Proposed Canadian AML Changes Could Affect Digital Currency, FMSBs (April 7, 2014)
The Canadian government has proposed a series of amendments to the country’s money laundering legislation, including provisions to extend the laws to cover digital currencies. The proposed changes to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PC Act) were introduced on March 28 as part of a bill to implement aspects of the federal budget.
Under the proposed amendments, persons dealing in digital currencies will be required to register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). The agency currently requires all money services businesses to report certain transactions, verify the identity of customers, keep transaction records and implement AML compliance programs. The regulations could adopt these requirements, with necessary changes, for dealers in virtual currencies as well, according to a blog post by Jacqueline Shinfield, partner, and Vladimir Shatiryan, associate, with the Toronto office of law firm Blake, Cassels & Graydon LLP. Specific guidelines on what currencies and activities are to be covered by the proposed laws have yet to be set forth, but will be defined by future regulations, according to the post.
The proposed amendments also would extend the scope of the PC Act to cover money services businesses that do not have a place of business in Canada but do provide services to customers in Canada. In the past, when determining if a foreign money services business (FMSB) was covered by the PC Act, FINTRAC took into account factors including whether the company had agents, employees, bank accounts or computer servers in Canada. “The changes to the PC Act appear to reflect a change in FINTRAC’s policy in this regard,” wrote Shinfield and Shatiryan. “Under the proposed legislation, when a FMSB without a place of business in Canada is transacting with Canadian customers, even if they are doing so on a cross-border basis, the FMSB will be subject to compliance with the PC Act and will be required to be registered with FINTRAC.”