Canada is preparing to significantly raise the financial penalties that businesses could face for failing to meet anti-money-laundering (AML) and counter-terrorist financing obligations under the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) regime. As part of federal legislation passed by the House of Commons and awaiting Senate approval, the maximum fines for violations could be increased by as much as 40 times their current levels, substantially escalating the cost of non-compliance.

Under the proposed changes, firms that handle large or high-risk transactions — such as banks, jewellers, real-estate professionals, and other reporting entities — could face penalties far higher than today’s limits if they fail to properly report suspicious transactions, maintain appropriate compliance programs, or fulfil required record-keeping duties. For example, a bank that was fined roughly $9.2 million in 2024 for failing to report suspicious activities could see a similar violation attract penalties in the hundreds of millions of dollars under the new framework.

The push to increase penalties is part of a broader effort to strengthen Canada’s AML enforcement after years of criticism that regulatory fines were too low to deter non-compliance. In recent years, FINTRAC has levied significant administrative monetary penalties (AMPs) against various entities, including historic fines exceeding $176 million against a virtual currency services provider and millions more against banks, casinos, and other institutions for compliance failures.

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Critics of the fine increases argue that while higher penalties may compel companies to invest more in compliance systems and staffing, they alone won’t fix systemic issues such as under-reporting of suspicious activities. There are concerns that firms, fearing high penalties, may flood regulators with low-risk reports to avoid sanctions, making it harder to identify truly suspicious activity and potentially overloading FINTRAC’s analytical capacity.

Regulators, however, say the reforms will empower compliance teams to convince senior management to allocate appropriate resources to AML oversight. They also highlight enhancements to FINTRAC’s use of technology — including artificial intelligence — to help sift through increased reporting volumes and focus enforcement efforts more effectively.

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Businesses covered by the AML regime should prepare for a compliance landscape where penalties are no longer merely symbolic, and the financial stakes for non-compliance are materially higher. With the legislative changes pending final approval, companies are advised to review and strengthen their AML policies, reporting systems, and training programs to avoid potentially crippling fines