FATF Says Canada Has Raised Its Game On Money Laundering, But Gaps Remain

What the FATF found

The Financial Action Task Force sets global standards to combat money laundering, terrorist financing, and the funding of weapons of mass destruction. In a fresh 405-page evaluation published Tuesday, Canada earns stronger overall grades than it did in 2016. A team of foreign experts conducted the review during a three-week visit last November.

The panel points to organized crime and professional third party launderers as the primary threats, with rising exposure tied to crowdfunding platforms and online casinos. Drug trafficking is the most common crime behind laundering cases, typically involving cocaine, and the report says fentanyl trafficking has risen by more than 42% since 2019. Canada's six biggest banks, meanwhile, are assessed as having a solid handle on money-laundering risks.

"Organized criminal groups involved in drug trafficking are known to invest in real estate to launder their proceeds of crime, and certain large Canadian municipalities are high-value real estate markets that attract significant foreign investment," the FATF said.

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How Canada has changed and where it still falls short

Since the previous review, Ottawa broadened the list of businesses subject to the regime, made it easier to identify the ultimate owners of corporations and property, and made amendments to the Criminal Code and to income tax legislation. A decade ago, Canada was found non-compliant in five areas, including transparency and assessing risks from new technologies. The watchdog now says the country has moved forward on all of those counts.

Still, the FATF urges more attention to non-financial sectors that handle sensitive money. Regulators tend to zero in on headline high-risk areas like casinos, meaning other corners of the market - including dealers in precious metals and companies in the real estate sector - receive comparatively little scrutiny. Lawyers also remain outside Canada's anti-money-laundering and terrorist-financing regime. The panel recommends continuing to enhance corporate transparency through beneficial ownership registries and to sanction non-compliance.

What this means for your money

Criminal Intelligence Service Canada estimates that C$45 billion to C$113 billion is washed through the country every year, with the low end equal to $32 billion.

In October, Finance Minister François-Philippe Champagne laid out a proposal to create a new financial crimes agency tasked with probing sophisticated schemes, paired with amendments to banking rules targeting online fraud and similar scams. He described the FATF report as "not only an improvement of Canada's last evaluation in 2016, but a validation of the work the government is undertaking with agencies and provinces together to better protect Canadians against fraud and the financial system against nefarious activity," adding that the government will examine the recommendations and follow through.

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