Canada’s AML Overhaul: A Gordian Knot?

Abstract: Canada’s sweeping amendments to its anti-money laundering (AML) regime under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act aim to expand regulatory oversight, enhance beneficial ownership transparency, and enable information sharing among financial institutions. However, these changes, unveiled ahead of the 2025 Financial Action Task Force evaluation, raise concerns about compliance burdens for new sectors like factoring, leasing, and cheque-cashing businesses. Ambiguities in key provisions, such as discrepancy reporting and privacy codes, risk creating inefficiencies and overregulation. As Canada seeks to strengthen its financial safeguards, striking a balance between effectiveness and simplicity will be crucial.

When it comes to financial crime, Canada is tightening the net. On November 30th, Ottawa unveiled sweeping changes to its anti-money laundering (AML) and anti-terrorist financing regime under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). The reforms are timely, arriving just ahead of the Financial Action Task Force’s (FATF) 2025 evaluation, but they are also ambitious—perhaps overly so.

These amendments expand the AML framework to include new sectors, increase transparency around beneficial ownership, and introduce broad powers to share sensitive information. Yet for all their noble intentions, they risk smothering businesses in red tape and creating confusion where clarity is sorely needed.

New Players, Old Problems

The first major change is the inclusion of factoring companies, financing and leasing firms, and cheque-cashing businesses under the PCMLTFA. Previously left on the regulatory sidelines, these sectors will now face the same rigorous compliance demands as traditional financial institutions. This means verifying customer identities, monitoring transactions, and reporting cash or virtual currency deals exceeding C$10,000.

For firms unaccustomed to such scrutiny, the transition will not be easy. Merchant cash advances, high-value leases, and even cheque cashing—all relatively informal activities—will now require full compliance programs. Many will need to hire compliance officers, rewrite procedures, and invest in systems to keep up. For smaller players, the cost of compliance could be existential.

Transparency or Bureaucracy?

Transparency is a guiding principle of the new regulations. Beneficial ownership information must now be verified against Canada’s federal registry of corporations. Any discrepancies—beyond minor typos—must be reported within 15 days. But what constitutes a “material discrepancy” is maddeningly unclear. Is it a missing owner? A misaligned shareholding? Without guidance, businesses may err on the side of caution, flooding regulators with trivial reports.

This shift effectively outsources the task of maintaining registry accuracy to the private sector. It also raises the specter of duplication. If every discrepancy must be reported, businesses will drown in paperwork while regulators scramble to process a surge of reports.

Privacy vs. Security: The New Information Frontier

Perhaps the most controversial element is the allowance for regulated entities to share personal information without client consent. The goal is laudable: enabling collaboration to detect money laundering and terrorist financing. But the execution is fraught. Firms must adopt Privacy Commissioner-approved “Codes of Practice” before sharing data. Each sector can craft its own code, a recipe for fragmentation and inefficiency.

Moreover, individuals can still file complaints about data sharing, potentially exposing the system to abuse. Criminals, ironically, may exploit this mechanism to sniff out whether they are under investigation. The balance between privacy and security is always delicate, but here it feels precariously poised.

Borderline Control

Trade-based money laundering is another target. A new rule requires importers and exporters to declare whether goods are linked to financial crime. Phantom shipments—used to obscure illicit cash flows—are in the crosshairs. Border officers will also gain new powers to seize suspicious goods. While well-intentioned, these measures could burden legitimate traders with onerous compliance requirements, adding friction to cross-border commerce.

A Mixed Verdict

Canada’s AML overhaul is an attempt to get ahead of global expectations and close glaring loopholes. Its objectives are hard to fault: more transparency, better collaboration, and fewer opportunities for criminals to exploit the financial system. Yet its complexity risks alienating businesses, particularly smaller firms with limited resources to adapt.

With a mere 30 days for public consultation, the clock is ticking. Policymakers must tread carefully. A regulatory regime that is too burdensome will stifle legitimate commerce, while one that is too lax will fail to deliver the promised clampdown on crime. Canada’s reforms aim to strike a balance—but for now, they look like a Gordian knot waiting to be untangled.

In its quest to build a safer financial system, Canada must remember one thing: simplicity is often the best safeguard.

For more information go to a deep dive article from our member, Blakes

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