Canada Proposes Tougher Penalties for Financial Crimes Amid TD Bank Controversy

Canada is gearing up to impose stronger penalties for financial crimes, with significant changes proposed to its anti-money laundering (AML) regulations in the latest fiscal update, the Fall Economic Statement. These updates come in the wake of controversies involving major institutions, including TD Bank, and aim to address evolving risks in financial crime and international compliance standards.

Under the proposed amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, penalties for violations will increase significantly. Among the measures are a 40-fold hike in penalties, the introduction of a criminal offense for providing false or incomplete information by reporting entities, and a tenfold increase in fines for all criminal offenses. The changes also empower the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), the country’s AML watchdog, to collaborate with other federal agencies with oversight of the financial sector.

These measures follow a series of high-profile cases, including an October ruling that saw TD Bank, Canada’s second-largest lender, fined over $3.09 billion after pleading guilty to violating federal anti-money laundering laws.

“The reason for all of these is that Canada is going to be evaluated by the Financial Action Task Force, in addition to recent U.S. regulatory environment and the evolving risks of financial crime,” said Alana Scotchmer, a partner at law firm Gowling WLG.

The Financial Action Task Force (FATF), an international body dedicated to combating money laundering, terrorist financing, and related threats, is slated to conduct its next assessment of Canada in 2025-2026. In its previous review in 2016, FATF had highlighted areas requiring improvement, including gaps in coverage across certain sectors.

Among Canada’s major financial institutions, TD Bank has faced the largest fine ever issued by FINTRAC, amounting to C$9.2 million, for failing to submit suspicious transaction reports. Similar penalties have also been levied against CIBC and RBC for similar violations. However, experts have pointed out a disparity in FINTRAC’s enforcement approach, which appears to prioritize compliance encouragement over hefty penalties or publicly naming entities.

“It simply is a different setup… That has the potential to become problematic with business being so international, particularly for businesses that have a global footprint,” Scotchmer noted.

The proposed changes also set new penalty limits, capping fines at C$4 million for individuals and C$20 million for companies in a single notice of violation. This marks a substantial escalation in Canada’s efforts to combat financial crime and align with international regulatory standards.

As Canada braces for FATF’s evaluation, the increased penalties and enhanced coordination between regulatory bodies signal the country’s commitment to strengthening its financial crime framework in the face of growing global scrutiny.

By fLEXI tEAM