018 Proposals had called for the STR to be filed within three days after the reporting entity had taken measures enabling it to establish reasonable grounds for suspicion. Many commenters said that the three-day deadline was unmanageable.
- The good news is that the government dropped that deadline in favour of a more flexible requirement to file the STR as soon as practicable after the reporting entity has taken measures enabling it to establish that there are reasonable grounds for suspicion. The bad news, of course is that in some circumstance "as soon as practicable" could amount to fewer than three days.
- We expect that, in an audit FINTRAC may call upon reporting entities tojustify (with explanations and documentation) that the amount of time they took to file an STR meets the "as soon as practicable” test
- Virtual currency businesses: The final Regulations have been aligned more closely with the FATF Guidance.
- Phased-in Implementation:The government took into account the comments that the proposed, one-year implementation deadline was inadequate. Instead, the final Regulations will come into force in three phases:
- Now:The burden-relieving amendments to permit use of scans, photocopies and other electronic means of verifying identification came into force when the Regulations were registered this month.
- June 1, 2020:The legislative amendments for virtual currency dealers will come into force on June1, 2020. These include requirements for such dealers to register as money services businesses (MSBs) and comply with other legislative requirements, such as suspicious transaction reporting and implementing compliance programs.
- June 1, 2021:The remaining requirements for virtual currency dealers (/.e., those set out in the final Regulation), as well as the other provisions in the final Regulations (such as the those relating to confirmation of corporate clients’ identity and keeping beneficial ownership information up-to-date) will come into force on June1, 2021.