Canada Receives Stronger FATF AML Assessment, but Gaps Remain

Canada has welcomed the latest Financial Action Task Force (FATF) and Asia/Pacific Group on Money Laundering (APG) Mutual Evaluation Report, which assesses the country’s anti-money laundering, anti-terrorist financing and counter-proliferation financing framework.
Canada’s Minister of Finance and National Revenue, François-Philippe Champagne, said in a statement that the assessment reflects steps Canada has taken to strengthen financial-crime prevention and detection, improve information sharing, and introduce new law-enforcement mechanisms.

The assessment represents Canada’s first full FATF mutual evaluation since 2016 and forms part of the FATF’s fifth round of evaluations, which places focus particularly on the effectiveness of a country’s AML/CFT framework, rather than only whether the necessary laws and regulations are formally in place.

FATF recognises progress across Canada’s AML framework

The evaluation acknowledged several areas where Canada has strengthened its AML/ATF/CPF system.

According to the Canadian Department of Finance, FATF highlighted Canada’s performance in risk assessment, domestic and international cooperation, the use of financial intelligence and efforts to combat terrorist financing.

The assessment also praised improvements in Canada’s corporate transparency and use of financial intelligence. Canada’s financial intelligence unit, FINTRAC, has strong analytical capabilities, and the country has taken practical steps to improve the availability and use of beneficial ownership information.

The new evaluation gives Canada six substantial and five moderate effectiveness ratings, with no effectiveness outcome rated low. Under FATF’s methodology, a substantial rating shows that an immediate outcome is achieved to a large extent, while a moderate rating indicates that improvements are still needed.

This represents progress from Canada’s 2016 assessment, which included one low effectiveness rating and several moderate ratings.

FATF identifies continuing AML weaknesses

Despite the progress, the evaluation also points to areas where Canada needs to strengthen its financial-crime controls.

One key concern is professional money laundering and complex standalone money-laundering cases. FATF found that Canada continues to face challenges in investigating and prosecuting sophisticated money-laundering cases, particularly where authorities cannot prosecute an underlying predicate offence alongside the laundering activity.

The assessment also identified issues with risk-based supervision, including concerns that supervisory frequency and intensity do not always align with the assessed risk of some sectors.

Beneficial ownership transparency remains another area of concern. FATF identified the need for further improvements in making ownership and control information available and effective for financial-crime investigations. The assessment also highlighted Canada’s legal sector as a continuing gap in the AML framework.

The evaluation further identifies opportunities to strengthen investigations, prosecutions and asset recovery. Canada’s Finance Minister said the government would review and act on the report’s recommendations.

Canada is introducing further financial-crime measures

The FATF assessment comes as Canada is implementing additional measures to strengthen its financial-crime framework.

The government has highlighted the formation of a new Financial Crimes Agency, intended to increase Canada’s capacity to address serious and complex financial crime. It is also taking action against the misuse of money services businesses for money laundering, terrorist financing and sanctions evasion.

The government has also referenced its recent Bill C-12 reforms, which introduced measures intended to strengthen AML/ATF supervision, compliance and enforcement. Another area of focus is the use of crypto ATMs, with the government announcing measures to address their use in scams and financial crime.

Canada is also developing a coordinated response to extortion-related financial crime, including financial-intelligence liaison officers, designated intelligence resources and a partnership involving financial institutions, government and law enforcement.

Implications for compliance teams

The Financial Action Task Force (FATF) evaluation provides several practical signals for financial institutions and reporting entities operating in Canada. It emphasised that risk-based supervision will remain a major focus. Compliance teams must ensure their AML programs accurately reflect the risk profiles of their customers, products, services, and delivery channels, particularly as higher-risk sectors face closer regulatory attention. To counter complex corporate structures and high-risk transactions, maintaining effective beneficial ownership controls to identify the individuals who ultimately own or control entities remains critical. While Canada has made progress in generating financial intelligence, the FATF highlights the need to translate this intelligence into action by ensuring suspicious activity reports effectively support investigations, prosecutions, and asset recovery. Compliance teams must keep emerging risks on the AML agenda and update monitoring scenarios to counter evolving threats like illicit money services businesses, crypto ATMs, fraud, extortion, and sanctions evasion.