Parliamentary Committee Notes: Combatting Money Laundering

Date: May 6, 2022
Classification: UNCLASSIFIED
Fully releasable: Yes
Branch / Agency: CPB / PS

Proposed Response:

If pressed, on the Cullen Commission of Inquiry into Money Laundering in British Columbia (the Commission):

Financial Implications:

Background:

Canada’s Anti-Money Laundering Regime (AML) was established in 2000 with the enactment of the  Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). The Regime’s legislative framework is complemented by other legislation, including the Criminal Code, the Customs Act, and the United Nations Act. The AML/ATF Regime is led by Department of FINANCE and includes 13 federal departments and agencies, including Public Safety Canada (PS) and PS Portfolio agencies, such as the RCMP, CBSA and CSIS.

On May 15, 2019, British Columbia (B.C.) Premier John Horgan announced the establishment of a Commission of Inquiry into Money Laundering in the province, to be led by B.C. Supreme Court Justice Austin Cullen. The objective of the Commission is to examine the money laundering challenges facing B.C., report on its findings and make recommendations. The Commission has a mandate to examine the full scope of money laundering in B.C., including activity in real estate, gaming, financial institutions, luxury goods, and the corporate and professional services sectors, through both study and hearing components. The Commission is also mandated to review the acts and/or omissions of regulatory authorities or individuals responsible for regulating these sectors in order to determine whether those acts or omissions have contributed to money laundering in the province or amount to corruption. 

The Government of Canada is a voluntary participant with standing in the Commission, and federal AML/ATF officials from twelve departments and agencies have provided expert interviews and appeared as witnesses for Commission hearings. In total, the Government facilitated presentations and interviews with 53 federal officials; 32 of which testified to the Commission, and produced 1,800 documents to the Commission. The Commission’s final report is expected to be submitted to the province of British Columbia by May 20, 2022.

In recent years, the Government has taken concrete action to strengthen Canada’s AML/ATF Regime. For instance, Budget 2019 proposed a number of measures to modernize Canada’s AML framework, including the launch of Public Safety’s Financial Crime Coordination Centre (FC3). FC3 provides coordination and support to increase Canada’s enforcement capacity to combat money laundering and financial crime. Funding was also established for the creation of a Trade Fraud and Trade-Based Money Laundering (TBML) Centre of Expertise to strengthen capacity at CBSA.

In November 2020, the RCMP received funding of $98.9 million over five years to enhance its operational capacity and modernize its technology, including $19.8 million to create Integrated Money Laundering Investigative Teams (IMLITs) in British Columbia, Alberta, Ontario, and Quebec. RCMP staffing processes for the IMLITs have been finalized, and the teams are undertaking investigations. Work is ongoing to bring in partners from the AML/ATF Regime to enhance the integration of the teams. CRA has committed resources for each of these teams but engagement differs between provinces. The Forensic Accounting Management Group has committed resources and discussions are underway to finalize participation.

In addition to ongoing domestic-focused work, the Government of Canada is also actively involved in international AML and ATF efforts. The Regime engages with the Financial Action Task Force (FATF), which is an intergovernmental body that aims to maintain the integrity of the global financial system by, among other things, setting global AML/ATF standards. FATF’s 2016 Mutual Evaluation Report of Canada found that, while Canada was deemed to have strong AML/ATF legislation and regulations, there were some challenges identified, including the absence of AML/ATF regulation of the legal profession, the need for improved access to accurate and up-to-date beneficial ownership information, better use of financial intelligence and increased efforts to investigate and prosecute complex money laundering cases and recover assets.

Since the adoption of its Mutual Evaluation Report in 2016, Canada has conducted regular reporting back to the FATF on the actions it has taken to strengthen its AML/CFT Regime. In Canada’s most recent follow-up report, published on October 1, 2021, the FATF recognized the improvements Canada has made to its AML/ATF Regime. Notable enhancements include: capturing businesses dealing in virtual currency under the AML/ATF Regime; improving customer due diligence measures; and requiring suspicious transaction reports to be submitted promptly to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), Canada’s financial intelligence unit. In recognition that many previous deficiencies have been addressed or largely addressed, the FATF elevated Canada’s international standing in compliance with the FATF standards.

The Prime Minster of Canada’s 2021 mandate letter to the Minister of Public Safety affirmed Canada’s commitment to establish a dedicated unit to investigate all forms of serous financial crimes and develop a proposal for the establishment of the Canada Financial Crimes Agency, whose sole purpose will be to investigate these complex crimes. The establishment of a dedicated unit to investigate all forms of serious financial crimes and a proposal for the FCA will be led by Public Safety Canada and supported by the Minister of Justice and Attorney General of Canada, and the Deputy Prime Minister and Minister of Finance.

Building on these commitments, Budget 2022 announced a series of measures and investments intended to strengthen Canada’s AML/ATF Regime. Budget 2022 proposed to provide $2 million to Public Safety Canada in 2022-23 to undertake initial work to develop and design the new Financial Crimes Agency, with further details to be announced in the 2022 Fall economic and fiscal update. The recent Budget also committed the government to conducting a comprehensive review of the AML/ ATF Regime, and bringing forward additional legislative proposals to address identified gaps including ensuring that the government has the tools necessary to preserve financial integrity and economic security, as necessary. Budget 2022 also announced the provision of $89.9 million over five years, and $8.8 million ongoing, in order to support the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to:

Other measures in Budget 2022 aimed at strengthening Canada’s AML/ATF Regime include a commitment to clarify the ability of the Minister of Foreign Affairs to cause the forfeiture and disposal of assets held by sanctioned individuals and entities. This action will also support Canada’s participation in the Russian Elites, Proxies, and Oligarchs (REPO) Taskforce for sanctions on Russia. The government also announced their intention to launch a financial sector legislative review focused on the digitalization of money and maintaining financial sector stability and security. The first phase of the review will be directed at digital currencies, including cryptocurrencies and stablecoins, with $17.7 million over five years (starting in 2022-23) provided to the Department of Finance to lead the review. Finally, the federal government announced their intention to extend AML/ATF requirements to all businesses conducting mortgage lending in Canada within the next year in order to limit the exploitation of the real estate market by criminals, which can affect housing affordability across the country.

Contacts:

Prepared by: CPB / FC3            
Approved by: Talal Dakalbab, Assistant Deputy Minister, CPB (613-852-1167)

Date modified: