On 31 January 2018, the House of Commons Standing Committee on Finance (the Committee) adopted the following motion:

That, pursuant to the motion adopted by the House on Monday, January 29, 2018, the Committee undertake a statutory review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act….

Pursuant to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), a review must be conducted by a committee of the House of Commons, of the Senate or of both Houses every five years. From 8 February to 20 June 2018, the Committee held 14 hearings on this review in Ottawa. In addition, from 1 to 8 June 2018, a delegation from the Committee traveled to Toronto, London United Kingdom (U.K.), Washington D.C. and New York City (the Committee’s travels) to examine the methods and best practices of other jurisdictions in their efforts to address money laundering and terrorist financing, as well as discuss Canada’s performance in these areas. In total, 71 groups or individuals made public presentations to the Committee over the course of this review.

Laundering the proceeds of crime (money laundering) is a criminal offence under section 462.31(1) of the Criminal Code, which details that:

Every one commits an offence who uses, transfers the possession of, sends or delivers to any person or place, transports, transmits, alters, disposes of or otherwise deals with, in any manner and by any means, any property or any proceeds of any property with intent to conceal or convert that property or those proceeds, knowing or believing that all or a part of that property or of those proceeds was obtained or derived directly or indirectly as a result of

• the commission in Canada of a designated offence; or
• an act or omission anywhere that, if it had occurred in Canada, would have constituted a designated offence.

In essence, money laundering is the process used to disguise the source of money or assets derived from criminal activity.

Canada’s anti–money laundering regime was formally established in 2000 under the National Initiative to Combat Money Laundering. The Proceeds of Crime (Money Laundering) Act was adopted that year and created a mandatory reporting system for suspicious financial transactions, large cross-border currency transfers and certain prescribed transactions. The legislation also established the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) with a mandate to ensure compliance of reporting entities, to collect and analyze financial transaction reports, and to disclose pertinent information to law enforcement and intelligence agencies. In December 2001, the Proceeds of Crime (Money Laundering) Act was amended to include measures to address terrorist financing and was renamed the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, which formally created Canada’s Anti‑Money Laundering and Anti–Terrorist Financing Regime (AML/ATF regime) and fulfilled Canada’s obligations under the United Nations International Convention for the Suppression of the Financing of Terrorism.

FINTRAC defines terrorist financing as the act of providing funds for terrorist activity. This may involve funds raised from legitimate sources such as donations from individuals, businesses and/or charitable organizations that are otherwise operating legally. Or it may involve funds from criminal sources such as the drug trade, the smuggling of weapons and other goods, fraud, kidnapping and extortion.[1]

The regime seeks to detect and deter money laundering and terrorist financing, and aims to facilitate their investigation and prosecution. The Act pursues these objectives in three main ways: by establishing record keeping and client identification standards, by requiring reporting from financial intermediaries, and by putting FINTRAC in place to oversee its compliance.

In view of the current five-year review of the Act, on 7 February 2018 the Department of Finance published a discussion paper entitled Reviewing Canada's Anti-Money Laundering and Anti-Terrorist Financing Regime (the Discussion Paper), which the outline of this report mirrors. This report examines the regime’s legislative and regulatory gaps, the exchange of information and the privacy of Canadians, ways of strengthening intelligence capacity and enforcement measures, as well as the modernization of the regime.

With respect to the Committee’s travels from 1 to 8 June 2018, various witnesses testified to the Committee under Chatham house rules to encourage openness and the frank sharing of information.[2] The testimony of these witnesses is therefore presented in this report in a manner that does not identify the source of the testimony.