Six months after new anti-money laundering regulations were introduced, Canada’s financial intelligence group issued new guidelines dealing with so-called politically exposed persons and heads of international organizations.
The amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, published in June 2016 in the Canada Gazette, are arguably the most important changes to the anti-money laundering regime in the past eight years, according to legal experts.
The new regulations introduces a more flexible client identification regime, are expected to facilitate digital commerce, and imposes substantial new risk assessment requirements. It will require reporting entities to spend more money, resources and time to ensure that its current policies, procedures, risk assessments, and training programs are compliant.
A letter recently sent to some Canadians “strongly” encouraging the voluntary disclosure of potential undisclosed foreign assets and unreported foreign income is the latest indication that the Canada Revenue Agency is stepping up efforts to crack down on international tax evasion and aggressive tax avoidance.
A growing number of wealthy Canadians are coming clean with concealed assets in foreign tax havens through the CRA’s voluntary disclosure program after lists emerged over the past couple of years with information revealing the names of supposed Canadians who allegedly have offshore accounts. The number of offshore disclosures increased from 1,215 in 2006‐2007 to 5,248 in 2013‐2014, representing over $2 billion in total unreported income since 2006‐2007, according to the CRA’s latest annual report. The CRA’s latest letter-writing campaign, which began last December, is widely expected to entice more Canadian taxpayers to come forward.
“It’s an inexpensive way of encouraging a greater level of compliance,” noted Michael Friedman, co-chair of McMillan LLP’s tax group.
New anti-money laundering regulations introduced to demonstrate Canada’s tough stance on dirty money to international authorities will require reporting entities to spend more money, resources, and time to be in compliance, according to experts.
Published in mid-February in its final form in the Canada Gazette, the amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Act) are meant to address several key failings identified by the Financial Action Task Force (FATF), an international body established in 1989 that sets standards for anti-money laundering (AML) and anti-terrorist financing (ATF) activities. In 2008, FATF found that Canada, a founding member, was “non-compliant” on preventative measures such as customer identification and due diligence to combat money laundering.
“It would probably embarrass our government if we did not comply with FATF because we have a government that certainly holds itself out as a country with a modern AML and ATF legislative regime that is at the forefront so our government would not want to be seen as having deficiencies – it could hurt Canada’s reputation,” noted Peter Aziz, an expert in regulatory compliance in the financial services and payments industry with Torys LLP.