VZCZCXRO7698
PP RUEHGA RUEHHA RUEHQU RUEHVC
DE RUEHOT #3302/01 3061531
ZNR UUUUU ZZH
P 021531Z NOV 06
FM AMEMBASSY OTTAWA
TO RUEHC/SECSTATE WASHDC PRIORITY 4319
INFO RUCNCAN/ALL CANADIAN POSTS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASH DC

UNCLAS SECTION 01 OF 03 OTTAWA 003302 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT FOR WHA/CAN, S/CT, EB/ESC - LYNNE LAMBERT, L/EB 
- TOM HEINEMANN AND IO/ESC - JOHN SANDAGE 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PTER CA
SUBJECT: CANADA SEEKS TO AMEND MONEY LAUNDERING, 
ANTI-TERRORISM FINANCING LEGISLATION; UNDERTAKES OTHER 
INITIATIVES 
 
 
¶1. (U) Summary:  The Harper Government has introduced a bill 
(C-25) in Parliament to amend the Proceeds of Crime (Money 
Laundering) and Terrorist Financing Act to ensure Canada's 
global leadership in combating organized crime and terrorist 
financing.  In his introduction of the bill on October 5, 
Finance Minister Flaherty said that "Canada's New Government 
will continue to be relentless in its battle against money 
laundering and terrorism financing," adding that "One of the 
best ways of putting these criminals out of business is to 
starve them of the funds they need to finance their 
activities. Our proposed amendments will improve our ability 
to act decisively."   C-25 will make Canada's anti-money 
laundering and anti-terrorist financing regime consistent 
with new Financial Action Task Force (FATF) standards.  They 
include enhancing information sharing between the Financial 
Transactions and Reports Analysis Centre of Canada (FINTRAC), 
law enforcement and other domestic and international 
agencies; creating a registration regime for money service 
businesses; enabling legislation for enhanced client 
identification measures; and creating an administrative and 
monetary penalties regime to better enforce compliance with 
the act.  C-25 was debated in the House of Commons last week 
and the Standing Committee on Finance held hearings on 
October 31.  Minister Flaherty expects the legislation to 
pass Parliament by the end of the year.  End summary. 
 
¶2. (U) Since criminals constantly change their tactics and 
find new ways to evade the law, Canada's anti-money 
laundering and anti-terrorist financing regime must stay 
up-to-date. The amendments to the 2001 Proceeds of Crime 
(Money Laundering) and Terrorist Financing Act (PCMTFA) 
contained in C-25 are designed to ensure Canada's regime 
remains consistent with revised international standards while 
addressing areas of domestic risk.  The new legislation will 
provide appropriate tools to law enforcement and meet 
international standards, while respecting the personal 
privacy of Canadians and minimizing the compliance burden on 
financial intermediaries.  C-25 proposes to enhance the 
provisions of the PCMLTFA by strengthening "know your client" 
standards; closing gaps in the regime; increasing compliance, 
monitoring and enforcement; and strengthening FINTRAC's 
intelligence function. 
 
¶3. (U) In preparation for the legislation, the Department of 
Finance issued a consultation paper entitled Enhancing 
Canada's Anti-Money Laundering and Anti-Terrorist Financing 
Regime in June 2005. Over 50 submissions from stakeholders 
were received, followed by further face-to-face 
consultations.  As a result, C-25 addresses industry concerns 
and minimizes the compliance burden by tailoring, where at 
all possible, proposed new requirements to existing business 
practices.  The legislation also serves to meet Canada's 
international commitments to combat money laundering and 
terrorist financing while ensuring that its domestic regime 
remains robust and up-to-date. 
 
Description of C-25 
------------------- 
 
¶4. (U) The key provisions of C-25 are: 
 
a)  Enhanced client identification and record-keeping for 
financial institutions and intermedaries 
 
The amendments include requirements for reporting entities to 
undertake enhanced monitoring of high-risk situations, 
correspondent banking relationships and transactions by 
politically exposed persons.  Banks, insurance companies, 
Qpolitically exposed persons.  Banks, insurance companies, 
securities dealers and money service businesses would be 
required to take measures to identify and monitor the 
transactions of foreign nationals and their immediate family 
who hold prominent public positions. 
 
b) Reporting attempted suspicious transactions 
 
All reporting entities currently reporting suspicious 
transactions would be required to report suspicious attempted 
transactions to FINTRAC, in line with the practice in other 
G7 countries and consistent with FATF Recommendations. 
 
c) Registration regime for money service businesses (MSBs) 
and foreign exchange dealers 
 
The amendments would create a federal registration system for 
individuals and entities engaged in money service businesses 
or foreign exchange.  FINTRAC would act as registrar and 
would maintain a public list of registered MSBs and foreign 
 
OTTAWA 00003302  002 OF 003 
 
 
exchange dealers.  These businesses are already covered by 
the PCMLTFA; however, given that this is an unregulated 
sector, the registry will assist FINTRAC in ensuring 
compliance with the Act. 
 
d) Enhancing the information contained in FINTRAC disclosures 
 
As recommended in the 2004 Auditor General's Report and at 
the behest of law enforcement, the amendments enhance the 
information FINTRAC can disclose to law enforcement and 
security agencies on suspicions of money laundering or 
terrorist financing.  This will increase the value of FINTRAC 
disclosures, ultimately leading to more investigations and 
eventual prosecutions. 
 
e) Creating an administrative and monetary penalties regime 
 
Currently the Act only allows for serious criminal penalties 
if it is contravened.  FINTRAC requires the ability to levy 
fines to deal with lesser contraventions in order to take a 
more balanced and gradual approach to compliance.  The 
amendments will create an administrative and monetary 
penalties system, whereby fines can be applied for 
non-compliance. 
 
f) Reintroducing requirements for legal counsel 
 
The GOC is working with the legal profession, including 
notaries in Quebec, to finalize requirements for client 
identification, record-keeping and internal compliance 
procedures for legal counsel when they act as financial 
intermediaries. 
 
The new bill removes the obligation for legal counsel to file 
suspicious transaction reports or other prescribed 
transaction reports. 
 
g) Expanding information sharing between federal departments 
and agencies 
 
Amendments would expand FINTRAC's ability to share 
information with the Canada Border Services Agency (CBSA), 
the Canada Revenue Agency and the Communications Security 
Establishment.  In addition, FINTRAC will now be able to 
receive terrorist property reports under United Nations Act 
regulations. 
 
Internationally, the enforcement of the anti-money laundering 
and anti-terrorist financing requirements would be 
strengthened by information-sharing provisions on 
compliance-related information between FINTRAC and its 
foreign counterparts on obligations applicable to the 
financial sector, and between the CBSA and its foreign 
counterparts on the enforcement of the cross-border currency 
reporting regime. 
 
h) Technical Amendments to improve the Act 
 
A number of technical amendments would improve the Act by 
addressing inconsistencies between the French and the English 
versions and ensuring consistency between the PCMLTFA and 
related provisions in other acts, and to clarify existing 
provisions and correct section references.  These amendments 
will help make the Act easier to read and interpret. 
 
Other GOC Initiatives 
--------------------- 
 
¶5. (U) In addition to the proposed legislation, the Harper 
Government has undertaken other initiatives to bolster its 
efforts to combat money laundering and terrorist financing. 
In its first budget in May, the Harper Government announced 
C$64 million in additional funding over the next two years 
for FINTRAC, the RCMP and the Department of Justice.  The 
funding would: 
 
-- increase the number of RCMP officers working in the 
anti-terrorist financing and anti-money laundering units; 
-- increase the capabilities of the Canada Border Services 
Agency (CBSA) to detect unreported currency at airports and 
border crossings; 
-- enable Canada's Justice Department to handle the expanding 
legal workload that will result from increasing the 
Qlegal workload that will result from increasing the 
enforcement resources of other government agencies; 
-- ensure that FINTRAC can better analyze transactions 
reports and monitor the compliance of the unregulated 
financial sectors such as money remitters. 
 
OTTAWA 00003302  003 OF 003 
 
 
 
¶6. (U) Canada is setting up its involvement in regional 
bodies such as the Asia/Pacific Group on Money Laundering and 
the Caribbean Financial Action Task Force.  Increased GOC 
funding will help the Eastern Caribbean Central Bank improve 
its money laundering and terrorist financing system, and to 
provide on-the-ground training to improve the effectiveness 
of regulation throughout the Caribbean and Asia/Pacific 
Regions.  Canada will also contribute resources to help the 
Asia/Pacific Group in the delivery of technical assistance 
and training within that region. 
 
¶7. (U) In July, Minister Flaherty announced that Toronto has 
been selected as the permanent headquarters of the 
secretariat of the Egmont Group, an organization of the 
 
SIPDIS 
world's financial intelligence units, including FINTRAC. The 
Harper Government will contribute C$5 million over the next 
five years to help the secretariat get established.  For the 
first time ever, Canada has assumed the FATF Presidency, the 
international body that develops and promotes policies to 
combat money laundering and terrorist financing. 
 
Visit Canada's Classified Web Site at 
http://www.state.sgov.gov/p/wha/ottawa 
 
WILKINS