Why prorogation could hurt Canada’s international reputation on financial crime

The political uncertainty in Ottawa could have serious implications for a crucial upcoming assessment of Canada’s regime to stop financial crime. 

Observers say Prime Minister Justin Trudeau’s decision to prorogue Parliament effectively kills a number of proposed amendments meant to shore up the country’s anti-money laundering regime before the Financial Action Task Force (FATF) begins its review in November 2025.  

Lincoln Caylor, a commercial litigation and fraud lawyer with Bennett Jones in Toronto, says that gives the next government precious little time to pass and implement policy before the review begins, raising the odds of Canada getting a bad grade. 

“The new government won’t have the luxury of the full process to put forward new amendments, and it will likely just be dealing with proposed legislation to the FATF review because there will be no legislation in place,” Caylor said. 

The FATF is an international organization joining countries dedicated to stopping money laundering and terrorist financing. 

Canadian observers say FATF’s upcoming review of the country could be a crucial bellwether for Canada’s efforts to clamp down on economic crime. Canada has long faced accusations of being soft on financial crime, including from advisors close to incoming U.S. President Donald Trump. 

Peter Dent, a regional market leader with Deloitte's forensic team, argues the United States — a FATF member — is likely to be especially tough on Canada during the review. 

Trump has repeatedly speculated about Canada becoming the “51st state” and has threatened to impose devastating tariffs, citing frustrations with border security. 

“I don’t think we’re going to be accusing them of being fair to us in the next eight months,” Dent said. 

Jessica Davis, the president of Insight Threat Intelligence in Ottawa, says a negative FATF review might not have obvious consequences for the average Canadian. 

But beyond the poor optics, Davis said a negative evaluation could make it harder for Canadian banks and companies to do business abroad. 

“It would be pretty embarrassing for a G7 country to get a negative review from FATF,” Davis said. 

FATF’s last review of Canada in 2016 gave the country good grades but said it “requires further improvements to be fully effective.” 

Soft spots included Canada’s regime for lawyers, which doesn’t require them to report suspicious transactions to the government, as well as the lack of a corporate beneficial ownership registry. 

In the lead-up to the review, the federal government had proposed a suite of measures Davis and Dent say were clearly intended to boost the country’s rating. 

Those included requiring businesses like white-label or “no name” ATM operators and title insurers to report suspicious transactions to a government agency — gaps officials said were pointed out during the last review. 

But Dent and Davis expect the harshest critiques to come around Canada’s enforcement regime. Prosecutions for money laundering in Canada are exceptionally rare. In 2023, Statistics Canada showed only 207 actual incidents were reported to police. Of those, just 25 were cleared by criminal charges.

“We have plenty of laws on the books. A lot of stuff is captured by those laws. But when you look at the outcomes …. It’s clear there’s some kind of disconnect between the laws and what’s happening on the ground,” Davis said. 

Canada’s lax enforcement regime has been in the international spotlight recently. 

Last year, Toronto Dominion Bank agreed to pay more than US$3 billion to the United States government for its failure to stop criminals from washing dirty money through the bank. 

Meanwhile, in Canada, the bank was fined just C$9.2 million under the country’s administrative fee system. 

The fall economic statement tabled last month included a proposal to apply a 40-fold increase to the size of the fines the government can issue. 

But it’s uncertain when that amendment could actually be passed, let alone implemented.

Trudeau prorogued Parliament until March 24, and opposition parties have said they intend to topple the minority government at the first opportunity, which makes a spring election likely. 

When a summer break is factored in, Dent said it is possible a new government may not sit until the fall. 

“I don’t know that there’s anything a new government could do before November other than make pronouncements,” Dent said.

Davis said the FATF review does allow countries under evaluation to make ongoing submissions. But she said the reviewers will also look for evidence that those laws are working, and the limited runway means that proof likely won’t exist. 

Davis said that, in the past, Canada might rely on the United States to support it during the review. But she says that logic no longer applies under Trump. 

“I think in previous iterations of this we could rely on the United States to protect us, to a certain extent … they don’t want us to get a bad mark from FATF,” Davis said. “Under a Trump administration, I don’t believe that holds true. That could be used as a bargaining lever, a way to apply pressure on Canada.”

Dent believes that all the amendments currently proposed will eventually be passed, no matter who forms government. 

What is less certain, Davis said, is the future of a proposed federal agency to investigate financial crimes. That agency, first proposed during the 2021 federal election, received funding in the 2024 budget to support its design and implementation, but there has been little news of it since. 

“I don’t hold out a lot of hope that we’re going to see a Canadian Financial Crimes Agency anytime soon, and that’s going to be a big problem for Canada,” Davis said.