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Anti-Money Laundering Amendments Accelerated: Businesses Face Unexpected Compliance Rush

By: Jonathan Yantzi and Alex Bernicchia-Freeman

To listen to an audio recording of this article, click here.

Background

In November 2024, draft amendments to the regulations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the “PCMLTFA”) were published. These amendments were not unexpected, as efforts to revitalize Canada’s anti-money laundering (“AML”) and anti-terrorist financing (“ATF”) legislation have been ongoing for several years. However, many were surprised to hear the Department of Finance announce on March 7, 2025, that the coming into force date for many of these amendments and new regulations (SOR/2025-67 and SOR/2025-68 as published on March 26, 2025, in the Canada Gazette) originally scheduled for October 1, 2025, would be accelerated by six months, seemingly giving businesses less than a month to ensure compliance by the April 1 deadline.

The announcement followed the March 4, 2025, issuance of a directive by the Minister of Finance to the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) directing FINTRAC to “mobilize resources in a way that responds to the urgency” of drug trafficking and transnational crime in Canada, with a particular focus on thwarting the importation and manufacturing of fentanyl. Importantly, this decision to accelerate will have an outsized impact on smaller businesses now captured by these regulatory amendments.

Amendments – Important Dates

The new regulatory measures coming into force on April 1, 2025, now include:

For amendments addressing new reporting entities, in recognition of the accelerated timeline, the Department of Finance has indicated to impacted industries that a transition period lasting until April 1, 2026, will see FINTRAC “put emphasis on engagement, outreach and guidance activities related to new regulatory obligations…in order to foster greater awareness and understanding among new reporting entities” which will include industry consultation relating to the development and implementation of compliance programs. In other words, despite such obligations coming into force on April 1, 2025, only time will tell how much compliance discretion and support FINTRAC will grant newly designated reporting entities during this transition period. But once the transition period has expired, FINTRAC will conduct ongoing supervisory activities to ensure compliance and may impose monetary penalties or take other enforcement actions against non-compliant entities.

Additionally, a new voluntary reporting framework came into force upon final publication of these amendments in the Canada Gazette, Part II on March 26, 2025, with the intent to promote and facilitate the sharing of compliance information related to money laundering, terrorism financing and sanctions evasion between private reporting entities. No transition period has been suggested under the voluntary reporting framework, with both FINTRAC and the Office of the Privacy Commissioner of Canada having already begun to ensure compliance as of March 26, 2025.

Lastly, an amendment requiring reporting entities under the PCMLTFA to report material discrepancies between information received when verifying the identity of an entity and what is found in Corporations Canada’s federal beneficial ownership registry will come into force on October 1, 2025, as originally anticipated.

New Reporting Entities – Impact on Business

Historically, the types of businesses required to abide by know-your-client (“KYC”) identification processes, transaction reporting and strict record-keeping (not to mention the implementation of compliance programs to ensure such requirements are met) were generally limited to sectors involving financial services, insurance, real estate, securities and gambling. These new amendments drastically widen the scope of businesses captured by FINTRAC compliance requirements.

As the Regulatory Impact Analysis Statement (“RIAS”) to the above amendments indicates, during the pre-publication consultation period in the year preceding the announcement of an accelerated coming into force timeline, numerous stakeholders (comprised of industry associations and private companies, among others) asked the Department of Finance to delay the original October 1, 2025, date to give industry participants more time (up to 18 months in some cases) to prepare for compliance implementation. Therefore, despite the Department of Finance’s recent assurances to stakeholders of a year-long transition period emphasizing engagement and outreach over supervision and enforcement, many stakeholders are worried about the financial and logistical implications of accelerated compliance requirements.

The following three types of businesses will face a unique set of challenges in preparing to comply with AML and ATF obligations under the PCMLTFA:

  • Factoring companies: These businesses provide liquidity to their clients in exchange for the cash value of a percentage of their clients’ accounts receivable (i.e., invoices) to be collected by the factor later, plus commission and fees. This business model allows companies to rapidly access liquidity without needing to resort to traditional loans and incurring interest. Pursuant to the regulations, factoring companies must fulfil record-keeping, client due diligence and transaction reporting requirements, and establish a compliance program.
  • Cheque-cashing businesses: These businesses offer clients (often with poor credit or reduced access to traditional banking services) the ability to immediately cash cheques, hold-free, for a fee. Pursuant to the regulations, cheque-cashing businesses also must fulfil record-keeping, client due diligence and transaction reporting requirements, and establish a compliance program.
  • Record-keeping: Any transaction of $3,000 or more must be recorded.
  • KYC: Anyone tendering a cheque worth $3,000 or more must have their identification verified.
  • Transaction reporting: Any transaction suspected to involve the commission or attempted commission of a money laundering offence must be reported.
  • Financing and leasing companies: This category encompasses a diverse assortment of business models and consists of both domestic and international lessors and small independent businesses. Under direct leasing arrangements, vendors will offer leasing as a financing option to their clients, while indirect leasing arrangements will involve a financial intermediary who purchases the asset from the vendor and allows the lessee to use the asset during the leasing term (and, in the case of financing, after full payment). Pursuant to the regulations, financing and leasing companies must fulfil record-keeping, client due diligence and transaction reporting requirements, and establish a compliance program. As noted in the RIAS, the financing and leasing of higher value products with a high demand (such as automobiles) pose a higher risk of money laundering, while lower value consumer products (such as rent to own furniture or electronics) pose a lower risk. Accordingly, these lower risk consumer arrangements (up to certain thresholds, as described below) will be excluded from the scope of the new amendments. However, financing and leasing arrangements for (i) property for business purposes (excluding real property or immovables); (ii) passenger motor vehicles; and (iii) property (including consumer goods but excluding real property or immovables) valued above $100,000 will be included. For vendors of commercial equipment that do not wish to go through AML compliance, the only option will be to sell the equipment to professional commercial equipment leasing companies that are fully AML compliant and let those leasing companies collect the lease payments.

The RIAS provides the following estimates on the number of stakeholders affected by the incoming regulatory amendments:

  • Trade-based financial crime: 272,060
  • Discrepancy reporting: 25,831
  • Factoring companies: 65
  • Cheque-cashing businesses: 600
  • Financing and leasing companies: 200

Applying FINTRAC compliance standards and requirements to such a large and varied group of business interests is unprecedented. Notwithstanding the transition period, the logistical and financial burden placed on new reporting entities to achieve compliance will be significant. Therefore, the acceleration of the coming into force timeline makes it even more imperative that affected businesses quickly determine the best courses of action to achieve compliance while limiting associated costs and avoiding business disruptions.

Compliance Solutions

There are many ways for newly designated reporting entities to ensure they meet compliance standards, but there is not a one-size-fits-all solution, since the range of businesses captured by the new amendments is broad. Therefore, a tailored approach is necessary. Businesses of all shapes and sizes should refer to the following suggestions to launch their compliance efforts:

  1. Appointing a compliance officer. While the role and responsibilities may be much more extensive for a larger or more complex organization, smaller businesses can also benefit from having a designated person in charge of AML/ATF compliance. If business leadership feels that nobody is well-suited to hold such a position, it may also outsource this position to a professional, but this will likely be less cost-effective.
  2. Drafting policies and procedures. This is not optional but mandatory, as it will form the basis for the identification and tracking of compliance over time, relating to both April 1 and October 1 regulatory amendments. However, if business leadership feels ill-suited or unprepared to draft such documents on its own, it can also outsource this task to external professionals.
  3. Staff training. Once compliance policies and procedures have been drafted, all employees and agents (if applicable) should be informed of the new amendments and trained on how they apply to their day-to-day activities. Training is not a one-time effort but must be delivered at regular intervals thereafter.
  4. Compliance program maintenance and review. Even if business leadership opts to appoint or hire internally to fulfil the roles described in points 1 and 2 above, long-term compliance program reviewing and updating is required. Such a task can be performed by an internal audit department, but an external accounting or law firm may be better designated to assist, especially for larger and more complex businesses.
  5. Outsourcing to AML service providers. For some businesses, it may prove more efficient and cost-effective to perform the above tasks internally, while other businesses may find it challenging to meet compliance standards without external help. While law and accounting firms provide high-quality services that may address some or all of these needs, specialized AML compliance services are also an option. These third-party service providers can prove to be exceptionally useful and more cost-effective when it comes to transaction monitoring and reporting, thereby allowing businesses to focus on their core business activities instead of getting bogged down in regulatory minutiae. Additionally, outsourcing can either be temporary or permanent, depending on business needs.

Conclusion

It remains to be seen how flexible FINTRAC will be during the transition period afforded to new reporting entities. While it appears that affected businesses are not expected to fully comply as of the April 1, 2025, transition period launch, businesses are rightfully concerned about meeting compliance standards in such a truncated period and, naturally, about the costs associated with meeting such standards. It is imperative that businesses address the issues described in this article as quickly and diligently as possible to avoid enforcement penalties or business disruptions moving forward.

The Financial Services Group at Aird & Berlis LLP will continue to monitor Canada’s anti-money laundering and anti-terrorist financing legislation and associated regulations. Please contact the authors or a member of the group if you have any questions or require assistance.

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