Anti-Money Laundering: A Comparative Review Of Legislative Development - Money Laundering - Canada (2024)

The historical background of money laundering legislation beganwith the drug trade. Initial AML efforts were introducedprimarily to curb the ability of drug cartels to use the proceedsof their crimes to process money from illegal drug activity andbuild larger drug businesses. The key historical turning point ofAML legislation was the Vienna Convention of 1988("Vienna Convention"), where 43 countries agreedon an approach to address money laundering rather than solelyfocusing on the drugs trafficking and related monetary issues.Shortly thereafter, the Financial Action Task Force("FATF") of the G-7 issued a report specificallyaddressing money laundering, citing 40 recommendations which neededto be implemented by the international community to effectivelyaddress this issue. These recommendations have driven the structureof the AML regimes of Canada the U.S. and the U.K. to date.

The current Canadian AML legislative system was originallydesigned to address drug offences but underwent two major changes.The initial change occurred with the adoption of Part XII.2 intothe Criminal Code ("Code"), which specificallycriminalized laundering and possessing the proceeds of crime. ThisPart also granted powers to law enforcement to detain, search, andseize property from anyone thought to be in possession of theproceeds of crime, expanding the scope of enforcement powersavailable in Canadian law against money laundering. The secondmajor change occurred in the early 2000's with the adoption ofthe current Proceeds of Crime (Money Laundering) and TerroristFinancing Act.¹ This law is Canada'scurrent AML regime and implements various tools such as reportingobligations, recordkeeping obligations, additional offences, andadministrative monetary penalties to strengthen enforcement againstmoney laundering. Furthermore, this legislation also createdFinancial Transactions and Reports Analysis Centre("FINTRAC"), Canada's special intelligence unit,which has responsibility for reviewing reports and conductingpreliminary investigations into money launderinginvestigations.

Currently, the focus of money laundering prevention efforts hascentered on increasing international cooperation and addressingterrorist financing. The FATF and World Bank have constantlyadvocated the need for international unity in addressing organizedcrime and money laundering by terrorist organizations as anecessary precursor to making any significant change in this globalissue. Although there is some harmonization amongst countries suchas Canada, the U.S. and the U.K., there are various othercountries, such as the Cayman Islands, whose legislative system arenot harmonized.

It has been 28years since the FATF's initial 40 recommendation report, and ascan be seen from this review of the Canadian legislation, theinternational harmonization in money laundering protocol sought bythe report is starting to take form. Although the AML regimesof all these countries do have various nuanced differences, thestructural similarities have made cooperation between agencies suchas FINTRAC, the Financial Crimes Enforcement Network("FinCEN")², and the Serious Organised CrimeAgency ("SOCA")³ both more feasible and moreseamless. Although money laundering is still a seriousproblem that totals in the billions of dollars worldwide, theintegration of regulators, enforcement regimes and standardizationof detection protocols has made it much more challenging forcriminals and terrorists to launder the proceeds of their criminalactivity.

The new reporting-based approach adopted by Canada, the U.S.,and the U.K. since the early 2000's has marked a significantand effective shift in AML strategy from a reactionary approach toa more proactive one. By creating regulators, thresholds, andreporting systems for transactions at a higher risk of beingrelated to laundering the proceeds of crime, these countries areable to attack money launderers in the early placement stage whenthey are most likely to be caught, as tracing proceeds during thelayering and integration stages consumes more resources andtime. In addition to this reporting-based shift, thecriminalization of more activities related to money laundering,such as tipping, possessing the proceeds of crime, and moneylaundering itself, and the stiff penalties associated with theseoffences has helped to deter this behaviour.

The key next steps in the fight against money laundering willrevolve around both improving the current AML regimes of thesecountries, and gaining more buy-in from other countries to improveand somewhat harmonize their money laundering policies. Dueto the nimbleness of criminal organizations as compared with slowermoving government processes, the legislation required to addressmoney laundering is often a step behind the techniques developed bymoney launderers. Larger economies such as Canada, the U.S.,and the U.K. will have to continue to review and update their AMLpolicies at a faster pace to keep up with criminal organizationswhich are constantly evolving. Furthermore, these countrieswill have to engage in diplomatic efforts to bring countrieswithout sound AML legislation on board, which will be no easytask. The inherent focus on confidentiality in offshorejurisdictions is not something many of these offshore jurisdictionswill want to forego, largely due to the positive impact theseregimes have on their national economies. However, sincemoney laundering removes funds that could otherwise be legitimatelyspent to grow the economy, leaders in the field of AML will have toadvance this message, but will also have to be careful to notinfringe the national sovereignty of these otherjurisdictions. Although the challenge to stop moneylaundering is still an uphill journey, the vast improvements madeto the AML regimes of Canada, the U.S., and the U.K. since themid-20^th century may make the climb a little lesssteep.

Footnotes

1 Proceeds of Crime (Money Laundering) and TerroristFinancing Act, SC 2000, c 17 (the"PCMLTFA").

2The Financial Crimes Enforcement Network (FinCEN)is a bureau of the U.S. Department of Treasury and the Americanequivalent to FINTRAC.

3The Serious Organised Crime Agency (SOCA) is theUnited Kingdom equivalent to FINTRAC.

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