The federal government recently introduced Bill C-2, which is known as the Strong Borders Act. It maintains certain proposed amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) introduced in the prior government's 2024 Fall Economic Statement, and proposes various additional amendments. The amendments seek to continue to strengthen the Canadian anti-money laundering (AML) regime.
In this post, we summarize certain key amendments proposed in the Strong Borders Act. Most notably, and as we previously predicted would be the case in our blog, Canada Announces Significantly Increased Penalties for Money Laundering Failures, the federal government intends to introduce considerably larger penalties for violations committed by individuals and entities subject to the PCMLTFA and its regulations (Reporting Entities).
Increased Administrative Monetary Penalties
The Strong Borders Act introduces substantial increases to the administrative monetary penalties (AMPs) that may be imposed when Reporting Entities fail to comply with the PCMLTFA and its regulations. Whereas currently the most serious violations have a maximum AMP of C$500,000, the proposed amendments introduce the following significantly increased ranges for AMPs:
- C$1 to C$40,000 in the case of a minor violation;
- C$1 to C$4,000,000 in the case of a serious violation; and
- C$1 to C$20,000,000 in the case of a very serious violation.
The proposed amendments also provide for a maximum total AMP that may be imposed if a Reporting Entity has committed multiple violations. In particular:
- in the case of a person, the greater of C$4 million and 3 percent of the person's gross global income in the year before the one in which the penalty is imposed; and
- in the case of an entity, the greater of C$20 million and 3 percent of the entity's gross global revenue in its financial year before the one in which the penalty is imposed.
In contrast, under the current AML regime, the largest reported cumulative AMP issued by Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) has been just over C$9 million for a total of five violations. The proposed amendments therefore signal a meaningful possibility for fines well beyond the largest AMP imposed to date.
Compliance Agreements and Compliance Orders
The Strong Borders Act proposes that Reporting Entities that receives an AMP for a prescribed violation must enter into a compliance agreement with FINTRAC. If a Reporting Entity fails to enter into such an agreement, or fails to comply with such an agreement, FINTRAC will issue a mandatory compliance order. In turn, any contravention of such an order would amount to a new violation under the PCMLTFA that could result in a further AMP with a unique liability cap. In particular, an AMP for a compliance order violation shall not exceed:
- in the case of a person, the greater of C$5 million and 3 percent of their gross global income for the year before the one in which the penalty is imposed; and
- in the case of an entity, the greater of C$30 million and 3 percent of the entity's gross global revenue in its financial year before the one in which the penalty is imposed.
Employees
The proposed amendments specify the fines and prison terms to be imposed under the PCMLTFA where Reporting Entity employers (or those acting on behalf of an employer, or those in a position of authority in respect of an employee) take steps with the intent to keep an employee from fulfilling an obligation under the PCMLTFA or to retaliate against an employee for doing so. In particular, Reporting Entity employers may face, on summary conviction, a maximum fine of C$1,000,000, maximum imprisonment of one year, or both. On conviction on indictment, employers may be subject to a maximum fine of C$2,500,000, maximum imprisonment of five years, or both.
Enrollment Requirements
Under the proposed amendments, with only minor exceptions, all Reporting Entities will be subject to a new requirement to enroll with FINTRAC. This differs from the current regime, which requires enrollment only by Reporting Entities that are domestic and foreign money services businesses. Reporting Entities that are required to enroll with FINTRAC would also face further ongoing requirements, such as the need to keep enrollment information up-to-date.
Conclusion
If enacted, the Strong Borders Act will result in the Canadian AML regime placing greater requirements on Reporting Entities and resulting in significantly increased consequences for non-compliance. Reporting Entities should therefore ensure they understand the applicable requirements, and that their AML processes and procedures are up-to-date and fully implemented.
The Bennett Jones Anti-Money Laundering group stands ready to assist with all aspects of compliance with Canada's AML regime and responding to any alleged compliance failures.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
