Strong Borders Act: A Landmark Shift in Canada’s AML Penalties

On June 3, 2025, Canada’s new federal government introduced Bill C-2 (Bill), the Strong Borders Act, for first reading in the House of Commons. The Bill includes significant amendments to Canada’s anti-money laundering legislation and introduces a new administrative monetary penalty (AMP) framework that is unprecedented in the Canadian financial services sector for the severity of its penalties. If enacted, the new penalty framework could transform how financial institutions and other reporting entities approach enforcement exposure under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).

The Bill will also require all reporting entities under the PCMLTFA to enrol with the Financial Transactions and Reports Analysis Centre (FINTRAC) and to renew their enrolment periodically. In addition, the Bill will enact a comprehensive ban on the acceptance of cash payments of C$10,000 or more by all businesses and charities in the Canadian economy, subject to exceptions that will be set out in regulations. Financial entities will also be prohibited from accepting third-party cash deposits. The PCMLTFA’s information-sharing provisions are also expanded, including to permit greater public-to-private information sharing. Many of the new measures were first announced in the 2024 Fall Economic Statement issued by Canada’s federal government before the last election.

We examine these and other key elements of the Bill in greater detail below.

A Landmark Shift in Penalties Regime

The PCMLTFA currently authorizes FINTRAC to impose penalties on reporting entities for noncompliance with the PCMLTFA and its regulations. Violations are categorized into three classes—minor, serious, and very serious—carrying maximum penalties of C$1,000, C$100,000, and C$500,000, respectively. Currently, most violations are classified as either minor or serious. The “very serious” classification is limited primarily to failure to submit a suspicious transaction report or to comply with a Ministerial directive.

New Penalties 

The Bill introduces a radical increase to the maximum administrative monetary penalties under the PCMLTFA, raising them by 40 times across all categories of violations. If enacted, minor, serious and very serious violations would carry maximum penalties of C$40,000, C$4-million, and C$20-million, respectively. The Bill also expands the list of violations that are classified as “very serious” to include all program-related requirements of the legislation, including the requirement to apply compliance policies and procedures, conduct risk assessment and effectiveness testing, appoint a compliance officer and implement a training program. In addition, the Bill introduces a new requirement for reporting entities to ensure that their compliance programs are “reasonably designed, risk-based and effective.” This new requirement – to be enforced as a “very serious” violation – will allow FINTRAC to assess AML compliance program elements and effectiveness more comprehensively during examinations. However, it will also increase the potential for the regulator to retrospectively second-guess often complex program design and implementation decisions made by reporting entities.

These changes represent a significant shift in the enforcement framework for the PCMLTFA, particularly given FINTRAC’s more assertive approach to enforcement in the last two years. With substantially higher penalties and increased regulatory discretion, reporting entities may be more inclined to challenge findings through a judicial appeal process.

Cumulative Cap 

Under the new framework, cumulative penalties for multiple violations will be subject to a cap set at C$20-million, or 3% of a reporting entity’s gross global revenue where that amount exceeds C$20-million. By contrast, the largest cumulative public penalty imposed by FINTRAC to date is below C$10-million. For some very large Canadian reporting entities, the new 3% cap could result in a penalty ceiling exceeding C$1-billion, based on reported gross revenues. Notably, where a reporting entity forms part of a group of affiliated companies, the cap will apply at the group level. A Canadian subsidiary of a foreign group of companies, for example, could be subject to a cap based on the global revenues of its affiliates outside Canada.

Ability to Pay

The Bill also introduces a reporting entity’s ability to pay as a new factor to be considered when determining the amount of a penalty, alongside existing criteria, such as the harm caused by the violation and the principle that penalties should promote compliance rather than be punitive. However, the amendments impose strict requirements on how a reporting entity may submit evidence to FINTRAC regarding its ability to pay, both at the time of the initial assessment and afterward. We expect regulations will help clarify how this factor and evidence requirements will be applied.

Compliance Agreements and Orders

Any reporting entity that commits a violation will also be required to enter into a compliance agreement with FINTRAC. The agreement will be mandatory and will include measures the reporting entity must take to comply with the PCMLTFA requirement within a deadline set by FINTRAC. If a reporting entity fails to enter into or comply with the compliance agreement, FINTRAC must issue a compliance order requiring the reporting entity to publicly disclose the measures it must take to comply with the PCMLTFA, and a deadline for compliance. Failure to comply with a compliance order would attract a penalty of up to C$30-million or 3% of the reporting entity’s gross global revenue, whichever is greater. Violation of a compliance order would also be added to the list of reasons the Bank of Canada may consider when refusing to register a payment service provider or revoking their registration under the Retail Payment Activities Act.

Penalties for Offences

Under the PCMLTFA, a contravention of a legislative requirement can be pursued under the AMP regime or as a criminal offence. The Bill increases the criminal fines that can be imposed for offences tenfold or more, ranging from C$2.5-million to C$20-million. depending on the offence. Notably, where a contravention is prosecuted as an offence, there is no statutory cumulative cap on the fines that may be imposed.

Violations alleged to have been committed before the new provisions come into force will be subject to the existing AML framework, while those alleged to have occurred afterward will be subject to the new provisions.

New Enrolment Requirement

The Bill will require all reporting entities under the PCMLTFA to apply for and maintain enrolment with FINTRAC, similar to the registration regime currently applicable to money services businesses (MSBs). Reporting entities will be required to keep the information required to be submitted for enrolment up-to-date and must periodically renew their enrolment. The enrolment process details will be set out in new regulations.

The new enrolment requirement will give FINTRAC broad oversight into the types of entities subject to the PCMLTFA and will enable FINTRAC to deny or revoke enrolment where a reporting entity fails to pay any penalty for violation of the PCMLTFA, or where FINTRAC determines that the reporting entity is in a “prescribed relationship” with another reporting entity that has failed to pay a penalty. It is not clear what impact a revoked enrolment would have on a reporting entity’s ability to carry on business in Canada, since operating without being enroled would amount to a contravention of the PCMLTFA. Regulations and additional guidance are needed to clarify these issues. FINTRAC will also be authorized to inquire into the business and affairs of any entity or individual that it reasonably believes to be subject to the PCMLTFA. MSBs are currently the only reporting entity type required to register with FINTRAC. The enrolment process for other reporting entity types would largely mirror the existing registration requirements for MSBs. Similar to FINTRAC’s online register of MSBs, FINTRAC would maintain a public roll of enroled reporting entities.

New Compliance Program Design and Effectiveness Requirement

As noted above, the Bill will create a new violation under the PCMLTFA for failure to ensure that a compliance program is reasonably designed, risk-based and effective. This requirement will effectively give FINTRAC greater discretion to be more prescriptive in its expectations of what constitutes an effective compliance program and take enforcement action for failure to meet its expectations, even where a program may otherwise comply with the more specific requirements under the PCMLTFA.

This will increase the challenges for reporting entities to anticipate whether FINTRAC will deem their program effective and appropriately designed. FINTRAC may also rely on this provision to compare reporting entities based on the number of suspicious transactions or other reports each entity files and to question the effectiveness of the compliance programs of entities filing fewer reports. This new violation will be classified as very serious, as described above. 

New Restrictions on Cash Transactions

The Bill makes it an offence for “any person or entity that is engaged in a business, a profession or the solicitation of charitable financial donations from the public” to accept a cash payment, donation or deposit of C$10,000 or more in a single transaction or in a prescribed series of related transactions. This prohibition is not limited to reporting entities and appears to restrict large cash transactions across the Canadian economy. Notably, only banks, credit unions, and trust and loan companies are exempt from this prohibition. Other reporting entities—including money services businesses, securities dealers, casinos and real estate agents—are not exempt, although the Bill authorized additional exceptions to be added through regulations.

Additionally, the Bill will prohibit financial entities from accepting cash deposits into an account from a depositor who is neither the account holder nor authorized to give instructions on the account, subject to certain exceptions. Money services businesses, securities dealers and other reporting entities are not subject to this prohibition.

Anonymous Accounts

The Bill also amends the existing prohibition in the PCMLTFA against opening accounts for persons whom a reporting entity has been unable to identify according to legislative requirements. The amendment adds a prohibition against opening accounts for persons whose names are “obviously fictitious.”

Enhanced Information Sharing

The Bill also introduces several changes to the information-sharing provisions of the PCMLTFA. In particular, it will permit law enforcement to share personal information with reporting entities, and will allow reporting entities to collect and use such information without the individual’s knowledge or consent. This is permitted where law enforcement affirms that the disclosure is for the purpose of detecting or deterring money laundering, terrorist activity financing or sanctions evasion, or an additional purpose that is “consistent” with one of these purposes, and that disclosure with the individual’s knowledge or consent would compromise these purposes.

The Bill will also add the director of FINTRAC as a member of the Financial Institutions Supervisory Committee (FISC) and will authorize information sharing within FISC, whose current members are the Superintendent of Financial Institutions, the Commissioner of the Financial Consumer Agency of Canada, Governor of the Bank of Canada, the Chief Executive Officer of the Canada Deposit Insurance Corporation and the Deputy Minister of Finance.

FINTRAC would also be permitted to disclose information it collects from reporting entities to the Commissioner of Canada Elections where there are reasonable grounds to suspect that the information is relevant to contravention of the Canada Elections Act.

Key Takeaways

Bill C-2 marks the most sweeping overhaul of Canada’s anti-money laundering enforcement regime to date, introducing a penalty framework that is without precedent in the Canadian financial services sector in terms of the severity of potential penalties. It builds on recent legislative amendments that have significantly expanded the scope of the PCMLTFA over the past two years, bringing a range of new business sectors – including mortgage lenders and brokers, financing and leasing companies, title insurers, ATM operators and others – within its ambit.

With substantially higher penalties, broadened regulatory discretion and a more assertive FINTRAC, financial institutions and other reporting entities will continue to face increasing pressure to design, implement and defend effective AML compliance programs. We expect the new framework will prompt greater willingness among reporting entities to challenge FINTRAC’s enforcement actions before the Federal Court of Canada, likely inviting greater judicial scrutiny in the enforcement of the PCMLTFA.

For more information, please contact the authors or any other member of our Financial Services Regulatory group.