Canadian Anti-Money Laundering Law 2018: A Period of Intense Activity

This year has proven to be an active one when it comes to anti-money laundering law in Canada.   As casinos, both land based and internet, are amongst the sectors of the economy subject to Canada’s anti-money laundering requirements, change to the anti-money laundering regime often mean important changes to anti-money laundering practice in casinos.  As we will see, the activities this year, and the coming changes, will definitely have impacts to casinos across the country.

Parliamentary Review of Anti-Money Laundering Legislation

First up this year was the commencement of a Parliamentary review of the primary anti-money laundering statute: the Proceeds of Crime (Money Laundering) and Terrorist Financing Act or PCMLTFA.   Section 72 of the Act requires a review of the statutory regime be conducted every 5 years by a committee of Parliament designated for that purpose.  The last review occurred in 2013 and was conducted by the Standing Senate Committee on Banking, Trade and Commerce.  The Senate provided its results by way of published report: Follow the Money: Is Canada Making Progress in Combatting Money Laundering and Terrorist Financing? Not Really.  At the end of January this year, the House of Commons Standing Committee on Finance was designated as the committee responsible for conducting the current review.  The Committee began hearing evidence and accepting written briefs as of February 8, 2018.  At the time of writing, the Committee had heard from 71 witnesses and had received 17 written briefs.  Witnesses include myriad bureaucrats, practising compliance experts, members of the legal profession, relevant federal agencies such as the prosecution service of Canada, the Department of Justice and the RCMP, as well as affected industry associations including the Canadian Gaming Association.  Transcripts of the verbal submissions of witnesses and copies of written briefs are all available at the Committee’s website.  The timeframe for the completion of the Committee’s work is not yet clear and the Committee continues to accept written briefs.

Department of Finance Canada Discussion Paper on Money Laundering and Terrorist Financing

In anticipation of the five year review, the Department of Finance Canada prepared and released a discussion paper on February 7, 2018, titled: Reviewing Canada's Anti-Money Laundering and Anti-Terrorist Financing Regime.  The paper is not only intended to support the review, but also provides proposals in response to deficiencies identified through the Financial Action Task Force’s (FATF) 2016 Mutual Evaluation of Canada’s anti-money laundering regime.  The paper remains available on the Department’s website, and while submissions on the paper were invited the time for responding closed May 18, 2018.  The Paper lays out a broad range of possible changes to the AML regime.   A few of the more noteworthy proposals include:

1. expanding the PCMLTFA to cover: privately owned automated teller machines, horse racing, armoured car services, luxury car and other high value goods dealers, and additional participants in the real estate sector including mortgage insurers, land title registries and title insurance companies;
2. expanding the requirements dealing with politically exposed persons to designated non-financial businesses and professions (this would be a new requirement for casinos);
3. prohibiting the structuring of transactions to avoid reporting (which would prohibit business process structuring by reporting entities designed to enhance money laundering controls);
4. expanding identification methods beyond a reliance on physical documents to allow for the verification of an individual’s identity through new technologies;
5. collapsing the various schedules (i.e. Large Cash Transaction Report, Suspicious Transaction Report) into a single uniform reporting schedule for all reports; and,
6. statutory provisions that would enable and authorize the sharing of money laundering and terrorist financing information between government and the private sector as well as between private sector entities.

Which of the proposed changes to the AML regime proceed and what form those ultimately take is not expected to be known for some time.  Nonetheless, one might expect to see proposals intended to fill gaps identified by the FATF to proceed at some point ahead of the next mutual evaluation.

FINTRAC Guidance on Suspicious Transactions

In a further and much appreciated consultative development, in May of this year FINTRAC contacted casino reporting entities to gather input from the casino sector on FINTRAC’s published guidance on suspicious transaction indicators.  FINTRAC was in the process of updating their guidance.  FINTRAC asked the sector to provide comment and suggestions not only on the general guidance on suspicious indicators but also on the casino specific guidance.   Casino reporting entities from eight provinces collaborated on a joint comprehensive submission to FINTRAC.  That work was completed and submitted to FINTRAC in early summer of this year and the new guidance from FINTRAC is expected to be published on their website some time later in 2018.

Proposed Amendments to the Regulations Under the PCMLTFA

On June 9, 2018, the federal government published notice of proposed changes to the regulations made under the PCMLTFA.   Stated objectives of the amendments include: operationalizing changes to the Act (enacted in 2014) and closing gaps in Canada’s AML/ATF regime; improving reporting entities’ compliance; improving the monitoring and enforcement efforts of FINTRAC; and improving Canada’s compliance with international standards.  While the amendments, if enacted as proposed, do not make major substantive changes to the overall legal framework, the changes laid out are likely to have important and substantial procedural impacts on the casino sector.  A few of the more important amendments for the casino sector are:

1. 24 Hour Rule - Currently casinos are required to treat multiple transactions by a customer as a single transaction where those transaction total $10,000 or more in a 24 hour period.  A report is required as soon as the aggregate of the transactions reaches $10,000.   This can result in multiple reports within a 24 hour period where the individual makes further transactions after the initial $10,000 threshold is met.   The amendments clarify that only one report that captures all transactions within the 24 hour period that collectively meet or exceed the threshold is required.
2. Ascertaining Identity - Currently, to rely upon a document to verify identity it must be original, valid and current.   The amendments will change this to “authentic, valid and current” – meaning authentic versions of an original will be acceptable.  Additionally, under current rules for the dual method, reliance on an electronic image of a document (for example a pdf from a scanned credit card statement) is not permitted.   The prohibition on electronic images of otherwise valid documents will be removed under the amendments.
3. Collection and Reporting of Customer Information - Changes have been made to all the schedules in the regulations and will require the collection of much more customer information by casinos.  For example, the new Casino Disbursement Report will require the casino to collect, in addition to the current information that must be collected and reported, the customer’s alias, citizenship, email address, employer, employer’s business address, and employer’s business telephone number.  It is anticipated that these amendments may require major systems changes for casinos and vendors supplying automated software solutions to casinos.
4. Time for Submitting a Suspicious Transaction Report – The time for submitting a suspicious transaction is changed from 30 days to “3 days after the day on which the casino took measures to establish that there are reasonable grounds to suspect that a transaction or attempted transaction is related to the commission of a money laundering or terrorist financing offence”.  Notes to the proposed regulations offer that after taking measures to assess and establish there are reasonable grounds to suspect, the casino would then have 3 days to file the report.   Further, the description states “… this means that the report would be filed 3 days after completion of the analysis that establishes reasonable grounds for suspicion.  The challenge is, the proposed wording requires the report to be filed 3 days after the casino takes measures to establish reasonable grounds to suspect, and makes no reference with respect to the measures being completed.  It remains unclear as to exactly when the trigger for the 3 days commences.

The publication gives no indication of the date when the regulations will ultimately come into effect, however it is stated that the amendments will come into force 12 months after the date of registration.

As you can see its been a busy year.  And with only the suspicious indicator guidance work expected to be completed this year, the pace of change in 2019 is likely to be even faster and more complex.  Fasten your seatbelts.

About the Author

Robert Kroeker is an executive responsible for compliance, legal and security services in the gaming sector.   He has held executive compliance roles in the sector in both public and private enterprises.   Prior to moving to the gaming industry he established and lead the civil asset forfeiture agency in the Province of British Columbia, which is responsible for the recovery of proceeds and instruments of crime through litigation at all levels of court.  He is a former member of the Royal Canadian Mounted Police.  He was called to the bar in British Columbia in 1993.