The Government of Canada is currently conducting a comprehensive consultation process to strengthen the country's anti-money laundering (AML) and anti-terrorist financing (ATF) regime. This initiative aims to assess the effectiveness of the existing framework, identify areas for improvement, and gather diverse perspectives from stakeholders, including businesses, individuals, and organizations. The consultation document, available at the provided link¹, outlines the key issues at hand and poses specific questions to guide the feedback.

The consultation seeks feedback on several themes, including strengthening intelligence and information sharing, enhancing compliance and supervision, improving international cooperation, addressing new and emerging risks, and promoting innovation and the use of technology. Stakeholders are encouraged to provide their perspectives and recommendations on these themes to help shape future policy and legislative changes.

Promoting innovation and technology use forms another important aspect of the consultation. The document acknowledges the potential of technology to enhance AML and ATF efforts, improve detection capabilities, and streamline compliance processes. Participants are invited to share their views on how technology can be leveraged to strengthen the regime, potential barriers to technology adoption, and strategies to promote innovation in the financial sector.

Throughout the consultation process, the government aims to engage with a broad range of stakeholders, including financial institutions, businesses, professional associations, civil society organizations, and the general public. It recognizes the importance of diverse perspectives and experiences in shaping an effective and inclusive AML and ATF regime.

The feedback received during the consultation will inform the development of a comprehensive action plan to strengthen Canada's AML and ATF framework. This plan will encompass policy, legislative, and operational changes aimed at enhancing the regime's effectiveness, promoting international cooperation, addressing emerging risks, and fostering innovation.

Below are some areas of the consultation paper that could impact day-to-day operations for gaming operators.

General Impacts on AML Compliance Operations

1) Keep Open Requests

While much of the first four chapters focuses on the current regime, what has been updated and how to tackle updates to the criminal code, 4.11 could have direct impact on operators. Something that is already in practice in other jurisdictions, including the United States, are “Keep Open” provisions. While as operators, banning individuals from gaming who pose undue money laundering risks to the organization is a commonsense practice, it can potentially impede investigations by cutting off information sources.  

While seeking views on a formalized “keep open” regime, an option floated is giving law enforcement, based on judicial authorization, the power to issue keep open orders. This would also help alleviate the potential risk legal or otherwise that financial institutions would potentially face by keeping accounts open that have apparent suspicious activity linked to AML/ATF activities.  

2) Information Sharing

Public to private information sharing has been a part of the Canadian system for quite some time, with partnerships to combat human trafficking, drug trafficking, underground banking and other illicit activity having been formed between multiple Federal, Provincial and private sector groups. Private to private information sharing however, has not been well supported by the current framework for information sharing for AML purposes. As a result, the government is looking at options, while respecting Canadian privacy protections, to allow institutions to share AML relevant subject matter. The feedback areas the government is looking for are on what information is relevant, models in other jurisdictions, guard rails for personal information and opportunities to leverage technology.

Jurisdictions like the the US have programs like 314(b) information sharing that allows for institutions to share with each other. As of 2019, there are over 7,000 institutions that participate in this voluntary information sharing program.² However, there is little technology or streamlined processes applied to these program currently and this consultation provides a great opportunity for multinational organizations to provide feedback from their jurisdictions (like the US) on how they could see this improved.  

3) Government Run PEP & HIO Database

Part of the Cullen Commission final report urged government to consider a PEP & HIO database, that includes family members of PEPs and HIOs, to assist reporting entities in their screening. The government is weighing issues like cost to maintain, whether to pass those costs onto operators and whether this list would be redundant of resources organizations are already using as part of their due diligence and investigation programs.  

From the perspective of operators, a government run list could alleviate some concerns about whether or not the organization is screening against the right watchlists. However, this is assuming there is no additional expectation of PEP/HIO identification beyond the government run database and that should there be a cost, it is not prohibitive. Additionally, there could be concern about the quality of the database. If cost management is already top of mind with creating this database, how often will it be updated to ensure the list stays relevant for operators. Can that database be trusted more than existing resources that operators already use? Those are questions that will need to be answered as this conversation happens.  

4) Source of Wealth (SOW) Thresholds

A large part of money laundering activities can be to conceal the source of wealth of an individual who has engaged in illicit activities. Report entities have policies and procedures to identify source of wealth of certain high-end or high-risk customers transacting in their organization. The government is looking to possibly amend regulations around the requirements for reporting entities and even apply a universal threshold for the application of SOW identification procedures.  

An amendment like this could move institutions away from a risk-based AML program and can create burdensome requirements for large institutions that transact with wealthy players. While SOW identification procedures should be in place in all organizations, respondents may want to look at circumstances where these procedures should occur rather than thresholds, as to not overburden their compliance departments with non-risk related activities.  

5) Other Considerations

Other considerations in the consultation that may have less direct effect on general day to day operations involve FINTRACs ability to request independent examinations of non-compliant operators, defining criteria for the competency of a compliance officer, amendments to the PCMLTFA to allow the use of audio/video technologies to virtualize compliance examinations, ability to publicize enforcement action details and a broader ability to issue administrative monetary penalties to individuals of an organization.

Some of these areas are common sense improvements like ability to utilize technology for examinations but the other areas should all undergo scrutiny by respondents to ensure the approach isn’t overly burdensome on organizations. The minimum requirements for a compliance officer, for example, would likely be different for a small start-up than a multi-province/international gaming company with billions in revenue. While less direct in impact, these areas still deserve careful consideration.

Gaming Specific Impacts

Specific to Casinos, the consultation seeks to answer a few questions.  

1) Expanded Definition of Casinos

One of them being whether or not the PCMLTFA definition of “casino” is dated, given the changes that have occurred to the industry over the past five years. The current definition of “casino” under the PCMLTFA is:

A government, organization, board or operator in Canada that is authorized to do business in Canada and that conducts and manages:

• a lottery scheme, located at a fixed place of business that includes games of roulette or card games; or

• games operated on or through a slot machine or similar electronic gaming device, located at a fixed place of business, where there are more than 50 machines or similar devices in the establishment. This could include a place of business such as a restaurant that has these electronic gaming machines; or
• a lottery scheme accessible to the public through the Internet or other digital network. This does not include offering online bingo or the sale of lottery tickets.³

With the decriminalization of single-game sports betting in August of 2021, this definition could be updated to include sports wagering entities. In a similar vein, the consultation seeks feedback on whether pari-mutuel betting and horse racing be scoped under PCMLTFA and whether a broader range of gaming activities should fall under this umbrella. Traditionally, these live events have been left out of the AML framework. The updated definition discussion can have a significant impact on operators who are already operating with an AML compliance program but may not fall under the current definition. Safe harbor and future information sharing provisions will now help bolster AML programs and allow sports betting operators to move forward with a clear mandate.

The consultation asks broader questions as well. One of them being, if there “are any changes to the PCMLTFA or compliance requirements needed to ensure better visibility into high-risk gaming activities and appropriate reporting to FINTRAC?”

Coming from a US perspective, one change that could give better visibility into high-risk activities in gaming institutions is expanding the ability to report non-transaction related suspicious activity on STRs. In the United States we frequently report on fraudulent IDs, identity theft and adverse news articles. There may not be anything about the transactions themselves that are suspicious but other non-transaction activities or findings can be. Casinos are also unique in that customers can spend large amounts of time in them, as opposed to other financial institutions. As a result, there is opportunity to observe additional suspicious activity. One such example is sex trafficking, especially in Casinos with hotels. The handlers, victims and purchasers in this case may not even be transacting directly with the casino in this case but it is their transactions amongst each other that may still be of significant interest to law enforcement. The ability to report on these activities gives a great view into high-risk activities that can take place on the floor or the confines of the gaming establishment.  

The last question posed to the sector is how information sharing around money laundering risks can be improved. Some other areas of the consultation may help address part of this question. Expanding the definition of Casinos to include sportsbetting and expanding private to private information sharing capabilities. This way as new activities or typologies are identified, all wagering institutions have the ability to communicate with each other on what they are seeing, while maintaining safe harbor protections. Those combined changes can start to foster a more collaborative information sharing environment.  

Overall, the consultation on strengthening Canada's anti-money laundering and anti-terrorist financing regime is a significant initiative currently undertaken by the government. By seeking input from a wide range of stakeholders, the consultation aims to gather insights and recommendations on various aspects of the regime, including intelligence sharing, compliance and supervision, international cooperation, emerging risks, and technology adoption. The feedback received during the consultation will guide the development of an action plan to enhance Canada's ability to detect, prevent, and deter money laundering and terrorist financing activities. Industry groups like the Canadian Gaming Association and their members will be instrumental in helping create informed regulation and regime updates to better protect the integrity of the Canadian financial system and gaming.  

Resources:

¹ https://www.canada.ca/en/department-finance/programs/consultations/2023/strengthening-canada-anti-money-laundering-and-anti-terrorist-financing-regime/consultation-on-strengthening-canadas-anti-money-laundering-anti-terrorist-financing-regime.html

² 314(b) Participation and Reporting (fincen.gov)

³ Casinos (canada.ca)

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