Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations

The regulations prescribe how businesses and professions covered by the Act carry out transaction reporting, recordkeeping, identity verification, ongoing monitoring and compliance-program duties. They apply across multiple reporting-entity sectors, including financial entities, securities dealers, casinos, money services businesses and foreign money services businesses. FINTRAC administers the reporting and compliance framework.

The instrument is only one part of Canada’s federal anti-money laundering and anti-terrorist financing regime. The enabling Act establishes core duties and covered persons, while separate registration, suspicious-transaction reporting and administrative monetary penalty regulations address related elements. A crypto business therefore cannot determine its federal status from SOR/2002-184 alone.

The regulations define “virtual currency” as a non-fiat digital representation of value usable for payment or investment and readily exchangeable for funds, or for another virtual currency readily exchangeable for funds. The definition also covers a private cryptographic key that enables access to that value. A virtual currency exchange transaction includes exchanges between funds and virtual currency or between virtual currencies.

FINTRAC treats virtual currency exchange and transfer services as money services business activities. The 2019 amendment package used a staged implementation: covered virtual-currency dealers became subject to registration and baseline statutory obligations from June 1, 2020, while the remaining transaction-specific regulatory changes generally took effect on June 1, 2021. Foreign businesses directing covered services at clients in Canada may fall within the foreign money services business category.

• Large virtual currency reporting: Reporting entities generally report receipt of virtual currency equivalent to CAD 10,000 or more. FINTRAC states that reports are due within five working days. Amounts received in two or more transactions within 24 consecutive hours can be treated as one transaction when the prescribed knowledge tests are met.
• Records and identity: Large virtual currency transaction records include transaction identifiers and sending and receiving addresses. The regulations also require identity verification for persons or entities from which a reportable large virtual currency amount is received. Depending on the activity, money services businesses keep additional records for virtual currency exchanges and transfers at lower thresholds.
• Travel rule: Financial entities, money services businesses and foreign money services businesses that must keep a virtual currency transfer record include originator and beneficiary names, addresses and available account or reference numbers with the transfer. They must take reasonable measures to obtain missing information and maintain written risk-based procedures for deciding whether to allow, suspend or reject a transfer when information remains unavailable.
• Canadian-dollar conversion: A virtual currency amount is converted into Canadian dollars using a Bank of Canada rate when one is published. If no rate is published, the reporting entity uses the rate it would apply in the ordinary course of business at the transaction time.

The regulations require copies of reports and other covered records to be retained for at least five years under the applicable retention rule. A large virtual currency report does not replace a suspicious transaction report: FINTRAC states that both may be required for the same transaction when the suspicious-transaction test is met.

This profile focuses on provisions most relevant to crypto activity. The current consolidated text, the enabling Act, related regulations and FINTRAC guidance should be reviewed together. This overview is a legal-reference summary and does not provide legal or compliance advice.