FINTRAC advisory and Ministerial directive updates

Effective March 22, 2025, Canada’s Minister of Finance has updated the existing Ministerial directives concerning countermeasures for financial transactions involving the Democratic People’s Republic of Korea (“North Korea”) and Russia. These directives impose new compliance requirements on businesses subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the “PCMLTFA”) and its associated Regulations. The Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) posted revised guidance on the Ministerial directives to assist businesses subject to the PCMLTFA in meeting their compliance requirements.

Ministerial directives are legally binding orders issued under the PCMLTFA, imposing countermeasures or regulatory restrictions on financial transactions involving designated foreign jurisdictions or entities. Noncompliance can result in regulatory penalties and enforcement actions.

Key updates to FINTRAC guidance

The following are key updates to FINTRAC’s guidance related to Ministerial directives:

Risk assessment of a sanctions evasion offence

In response to the Minister of Finance’s updated Ministerial Directive, FINTRAC has released a revised guidance emphasizing the risk that North Korea may be engaged in activities facilitating sanctions evasion.

Accordingly, financial institutions and reporting entities must treat all transactions to or from North Korea as high risk due to the potential for sanctions evasion. Entities are required to develop and implement policies to assess the risk of sanctions evasion related to North Korea, verify the identities of individuals involved in such transactions, exercise customer due diligence, and maintain detailed records.

These requirements should be reflected in documented risk assessments of clients and business activities. Compliance programs must thoroughly document these measures, as FINTRAC may review risk assessments and mitigation efforts during compliance examinations.

Correspondent banking relationship requirements

Before engaging in transactions with foreign financial institutions through correspondent banking relationships, entities must consider the risk of sanctions evasion related to North Korea and Russia. Reporting entities are required to evaluate the measures taken by the foreign institution's jurisdiction to implement the United Nations Security Council’s sanctions against these countries. Additionally, entities must incorporate these risk assessments into their ongoing monitoring processes to ensure compliance and to mitigate potential risks associated with sanctions evasion.

Conclusion

These Ministerial directives apply to all entities subject to the PCMLTFA, including financial institutions, money services businesses, and other designated reporting entities. Compliance with these directives is essential to mitigate risks related to money laundering, terrorist financing, and sanctions evasion.

Businesses should take immediate steps to review and update their internal policies, risk assessment frameworks, and transaction monitoring procedures to align with the new directives. If you feel your business may be impacted, please contact a member of our Financial Services or Compliance teams for assistance.