Canada’s history 

with the Financial 

Action Task Force

The Financial Action Task Force (FATF) 
is an international standard-setting AML/
CTF organization. It was established in 
1989 at the G7 Summit in Paris with 
the purpose of maintaining integrity in 
the global financial system by working 
to ensure member firms implement 
regulatory infrastructures to impede 
abuse by money launderers and terrorist 
financiers. Canada has been a member 
of The FATF since its creation and 
enacted proceeds of crime legislation 
that same year. 

As a member of The FATF, Canada 
undergoes peer evaluations to assess 
the effectiveness of its anti-money 
laundering and anti-terrorist financing 
measures. In its second mutual 
evaluation report on Canada in 1997, 
FATF noted Canada’s lack of a Financial 
Intelligence Unit (FIU) and that its 
reliance on voluntary (rather than 
mandatory) suspicious transactions 

reporting had not proven effective. In 
response to this evaluation, Canada 
introduced the National Initiative to 
Combat Money Laundering. 

In 2000, the Parliament of Canada 
passed legislation that established 
a system of mandatory reporting 
of suspicious and other prescribed 
transactions and created its own FIU, 
FINTRAC. With this, Canadian federally 
regulated financial institutions (FRFIs) 
operate under the supervision of 
the Office of the Superintendent of 
Financial Institutions (OSFI) as the main 
regulatory body, but all market players 
also answer to FINTRAC with respect to 
complying with reporting requirements 
aimed at facilitating the detection and 
deterrence of money laundering and 
terrorist financing. Canada operates 
a regulatory framework where OSFI 
works closely with FINTRAC in order to 
ensure FRFIs implement policies and 
procedures to ensure compliance with 
the local necessary regulations.

In the FATF’s 2008 AML regime 
evaluation of Canada, its AML legislation 
was found to be inconsistent with 

the international standard for dealing 
with customer identification (FATF 
Recommendation 10). FATF criticized 
Canada for not implementing sufficient 
measures to ensure market participants 
were able to identify their customers, 
understand their operations and conduct 
ongoing monitoring of their behaviour. 
This continued criticism places Canada 
in a difficult position. If notable and 
continuous improvements are not made, 
Canada could face increased scrutiny 
from FATF and more burdensome 
reporting obligations and other 
restrictive measures. 

Since 2008, Canada has responded 
with changes to The Proceeds of 
Crime (Money Laundering) and 
Terrorist Financing Act (PCMLTFA) and 
associated regulations. For example, in 
December 2008 changes were made 
to monetary penalties, requirements for 
new sectors (e.g., dealers in precious 
metals and stones) and June 2008 
saw changes which mandated every 
organization subject to the act to 
conduct a bi-annual review of their 
AML/CTF compliance program.

Canadian-based 

organizations are 

operating in an 

environment

 where 

increasingly 

non-compliance

 will not 

be tolerated.

© 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms 
affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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At Risk 

 

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Volume 7, No. 1