New Anti-Money Laundering Obligations for the Financing and Leasing Sector
The Federal Government announced its intention to regulate financing and leasing entities under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) in Budget 2024. Corresponding draft regulations were published on November 30, 2024, creating new obligations for covered entities.
Who will have to comply with the new obligations? (i.e., is a ‘reporting entity’)
Any person or entity that is engaged in the business of financing or leasing of
- property, other than real property or immovables, for business purposes;
- passenger vehicles in Canada; or
- property, other than real property or immovables, valued at $100,000 or more
Both direct and indirect financing and leasing arrangements are captured in the proposed amendments.
What are the new obligations?
Financing and leasing entities would be required to establish compliance programs and fulfill record-keeping, due diligence, and transaction-reporting requirements. Obligations specific to financing and leasing entities would also be introduced, such as new identify verification requirements and requirements to maintain associated records:
- Establish and maintain a compliance program
- Enhanced KYC requirements: Client identification, ongoing monitoring of accounts, high-risk clients, beneficial ownership, third-party determination
- Transaction reporting
- Discrepancy reporting
- Record keeping
When will the new obligations enter into force?
Covered entities in the financing and leasing sector must comply with the new obligations by October 2025. This timeline may change.
Why is this happening now?
As a member of the Financial Action Task Force (FATF), Canada is one of the few jurisdictions that has not included financing and leasing companies under its AML/ATF regime. These amendments will align Canada with its international obligations.
What is the CFLA doing about this?
In 2024, the CFLA had extensive and in-depth discussions with Finance Canada and FINTRAC. We made formal submissions with input from a broad internal consultation with all relevant subsectors, including a commentary on the draft regulations. We emphasized the impossible implementation timeline and inconsistent application of the reporting threshold and provided solutions for both issues.
We also created an AML Working Group representing all major industry subsectors, which advises the Association on impact and implementation.
We continue our discussions with the government and advocate forcefully for the asset-backed finance industry.