OTTAWA
The federal government plans to shift the supervision of banks' anti-money-laundering efforts from Canada's financial intelligence watchdog to the federal banking regulator.
The change, announced in the federal budget released on Thursday, would transfer the oversight role from the Financial Transactions and Reports Analysis Centre of Canada, known as FinTRAC, to the Office of the Superintendent of Financial Institutions, or OSFI.
The budget document said the move is intended to "enhance the anti-money laundering and anti-terrorist-financing supervision and compliance of the largest financial institutions."
Department of Finance spokesperson Marie-France Faucher said the transfer is not linked to any specific report or enforcement matter.
"OSFI can leverage its expert knowledge of and existing relationships with federal financial institutions to facilitate improved anti-money laundering and anti-terrorist financing outcomes," Faucher said in a statement.
She added that supervising financial institutions' compliance with anti-money-laundering and anti-terrorist-financing rules aligns with OSFI's objective of bolstering public confidence in the financial system.
The proposal follows a report late last month by the federal Auditor-General, which found delays in FinTRAC's production of financial intelligence and said the watchdog is overseeing too many businesses to effectively monitor their compliance with financial-crime laws.
FinTRAC currently oversees 38,000 businesses subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
The Auditor-General's report found that as the number of registered businesses under FinTRAC's supervision ballooned, the watchdog started performing more "light-touch" and automated assessments.
The change also follows a global review of Canada's financial-crime regime by the Financial Action Task Force, an intergovernmental body that establishes international standards for anti-money laundering.
The task force gave Canada a passing grade but identified a number of weaknesses, criticizing FinTRAC's supervisory activities as "not sufficiently frequent and not commensurate with risks."
Alana Scotchmer, a partner at Gowling WLG who specializes in financial-services regulation, said the proposed change only applies to federally regulated institutions, not securities dealers, provincially regulated credit unions or trust companies.
That means there would be two anti-money-laundering supervisors in the financial sector, "and consistency between them will matter," she said in an email.
"OSFI is a prudential regulator and supervisor, not a financial intelligence unit like FinTRAC," Scotchmer said. "How it operationalizes this ... will be the real test."
The Canadian Bankers Association said in a statement that it "welcomes the continued risk-based evolution" of Canada's anti-money-laundering framework, including the new proposal.
OSFI already has some responsibility for supervising banks' anti-money-laundering compliance, including ensuring they have policies and procedures in place to protect themselves from threats to their integrity and security.
FinTRAC has levied some of its largest-ever monetary penalties against financial institutions in recent years.
In 2024, the watchdog ordered Toronto-Dominion Bank to pay nearly $9.2 million for faulty anti-money-laundering controls, while RBC was fined $7.5 million and CIBC was ordered to pay more than $1.3 million.
Earlier this year, an Ontario court certified a class-action lawsuit against TD Bank over money laundering, alleging the bank misrepresented deficiencies in its compliance program.
This story was written by the e2gold.ca newsroom from reporting by The Globe and Mail and Rich Picks Daily. Quotes are checked word for word against that reporting.