Wrapping your head around the new AML/ATF standards

With a calendar full of fast-paced, high activity anti-money laundering (AML) and anti-terrorist financing (ATF) initiatives over the next two calendar years, Michele Wood-Tweel, VP regulatory affairs, CPA Canada, says CPAs need to pay attention. 

Though these areas are already high priorities for government and regulatory agencies, including CPA Canada, looming assessments will push activity into overdrive to ensure the Canadian AML and ATF regime rises to account for new threats and meet ever-changing international standards. 

“We anticipate that there's going to be a high level of activity on the policy front within government and in terms of legislation and regulations that might occur,” she says. 

This has already started with the launch of a mandatory five-year review of Canadian AML legislation, including the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, (PCMLTFA) by the House of Commons Standing Committee on Finance. Last summer CPA Canada responded to the consultation process which acted as a precursor to the parliamentary review. 

AML and ATF rules are critical to the operations of Canada’s largest corporations including chartered banks and life insurance companies. They even affect a variety of other businesses like casinos, gemstone dealers and real estate. In a world where instances of fraud are rising and geopolitical sanctions are inspiring bad actors to find creative ways to wash funds, it’s critical that CPAs keep abreast of new AML and ATF developments. 

This includes changes proposed in the most recent National Inherent Risk Assessment (NIRA) update, which was announced alongside the 2023 federal budget. The NIRA, conducted by the federal government, evaluates threats and risks that exist in Canada related to money laundering and terrorist financing. The 2023 update is the first since the first NIRA was published in 2015. FINTRAC, Canada’s federal financial intelligence unit, will help disseminate knowledge on how to integrate NIRA findings into organizational frameworks. 

To keep CPAs up to date, in late spring 2024 CPA Canada will release a webinar reviewing the NIRA and its impacts. CPA Canada is working with the Department of Finance, FinTRAC and the RCMP to bring the webinar to life. It is one of several planned learning opportunities this year on the AML and ATF regime, including an AML session planned for CPA Canada’s The One National Conference in September. 

CPAs will also want to watch for the planned Financial Action Task Force (FATF) mutual evaluation, expected in December 2025. The task force, which monitors global money laundering and terrorist financing, is likely to spur regulatory updates in these areas. The mutual evaluation will bring representatives from the task force to evaluate Canadian AML and ATF activities for the first time in nearly a decade. “In the past, we've had a lot of attention around technical compliance with what the international standards are,” says Wood-Tweel. “This round is going to be around operational effectiveness.” 

For deficiencies outlined by the FATF review, Canadian authorities will have a period to address them before the non-addressed areas attract negative attention from Canada’s FATF international peers. 

Though Canada broadly complies with FATF’s 40 recommendations, it previously found only partial compliance with five and non-compliance with one. Transparency and beneficial ownership of legal arrangements and legal persons are among the areas needing improvement, and Wood-Tweel says there are already steps in place to improve compliance with FATF recommendations. 

In January, Corporations Canada announced federal corporations must file beneficial ownership information for public view, showing the identities of individuals with significant control (ISC). An ISC controls, directs or owns 25% or more of a firm’s shares. This will likely take a year to be “substantially complete,” according to a government release. Under the Tax Act, there are also additional measures in place for reporting the beneficial owners of trusts. 

“This is a wholesale change and a historic change from what has always been corporate opaqueness in Canada to corporate transparency,” says Wood-Tweel. In Quebec, it is already possible to search for individual persons on these registers. 

CPA Canada is also involved in ongoing international collaborations in AML and ATF areas including the Global Accounting Alliance’s Influence and Advocacy Steering Committee, AICPA and CIMA. 

Following the parliamentary and FATF reviews, Wood-Tweel says, it’s undoubtable there will be new AML and ATF laws and regulations in Canada. “Watch this space,” she says.