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

Regulations Addressing Virtual Currencies Published

On June 9, 2018, proposed Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, 2018 (the “Proposed Regulations”) were published in the Canada Gazette. The accompanying statement from the Department of Finance Canada (the “Statement”) states that regulatory changes are required to address the deficiencies identified by the Financial Action Task Force’s (“FATF”) evaluation of Canada’s Anti-Money Laundering and Anti-Terrorist Financing regime in 2015-16, discussed in Anti-terrorism and Charity Law Update No.47, as well as to implement the legislative efforts to strengthen this regime through amendments introduced in the Economic Action Plan 2014 Act, No. 1 and the Budget Implementation Act, 2017, No. 1.

Recognizing that the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the “Proceeds of Crime Act”) was not originally conceived for financial services and institutions in the digital world, the Statement highlights the following changes introduced by the Proposed Regulations: new customer due diligence requirements and beneficial ownership reporting requirements; new regulations for businesses dealing in virtual currency; updated schedules to the regulations; regulation of foreign money service businesses; and a number of technical amendments. The Statement also indicates that the proposed amendments would help improve the efforts of the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”).

In this regard, the Proposed Regulations state that virtual currencies “are vulnerable to abuse for money laundering and terrorist activity financing purposes because they allow greater levels of anonymity, or in some cases complete anonymity, when compared to traditional non-cash payment methods.” As such, the Proposed Regulations introduce new requirements to financial entities, money services businesses, real estate brokers, accountants and other persons and entities, such as registered charities running a lottery scheme in the permanent establishment of a casino in certain circumstances described in the Proceeds of Crime Act, to keep “large virtual currency transaction records” indicating the receipt of amounts of $10,000 or more in virtual currency in a single transaction.

Charities and not-for-profits accepting donations in virtual currency, or otherwise considering fundraising or investing options available to them with regard to virtual currencies should carefully monitor these Proposed Regulations and any associated developments in the coming months.

Amendments to the Criminal Code in Bill C-74, Budget Implementation Act, 2018, No. 1

Bill C-74 introduces a new Part XXII.1 to the Criminal Code establishing a new remediation agreement regime that will come into force on September 19, 2018 (ninety days after June 21, 2018, the date on which Bill C-74 received Royal Assent). A remediation agreement is defined as an “agreement, between an organization accused of having committed an offence and a prosecutor, to stay any proceedings related to that offence if the organization complies with the terms of the agreement.” The term organization is defined as a body corporate, society, company, firm, partnership, or an association of persons.

The amendment also includes a Schedule to Part XXII.1 which provides a list of offences in respect of which a remediation agreement may be entered into subject to court approval, including offences under the Corruption of Foreign Public Officials Act, namely bribing a foreign public official (section 3) and maintenance or destruction of books and records to facilitate or hide the bribing of a foreign public official (section 4). In this regard, it applies to offences alleged to have been committed by an organization outside Canada.

This new regime is a reminder to charities and not-for-profits with operations outside Canada to consider reviewing their internal policies and procedures and any practices that involve dealings with foreign officials. This has become particularly important since, as discussed in the November 2017 Anti-Terrorism/Money Laundering Law Update, the facilitation payments exemption in the Corruption of Foreign Public Officials Act was repealed last Fall.

​​Read the June 2018 Charity & NFP Law Update