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Conference update: Virtual currency exchanges, beneficial ownership and other developments in Canadian anti-money laundering regulations

anti-money launderingOn February 7, 2018, the Canadian federal government had released a consultation paper for comments that has potentially far-reaching implications for compliance with Canadian anti-money laundering (AML) requirements. The comment period on this paper ended on May 18, 2018.

At the recently concluded 17th Annual Forum on Anti-Money Laundering & Financial Crime in Toronto, some interesting observations were made by various speakers (including representatives from certain Canadian regulators). A number of these observations touched on topics covered by the above-mentioned consultation paper. Set out below are some key highlights:

Approach to regulations: In responding to a comment that Canada is seen by international bodies as not being sufficiently active in its enforcement, it was noted that the government is aware of this perception. Although it was not expressly said, one came away from the conference with the impression that the government is taking AML regulation much more seriously. Given the nature and extent of changes discussed in the consultation paper, I predict the regulators will take a more muscular approach to AML regulation going forward.

Timing: A report on the recommended regulations is expected in Fall 2018. Timing of the final text of regulations is unclear.

Virtual currency exchanges: In Fall 2018, the government is planning to publish regulations that will regulate virtual currency exchanges. These regulations were first foreshadowed in 2014 (the wheels of bureaucracy clearly do not move very fast when it comes to regulations!). This area should be monitored over the next few months.

Corporate transparency and beneficial ownership: The government is working on a strategy to make beneficial ownership information available more easily and the idea of a central registry is being seriously considered. However, the government has to work across the country with local regulators in all 14 jurisdictions to find a solution that works at a national level. Accordingly, from a timing perspective, there may be challenges in implementing a central registry any time soon.

Technology: The potential benefits of technology in various areas (e.g., sharing of information between private and public sector, client identification methods, etc.) are recognized by the government and regulatory changes to reap such benefits are expected.

Principles-based vs. prescriptive regulations: The government recognizes that reporting entities prefer clearly set out rules that are easy to understand and follow. However, there is a trade-off in having rules that are too prescriptive because they can become outdated, especially with technological developments in various fields. Accordingly, the government has generally used a principles-based approach in its regulations. The government is looking to strike a balance between these two approaches to regulations.

By Kashif Zaman, Osler 

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In addition to our regular guest bloggers, Inside Internal Controls blog published by First Reference, provides occasional guest post opportunities from various subject matter experts on the topics of risk management and best practices in finance and accounting, information technology, environmental issues, corporate governance, sales/marketing and operations, not-for-profits and business related issues in Canada. If you are a subject matter expert and would like to become an occasional blogger, please contact Yosie Saint-Cyr at editor@firstreference.com. If you liked this post and would like to subscribe to Inside Internal Controls blog click here.
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