When the FATF arrives in Canada later this year, the visit will serve as more than a routine policy check—it will act as a nationwide assessment of how effectively the country combats financial crime.
The FATF Mutual Evaluation is a critical test of whether Canada’s frameworks to detect, deter, and report money laundering and terrorist financing are truly fit for purpose, claims Alessa.
For compliance professionals, this evaluation carries major implications. The FATF’s findings can shape how regulators supervise institutions, influence enforcement priorities, and affect how international partners perceive Canada’s financial system.
The FATF, an inter-governmental body that develops and promotes policies to fight money laundering, terrorist financing, and proliferation financing, conducts periodic Mutual Evaluations of its member countries. Each assessment examines two key dimensions: technical compliance—whether national laws align with the FATF’s 40 recommendations—and effectiveness—how well those laws are implemented in practice.
Far from a paperwork exercise, the FATF’s review involves in-depth interviews, document analysis, and on-site meetings with regulators, banks, money services businesses (MSBs), and law enforcement agencies. The resulting public report offers a detailed scorecard of each country’s anti-money laundering (AML) performance.
Canada’s previous FATF evaluation in 2016 identified significant weaknesses in beneficial ownership transparency, real estate oversight, and enforcement capacity. Since then, several reforms have been introduced to address these gaps. Notably, the federal government passed Bill C-2, or the Strong Borders Act, to extend AML coverage and strengthen penalties. The Federal Beneficial Ownership Registry, launched in June 2024, now mandates disclosure of individuals with significant control—defined as 25% or more ownership. Additionally, a new Financial Crime Agency, announced in October 2025, will centralise fraud and AML enforcement, while FINTRAC’s scope has expanded to include factoring, leasing, and cheque-cashing firms under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).
The FATF’s upcoming review will test whether these reforms have achieved measurable progress. Rather than assessing legislative intent, the focus will be on outcomes—how well Canada’s financial system prevents and detects illicit activity.
In the lead-up to the evaluation, regulators including FINTRAC and the Office of the Superintendent of Financial Institutions (OSFI) have ramped up scrutiny. Financial institutions should anticipate deeper examinations, fewer allowances for minor compliance lapses, and stricter penalties for program deficiencies. Documentation will also be key: FATF assessors will expect to see concrete evidence of effectiveness, such as suspicious transaction reports leading to investigations or clear escalation trails showing active oversight.
Sector-specific attention is also expected. In 2016, FATF highlighted the legal and real estate sectors as weak points. In 2025, the focus is shifting towards trade-based money laundering, crypto and FinTech compliance, sanctions screening, and beneficial ownership transparency. Firms operating in these sectors should prepare for heightened attention and ensure their AML frameworks are up to standard.
The consequences of Canada’s FATF performance extend beyond national borders. A poor rating could prompt international financial institutions to impose stricter due diligence on Canadian entities, potentially slowing cross-border payments and increasing counterparty risk. Conversely, a strong evaluation would reinforce Canada’s reputation as a stable, trustworthy jurisdiction for global finance.
For compliance teams, preparation is key. Institutions should update AML risk assessments to reflect evolving threats such as sanctions evasion, trade-based laundering, and crypto exposure. They should also review suspicious transaction reporting processes, document program effectiveness with tangible examples, and refresh training to ensure staff can recognise and respond to red flags. In addition, organisations should verify that third-party providers—especially those handling enhanced due diligence or sanctions screening—meet national and international standards.
Ultimately, this FATF evaluation is not only a benchmark for regulatory compliance but a reflection of Canada’s broader commitment to safeguarding the integrity of its financial system. A robust showing will validate years of institutional effort, while shortcomings could spark renewed reforms and tougher oversight across sectors.
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