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Fintechs Canada calls on Federal Government to Strengthen Anti-Money Laundering and Anti-Terrorist Financing Regime

Fintechs Canada has called on the government to strengthen its anti-money laundering and anti-terrorist financing regime. Considered by some to be a haven for money laundering, Canada’s approach to combating financial crime undermines the integrity of its financial sector and doesn’t do enough to stop criminals.

Combating financial crime is a big focus for the government this year. The federal government’s 2023 budget included major changes to Canada’s anti-money laundering and anti-terrorist financing (AML/ATF) regime. Moreover, as required under current law, a parliamentary committee is set to review the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). 

As part of our mandate to strengthen the integrity of Canada’s financial sector, Fintechs Canada commented on the government’s recent consultation paper related to strengthening Canada’s AML/ATF regime.

The government’s review of the PCMLTFA is comprehensive. In the paper, the government asked stakeholders to comment on a wide range of options, including amendments to the Criminal Code and changes to FINTRAC reporting frameworks. 

Some of Fintechs Canada’s recommendations to the government are summarized below:

Consultation Point: The government asked whether amendments to the Criminal Code and Canada Evidence Act were necessary to manage risks posed by cryptocurrency and digital assets.

Our Position: Fintechs Canada noted that neither the Criminal Code nor the Canada Evidence Act needed to be amended to strengthen Canada’s AML/ATF regime. Law enforcement already has the power under current law to seize digital assets. Moreover, the Criminal Code already applies to Money Services Businesses (MSBs), which companies that deal in virtual currency need to register as under the PCMLTFA. When it comes to the Canada Evidence Act, the use of electronic data, such as blockchain data, is already contemplated as evidence in the event of a criminal investigation.

 

Consultation Point: The government asked whether it should implement a regime to compel providers of accounts to keep accounts open during investigations (a “keep open” regime).

Our Position: Fintechs Canada is supportive of the government exploring a “keep open” regime. Our submission also noted that it would be important for the government to ensure that decisions on whether to issue a “keep open” order are made in a timely manner to appropriately manage any risks to the providers of accounts.

 

Consultation Point: The government requested comment on whether there should be information sharing between all reporting entities.

Our Position: Fintechs Canada believes that private-to-private information sharing should only be required between federally regulated financial institutions. In addition to this requirement, we urged the federal government to ensure that formal privacy protections are in place to strengthen consumer privacy while still making it easy to identify those engaging in criminal activity.

 

Consultation Point: The government asked whether it should create and maintain a database of politically exposed persons and how it could go about doing that.

Our Position: Fintechs Canada believes the government should establish and maintain a database of political exposed persons because private databases can be prohibitively costly and inconsistent. In our submission, we also stressed that the government should not charge reporting entities to use the database, as doing so would undermine the purpose of creating and maintaining one in the first place.

 

Consultation Point: The government asked if new classes of reporting entities should be created, specifically one for payment service providers (PSPs).

Our Position: Fintechs Canada strongly supports the creation of a new reporting entity class for PSPs. Because of the differences between PSPs and MSBs, we noted that the requirements for reporting should differ considerably. Doing so would also give the government the ability to modernize client identity verification, allowing for greater financial inclusion, especially among business owners who are new to Canada and who don’t have a credit history recognized by our financial sector.

 

In the rest of our submission, we encourage the government to enhance reporting frameworks, consider that the risks posed by digital assets aren’t new, and to take the practice of de-risking more seriously. 

To access our full submission, please click here.

 

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