Consultation “Reviewing Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime”

February 14, 2018 | By: .(JavaScript must be enabled to view this email address) Mark Blumberg
Topics: News, Canadian Charity Law, Global Giving, Ethics and Canadian Charities, Avoiding 'Charity' Scams

The Department of Finance is reviewing Canada's anti-money laundering and anti-terrorist financing regime.  They have published a consultation paper at Reviewing Canada's Anti-Money Laundering and Anti-Terrorist Financing Regime.  They are looking for submissions on the discussion paper before April 30, 2018.  I have met FATF in the past when they were evaluating Canada's effectiveness in dealing with AML and ATF and there are significant concerns - especially relating to the legal sector in Canada.   

There are few specific references to charities in the consultation document [which we have highlighted in bold]:

(iii) Disruption

The final pillar deals with the disruption of money laundering and terrorist financing. Regime partners, such as the Canadian Security Intelligence Service (CSIS), the Canada Border Services Agency (CBSA) and the Royal Canadian Mounted Police (RCMP), supported by FINTRAC’s intelligence gathering and analysis activities, undertake investigations in relation to money laundering, terrorist financing, other profit-oriented crimes and threats to the security of Canada in accordance with their individual mandates. The Canada Revenue Agency (CRA) also plays an important role in investigating tax evasion (and its associated money laundering) and in detecting charities that are at risk, to ensure that they are not being abused to finance terrorism. The Public Prosecution Service of Canada (PPSC) along with provincial prosecutors ensure that crimes are prosecuted to the fullest extent of the law. The restraint and confiscation of proceeds of crime is also an important law enforcement component of the regime. Public Services and Procurement Canada (PSPC) manages all seized and restrained property for criminal cases prosecuted by the Government of Canada as well as providing forensic accounting expertise to the RCMP. The CBSA enforces the Cross-Border Currency Reporting Program, and transmits information from reports and seizures to FINTRAC. The Regime also has robust terrorist listing processes to freeze terrorist assets, pursuant to the Criminal Code and the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism, which are led by Public Safety Canada (PS) and Global Affairs Canada (GAC), respectively.

The Legal Profession in Canada

Legal professionals who conduct financial transactions on behalf of clients can pose a money laundering and terrorist financing risk, in particular at the placement and layering stages of money laundering, and therefore present risks to the integrity of both domestic and global financial systems. This risk has also been recognized by the FATF. In a report titled Money Laundering and Terrorist Financing Vulnerabilities of Legal Professionals, the FATF found that criminals seek out the involvement of legal professionals in their money laundering and terrorist financing activities, sometimes because a legal professional is required to complete certain transactions, and sometimes to access specialised legal and notarial skills and services which could assist the laundering of the proceeds of crime and the funding of terrorism.

In the 2015 National Inherent Risk Assessment, the legal sector was assessed as posing a high risk of money laundering and terrorist financing in Canada. This sector has a large number of practitioners with specialized knowledge and expertise that is vulnerable to being exploited, wittingly or unwittingly, for illicit purposes. It is the financial services offered by lawyers that make lawyers gatekeepers to the financial system and that make them the most vulnerable. In addition to conducting wire transfers, issuing cheques and accepting cash, these services include establishing trust accounts, forming and managing corporations and legal trusts, carrying out real estate and securities-related transactions and setting up and managing charities. The legal profession offers vulnerable services to a range of individuals and businesses and frequently act as a third party in transactions. The client profile of the legal sector is believed to include a combination of Politically Exposed Persons, who are people who occupy a position of influence in a government or military, clients in vulnerable businesses and professions, and clients whose activities are conducted in locations of concern, though this list is not exhaustive. The legal profession normally interacts directly with clients but can also conduct business indirectly as well. For these reasons, the application of the rules from Canada’s AML/ATF framework to lawyers is important to support efforts to detect and deter money laundering and terrorist financing.

Do you require legal advice with respect to Canadian or Ontario non-profits or charities?


Charity Lawyer Mark Blumberg

Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.
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