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Budget 2024: Updates to the PCMLTFA

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Updates to the PCMLTFA

Legislative Amendments to the PCMLTFA

In Budget 2024, the government proposes several legislative amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). These changes aim to enhance the effectiveness of the Act in combatting financial crimes and ensuring compliance among reporting entities. Proposed amendments to the PCMLTFA would include new measures to increase transparency and improve enforcement mechanisms.

Scope of Amendments

The scope of the amendments is broad, covering various aspects of financial regulation. Key changes include:

  • Allowing FINTRAC to publicize and share more information about violations under the PCMLTFA to enhance transparency and encourage compliance.
  • Expanding AML/ATF regulatory and reporting obligations to include Factoring Companies, Cheque-Cashing Businesses, and Leasing and Finance Companies
  • Making additional technical amendments to streamline processes and close existing loopholes.

Factoring Companies

Factoring companies purchase accounts receivable from businesses, providing them with immediate cash flow. While this service is beneficial for maintaining liquidity, it can also be exploited for money laundering and terrorist financing activities. By bringing factoring companies under AML/ATF regulations, we can ensure:

  • Customer Due Diligence (CDD): Factoring companies will be required to perform thorough due diligence on their clients to verify their identity, understand their business operations, and assess potential risks.
  • Transaction Monitoring: Continuous monitoring of transactions will help detect and report suspicious activities.
  • Record Keeping: Maintaining detailed records of transactions and client information will aid in audits and investigations.

Cheque-Cashing Businesses

Cheque-cashing businesses offer quick cash services, which can be attractive for those looking to launder money. Including these businesses under AML/ATF obligations will help in:

  • Identification Requirements: Customers will need to provide valid identification to cash cheques, reducing anonymity.
  • Reporting Obligations: Suspicious transactions and large cash transactions will be reported to the relevant authorities.
  • Compliance Programs: Implementing comprehensive compliance programs will ensure that employees are trained to recognize and report suspicious activities.
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Leasing and Finance Companies

Leasing and finance companies provide various financial services, which can also be vulnerable to misuse. By extending AML/ATF regulations to these companies, we can ensure:

  • Risk Assessment: Conducting regular risk assessments to identify and mitigate potential money laundering and terrorist financing risks.
  • Enhanced Due Diligence (EDD): For high-risk clients and transactions, companies will perform enhanced due diligence to thoroughly understand the customer’s profile and the nature of their transactions.
  • Internal Controls: Establishing strong internal controls and audit mechanisms to ensure compliance with AML/ATF regulations.

Impact on Reporting Entities

The proposed changes will have significant implications for reporting entities, including banks, financial institutions, and other organizations subject to the PCMLTFA. These entities will need to adapt to new compliance requirements and reporting standards. Substance Law can assist in navigating these changes, ensuring that your organization remains compliant and avoids potential penalties.

Public Consultation Outcomes

The government conducted extensive public consultations to gather feedback on the proposed amendments. The outcomes of these consultations have been instrumental in shaping the final legislative measures. Stakeholders from various sectors provided valuable insights, which have been incorporated into the amendments to ensure they are both effective and practical.

Strengthening Compliance and Enforcement

Enhanced Transparency Measures

The 2024 Budget introduces several measures to strengthen transparency and incentivize compliance. These include making technical amendments to close loopholes and correct inconsistencies. Establishing public-private partnerships with the financial sector is also a key focus, aimed at improving the detection and disruption of profit-oriented crimes, including human trafficking, online child sexual exploitation, and fentanyl trafficking.

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New Enforcement Tools

To bolster enforcement, the Budget proposes new tools designed to address growing risks such as sanctions evasion. These tools will provide guidance on the identification of sanctions evasion within the financial services sector. Additionally, the introduction of these tools will help in the detection and disruption of international financial crime.

Technical Adjustments

Technical adjustments are being made to close existing loopholes and correct inconsistencies in the current framework. These adjustments are crucial for maintaining the integrity of the system and ensuring that all entities are held to the same standards.

Combatting Financial Crime

Sanctions Evasion

The 2024 budget proposes to provide $29.9 million over five years for the CBSA to support the implementation of its new authorities under the PCMLTFA to combat sanctions evasion. This funding will enable the creation of new trustworthy units specifically tasked with complex financial crime. Strengthening efforts to combat international financial crime is a top priority.

Information Sharing Enhancements

To further enhance the fight against financial crime, the government is introducing measures to improve information sharing between regulatory agencies and reporting entities. Substance Law can assist organizations in navigating these new requirements, ensuring they remain compliant and avoid potential penalties.

National Security Considerations

Financial crime poses significant risks to national security. The government has undertaken significant work since 2017 to crack down on financial crime, including fighting trade-based fraud and money laundering. These efforts are crucial in safeguarding the nation’s financial system and maintaining public trust.

Conclusion

In conclusion, Budget 2024 marks a significant step forward in Canada’s ongoing efforts to combat financial crime and enhance the integrity of its financial system. The proposed amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) reflect a comprehensive approach to addressing emerging risks and vulnerabilities, particularly in the context of new financial technologies and national security concerns. By strengthening compliance and enforcement mechanisms, and expanding the scope of reporting requirements to include sanctions evasion, the Government of Canada is demonstrating its commitment to maintaining a robust anti-money laundering and anti-terrorist financing framework. These legislative changes, coupled with increased transparency and public consultation, are poised to fortify Canada’s defences against financial crime and ensure a safer, more secure financial landscape for all.

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Frequently Asked Questions

What are the key legislative amendments to the PCMLTFA proposed in Budget 2024?

The key legislative amendments to the PCMLTFA proposed in Budget 2024 include expanding the scope of the Act to cover sanctions evasion, enhancing transparency measures, introducing new enforcement tools, and making technical adjustments to strengthen compliance.

How will the proposed amendments impact reporting entities?

The proposed amendments will impose new reporting obligations on entities, requiring them to report activities related to sanctions evasion. Additionally, enhanced transparency measures will require entities to be more forthcoming in their reporting, thereby encouraging greater compliance.

What was the outcome of the public consultation on strengthening Canada’s AML/ATF regime?

The public consultation, conducted by the Department of Finance and FINTRAC, concluded in August 2023. It sought input on emerging risks and vulnerabilities in light of new financial technologies and national security risks. The feedback received has informed the proposed amendments in Budget 2024, aimed at strengthening Canada’s AML/ATF framework.

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