Canada’s efforts to combat dirty money secured a favourable international assessment, despite persistent weaknesses in prosecuting professional money launderers and recovering criminal profits.
The Financial Action Task Force’s latest report raises questions about how effectively the country’s extensive financial monitoring system translates into consequences for criminals.
Financial intelligence expert Jessica Davis welcomed the outcome but warned the government against treating it as “mission accomplished.”
In her analysis, Davis said that Canada has struggled to demonstrate robust results against sophisticated financial crime operations even as it spent years building legislation, reporting requirements, and intelligence-sharing systems.
The assessment supports her warnings.
The Financial Action Task Force (FATF) found that prosecutions and convictions for professional money laundering don’t reflect the scale of the activity identified in national risk assessments.
Cases become particularly difficult when authorities cannot prosecute the original offence that laundered the money in the first place. Even when money laundering charges are laid, they are frequently withdrawn through agreements that secure convictions for crimes that technically carry higher maximum penalties, according to the report.
FATF said these agreements can produce convictions for serious criminal activity, but that the practice ultimately means fewer money laundering prosecutions.
The report found that the actual sentences were inconsistent and frequently fell at the lower end of the penalty range.
Canada’s biggest money laundering threats involve proceeds from drug trafficking, fraud, commercial trade fraud, and tax crimes, which largely came from organized crime.
The report identified weaknesses in the oversight intended to detect those funds.
FINTRAC, the federal agency that monitors suspicious financial activity, does not always check businesses at the greatest risk of handling dirty money often enough or thoroughly enough.
FATF found deficiencies in suspicious transaction reporting and record-keeping among many of the banks, credit unions, money services, and crypto wallets they reviewed.
Davis said that the criminals understand these weaknesses and add that to their calculus of how to operate without detection.
Outside the financial sector, FATF found that oversight of real estate businesses and precious metal and gemstone dealers remains limited relative to their vulnerabilities.
Although lawyers are overseen by their professional regulators, they remain outside the federal anti-money-laundering framework. FATF warned about the lack of obligation for Canadian lawyers to report suspicious transactions. This gap leaves a significant blind spot for FINTRAC in tracking potentially illegal financial activity.
On the positive side, Canada has improved access to information that identifies who ultimately owns companies. However, uneven provincial and territorial requirements, gaps in registries, and inconsistent verification continue to weaken those reforms.
Recovering criminal profits presents another challenge. Authorities seized or restrained more than $1 billion in assets during the review period. Approximately $333 million was forfeited under the Criminal Code, with another $199 million forfeited through provincial and territorial civil proceedings.
Those figures do not establish a direct recovery rate. The report nevertheless identifies difficulties securing property mixed with legitimate assets or controlled by offenders without being registered in their names.
For victims, the consequences are palpable. Court-ordered restitution frequently goes unpaid, particularly in medium- and high-value cases.
The assessment was more positive about terrorist financing. FATF described Canada’s detection and investigation system as effective and found that agencies coordinate well.
Although prosecutions remain few, the report concluded that Canada has the ability to prosecute cases appropriately in line with the threat environment. It nevertheless asks whether sentences currently dolled out are sufficient to deter potential offenders.
That leaves Canada with a clear path forward. We must turn our intelligence and investigative capacity into more successful prosecutions and improve the recovery of criminal proceeds while making sure the victims receive full compensation.
Does "dirty money" include Liberal slush funds?