Canada amends AML law to include virtual currencies

The Canadian parliament has amended the "Proceeds of Crime (Money Laundering) and Terrorist Financing Act", first enacted in 2000, to now include virtual currencies.

The amendment is part of Bill C-31 titled "An Act to implement certain provisions of the budget tabled in Parliament on February 11, 2014 and other measures." The bill contains a miscellany of items on various topics. The amendment of interest is summarized as follows:

"Division 19 of Part 6 amends the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to, among other things, enhance the client identification, record keeping and registration requirements for financial institutions and intermediaries, refer to online casinos, and extend the application of the Act to persons and entities that deal in virtual currencies and foreign money services businesses."

It goes on to state that there will also be modifications with regards to the information that the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and Canada Border Services Agency can receive or disclose.

In February, $23 million was earmarked over 5 years to fund additional oversight by FINTRAC "to address emerging risks, including virtual currencies."

The amendment specifically comes to update the definition of a "money services business" to include those dealing in virtual currencies. Similarly, it adds "dealing in virtual currencies" to the list of activities performed by businesses bound by the act.

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Christine Duhaime, a senior financial crime advisor with MNP LLP, explained that the amendment is intended for foreign Bitcoin companies, but there is concern if a balance can be struck "between combating financial crime and supporting innovative technology development." While the legislation is important, "the concern is that venture capital for Bitcoin start-ups may dry up if legislative obligations prove to be too onerous or expensive."

The amendment follows the path taken by FinCEN in the U.S. In March, they classified businesses dealing in virtual currency as money services businesses and now require registration as such. They write in their March 18 guidance: "The definition of a money transmitter does not differentiate between real currencies and convertible virtual currencies. Accepting and transmitting anything of value that substitutes for currency makes a person a money transmitter under the regulations implementing the BSA.”

Most other countries only require licensing for a Bitcoin business if it deals in transmitting fiat as well, which would exclude, for example, exchanges dealing only in coin-to-coin trading.