FINTRAC’s latest guidance and policy changes

Canada’s shifting sanctions regime and FINTRAC’s expanding oversight demand that reporting entities integrate compliance into their AML programs and stay alert to evolving regulatory guidance. In order to help you stay up to date on the rapidly evolving landscape, this article summarizes key notices, advisories, and bulletins issued by the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) over the past months and since our last update.

Topics covered include FINTRAC’s supervisory framework and updates to its administrative monetary penalties policy, updates to the guidance related to the Ministerial Directive on the Islamic Republic of Iran and cheque cashers, factors, and financing or leasing entities, FINTRAC’s Special Bulletin on financial activity associated with evasion of counter proliferation sanctions, and FINTRAC’s advisory on financial transactions related to countries identified by the Financial Action Task Force.

Supervisory framework and administrative monetary penalties policy updates

On August 6, 2025, FINTRAC published its supervisory framework that guides its ongoing supervisory activities that ensure compliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (“Act”) and updated its administrative monetary penalties (“AMP”) policy, as discussed below. This guidance provides FINTRAC with greater clarity on regulatory requirements and enables FINTRAC to undertake meaningful additional consultations to understand reporting entities’ (“REs”) plans for implementing measures.

The supervisory framework (“Framework”) is a significant step towards the anticipated expansion of FINTRAC’s supervisory role. It outlines FINTRAC’s strategic and operating principles for supervision, provides a comprehensive overview of legislative authorities, tools, and approaches, promotes transparency, and ensures a consistent approach to supervisory activities. The Framework will evolve in line with the continually changing financial ecosystem and its emerging risks.

The Framework has three components:

1. Guiding principles that are risk-based, early intervention, transparent, and forward-looking
2. A risk framework and supervisory strategic plan, which provide a structured approach for FINTRAC to establish, implement, and evaluate its supervisory activities
3. Three pillars of supervision (engaging, monitoring, and enforcing), which represent a continuum of tools, activities, and interventions that FINTRAC uses to carry out its supervisory mandate

If FINTRAC identifies non-compliance in its supervisory activities, it has the authority to impose AMPs or take other enforcement actions, as necessary.

The AMP policy provides a framework for the determination of an AMP, as well as summarizes the principles and guidelines used by FINTRAC to issue such penalties. FINTRAC may issue an AMP and serve a notice of violation when it has reasonable grounds to believe an RE has violated a requirement of the Act and associated Regulations. The Act and these Regulations set out three criteria that must be taken into account when determining a penalty amount: 1) The purpose of administrative monetary penalties, which is to encourage compliance, not to punish (non-punitive); 2) the harm done by the violation; and 3) the RE’s history of compliance. Violations are categorized as minor ($1–$1,000), serious ($1–$100,000), or very serious (up to $500,000 for entities).

Updates to the AMP Policy include a penalty reduction on a case-by-case basis. FINTRAC may exercise its discretion to adjust its policy and may choose not to apply the penalty reduction based on the established criteria, particularly in cases of serious violations. Additionally, FINTRAC will no longer share findings with REs before finalization, allowing a notice of violation to be issued immediately after assessment activities. In most cases, FINTRAC will publicly disclose the entity’s name, violation details, and penalty amount, making reputational risk as significant as the financial impact.

The revised AMP policy, together with the recent rise in both the frequency and amount of AMPs issued by FINTRAC, reflects a clear shift toward stricter enforcement. Further, amendments proposed in the recently introduced Bill C-2, also known as the Strong Borders Act, may increase the amount of AMPs that may be imposed for different violations in the future.

Updates to the guidance related to the Ministerial Directive on the Islamic Republic of Iran: clarifications on transactions and reporting instructions

On July 14, 2025, FINTRAC published guidance explaining the requirements of the Ministerial Directive on Financial Transactions Associated with the Islamic Republic of Iran (“Directive”). The new guidance adds to and expands the existing obligations of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, as described more fully below.

The Directive, in force since July 25, 2020, and amended February 15, 2024, aims to ensure the safety and integrity of Canada’s financial system. The Directive applies to banks, credit unions, financial services cooperatives, caisses populaires, authorized foreign banks, and money services businesses.

These specific persons and entities must treat every financial transaction originating from or bound for Iran, regardless of its amount, as a high-risk transaction for the purposes of subsection 9.6(3) of the Act, They must verify the identity of any client requesting or benefiting from such a transaction, exercise customer due diligence in relation to any such transaction, keep and retain a record of any such transaction, and report all such transactions to the Centre.

Other requirements include information on how the organizations become aware of ministerial directives and respond to them, determining if a transaction originates from or is bound for Iran, and the mitigation measures they will take. Risk assessment guidance can help organizations conduct and document this. FINTRAC may assess compliance with any ministerial directive and review overall risk assessments, demonstrating the importance of robust compliance programs and preparation for potential examinations.

Special Bulletin on financial activity associated with evasion of counter proliferation sanctions

On July 11, 2025, FINTRAC released a Special Bulletin (“Special Bulletin”) that provides background information relevant to financial transactions associated with the suspected evasion of sanctions related to counter proliferation. FINTRAC defines proliferation as efforts by state and non-state actors, including terrorist organizations, to acquire the goods, technologies, resources and knowledge needed to develop chemical, biological, radiological, and nuclear weapons and high-yield explosives, including their precursors and delivery systems. Counter proliferation sanctions are used to prevent these efforts.

This Special Bulletin builds on FINTRAC’s Special Bulletin released in June 2024 to assist REs in identifying and assessing sanctions risks, mitigating these risks, and detecting suspicious transactions through a Suspicious Transaction Report (“STR”).

The new Special Bulletin informs businesses subject to the Act and the public about the characteristics of completed or attempted financial transactions related to this activity in order to facilitate their detection, prevention, and deterrence.

Canada’s counter-proliferation financing efforts require REs to apply risk-based transaction monitoring, sanctions screening, and thorough customer due diligence efforts. REs must scrutinize trade finance documentation, end-use certificates, corporate structures, and virtual currency activity. Further, these efforts require REs to submit STRs to FINTRAC if they suspect a financial transaction is related to money laundering, terrorist financing, or sanctions evasion. These reports are crucial for FINTRAC’s development and dissemination of financial intelligence on proliferation financing and disrupting financial flows for proliferators. REs should include details about products, services, accounts, and jurisdictions involved, as well as ownership, control, and structure information.

Updates to the guidance for cheque cashers, factors, and financing or leasing entities

On July 10, 2025, FINTRAC updated guidance for cheque cashers, financing or leasing entities, and factors (a person or entity engaged in the business of factoring, with or without recourse against the assignor). These specific persons and/or entities must fulfill obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and associated Regulations.

There are different obligations depending on whether a specific person or entity is a cheque casher (when you offer to cash cheques for clients in exchange for funds). While cheque cashers, financing or leasing entities, and factors must all implement a compliance program, know their client, report transactions, keep records, and apply ministerial directives, cheque cashers must now also register as a money services business. If you are an employee of a cheque casher, the following requirements are the responsibility of your employer, except with respect to reporting suspicious transactions, which is applicable to both you, as an employee and your employer.

Notably, FINTRAC is authorized to conduct compliance examinations to assess compliance, and penalties for non-compliance can be issued.

FINTRAC advisory: Financial transactions related to countries identified by the Financial Action Task Force

On June 13, 2025, the Financial Action Task Force (“FATF”) reiterated its call to apply countermeasures against the jurisdictions of the Democratic People’s Republic of Korea (“DPRK”) and Iran. Additionally, the FATF urged its members and other jurisdictions to apply enhanced due diligence measures proportionate to the risks arising from doing business with persons and entities based in, or connected to, Myanmar.

On the same date, FATF issued a statement on jurisdictions under increased monitoring, listing those with an action plan with the FATF to address their strategic anti-money laundering and anti-terrorist activity financing deficiencies (referred to as the ‘grey list’). Countries no longer subject to increased monitoring and therefore have been de-listed from the ‘grey list’ include Croatia, Mali, and Tanzania.

The July 9, 2025, FINTRAC advisory outlines mandatory enhanced measures for financial transactions involving countries identified by the FATF as high-risk jurisdictions, including DPRK, Iran, and Myanmar. This involves strict customer due diligence (“CDD”) and record-keeping. Countries with strategic anti-money laundering and anti-terrorist financing deficiencies are monitored, and REs should be aware of increased risks.

Entities on the Criminal Code list of terrorist entities, such as the Islamic State and the Taliban, are designated, and reporting obligations apply. Since August 19, 2024, entities must report suspected sanctions evasion transactions to FINTRAC in addition to other reporting obligations. As an RE, they must submit a Listed Person or Entity Property Report (“LPEPR”) to FINTRAC without delay, once the threshold to disclose under the Criminal Code or the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism has been met.

As of March 2, 2025, what was previously known as the Terrorist Property Report is now known as LPEPR. New reporting obligations apply, in addition to long-standing obligations with respect to property owned or controlled by a terrorist group as defined in the Criminal Code.

Compliance programs must integrate specific policies to detect and mitigate risks associated with sanctioned countries/entities, including enhanced due diligence and record-keeping. FINTRAC provides guidance and bulletins to help identify risks and characteristics of suspicious transactions related to these jurisdictions and sanctions evasion.

Final thoughts

Canada’s evolving sanctions landscape introduces new compliance obligations that reflect the growing complexity of global financial crime. As FINTRAC’s role expands, REs must stay agile, informed, and ready to adapt.

By integrating sanctions compliance into AML programs and remaining vigilant about updates from FINTRAC and Global Affairs Canada, REs can help protect Canada’s financial system from abuse and ensure they remain in step with their regulatory obligations.

If you feel your business may be impacted, please contact a member of our Financial Services or Compliance teams for assistance.