Canada Tightens Crypto Regulations Alongside AML/CTF Overhaul

The Financial Transactions and Reports Analysis Center of Canada (FINTRAC) has announced it will soon implement new anti-money laundering (AML) and counter-terrorist financing (CTF) regulations. The laws including updated guidelines for virtual currencies.

In a departmental report published on March 10, FINTRAC emphasizes that the establishment of “an enhanced AML/[CTF] regime” for businesses operating with cryptocurrencies is “a major priority in the near term.”

FINTRAC expands regulatory mandate regarding offshore crypto companies

In the report, FINTRAC emphasizes the challenges arising from business and consumer adoption of new technologies such as cryptocurrency — adding that while most of the changes arising from new technologies are incremental in nature, “many are revolutionary” in impact.

The updated legislative framework will include new reporting requirements for virtual currency transactions, extending FINTRAC’s regulatory mandate to greater cover the operations of overseas-based companies operating with cryptocurrencies.

Canada’s financial regulator plans to undertake “substantial national consultations with stakeholders and a rigorous implementation phase” in rolling out the new regulations. FINTRAC adds that it hopes to work with industry representatives in considering adjustments to the new framework.

Canada to implement new reporting requirements for crypto companies

Passed during June 2019, the new regulations mandate that businesses operating with cryptocurrencies record and report a large amount of identifying information from the clients whose transactions they process.

For each successful or attempted transaction or remittance valued at more than 1,000 Canadian dollars, businesses must record the type and amount of each virtual currency involved, the sending and receiving addresses involved in the transactions, the source of the virtual currency, and the entities involved in the transfer.

All cryptocurrency transfers above 10,000 CAD must be reported to FINTRAC.

Canada responds to FATF directives

Much of Canada’s AML/CTF overhaul appears to have been rooted in the 2016 assessment of the country’s anti-money laundering apparatus by the G7 intergovernmental financial watchdog the Financial Action Task Force on Money Laundering (FATF).

In the report, FATF noted that Canada’s cryptocurrency industry was among the country’s most vulnerable sectors to AML/CTF violations. 

The report highlighted that virtual currencies did not fall under the country’s regulatory apparatus at the time despite Canada’s government taking legislative measures to address the issue.