Budget 2024 proposes new reforms to combat financial crime in Canada

The federal government’s Budget [PDF] 2024, released on April 16, 2024, contains a number of initiatives and legislative reforms aimed at combatting financial crime in Canada, including terrorist financing, corruption, sanctions evasion, tax evasion, money laundering, and fraud. The Budget promises changes to Canada’s anti-money laundering and anti-terrorist-financing (AML/ATF), criminal, and tax regimes to create additional powers, efficiencies and incentives relating to compliance and enforcement, as well as the creation of new specialized units specifically tasked with complex financial crime.

Compliance and enforcement reforms proposed in the Budget

Amendments to PCMLTFA

The 2024 Budget introduces a number of amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), Canada’s principal anti-money laundering legislation. Following developments such as the Panama Papers and FinCEN Files data leaks in recent years, as well the June 2022 findings of the Government of British Columbia’s Commission of Inquiry into Money Laundering in British Columbia (also known as the Cullen Commission, as we have previously written about), money laundering has increasingly been seen as a significant issue in Canada.  

Consistent with this, the government has previously introduced a number of compliance reforms including establishment of a publicly accessible beneficial ownership registry (as we have previously written about, with the reporting obligations for federal corporation recently becoming effective in January 2024) and various amendments to the PCMLTFA. Those changes — discussed in further detail in our Legal Outlook 2023 articles on white-collar enforcement and financial services regulatory trends — have included, among others:

• improved information sharing between law enforcement and the Canada Revenue Agency (CRA), and Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)
• whistleblower protections for employees who report information to FINTRAC
• prohibiting money services businesses (MSBs) from engaging with agents or mandataries convicted of certain offences
• a new offence for structuring financial transactions to avoid FINTRAC reporting
• new regulations requiring the mortgage sector to comply with new AML/ATF obligations

Since June 2023, the Department of Finance and FINTRAC have been engaged in a public consultation to strengthen Canada’s AML/ATF regime, seeking input regarding risks and vulnerabilities emerging in light of new financial technologies and in respect to national security risks. This consultation was concluded in August 2023.

Following this consultation, the 2024 Budget proposes a number of additional amendments to the PCMLTFA. Proposed amendments include the following:

• enhancing information-sharing abilities between reporting entities to detect and deter financial crime while maintaining privacy protections for personal information, including an oversight role for the Office of the Privacy Commissioner under regulations
• permitting FINTRAC to disclose financial intelligence to provincial and territorial civil forfeiture offices to support efforts to seize property linked to unlawful activity, and Immigration, Refugees and Citizenship Canada to strengthen the integrity of Canada’s citizenship process
• enabling AML/ATF regulatory obligations to cover factoring companies, cheque-cashing businesses, and leasing and finance companies
• allowing FINTRAC to publish more information about violations of reporting obligations and resulting administrative penalties to strengthen transparency and incentivize compliance
• making technical amendments to close loopholes and correct inconsistencies

The exact form of these amendments has yet to be announced.  

Criminal Code amendments

The 2024 Budget also included various proposed amendments to the Criminal Code aimed at combating money laundering, terrorist financing, sanctions evasion and other forms of economic crime. Specifically, the Budget introduces proposed amendments granting additional judicial powers to allow courts to

• make orders requiring financial institutions to keep accounts open for the purpose of assisting in the investigation of suspected criminal offences
• issue repeating production orders authorizing law enforcement to obtain ongoing, specified information o account activity connected to persons of interest in criminal investigations

These new proposals follow amendments to the Criminal Code introduced last year which gave law enforcement the ability to freeze and seize virtual assets with suspected links to crime (through a special warrant obtained pursuant to the new section 462.321 of the Criminal Code), as proposed under the 2023 Budget.

Additionally, the 2024 Budget includes proposed amendments to the Income Tax Act and Excise Tax Act authorizing Canada revenue Agency officials to seek general warrants through court applications.

Canada Financial Crimes Agency

In 2022, the federal government announced its intention to establish a new Canada Financial Crimes Agency (CFCA) to act as Canada’s lead enforcement agency against financial crime. As currently envisioned, the CFCA will act as a nation-wide agency whose sole purpose is to investigate highly complex crimes and enforce federal law in this area and would bring together existing law enforcement resources of the RCMP, intelligence capabilities of FINTRAC, and expertise of the Canada Revenue Agency. The 2024 Budget allocates $1.7 million over two years to the Department of Finance to finalize the design and legal framework of the CFCA.

The proposed establishment of the CFCA reflects an ongoing trend of specialized enforcement agencies or units dedicated to investigating and enforcing complex financial crimes, following criticism of Canada’s perceived lack of enforcement. In 2020, the federal government announced the establishment of the new Integrated Money Laundering Investigative Teams in British Columbia, Alberta, Ontario, and Quebec, which seek to bring together expertise from a variety of agencies to assist the RCMP in addressing high-profile cases and advancing money laundering and proceeds of crime investigations nationwide. This follows the establishment of other agencies such as the Canadian Ombudsman for Responsible Enterprise (which reviews ethics and human rights complaints) and provincial agencies such as Quebec’s Unité permanente anticorruption.

It remains to be seen what impact the proposed CFCA, and other recently established enforcement agencies, will have on Canada’s perceived lackluster enforcement record.

Measures to fight trade-based fraud and money laundering

Finally, the 2024 Budget highlights “trade-based” financial crime as one of the most pervasive means of laundering money, through which an estimated hundreds of millions are laundered each year. As described by Public Safety Canada, trade-based money laundering is the process of disguising proceeds of crime and other illicit financial flows as legitimate international trade transactions. The federal government has previously announced in its 2023 Fall Economic Statement [PDF] several proposed enhancements to the Canada Border Services Agency’s (CBSA) powers under the PCMLTFA, a well as the creation of a “Trade Transparency Unit” to detect, deter, and disrupt trade-based financial crime. 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 financial crime and strengthen efforts to combat international financial crime.

Takeaways for businesses

The initiatives set out in the 2024 Budget continue a trend in recent years of legislative reforms and additional enforcement developments for complex financial crime. While it remains to be seen how effective these additional measures will be, they are reflective of a regulatory and business environment in which companies are increasingly asked to demonstrate their commitment to compliance and acting ethically in the course of business. As always, organizations should apply best practices to manage AML/ATF and other financial crime risks. As the landscape continues to shift in Canada, remaining vigilant and ensuring policies are updated and revisited to ensure their compliance with all AML/ATF laws and regulations is key. Businesses should also anticipate increased coordination with provinces and territories as they begin to make legislative, regulatory and enforcement changes to respond accordingly within their own jurisdiction.