As Canada’s gaming industry soars into the digital age, the anti-money laundering (AML) regulations that govern the industry are stuck in the past – and the consequences are mounting. While online wagering surges and technology reshapes the industry, AML regulations remain stuck in a largely outdated model that creates gaps in the regime and creates unnecessary compliance challenges.  

Nowhere is this disconnect more visible – or more costly – than in Ontario, where iGaming Ontario (iGO) launched a massively successful regulated online market without the technology infrastructure in place to support AML compliance and reporting. That decision has left operators drowning in manual processes and exposed to intensifying regulatory risk.

This article explores how Canada’s AML regime is failing to keep pace with modern gaming, why iGO’s experience should serve as a wake-up call to other provinces, and what the government needs to consider when updating the legislation.

A Broken Fit: Outdated AML Laws Meet a Modern Gaming Industry

Canada’s AML legislation focuses entirely on the “conduct and manage” framework, which does not adequately account for the complexity and variety of regulated gaming channels and products available today. Activities like pari-mutuel wagering (online or land-based) and certain types of sports betting don’t align with the legislation’s very strict definition of a “casino.” This isn’t just a semantic problem – it leads to real regulatory inconsistencies.

For example, a sports bet placed at a kiosk located outside a “casino” may not trigger AML requirements, while the same bet placed online through a regulated online operator does. And depending on the nature of the operator’s relationship with the player, there are questions as to whether “Know Your Customer” requirements even apply. These gaps create confusion, compliance challenges, and, worst of all, vulnerabilities that could be exploited by bad actors.

iGO and the Ontario Tech Gap: A Case Study in Technology Breakdown

Ontario’s 2022 launch of its regulated iGaming market was, in many ways, a success story. The province has created a thriving online gaming ecosystem, attracting over 50 licensed operators and generating tens of billions in wagers – money that creates jobs, economic activity, and revenue to the province.

But beneath that success lies a critical flaw: iGO went live without a clear roadmap to adopting AML compliance and reporting technology. This oversight has had disastrous downstream effects. Operators were forced to manually submit reports, a workable plan only for the short term. Then came the crisis.

In March 2024, FINTRAC, Canada’s financial intelligence unit, suffered a “cyber incident” that took its systems offline for nearly 10 months. During that time, an estimated 60,000 to 70,000 AML reports accumulated from Ontario operators, who had no means of submitting them electronically to FINTRAC.

Making matters worse, iGO had no infrastructure to automate uploads, leaving operators to slog through tens of thousands of reports once FINTRAC’s systems came back online – each one requiring up to an hour to prepare. The labor costs continue to be enormous, and the regulatory risk is substantial.

The Legislative Lag: Reform Delayed, Risk Amplified

Canada’s AML regime must be reviewed by Parliament every five years. Consultations were underway before being paused by several factors, including the proroguing of Parliament and a federal election. As of the writing of this blog, the consultations have not yet restarted.

But then the government tabled Bill C-2 in early June, proposing several key changes:

• Maximum fines of $20 million per violation of AML requirements;

• Mandatory enrolment with FINTRAC for all businesses covered by AML law; and

• Bans on large cash transactions exceeding $10,000, with unclear exemptions.

While these measures certainly take a stronger approach to AML regulation, the legislation leaves crucial questions unanswered: Are casinos exempt from the cash transaction ban? Will online operators be held to the same standards as land-based ones?

Despite the industry evolving rapidly, consultations are not expected to resume until late summer or fall 2025. Meanwhile, operators are left navigating a fragmented, ambiguous regulatory landscape.

The Real Cost of Regulatory Inertia

FINTRAC is now taking a much more aggressive approach to enforcement against business subject to AML laws, but not necessarily in the most productive way.

For example, in the United States., AML regulatory enforcement typically follows major criminal investigations: illegal bookmakers, money laundering rings, or fraud schemes. But in Canada, recent enforcement actions in the gaming industry appear to have centered on administrative missteps – such as incomplete internal policies or improperly assessed risk factors – without any indication of actual criminal activity.

This signals a troubling shift. FINTRAC appears to be penalizing businesses not for failing to address financial crime, but for failing to complete paperwork that may not even reflect today’s risk environment.

And in the case of Ontario, this is happening in a context where operators were simply not given the tools in the first place so they can allocate resources to rightly focus on risk, versus completing manual compliance processes.

Conclusion: The Price of Delay Is Too High

Canada’s AML regime, as it stands, was not designed for a gaming industry that is global, digital, and moving at breakneck speed. Ontario’s iGaming market exposed some of the flaws in the system, and operators are paying the price in time, labor, and regulatory exposure.

If provinces like Alberta want to avoid repeating these mistakes, they must prioritize AML infrastructure before market launch. And if the federal government want to support a secure, thriving industry that effectively combats financial crime, they must update Canada’s AML regime to reflect today’s realities, not yesterday’s assumptions.

Compliance isn’t just a checkbox exercise; it’s the backbone of a responsible, trustworthy gaming industry. Without modernizing the AML framework, we risk more than inefficiency. We risk the integrity of the entire system.

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ABOUT THE AUTHOR

Derek Ramm, Global Head of Advisory Services

Derek has extensive experience in the compliance and financial intelligence fields, and has brought his expertise to both the public and private sectors, providing him with a unique and well-rounded perspective to business challenges. Prior to joining Kinectify, Derek served as the Director of Anti-Money Laundering at the Alcohol and Gaming Commission of Ontario, where he led the agency's AML regulatory oversight initiatives in the gaming, horse racing, liquor and cannabis industries. Derek was previously the Managing Principal at MT>Play, an advisory venture of McCarthy Tetrault that provided strategic advice to gaming organizations and governments around the world. He has also held senior roles at Canada's federal financial intelligence unit (FINTRAC), the Ontario Lottery and Gaming Corporation, and was the chief anti-money laundering officer at one of North America's largest independent investment management firms. He was also appointed by the Government of Bermuda to serve as a Commissioner on the Bermuda Casino Gaming Commission.

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ABOUT KINECTIFY

Kinectify is an intelligence and risk management technology company serving gaming operators. Kinectify's modern AML platform empowers clients to efficiently manage risk with real-time intelligence so they can focus on growing their businesses instead of being bogged down by compliance. In addition, Kinectify's advisory services enhance gaming operators' capacity with industry experts who can design and test programs, meet compliance deadlines, and even provide outsource services for the day-to-day administration of compliance programs.

To learn more about Kinectify and book a demo, click here.