Canada’s New AML Rules for Lenders: A Costly Compliance Squeeze?

Abstract: April 1st is a’coming. What does this amendment to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) mean for finance and leasing companies across auto, equipment, and mortgage? We continue to advocate for an AML framework that effectively targets financial crime while at the same time minimizing turbulence for consumers and businesses. What is the scope of compliance and what is the actual timeline of compliance? No doubt it will expand anti-money laundering (AML) obligations to non-prime lenders, auto financiers, and leasing companies. While these changes aim to strengthen financial crime prevention, they also introduce significant compliance challenges, particularly for smaller lenders. The regulations take a risk-based approach by excluding lower-value consumer financing while imposing AML requirements on high-value asset transactions. However, the accelerated implementation timeline raises concerns about the readiness of industry participants. The Canadian Lenders Association (CLA) supports effective AML measures but emphasizes the need for practical, proportional compliance requirements. Ongoing collaboration between the government and industry will be crucial to ensuring a smooth transition that balances financial security with continued access to credit.

Canada’s financial sector is preparing for the implementation of new amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), set to take effect on April 1, 2025. These changes expand anti-money laundering (AML) obligations to non-prime lenders, auto financiers, and leasing companies, reinforcing the government’s commitment to combat financial crime.

The Canadian Lenders Association (CLA) supports strong and effective AML measures to prevent illicit activity in the financial system. A well-calibrated regulatory framework is essential to ensuring that financial institutions can help detect and prevent fraud and money laundering while continuing to provide responsible credit to Canadian consumers and businesses. To that end, the CLA remains committed to working closely with the government to ensure that these regulations are both effective and practical to implement.

A Risk-Based Approach with Key Considerations

The final regulations acknowledge that not all financing and leasing transactions present the same level of AML risk. Lower-value consumer financing—such as rent-to-own agreements for furniture and electronics—has been appropriately excluded from reporting requirements. Additionally, clearer definitions now specify which entities are subject to compliance, ensuring greater regulatory clarity.

At the same time, the new rules introduce AML obligations for financing and leasing transactions involving certain high-value assets, including business equipment, passenger vehicles, and property. This approach is designed to capture higher-risk transactions. However, it is important to ensure that compliance requirements remain proportional to risk, particularly for lenders serving consumers and small businesses that rely on accessible credit options.

Implementation Challenges and the Importance of a Smooth Transition

One of the primary challenges for industry participants is the accelerated timeline. The April 1, 2025, deadline requires businesses to swiftly implement new compliance programs, adjust transaction monitoring systems, and train staff. This is a significant undertaking, particularly for non-bank lenders and leasing firms that may not have the same compliance infrastructure as large financial institutions.

The government has acknowledged this by committing to engagement and outreach during the first year of implementation. The CLA appreciates this approach and encourages ongoing collaboration to ensure that compliance expectations are realistic and achievable, without creating undue barriers to lending.

Collaborating for Effective Implementation

The CLA continues to advocate for an AML framework that effectively targets financial crime while minimizing unintended consequences for consumers and businesses. The association looks forward to working with regulators to refine guidance, support industry compliance, and ensure that lending remains accessible to Canadians.

A well-functioning financial system requires both strong protections against illicit activity and a regulatory framework that enables responsible lending. With thoughtful implementation and industry-government collaboration, Canada must achieve both.

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