The Cullen Commission Report: What You Need to Know

On June 15, 2022, the Honorable Austin Cullen released the long-awaited Cullen Commission Report (Report). While there are many interesting observations and comments to read, the purpose of this newsletter is to review the recommendations made and the effect they might have on organizations operating in British Columbia (BC). B.) if implemented.

As a starting point, the report concludes that Canada’s federal anti-money laundering regime is not effective. Accordingly, the report recommends the creation of a provincial Money Laundering Intelligence and Investigation Unit and the appointment of an Independent Anti-Money Laundering (AML) Commissioner in British Columbia who provide strategic oversight of the province’s response to money laundering.

Here are some other recommendations that will affect those operating a business in British Columbia:

MONEY SERVICE BUSINESSES (MSBS)

The report recommends that British Columbia regulate MSBs at the provincial level to add “thorough scrutiny” to regulation by the Financial Transactions and Reports Analysis Center of Canada (FINTRAC) under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (RPCFAT). In this regard, the report recommends that MBS be regulated by the BC Financial Services Authority (BC FSA) and that MSBs be audited more frequently, noting that FINTRAC generally does not review an MSB until it is in business for at least two years. years.

It is recommended that British Columbia’s regulatory regime for MSBs should, at a minimum:

  • Define an ESM in a manner consistent with the PCMLTFA definition (except for virtual currency brokers);

  • Have the ability to identify unregistered MSBs and sanction them;

  • Have a registration process in which the suitability of applicants is assessed in a broader way than is currently done under the PCMLTFA (with the ability to refuse registration for reasons other than a criminal conviction and to require the disclosure of business relationships, similar to the regime in Quebec);

  • A compliance process that applies in the early years of an MSB’s existence (before the two-year mark as is the case with FINTRAC);

  • Sharing information with FINTRAC and others; and

  • Administrative and financial penalties.

This will create another level of regulation for MSBs in Canada which, combined with the obligations to come under the new Retail Payment Business Actwill require more time and resources.

The report, upon review, did not recommend that ATM operators be subject to the MSB regime.

MORTGAGE BROKERS

The report recognizes that mortgage brokers gain important insights into their clients’ financial status and gain direct insight into client behaviors that may be suspicious. On this basis, the report recommends that the Minister of Finance of British Columbia urge the federal Minister of Finance to subject mortgage brokers to the PCMLTFA.

In addition, the report recommends that private mortgage lenders be subject to a registration regime in British Columbia, as well as regulatory oversight and enforcement. In this regard, it should be noted that in the recent federal budget, the government indicated that the PCMLTFA would be amended to include unregulated mortgage lenders.

As such, it is clear that there will be more AML regulation of the mortgage industry and real estate in general in the future.

CREDIT COOPERATIVES

The report reviews some of the anti-money laundering expectations set out in the Office of the Superintendent of Financial Institutions (OSFI) Guideline B-8 that applies to federally regulated financial institutions (which has been repealed). The report recommends that the BC FSA develop its own anti-money laundering guidelines applicable to credit unions operating in British Columbia and that, in general, the BC FSA be given a clear and enduring fight against money laundering and sufficient resources to implement it. As such, an additional layer on AML regulation will now be placed on credit unions operating in British Columbia.

LUXURY PRODUCTS

The report defines “luxury goods” very broadly to include high-value goods and looked at luxury goods in context not only as a way to launder money, but also to use the proceeds of the crime to purchase luxury goods for use or enjoyment. Due to the difficulty of defining and regulating the luxury goods market, the report recommends that the province implement a universal record-keeping and reporting requirement for cash transactions of C$10,000 or more in a alone or a series of related transactions. In these circumstances, it is recommended that businesses accepting cash of C$10,000 or more be required to, among other things:

  • Verify the customer’s identity and collect their name, address and date of birth;

  • Find out about the source of funds used for the purchase;

  • Determine whether the purchase is being made on behalf of a third party and, if so, collect the third party’s information; and

  • Report the transaction to the province.

This would be overseen by the LBC Commissioner.

It remains to be seen whether British Columbia will implement some or all of the report’s recommendations. If implemented, the province will need even more resources dedicated to compliance, including in previously unregulated areas.

Blakes periodically provides interested persons with materials about our services and changes in the law. This article is provided for informational purposes only and does not constitute legal advice or an opinion on any matter. Blakes will be happy to provide additional details or guidance on specific situations if desired. For permission to reprint articles, please contact Blakes Marketing at 416-863-4345 and [email protected] © 2019 Blake, Cassels & Graydon LLP.

Blakes periodically offers documents on trends and new facts in the legal field to those who want them. This article is for informational purposes only and does not constitute legal advice or an opinion on any subject. We will be happy to provide you with additional details or advice on specific situations if you wish. For permission to reproduce articles, please contact Blakes Marketing and Communications at 514-982-4026 or by email at [email protected]. © 2019 Blake, Cassels & Graydon LLP

About Joan Ferguson

Check Also

Loans Director Jenny Vipperman Joins LenderClose Board of Directors

DES MOINES, Iowa–(BUSINESS WIRE)–LenderClose, the fintech lending platform now used by more than 400 credit …