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FINA Committee Report

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As a result of their deliberations committees may make recommendations which they include in their reports for the consideration of the House of Commons or the Government. Recommendations related to this study are listed below.

Chapter 1 Recommendations

Recommendation 1

That the Government of Canada work with the provinces and territories to create a pan-Canadian beneficial ownership registry for all legal persons and entities, including trusts, who have significant control which is defined as those having at least 25% of total share ownership or voting rights.

  • Such a registry should include details such as names, addresses, dates of birth and nationalities of individuals with significant control.
  • The registry should not be publicly accessible, but it can be accessed by certain law enforcement authorities, the Canada Revenue Agency, Canadian Border Services Agency, FINTRAC, authorized reporting entities and other public authorities.
  • To ensure that the registry is accurate and properly performing its function, it should have the capability to follow up on information submitted to it.
  • The registry should take into account the best practices and lessons learned from other jurisdictions. In particular, the Committee was interested in the United Kingdom’s dual system of registration, which can be done through a legal professional or through direct online registration, as seen in the U.K.’s Companies House.
  • Authorities should be granted appropriate powers to apply proportionate and dissuasive sanctions for failure to fully comply in the prescribed time frame.
  • Beneficial owners of foreign companies that own property in Canada should be included in such a registry.
  • That subject to Canadian law, requests by foreign governments for information sharing under a Canadian beneficial ownership registry should be considered by the Government of Canada, in cases where tax treaties or other lawful agreements or protocols exist for potential or existing money laundering, terrorist financing or criminal activity.

Recommendation 2

That the Government of Canada review, refine, and clarify through training, the statutory definition of politically exposed persons (PEP). In particular, the notion of ‘association with a PEP’ under this definition creates ambiguity and inconsistency among institutions in regards to who exactly constitutes a PEP.

Recommendation 3

That the Government of Canada move to a risk-based model of compliance for politically exposed persons, softening the requirements for those with transparent and unsuspicious financial portfolios.

Recommendation 4

Given that the legal professions in the U.K. are subject to the same AML/ATF reporting requirements as other reporting entities in all non-litigious work that is performed, the Government of Canada and the Federation of Law Societies should adopt a model similar to the U.K.’s Office of Professional Body Anti-Money Laundering Supervision.

  • The Government of Canada request Reference from the Supreme Court of Canada as to whether solicitor-client privilege exists when a client requests advice on how to either launder money or structure finances for the purposes of illegal activity.

Recommendation 5

That the Government of Canada bring the legal profession into the AML/ATF regime in a constitutionally compliant way with the goal of ensuring that the Canadian standards set by the PCMLTFA protect against money laundering and terrorist financing.

Recommendation 6

That the Government of Canada consider implementing a body similar to the U.K.’s Office of Professional Body Anti-Money Laundering Supervision with respect to Canadian self-regulated professions.

Recommendation 7

That the Government of Canada amend the PCMLTFA so that the armoured car and white label ATM sector be subject the AML/ATF regime, as is the case in the United States and the province of Quebec, respectively.

Recommendation 8

That the Government of Canada amend the PCMLTFA to require all reporting entities, including designated non-financial businesses and professions, such as the real estate sector (brokers and lenders), that are now exempt from the obligation of identifying beneficial ownership, to do the following:

  • determine and verify the identity of the beneficial owners;
  • determine if their customers are politically exposed persons, or if they are the family members or associates of politically exposed person;
  • prohibit opening accounts or completing financial transactions until the beneficial owner has been identified and their identity verified with government-issued identification.

*Consideration of the above should also be applied to foreign beneficial owners.

Recommendation 9

That the Government of Canada amend the PCMLTFA to extend the requirements for real estate brokers, sales representatives and developers to mortgage insurers, land registry and title insurance companies.

Recommendation 10

That the Government of Canada make it a criminal offence for an entity or individual to structure transactions in a manner designated to avoid reporting requirements. These provisions would be modeled on Title 31 of U.S. code section 5324.

Recommendation 11

That the Government of Canada require companies selling luxury items to be subject to reporting requirements under the PCMLTFA and report large cash transactions to FINTRAC if those transactions are not already reported through other means.

Recommendation 12

That the Government of Canada amend Canadian privacy laws with the sole purpose of permitting security regulators to fully and appropriately examine the professional record of conduct of security dealers and their employees.

Recommendation 13

That the Government of Canada develop a national view of AML by partnering with provinces and territories to train local regulators on best practices in order to prevent securities firms from being overlooked.

Chapter 2 Recommendations

Recommendation 14

That the Government of Canada examine the U.S. Government’s “third agency rule” for information sharing and determine whether this rule would assist in investigation / detection of money laundering and terrorist financing in Canada.

Recommendation 15

That the Government of Canada expands FINTRAC’s mandate to allow for:

  • a greater focus on building actionable intelligence on money laundering and terrorist financing, akin to FinCEN in the United States, and provide FINTRAC with the necessary resources to effectively undertake the corresponding analysis;
  • the retention of data for 15 years;
  • an operational model to allow for two-way information sharing system (rather than strictly being an information gathering system);
    • FINTRAC should be able to share feedback, best practices and long-term trends, so that reporting entities can properly assist FINTRAC.
  • the ability to request more information from specific reporting agencies to clarify reported suspicious activity or to build a stronger case before referring it to law enforcement;
  • the ability to release aggregated data, subject to Canadian law, about a group of specific reporting agencies or a sector for statistical, academic or government purposes.

Recommendation 16

That the Government of Canada establish a round table partnership with industry leaders who are investing significantly in technology that more efficiently tracks suspicious activities and transactions, so as to promote best industry practices.

Recommendation 17

That the Government of Canada take steps to emulate the U.K.’s model of a Joint Money Laundering Intelligence Taskforce in Canada.

Recommendation 18

That the government of Canada consider tabling legislation that would allow information that is limited to AML/ATF subject matter to be shared between federally regulated financial institutions such as banks and trust companies, provided that FINTRAC is notified upon each occurrence of such sharing.

Recommendation 19

That the Government of Canada implement the necessary requirements to banking to determine a “low-risk threshold” and establish exemptions to ensure the most vulnerable Canadians are not being denied a bank account due to lack of adequate identification.

Chapter 3 Recommendations

Recommendation 20

The Committee recommends, in recognizing the difficulty prosecutors have in laying money-laundering charges due to the complexity of linking money laundering to predicate offences, that the Government of Canada:

  • bring forward Criminal Code and Privacy Act amendments in order to better facilitate money laundering investigations;
  • any necessary resources be made available to law enforcement and prosecutors to pursue money-laundering and terrorism financing activities.

Recommendation 21

That the Government of Canada expand FINTRAC oversight to ensure that all casino operators, employees, and frontline gaming personnel are trained in anti-money laundering legislation.

Recommendation 22

That the Government of Canada establish an information sharing regime through FINTRAC and provincial gaming authorities to ensure more accurate and timely reporting.

Recommendation 23

That the Government of Canada amend the PCMLTFA to enable law enforcement agencies to utilize geographic targeting orders similar to those used in the United States.

  • Federal, provincial, and territorial governments should collaborate to close the loophole regarding the transaction of sales between parties who are not subject to PCMLTFA reporting requirements, which creates vulnerability for money laundering to occur.

Recommendation 24

That the Government of Canada follow the example of the Netherlands, which gives holders of bearer shares – now prohibited – a fixed period of time to convert them into registered instruments before they are deemed void.

Chapter 4 Recommendations

Recommendation 25

That the Government of Canada regulate crypto-exchanges at the point that fiat currency is converted so as to establish these exchanges as money service businesses (MSB).

Recommendation 26

That the Government of Canada establish a regulatory regime for crypto-wallets so as to ensure that proper identification is required, and that true ownership of wallets is known to the exchanges and law enforcement bodies if needed.

  • Ensure that bitcoin purchases of real estate and cash cards are properly tracked and subjected to AML regulation;
  • Law enforcement bodies must be able to properly identify and track illegal crypto-wallet hacking and failures to report capital gains.

Recommendation 27

That the Government of Canada establish a license for crypto-exchanges in line with Canadian law, which includes an anti-money laundering program and look to the State of New York’s program as a model for best practices.

Recommendation 28

That the Government of Canada consider prohibiting nominee shareholders. However, if nominee shareholders are permitted, they should be required to disclose their status upon the registration of the company and registered as nominees. Nominees should be licensed and subject to strict anti-money laundering obligations.

Recommendation 29

That the Government of Canada include clearer directions and streamline the reporting structure of Suspicious Transaction Reports, such as through the use of ‘drop-down boxes,’ to increase ease of use by specific reporting entities and ensure better compliance.

Recommendation 30

That the Government of Canada change the structure of FINTRAC’s Suspicious Transaction Report to resemble the Suspicious Activity Reports used in the United Kingdom and the United States in order to focus on suspected violations rather than an arbitrary monetary threshold.

Recommendation 31

That the Government of Canada enhance the direct reporting system of casinos to FINTRAC through the suspicious transaction reports to include suspicious activities.

Recommendation 32

That the Government of Canada update reporting regulations for financial institutions to include bulk online purchasing of store gift cards or prepaid credit cards.