By Terrance S. Carter, Nancy E. Claridge and Sean S. Carter

Anti-Money Laundering Amendments Include Virtual Currency Reporting Obligations

A series of substantial amendments to regulations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the “Act”) are now in force. The amendments are part of ongoing regulatory changes made over the past two years, which came into force on June 1, 2021 (the “Amendments”). New guidance from the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) is effective as of the same date. Included among the Amendments are new virtual currency obligations for reporting entities (“REs”) under the Act; new definitions; changes to record keeping and ongoing monitoring requirements; and requirements for continuously updating the veracity of beneficial ownership information, which includes beneficial ownership of charities and not-for-profit organizations.

Although usually not considered REs, charities involved in certain activities, such as carrying out a related business that falls under the definition of a money services business (“MSB”) would be included among the REs under the Act and must comply with all applicable obligations. The Amendments have added reporting and record-keeping requirements for all REs for virtual currency transactions of $10,000 or more in a single 24-hour period; MSBs are subject to record keeping requirements for virtual currency transactions of $1,000 or more. MSBs are also required to maintain records for electronic fund transfers of $1,000 or more.

Among the new definitions introduced to the Act are “prepaid payment product” (“PPP”) and “prepaid payment product account” (“PPPA”) along with new obligations for financial entities that issue these. The definition for a PPPA explicitly excludes charities, and means an account — 

other than an account to which only a public body or, if doing so for the purposes of humanitarian aid, a registered charity as defined in subsection 248(1) of the Income Tax Act, can add funds or virtual currency — that is connected to a prepaid payment product and that permits

(a) funds or virtual currency that total $1,000 or more to be added to the account within a 24-hour period; or

(b) a balance of funds or virtual currency of $1,000 or more to be maintained [emphasis added].

The FINTRAC Guidance describes “beneficial owners” as “individuals who directly or indirectly own or control 25% or more of a corporation or an entity other than a corporation” and “cannot be other corporations, trusts or other entities. They must be the individuals who are the owners or controllers of the entity.” New in the Amendments is the extension of beneficial ownership requirements for all RE sectors, including “designated non-financial businesses and professions”, such as accountants, real estate brokers, developers or sales representatives, and agents of the Crown.

According to a notice published by FINTRAC on its website last month, compliance with the regulatory requirements in effect prior to June 1, 2021 will be assessed until March 31, 2022. FINTRAC will begin assessing compliance with the Amendments on April 1, 2022; however, “FINTRAC may assess transactional information for a period prior to April 1, 2022, while exercising reasonability and taking into consideration the flexible measures that FINTRAC has previously communicated in the Notice on forthcoming regulatory amendments and flexibility.”

Charities and not-for-profits, especially those carrying on a related MSB, are encouraged to read the new FINTRAC Guidance for all the requirements and obligations now in force under the Act.

Read the June 2021 Charity & NFP Law Update