Key Takeaways:
- The Financial Action Task Force (FATF) conducted a three-week review of Canada’s anti-money laundering efforts in November, which included interviews with executives at TD Bank and 13 government agencies.
- The review comes after TD Bank paid a $3 billion fine to settle a U.S. money laundering case, and amid concerns about Canada’s reputation as a secure and reliable financial system.
- A negative report from FATF could hurt Canada’s foreign investments and reputation, particularly as Prime Minister Mark Carney tries to boost productivity and diversify trade relations.
- Canada hopes to prove it has taken sufficient measures to improve its anti-money laundering efforts since the last review in 2016, which found significant shortcomings.
- The review will take into account TD Bank’s historic penalty and the country’s efforts to track companies incorporated in Canada and their controlling owners.
Introduction to the FATF Review
The Financial Action Task Force (FATF), an international crime watchdog, conducted a three-week review of Canada’s anti-money laundering efforts in November. The review, which included interviews with executives at TD Bank and 13 government agencies, has caused concerns in Ottawa and Toronto’s financial sector. The visit coincided with new indictments against fugitive Canadian Olympic snowboarder turned alleged cocaine kingpin Ryan Wedding, highlighting the country’s ongoing struggles with financial crime. A negative report from FATF could hurt Canada’s foreign investments and reputation, particularly as Prime Minister Mark Carney tries to boost productivity and diversify trade relations.
Canada’s Anti-Money Laundering Efforts
Canada hopes to prove it has taken sufficient measures to improve its anti-money laundering efforts since the last review in 2016, which found significant shortcomings. The country has had nine years to implement significant changes, but critics argue that it continues to fall short. According to Christian Leuprecht, a Royal Military College of Canada professor and author of "Dirty Money: Financial Crime in Canada," the shortcomings in Canada’s anti-money laundering efforts are particularly concerning given the recent high-profile cases of financial crime. The Canadian government estimates that up to C$113 billion is "snow-washed" through anonymous companies in Canada each year, which is equivalent to up to five per cent of the country’s economy.
The Review Process
The FATF review included in-person interviews with executives at TD Bank, which last year paid the largest-ever fine to settle a U.S. money laundering case. The reviewers asked about enforcement rules and regulations at the federal and provincial levels, as well as how companies have set up their individual risk and anti-money laundering systems. The panel’s questions centered on each company’s internal compliance programs, which has raised concerns among government agencies and companies. One source said that the government agencies and companies had focused their preparation for the FATF interviews on how companies work with enforcement agencies, but the panel’s questions were more focused on internal compliance programs.
Implications of the Review
A negative report from FATF could have significant implications for Canada’s foreign investments and reputation. Prime Minister Mark Carney has proposed setting up a federal agency to investigate financial crimes, investing C$1.8 billion to combat crime, and creating a path for the country’s banking regulator and enforcement agency to exchange information. A clean bill of health from the evaluation would give partners and investors confidence that Canada’s financial system is secure, reliable, and clean. According to Salvator Cusimano, executive director of Transparency International Canada, a positive report would be particularly important at a time when Canada is seeking to diversify trade relations and attract investment.
Conclusion and Next Steps
The results of the FATF review will not be known until June 2026, but the implications of the review are already being felt. Canada’s anti-money laundering agency, the Financial Transactions and Reports Analysis Centre of Canada, has increased penalties in recent years, and compliance analysts say that Canada is unlikely to be "grey-listed" by FATF. However, critics argue that the country still has a long way to go in terms of improving its anti-money laundering efforts. As Jeffrey Simser, former legal director with the Ontario Ministry of the Attorney General, noted, the criticism will likely focus on the effectiveness of Canada’s laws and regulations in preventing financial crime. Ultimately, the FATF review will provide an important assessment of Canada’s progress in combating financial crime and improving its anti-money laundering efforts.