Canada's measures to combat money laundering and terrorist financing

1. Anti-money laundering and counter-terrorist financing measures in Canada – Mutual Evaluation Report – September 2016 1
Anti-money laundering and counter-
terrorist financing (AML/CFT)
measures in Canada
Fourth Round Mutual Evaluation
Key findings, ratings and priority actions
September 2016
www.fatf-gafi.org/publications/mutualevaluations/documents/mer-canada-2016.html

2. Anti-money laundering and counter-terrorist financing measures in Canada – Mutual Evaluation Report – September 2016
Key findings
 The Canadian authorities have a good understanding of
most of Canada’s money laundering and terrorist financing
(ML/TF) risks. The 2015 Assessment of Inherent Risks of
Money Laundering and Terrorist Financing in Canada (the
NRA) is of good quality. AML/CFT cooperation and
coordination are generally good at the policy and
operational levels.
 All high-risk areas are covered by AML/CFT measures,
except legal counsels, legal firms and Quebec notaries. This
constitutes a significant loophole in Canada’s AML/CFT
framework.
214-Sep-2016

3. Anti-money laundering and counter-terrorist financing measures in Canada – Mutual Evaluation Report – September 2016
Key findings
 Financial intelligence and other relevant information are
accessed by Canada’s financial intelligence unit, FINTRAC,
to some extent and by law enforcement agencies (LEAs) to
a greater extent but through a much lengthier process.
They are used to some extent to investigate predicate
crimes and TF activities, and, to a much more limited
extent, to pursue ML.
 FINTRAC receives a wide range of information, which it
uses adequately, but some factors, in particular the fact
that it is not authorized to request additional information
from any reporting entity (RE), limit the scope and depth of
the analysis that it is authorized to conduct.
14-Sep-2016 3

4. Anti-money laundering and counter-terrorist financing measures in Canada – Mutual Evaluation Report – September 2016
Key findings
 Law enforcement results are not commensurate with the
ML risk and asset recovery is low.
 Canada accords priority to pursing TF activities. TF-related
targeted financial sanctions (TFS) are adequately
implemented by financial institutions (FIs) but not by
designated non-financial business and professions
(DNFBPs). Charities (i.e. registered NPOs) are monitored on
a risk basis.
 Canada’s Iran and Democratic People’s Republic of Korea
(DPRK) sanction regime is comprehensive, and some
success has been achieved in freezing funds of designated
individuals, there is no mechanism to monitor compliance
with proliferation financing (PF)- related TFS.
414-Sep-2016

5. Anti-money laundering and counter-terrorist financing measures in Canada – Mutual Evaluation Report – September 2016
Key findings
 FIs, including the six domestic systemically important banks,
have a good understanding of their risks and obligations,
and generally apply adequate mitigating measures. The
same is not true for DNFBPs. REs have gradually increased
their reporting of suspicious transactions, but reporting by
DNFBPs other than casinos is very low.
514-Sep-2016

6. Anti-money laundering and counter-terrorist financing measures in Canada – Mutual Evaluation Report – September 2016
Key findings
 FIs and DNFBPs are generally subject to appropriate
risk-sensitive AML/CFT supervision, but supervision of
the real estate and dealers in precious metals and
stones (DPMS) sectors is not entirely commensurate to
the risks in those sectors. A range of supervisory tools
are used effectively especially in the financial sector.
There is some duplication of effort between FINTRAC
and the Office of the Superintendent of Financial
Institutions (OSFI) in the supervisory coverage of
federally regulated financial institutions (FRFIs) and a
need to coordinate resources and expertise more
effectively.
614-Sep-2016

7. Anti-money laundering and counter-terrorist financing measures in Canada – Mutual Evaluation Report – September 2016
Key findings
 Legal persons and arrangements are at a high risk of
misuse, and that risk is not mitigated.
 Canada generally provides useful mutual legal assistance
and extradition. The authorities solicit other countries’
assistance to fight TF and, to a somewhat lesser extent, ML.
Informal cooperation is generally effective and frequently
used.
714-Sep-2016

8. Anti-money laundering and counter-terrorist financing measures in Canada – Mutual Evaluation Report – September 2016
Ratings – Effectiveness (1/3)
8
Immediate outcome of an effective system to combat money
laundering (ML) and terrorist financing (TF)
Extent to
which
Canada has
achieved this
objective
1. ML and TF risks are understood and, where appropriate,
actions co-ordinated domestically to combat ML and TF
Substantial
2. International co-operation delivers appropriate information,
financial intelligence, and evidence, and facilitates action
against criminals and their assets
Substantial
3. Supervisors appropriately supervise, monitor and regulate
financial institutions and designated non-financial
businesses and professions (DNFBPs) for compliance with
AML/CFT requirements commensurate with their risks.
Substantial
4. Financial institutions and DNFBPs adequately apply AML/CFT
preventive measures commensurate with their risks, and
report suspicious transactions.
Moderate

9. Anti-money laundering and counter-terrorist financing measures in Canada – Mutual Evaluation Report – September 2016 9
Immediate outcome of an effective system to combat money
laundering (ML) and terrorist financing (TF)
Extent to
which
Canada has
achieved this
objective
5. Legal persons and arrangements are prevented from misuse
for money laundering or terrorist financing, and information
on their beneficial ownership is available to competent
authorities without impediments
Low
6. Financial intelligence and all other relevant information are
appropriately used by competent authorities for money
laundering and terrorist financing investigations.
Moderate
7. Money laundering offences and activities are investigated
and offenders are prosecuted and subject to effective,
proportionate and dissuasive sanctions
Moderate
8. Proceeds and instrumentalities of crime are confiscated. Moderate
Ratings – Effectiveness (2/3)

10. Anti-money laundering and counter-terrorist financing measures in Canada – Mutual Evaluation Report – September 2016 10
Immediate outcome of an effective system to combat money
laundering (ML) and terrorist financing (TF)
Extent to
which
Canada has
achieved this
objective
9. Terrorist financing offences and activities are investigated
and persons who finance terrorism are prosecuted and
subject to effective, proportionate and dissuasive sanctions.
Substantial
10. Terrorists, terrorist organisations and terrorist financiers are
prevented from raising, moving and using funds, and from
abusing the non-profit sector.
Substantial
11. Persons and entities involved in the proliferation of weapons
of mass destruction are prevented from raising, moving and
using funds, consistent with the relevant United Nations
Security Council Resolutions.
Moderate
Ratings – Effectiveness (3/3)

11. Anti-money laundering and counter-terrorist financing measures in Canada – Mutual Evaluation Report – September 2016 11
Ratings – Effectiveness
0
5
5
1
High
Substantial
Moderate
Low
14-Sep-2016

12. 13-Sep-16
12
Ratings – technical compliance
(1/5)
AML/CFT POLICIES AND COORDINATION
1. Assessing risks & applying a risk-based approach LarLarLarLar Largely compliant
2. National cooperation and coordination ComComCo Co Compliant
MONEY LAUNDERING AND CONFISCATION
3. Money laundering offence ComComCo Co Compliant
4. Confiscation and provisional measures LarLarLarLar Largely compliant
TERRORIST FINANCING AND FINANCING OF PROLIFERATION
5. Terrorist financing offence LarLarLarLar Largely compliant
6. Targeted financial sanctions related to terrorism & terrorist
financing LarLarLarLar Largely compliant
7. Targeted financial sanctions related to proliferation LarLarLarLar Largely compliant
8. Non-profit organisations ComComCo Co Compliant

13. 13-Sep-16
13
Ratings – technical compliance
(2/5)
PREVENTIVE MEASURES
9. Financial institution secrecy laws Co Co ComCo Compliant
Customer due diligence and record keeping
10. Customer due diligence LarLarLarLar Largely compliant
11. Record keeping LarLarLarLar Largely compliant
Additional measures for specific customers and activities
12. Politically exposed persons No No NonNo Non compliant
13. Correspondent banking LarLarLarLar Largely compliant
14. Money or value transfer services Co Co ComCo Compliant
15. New technologies No No NonNo Non compliant
16. Wire transfers Pa Pa ParPa Partially compliant

14. 13-Sep-16
14
Ratings – technical compliance
(3/5)
PREVENTIVE MEASURES (continued)
Reliance, Controls and Financial Groups
17. Reliance on third parties ParPa Pa Par Partially compliant
18. Internal controls and foreign branches and subsidiaries LarLarLarLar Largely compliant
19. Higher-risk countries ComCo Co Com Compliant
Reporting of suspicious transactions
20. Reporting of suspicious transactions ParPa Pa Par Partially compliant
21. Tipping-off and confidentiality LarLarLarLar Largely compliant
Designated non-financial Businesses and Professions (DNFBPs)
22. DNFBPs: Customer due diligence NonNonNo Non Non compliant
23. DNFBPs: Other measures NonNo No Non Non compliant

15. 13-Sep-16
15
Ratings – technical compliance
(4/5)
TRANSPARENCY AND BENEFICIAL OWNERSHIP OF LEGAL
PERSONS AND ARRANGEMENTS
24. Transparency and beneficial ownership of legal persons ParParParPa Partially compliant
25. Transparency and beneficial ownership of legal
arrangements No NonNonNo Non compliant
POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES
AND OTHER INSTITUTIONAL MEASURES
Regulation and Supervision
26. Regulation and supervision of financial institutions LarLarLarLar Largely compliant
27. Powers of supervisors Co ComComCo Compliant
28. Regulation and supervision of DNFBPs Pa ParParPa Partially compliant
Operational and Law Enforcement
29. Financial intelligence units Pa ParParPa Partially compliant
30. Responsibilities of law enforcement and investigative
authorities ComComComCo Compliant
31. Powers of law enforcement and investigative authorities LarLarLarLar Largely compliant
32. Cash couriers LarLarLarLar Largely compliant

16. 13-Sep-16
16
Ratings – technical compliance
(5/5)
POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES
AND OTHER INSTITUTIONAL MEASURES (continued)
General Requirements
33. Statistics Co ComCo Com Compliant
34. Guidance and feedback LarLarLarLar Largely compliant
Sanctions
35. Sanctions LarLarLarLar Largely compliant
INTERNATIONAL COOPERATION
36. International instruments Co ComCo Com Compliant
37. Mutual legal assistance LarLarLarLar Largely compliant
38. Mutual legal assistance: freezing and confiscation LarLarLarLar Largely compliant
39. Extradition Co ComCo Com Compliant
40. Other forms of international cooperation LarLarLarLar Largely compliant

17. Anti-money laundering and counter-terrorist financing measures in Canada – Mutual Evaluation Report – September 2016 17
Ratings – technical compliance
11
18
6
5
Compliant
Largely compliant
Partially compliant
Non compliant
14-Sep-2016

18. Anti-money laundering and counter-terrorist financing measures in Canada – Mutual Evaluation Report – September 2016
Priority Actions for Canada to
strengthen its AML/CFT System
 Ensure that legal counsels, legal firms, and Quebec
notaries engaged in the activities listed in the standard
are subject to AML/CFT obligations and supervision.
Bring all remaining FIs and DNFBPs in the AML/CFT
regime.
 Increase timeliness of access by competent authorities
to accurate and up-to-date beneficial ownership
information - Consider additional measures to
supplement the current framework.
 Increase timely access to financial intelligence –
authorize FINTRAC to request and obtain from any RE
further information related to suspicions of ML,
predicate offenses and TF.
 Use financial intelligence to a greater extent to
investigate ML and traces assets.
1814-Sep-2016

19. Anti-money laundering and counter-terrorist financing measures in Canada – Mutual Evaluation Report – September 2016
Priority Actions for Canada to
strengthen its AML/CFT System
 Increase efforts to detect, pursue and bring before the
courts cases of ML related to all high-risk predicate
offenses, third party ML, self-laundering, laundering of POC
of foreign predicate and the misuse of legal persons and
trusts in ML activities.
 Ensure that asset recovery is pursued as a policy objective
throughout the territory.
 Ensure compliance by all FIs with the requirement to
confirm the accuracy of beneficial ownership in relation to
all customers.
 Require DNFBPs to identify and verify the identity of
beneficial owners and PEPs.
1914-Sep-2016

20. Anti-money laundering and counter-terrorist financing measures in Canada – Mutual Evaluation Report – September 2016
Priority Actions for Canada to
strengthen its AML/CFT System
 Coordinate more effectively supervision of FRFIs by OSFI
and FINTRAC to maximize the use of resource and
expertise, and review implementation of the current
approach.
 Ensure that FINTRAC develops sector-specific expertise, and
applies more intensive supervisory measures to the real
estate and the DPMS sectors.
2014-Sep-2016