Mortgage sector added to AML rules

Summary#

These final regulations amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations and the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations to bring parts of the mortgage industry under Canada’s anti-money‑laundering rules and to tighten checks on correspondent banking. They require new reporting and record‑keeping for large cash and virtual‑currency payments and add new due‑diligence steps for banks dealing with foreign banks. The rules take effect one year after publication — October 11, 2024.

What it does#

• Defines three mortgage‑industry categories: mortgage administrator, mortgage broker, and mortgage lender and treats them as businesses covered by the AML rules.
• Requires mortgage administrators, brokers and lenders to report single transactions of $10,000 or more in cash or in virtual currency to the Canadian Financial Transactions and Reports Analysis Centre (the Centre), with some exceptions (for example, payments from financial entities or public bodies).
• Requires those mortgage actors to keep records for large cash and virtual‑currency transactions (every receipt of $10,000 or more), plus extra records about loans and clients (receipt of funds, client information, loan terms, evidence of authority for corporations).
• Adds identity‑verification steps for mortgage sector transactions and sets timing rules (in some cases at the time of the transaction; for corporations and some entities, within 30 days).
• Strengthens due diligence for correspondent banking by requiring banks to check and record:
  • the nature of the foreign bank’s clients and markets;
  • the foreign bank’s reputation for AML/ATF compliance;
  • the quality of AML/ATF supervision in the foreign bank’s jurisdictions;
  • ongoing monitoring of the correspondent relationship, at a risk‑appropriate frequency.
• Lowers or classifies certain violations under the administrative‑penalties schedule (adds several items as “Minor” or one item as “Serious”), so specific breaches of the new rules are mapped to penalty categories.
• Updates some wording (for example, replacing “Her Majesty” with “His Majesty”) and aligns reporting/recording rules where other parties may receive funds on behalf of an obligated reporting entity.

Who's affected#

• Mortgage administrators, mortgage brokers, and mortgage lenders — these businesses now have formal reporting, record‑keeping and identity‑checking duties.
• Banks and other financial institutions that maintain correspondent banking relationships — they must do more checks and ongoing monitoring of foreign banks.
• Real estate professionals and developers, dealers in precious metals and others already listed in the Regulations may see related changes to timing and PEP‑check rules.
• Clients who make large payments in cash or virtual currency in mortgage or real estate transactions — especially anyone making $10,000 or more in a single transaction (or $100,000 or more in some PEP‑related checks) — may be asked for more identity and transaction details.
• Compliance teams and legal/finance departments in the mortgage and banking sectors will need to update procedures and systems.

Why it matters#

• The rules close a gap by bringing many mortgage‑sector players into Canada’s anti‑money‑laundering system. That makes it harder to use real‑estate lending and mortgage servicing to move illicit money.
• More transactions in cash or virtual currency over $10,000 will be reported and recorded. That can slow some large cash deals and require extra paperwork from buyers, sellers and intermediaries.
• Banks will have to check foreign partners more carefully and monitor correspondent accounts more frequently. That could reduce exposure to risky foreign banks but may add compliance costs and slow cross‑border banking relationships.
• For ordinary consumers, the immediate impact is mainly administrative: more identity checks and documentation for large payments in mortgage or real‑estate contexts. For the public, the change aims to reduce the use of real estate and mortgages for laundering money and financing terrorism.