Regulatory Framework
Canada has developed a robust anti-money laundering regime built around the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), the federal law on the recycling of proceeds of crime and terrorist activity financing. Adopted in 2000 and substantially amended in 2006, 2014, 2019, and 2024, this law establishes the legal framework for due diligence, reporting, and record-keeping obligations. The Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) constitute the implementing regulation that details operational obligations.
FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) is Canada's financial intelligence unit and AML supervisory authority. FINTRAC receives and analyses transaction reports, conducts compliance examinations of reporting entities, and transmits relevant financial intelligence to law enforcement and national and international partners. FINTRAC has administrative sanctioning powers (administrative monetary penalties) and can refer serious cases to the Director of Public Prosecutions.
OSFI (Office of the Superintendent of Financial Institutions) supervises the financial soundness of federal banks and integrates AML risks into its prudential supervision. Provincial regulators complement the framework for provincially regulated financial institutions (provincial credit unions, securities brokers).
Canada is a founding member of the FATF and undergoes regular mutual evaluations. The most recent evaluation (2025) led to recommendations to strengthen supervision of non-financial professions and improve access to beneficial ownership information.
Who Must Comply
The PCMLTFA and PCMLTFR define reporting entities:
- Banks and trust companies: federally chartered banks, authorised foreign banks, trust and loan companies
- Credit unions and caisses populaires: federal and provincial (including Desjardins caisses in Quebec)
- Life insurance companies: for life insurance and annuity operations
- Securities dealers: members of the IIROC (now the New SRO of Canada since 2023)
- Money services businesses (MSBs): money transfer businesses, currency exchange, virtual currency dealing businesses, registered with FINTRAC
- Foreign money services businesses: foreign MSBs operating in Canada
- Real estate brokers and developers: real estate brokers, agents, and developers
- Accountants and accounting firms: Chartered Professional Accountants (CPA)
- Casinos: land-based casinos and authorised online gaming platforms
- British Columbia notaries and lawyers: for certain financial transactions (with specific protections related to professional privilege)
- Dealers in precious metals and stones: precious metals and stones dealers
- Virtual currency exchange platforms: registered with FINTRAC since 2020
Canada has extended obligations to Crown agents and public bodies that conduct currency exchange or fund transfers under certain conditions.
Customer Due Diligence Requirements
Standard Due Diligence (CDD)
Due diligence obligations (know your client) are defined in the PCMLTFR:
Customer identification: for natural persons, minimum data includes name, date of birth, and address. Verification must be carried out from a reliable government-issued identity document bearing the person's name and photograph. Accepted documents include the Canadian passport, citizenship card, provincial driver's licence, provincial health card (in provinces where permitted), and permanent resident card.
Verification methods: FINTRAC recognises several identity verification methods: the photo identification method (government-issued photo identification), the dual-process method (two methods from independent reliable sources), and the bank product method (existing bank product). Verification may also be performed by an agent or mandatary, or via a digital mechanism compliant with FINTRAC directives.
Beneficial ownership identification: any natural person who directly or indirectly holds 25% or more of the shares or units of an entity, or exercises effective control. Canada introduced a federal beneficial ownership registry in 2024, administered by Innovation, Science and Economic Development Canada (ISED), complementing existing provincial registries (notably in British Columbia and Quebec).
Determining the purpose and nature of the relationship: understanding the customer's activity, expected transactions, and source of funds.
Ongoing monitoring: transaction monitoring and customer information updating on a continuous, risk-proportionate basis.
Enhanced Due Diligence (EDD)
Enhanced due diligence measures are mandatory in the following situations:
- Politically exposed foreign persons (PEFPs), politically exposed domestic persons (PEDPs), and heads of international organisations (HIOs): measures include management approval, establishing source of funds and wealth, and enhanced monitoring.
- Correspondent banking: correspondent relationships with foreign financial institutions are subject to specific obligations.
- High-risk relationships: identified by the reporting entity in its risk assessment. FINTRAC publishes sector-specific risk indicators.
- Complex or unusual transactions: transactions not matching the customer profile.
- High-risk countries: countries identified by the FATF or subject to countermeasures.
Required Documents
For natural persons:
- Valid Canadian passport, citizenship card, provincial driver's licence, or permanent resident card
- Proof of address (utility bill, bank statement, government correspondence)
- Social Insurance Number (SIN) in cases provided by tax law
- For PEFPs/PEDPs/HIOs: documentation on source of funds and wealth
For legal persons:
- Federal or provincial articles of incorporation or certificate of incorporation
- Business Number (BN) issued by the CRA (Canada Revenue Agency)
- Registration in the federal or provincial beneficial ownership registry
- Identity documents of directors and beneficial owners (25%+)
- Notice of directors (annual return)
- Where applicable, board resolution authorising the relationship
For trusts:
- Trust deed or declaration of trust
- Identification of trustees, settlors, and beneficiaries
- Trust BN (where applicable)
Retention period: 5 years from the date the record is created or, for business relationship records, 5 years after account closure.
Reporting Obligations
Suspicious Transaction Report (STR): reporting entities must submit an STR to FINTRAC when there are reasonable grounds to suspect that a transaction or attempted transaction is related to the commission or attempted commission of a money laundering or terrorist financing offence. The STR must be submitted within 30 days of forming the suspicion.
Large Cash Transaction Reports (LCTR): mandatory reporting for any cash transaction of CAD 10,000 or more (or foreign currency equivalent). The LCTR must be submitted within 15 days of the transaction.
Electronic Funds Transfer Reports (EFTR): mandatory reporting for international electronic transfers of CAD 10,000 or more. Deadline of 5 business days.
Terrorist Property Reports (TPR): immediate reporting when a reporting entity possesses or controls property belonging to or at the disposal of a terrorist group or listed person.
Casino Disbursement Reports (CDR): for casinos, reporting of disbursements of CAD 10,000 or more.
Tipping off prohibition: the PCMLTFA prohibits informing a customer or third party that an STR has been submitted. Violation is a criminal offence.
In 2024, FINTRAC received approximately 32 million reports in total, including automatic LCTRs and EFTRs.
Penalties for Non-Compliance
Administrative sanctions (FINTRAC):
- Administrative monetary penalties (AMPs): FINTRAC uses a calculation framework accounting for severity, compliance history, and entity size. Maximum penalties are CAD 1 million per violation for serious violations and CAD 500,000 for minor violations
- Warning letters and non-compliance letters
- Compliance agreements with corrective action plans
- Publication of penalties on the FINTRAC website
Criminal sanctions:
- Money laundering (Section 462.31 of the Criminal Code) is punishable by 10 years' imprisonment for an indictable offence
- Failure to report (PCMLTFA) is punishable by 5 years' imprisonment and/or a fine of CAD 2 million for an indictable offence
- Terrorist financing (Section 83.02 of the Criminal Code) is punishable by 10 years' imprisonment
- Violation of the tipping-off prohibition is punishable by 2 years' imprisonment
Provincial sanctions: provincial regulators (securities commissions, credit union regulators) may impose additional sanctions.
How CheckFile Helps
Canada's KYC regime imposes specific document verification obligations, including the need to validate identity documents issued by different levels of government (federal and provincial/territorial). CheckFile offers an AI-powered document verification solution designed for the particularities of the Canadian market.
The platform automatically verifies the authenticity of Canadian identity documents — passport, citizenship card, driver's licences from each province and territory (with their specific security features), permanent resident card — as well as more than 6,000 international document types. The AI analyses security features, extracts biographical data, and detects document fraud with accuracy exceeding 99%.
To facilitate compliance with the federal Corporate Transparency Act and provincial beneficial ownership registries, CheckFile enables centralised collection and verification of beneficial owner identity documents. The complete, timestamped audit trail meets FINTRAC examination requirements, with secure archival for the required 5 years. API integration is compatible with Canadian banking platforms and bilingual (English/French) onboarding systems. Processing complies with PIPEDA and Quebec's Law 25 on the protection of personal information.
FAQ
What documents are required for KYC in Canada?
For natural persons, a government-issued photo identification document (passport, provincial driver's licence, citizenship card) is required. For legal persons, articles of incorporation, Business Number, beneficial ownership registry registration, and identity documents of beneficial owners (25%+) are needed. Retention is 5 years. FINTRAC accepts several verification methods, including the dual-process method and the bank product method.
What are the penalties for KYC non-compliance in Canada?
FINTRAC administrative penalties can reach CAD 1 million per violation. Money laundering is punishable by 10 years' imprisonment. Failure to report carries 5 years' imprisonment and/or a CAD 2 million fine. Penalties are published on the FINTRAC website. Provinces may impose additional sanctions.
How often must KYC checks be updated in Canada?
FINTRAC requires risk-based ongoing monitoring. High-risk customers (PEFPs, PEDPs, HIOs, correspondent banking) are reviewed at least annually. Medium-risk customers every 3 years and low-risk customers every 5 years. Any trigger event (change of beneficial owner, unusual transaction, adverse public information) requires an immediate update. FINTRAC checks file quality during compliance examinations.