On April 5, 2022, changes affecting the Canada's anti-money laundering legislation, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, S.C. 2000 c 17 (the "PCMLTFA"), were published in the Gazette.
These changes, which were initially an emergency response to the protest convoys occupying major Canadian urban areas, are now permanently in force, modifying important aspects of the PCMLTFA's main regulation, SOR/2002-184. These changes will likely have significant implications for services offering crowdfunding, payment processing, as well as existing money services businesses ("MSB").
A summary of the changes made in the Regulation is available below, but as a brief overview:
- Crowdfunding platforms and services (the maintenance and use of website and/or software to raise funds or virtual currency) are now expressly regulated under the PCMLTFA as MSBs, and are subject to the same reporting and verification requirements.
- Certain payment service providers facilitating electronic funds transfers will also now be considered MSBs and subject to reporting and verification requirements.
- Existing MSBs and foreign money service businesses ("FMSB") may see the scope of reportable activity expand, as the definition of "electronic funds transfers" now includes transactions carried out by credit/debit cards where there is an agreement by the recipient of the funds with a payment services provider.
- The Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations (SOR/2007-292) has been amended to add a new monetary penalty relating to record keeping by crowdfunding platforms and arising from crowdfunding platform services.
Impacted crowdfunding platforms, entities offering crowdfunding platform services, and certain payment service providers, are now required to ensure that they take the requisite steps to be in compliance with the PCMLTFA, including:
- Registering as an MSB with the Financial Transactions and Reports Analysis Centre of Canada ("FINTRAC"), which regulator charged principally with enforcing the PCMLTFA;
- Developing and maintaining a compliance program;
- Carrying out know-your-client and know-your-business verifications where required to do so;
- Maintaining records, including records relating to identification and transactions; and
- Reporting suspicious transactions to FINTRAC.
FINTRAC has already published commentary to assist businesses with assessing whether they are impacted by these new amendments. FINTRAC has also retracted past commentary which is in conflict with the updated Regulation (for instance, PI-7670). We anticipate further commentary will be forthcoming from FINTRAC, and existing commentary will continue to be revised. However, businesses which are impacted by this expansion of the PCMLTFA's scope should consider themselves governed by the PCMLTFA, and be proactive in ensuring they are compliant with its requirements.
Table of changes