By Terrance S. Carter, Nancy E. Claridge and Sean S. Carter

Canada Strengthens Anti-Money Laundering Rules: Implications for the Charity and Not-for-Profit Sector

The Government of Canada announced in a March 7, 2025 news release that new regulatory amendments to strengthen Canada’s Anti-Money Laundering and Anti-Terrorist Financing (AML/ATF) framework are being implemented. These measures purport to improve financial transparency, curb organized crime, and close regulatory gaps that have allowed illicit financial activities to thrive. While primarily targeting financial crime, these changes will have implications for the charity and not-for-profit sector, particularly regarding compliance and reporting obligations.

The new regulations introduce several significant changes. The Canada Border Services Agency (CBSA) will have greater authority to detect and disrupt trade-based money laundering, particularly those linked to transnational drug trafficking and organized crime. A new framework will allow private institutions to share information related to money laundering, terrorist financing, and sanctions evasion, strengthening collective efforts to identify and prevent illicit financial activities. Additionally, private institutions will now be required to report discrepancies between client-provided information and the federal beneficial ownership registry, reinforcing corporate transparency. Factoring companies, cheque cashing businesses, and financing and leasing firms will also now be subject to AML/ATF obligations to prevent exploitation by criminals.

The new regulatory landscape may present both challenges and opportunities for charities and not-for-profits. While the intent is to curb financial crime, past AML/ATF initiatives have, at times, led to unintended consequences for legitimate charitable activities, including increased scrutiny and de-risking by financial institutions. Charities and not for-profits that conduct international transactions, particularly in high-risk jurisdictions, may face heightened due diligence from financial institutions due to enhanced information-sharing mechanisms. Organizations structured as federal corporations under the Canada Business Corporations Act may need to ensure consistency between their corporate records and the new beneficial ownership registry to avoid discrepancies that could trigger reporting obligations. As well, the amendments authorize provincial and territorial civil forfeiture offices to receive financial intelligence from FINTRAC starting April 1, 2025.

These amendments build on Canada's broader efforts to combat financial crime, with over $379 million invested in AML/ATF initiatives over the past five years. The government has also taken steps to enhance compliance, improve financial intelligence, and expand AML obligations to high-risk sectors. Additionally, Canada’s G7 Presidency in 2025 will focus on illicit finance, signaling continued international cooperation on AML/ATF matters. This focus may influence future regulatory expectations for not for profits operating in cross-border financial environments.

While these regulatory changes are intended to strengthen Canada’s financial security, charities and not-for-profits should assess their compliance strategies to ensure alignment with evolving AML/ATF obligations. Organizations that engage in cross-border philanthropy, financial transactions, or corporate structuring should be particularly mindful of new reporting and due diligence requirements. Proactive engagement with financial institutions can help mitigate the risk of unintended restrictions while ensuring continued access to essential financial services. Charities should also familiarize themselves with the CRA’s Checklist on Preventing Terrorist Abuse.

FATF Plenary February 2025: Implications for the Charity and Not-for-Profit Sector

The February 2025 Financial Action Task Force (FATF) Plenary, held in Paris, focused on strengthening global measures against money laundering, terrorism financing, and proliferation financing (the illegal manufacture, development, etc. of nuclear, chemical, or biological weapons). These developments are relevant for charities and not-for-profit organizations, particularly those working in the international context, which can face compliance challenges due to onerous financial regulations intended to curb illicit activities.

The Financial Action Task Force (“FATF”) is an inter-governmental body which exists in order to set standards and promote effective implementation of measures for combating money laundering, terrorist financing and other international threats. It has a list of 40 Recommendations, which according to their establishing document, “set out a comprehensive and consistent framework of measures which countries should implement in order to combat money laundering and terrorist financing.” The FATF Standards comprise the Recommendations and their interpretive notes, as well as a glossary which accommodates these documents.

The FATF approved changes to its Standards following extensive public consultation, aiming to promote a risk-based approach while fostering financial inclusion. These revisions seek to balance financial integrity with accessibility, ensuring that lower-risk transactions are not unnecessarily burdened with stringent compliance requirements. A follow-up consultation will be conducted by the FATF to guide implementation.

The FATF also advanced efforts to combat “financial flows” linked to online child sexual exploitation. A forthcoming report, based on case studies and intelligence, will outline strategies for identifying and disrupting illicit financial transactions tied to such crimes. This report was officially launched in London on March 13, 2025.

Another area of focus was payment transparency and the detection of complex proliferation financing and sanctions evasion schemes. The FATF will seek public input to refine these measures, aiming to improve financial security while ensuring effective risk mitigation for financial institutions.

The Plenary updated its list of high-risk and monitored jurisdictions (defined as those “actively working with the FATF to address strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing”), adding Laos and Nepal to the list of countries under increased monitoring due to identified deficiencies in their anti-money laundering and counter-terrorism financing (AML/CFT) frameworks. The Philippines was removed from this list, having successfully addressed previous concerns. The Philippines will continue working with the Asia/Pacific Group on Money Laundering to maintain compliance. The FATF reiterated the ongoing suspension of Russia’s membership, emphasizing the need for vigilance against circumvention of sanctions imposed on the Russian Federation.

A major revision to FATF’s Recommendation 1 was approved to ensure countries adopt a more effective risk-based approach to AML/CFT efforts. Recommendation 1 involves assessing risks and applying a risk-based approach to ensure that measures taken are appropriate. The update was driven by a 2021 study that found disproportionate de-risking and financial exclusion due to overly rigid compliance measures. The changes are aimed to facilitate access to financial services while maintaining robust safeguards. A new public consultation on Recommendation 16, which addresses wire transfers, will examine ways to improve transparency in payment systems by standardizing originator and beneficiary information. The goal is to enhance security, reduce duplication, and optimize compliance processes without impeding financial transactions.

Additionally, the FATF launched a review of Complex Proliferation Financing and Sanctions Evasion Schemes to identify best practices for mitigating risks associated with illicit financial networks. The general public will be invited to contribute to this initiative.

For charities and not-for-profits, these developments signal ongoing regulatory scrutiny, particularly concerning financial transparency and anti-terrorism financing measures. While FATF’s risk-based approach aims to prevent excessive de-risking, organizations should remain vigilant in their compliance efforts to ensure they are not inadvertently impacted by evolving financial regulations. As consultations continue, the sector has an opportunity to engage with policymakers to help shape frameworks that balance financial security with operational realities.

​Read the March 2025 Charity & NFP Law Update