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New AML measures that CPAs need to keep on their radar

Canada expects to have a beneficial ownership registry by 2023 and has also committed to the creation of a financial crimes agency

An office manager holding a meeting with her teamMore than ever, accountants need to know who they are dealing with, and for certain transactions, report that information when required (Tom Werner/Getty Images)

Canada has been actively updating its anti-money laundering (AML) regime for several years now, with many amendments to regulations coming into effect in 2020 and 2021.

But, in its latest budget, the federal government stepped up its efforts even further, announcing that a publicly searchable beneficial ownership registry will be in place as early as 2023—two years ahead of schedule. It also noted that a financial crimes agency will be established.

Here’s what you need to know about the latest announcements, including new AML requirements and how to prepare. (Be sure to check CPA Canada’s 2022 AML guide as well for a full overview of requirements that apply to CPAs).

A REGISTRY OF BENEFICIAL OWNERS

One of the measures that will go a long way toward bringing Canada’s AML regime in line with Financial Action Task Force (FATF) recommendations is the creation of a registry of beneficial owners of Canada Business Corporations Act (CBCA) companies.

The registry will apply to companies governed under the CBCA. Generally, private companies under the CBCA have been required since 2019 to maintain a company register of individuals who have “significant control” over the corporation. However, the registry will not automatically apply to companies governed under provincial laws, which represent the vast majority of companies in Canada.

“Participation by provinces and territories will be voluntary and is hoped for,” says Michele Wood-Tweel, FCPA, vice-president, regulatory affairs at CPA Canada. “However, since jurisdictions are at various stages, it could still be difficult for a CPA to obtain information about the actual ownership of a private company for a number of years.”

Despite these challenges, the registry is expected to improve Canada’s beneficial ownership transparency considerably and help bring it more into line with other countries, which have already taken similar steps.

A CENTRAL AGENCY

Another positive move is the commitment to create a lead financial crimes agency, says CPA and financial crimes expert Marc Tassé. “By acting as a central hub for the various enforcement activities, the agency should allow for better coordination of efforts and improved information sharing between agencies,” he says.

Although its precise legislative powers have yet to be determined, the agency should be able to deal with challenges that result from complex and rapidly evolving financial crimes whether of domestic or international origins.

EVOLVING RISKS

“AML risks have changed dramatically,” says Wood-Tweel. “You can’t have the same requirements you had 20 years ago. A contemporary regime now has to account for things like virtual currencies and crowdfunding platforms for which transactions may have to be reported to the Financial Transactions and Reports Analysis Centre (FINTRAC).

Cybercrime around the world has also increased and especially during the pandemic, which means more money has to be laundered, and, says Wood-Tweel, “criminals will always look for the weakest links including those jurisdictions that lack transparency for legal entities so as to hide their illegal activities.”

Even the economic sanctions that have been levied by many countries including Canada create a new AML risk. “Individuals and organizations affected may try to get around the sanctions imposed since Russia invaded Ukraine by moving their money or assets to the safety of another country, targeting jurisdictions where the transparency measures are least restrictive.”

LEGISLATIVE AND FINANCIAL MEASURES

The federal government is also drafting updates to strengthen the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, the Criminal Code and other legislation to enhance the ability of authorities to detect, investigate and prosecute financial crimes.

The 2022 budget proposes to allocate $89.9 million over five years and $8.8 million ongoing to support Canada’s financial intelligence unit and anti-money laundering and anti-terrorist financing regulator, FINTRAC.

“In response to evolving threats, Canada is strengthening its regime like many other countries around the world,” Wood-Tweel says. “Canada was not always a destination of choice for money laundering, but it has become one like many other countries and it has no choice but to act. CPAs are well positioned to contribute to the fight on many fronts.”

HOW CPAs CAN PREPARE

There are several ways to get ready for the requirements already in place and measures in the budget.

Stay informed. “You may need to review your AML policies, processes and compliance program, and ensure your employees are trained on what information they need to get,” says Wood-Tweel. “For example, if CPAs are carrying out activities covered by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and if they have reasonable grounds to suspect that the transaction being conducted is money laundering, they need to report it to FINTRAC, and more quickly than they may have done before.”

Know your client. More than ever, CPAs involved in transactions and activities covered by the PCMLTFA need to know who they are dealing with. “This is true if they are dealing with people who hold public political positions in Canada or abroad, for example, or who work in the leadership of international organizations because of new requirements,” Wood-Tweel continues.

Be vigilant. Facilitators, nominees, trustees—there can be a variety of intermediaries in a money laundering transaction. “As a CPA, you are not permitted to associate with information that you know is false, so ask questions,” says Tassé. “And, if you discover that your client is not the true owner of the asset, don’t present it as an asset of that person or that company.”

Be ethical. CPAs have to comply with their code of ethics and that’s why all CPAs need to keep up with their ethics training, to ensure that if they are faced with a dilemma, they have the ethical skills to respond.

KEEP UP TO DATE ON YOUR AML OBLIGATIONS

Refer to the newly updated AML guide to learn more about the changes to AML/ATF regulations and how the new rules affect CPAs.

Also, CPA Canada has a wealth of AML/ATF resources on subjects such as the risks of non-compliance, knowing your client and record-keeping and reporting.

Plus, find out how Canada has progressed in relation to FATF recommendations and tune in to our webinar on the latest AML developments.

For more on sanctions related to Russia, see What current global crises mean for Canadian CPAs.