Canada’s AML report card: Better marks, but more work ahead

The Financial Action Task Force (FATF), an intergovernmental body that sets international standards for anti-money laundering, anti-terrorist financing (AML/ATF) and anti-proliferation financing, has released its 2026 Mutual Evaluation Report (the Report) regarding Canada’s AML/ATF framework.

The top-line finding is that Canada faces material money laundering risks attributed largely to high-profit criminal activity perpetrated by organized groups and professional money laundering intermediaries in the areas of drug trafficking, fraud, commercial trade fraud and tax crimes.

The 400-page Report synthesizes the assessors’ observations from a three-week on-site review conducted in November 2025. As part of that process, representatives from six FATF members and one associated regional body, including the United Kingdom and Australia, held over 80 sessions and interviewed roughly 700 participants from Canada’s public and private sectors.

Overall, Canada has been placed in the “regular follow-up” category, which is an improvement over its “enhanced follow-up” status following Canada’s last evaluation in 2016.

What does FATF’s 2026 report mean for Canada?

Canada’s strongest ratings reflect its awareness of country-level risk and its ability to collect financial intelligence, enact technical regulations that meet FATF standards, and respond to terrorist financing and sanctions issues.

Its weaker ratings, however, are concentrated in areas that may be harder to reform: effective compliance supervision, pan-Canadian beneficial ownership transparency, prosecution of standalone money laundering offences, asset recovery, and the exclusion of the legal profession from the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).

Key takeaways

• Canada’s overall standing has improved, moving from “enhanced follow-up” after its 2016 evaluation to “regular follow-up.”
• Financial institutions, cryptocurrency businesses and higher-risk non-financial sectors should expect increased scrutiny, including more targeted FINTRAC supervision and enforcement.
• Significant gaps remain in beneficial ownership transparency, money laundering prosecutions, asset recovery and other areas.
• Further change is likely. Canada now has three years to address FATF’s highest-priority deficiencies, making the Report an important roadmap for future legislative, regulatory and supervisory activity.

Report card at a glance

Canada received stronger grades for:

• national risk assessment, effective inter-body coordination and subsequent policy setting
• rich data in financial intelligence
• terrorist financing investigations and prosecutions
• terrorist financing prevention and sanctions
• economic sanctions

Canada received weaker grades for:

• regulatory and operational structure
• asset recovery and enforcement
• money laundering investigations and prosecutions
• trade-based money laundering prevention
• supervision of financial sector reporting entities
• supervision of non-financial sector reporting entities
• transparency and beneficial ownership
• legal profession not regulated under the PCMLTFA

In one sentence: FATF finds that Canada is stronger at understanding AML/ATF risk and generating financial intelligence than at turning that information into effective enforcement, supervision and deprivation of ill-gotten gains.

What comes next: FATF’s three-year reform requirement

FATF’s Report is not just a scorecard; rather, it is a roadmap for the next phase of Canada’s AML/ATF reform agenda. Under FATF’s fifth-round mutual evaluation process, Canada now has three years to address the Report’s highest-priority deficiencies.

The Report identifies 12 Key Recommended Actions (KRAs), which will shape Canada’s follow-up process and, in practice, signal where businesses should expect further legislative, regulatory and enforcement activity.

• Financial institutions (FIs) and cryptocurrency businesses, referred to as virtual asset service providers (VASPs), should expect more targeted, risk-based supervision, institution-level risk assessments and stronger pressure to remediate deficiencies quickly.
• Non-financial sectors should expect a more sector-specific approach to risk differentiation, more active supervision of higher-risk designated non-financial businesses and professions (DNFBPs) and greater use of penalties, especially in sectors like real estate and dealers in precious metals and stones (DPMS).
• For beneficial ownership (BO), businesses should expect continued pressure for a consistent pan-Canadian framework, with particular focus on Ontario and Alberta, stronger verification measures and better access to trust BO information.
• For prosecutions, businesses and individuals should expect renewed emphasis on complex, professional and standalone money laundering cases, together with pressure to improve prosecution outcomes.
• For asset recovery, businesses and individuals should expect broader use of proceeds-of-crime tools, value-based recovery and more proactive use of civil forfeiture regimes across Canada.

While the KRAs do not prescribe the precise form Canadian reforms must take, they provide a useful roadmap of the areas in which further developments may be expected over the next three years. As discussed in our blog, Canada’s AML Reform Advances: Bill C-12 Brings Hefty Penalties and Higher Compliance Expectations into Force, recent reforms have already moved Canada toward a tougher and more interventionist AML/ATF regime. FATF’s roadmap suggests that this trajectory is likely to continue.

What follows is a closer look at the assessors’ findings on Canada’s AML/ATF regime.

What Canada does well

Canada’s risk assessment and operational priorities

FATF credited Canada with developing a mature and nuanced understanding of its money laundering and terrorist financing (ML/TF) threats and vulnerabilities through successive National Risk Assessments (NRAs) conducted in 2015, 2023 and 2025 by the Department of Finance. The 2025 NRA provides a comprehensive analysis of Canada’s principal threats, threat actors and vulnerable sectors, and FATF commended the systematic use of inter-agency and public-private engagement to gather information from sources across the AML/ATF regulatory population in a structured manner.

FATF also found that Canada gained traction in translating the data that informed its risk assessment into government policy and operational action. Canada’s 2023-2026 Anti-Money Laundering and Anti-Terrorist Financing Strategy was clearly informed by the NRAs and related supporting assessments, and FATF concluded that the objectives and activities of government authorities are broadly aligned with its evolving national AML/ATF priorities.  

FATF acknowledged that a number of gaps identified in 2016 have since been addressed through legislative, regulatory and operational reforms, including expansion of the PCMLTFA to regulate sectors that were not previously subject to the regime, as well as reforms relating to BO, information sharing and financial-crime enforcement. FATF nevertheless noted that this alignment is less consistent when it comes to the supervisory priorities of the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).

Financial intelligence

The quality of financial data and intelligence was another area of strength highlighted in the Report. FATF found that FINTRAC has access to a broad range of transactional, regulatory and other information and produces high-quality operational and strategic financial intelligence that is actively used by law enforcement and other competent authorities. Its intelligence products have supported investigations into higher-risk predicate offences such as fraud and drug trafficking, including by identifying persons and entities of interest, tracing criminal proceeds and developing investigative leads, while strategic intelligence has also influenced public- and private-sector responses to emerging ML/TF risks.

Sanctions and anti-terrorist financing

Canada received Substantial ratings for the effectiveness of terrorist financing investigations and prosecutions, terrorist financing preventive measures and certain targeted financial sanctions relating to terrorist and proliferation financing.

Under FATF’s methodology, a Substantial rating means that the relevant outcome is achieved to a large extent, although moderate improvements are still needed. Canada was described as having a “well-established and effective system to detect and investigate terrorist financing” and as implementing UN targeted financial sanctions “without delay”.

However, the Report’s sanctions analysis was limited to a narrow subset of Canadian sanctions law. It focuses largely on UN-based sanctions, Criminal Code anti-terrorism tools and PCMLTFA sanctions-related reporting obligations, such as suspicious transaction reporting relating to suspected sanctions evasion offences and Listed Person or Entity Property Reports.

For more details about those obligations, read our previous blog, Canada’s New Sanctioned Property Reporting Regime Now in Force.

Practical gaps in screening, sanctions infrastructure and asset identification

Despite Canada’s Substantial ratings for effectiveness, the Report identified practical gaps that matter for Canadian businesses. It recommended that private-sector checks against UN sanctions lists be performed regularly for existing customers and intermediaries, rather than only at onboarding, and called for a more user-friendly national sanctions platform. The Report also found that Canada “lacks proactive measures, tools, and actions” to identify funds and other economic resources held by designated persons, including through systematic registry checks.

For businesses, the message is clear: more legislative, regulatory and supervisory change is likely in the near term as Canada works to address FATF’s priority recommendations.

What needs improving

Although Canada has made great strides to address its ML/TF risks since its previous FATF review, the Report discusses in extensive detail the areas that need improvement or where there are gaps. Businesses should therefore expect government and FINTRAC to focus reforms and supervisory efforts on these areas.

Financial sectors: banks, Fintech and crypto businesses expect more risk-focused and intensive oversight

FATF’s assessment points to the need in Canada for a more granular and risk-focused approach to the supervision of FIs, money services businesses (MSBs) and VASPs. Although Canadian regulations provide robust market-entry controls, and Domestic Systemically Important Banks (D-SIBs) and MSBs within large international financial groups generally demonstrated a good understanding of their ML/TF risks, FATF found that FINTRAC’s understanding of risk at the individual institution level needs improvement and recommended that supervisory priorities be more closely aligned with the risk profiles of particular institutions and activities.

Large and complex financial institutions

• FATF suggests FINTRAC’s supervisory activities should become both more frequent and more targeted toward higher-risk areas within a firm.
• FATF noted in particular that full-scope FINTRAC examinations of D-SIBs occurred approximately once every six years on average, which it considered insufficient.
• FATF also found that examinations could be more effective by focusing on higher-risk business lines, products and services, and by testing whether controls effectively mitigate those risks rather than conducting a full-scope review that takes 12 months to complete.

Securities firms

• FATF found that many firms assessed their own vulnerability to money laundering to be lower than FINTRAC’s assessment.
• Some securities firms demonstrated limited understanding of risks specific to their business models, including geographic exposure, digital onboarding and third-party payments from wealth-management accounts.
• Among securities firms examined over the review period, only 44% were fully compliant with the requirement to conduct an institutional risk assessment, which is a fundamental exercise for AML/ATF purposes.
• FATF recommends intensified FINTRAC supervision to improve securities firms’ understanding of both sectoral and institution-specific risks.

VASPs and MSBs

• FATF found that VASPs and smaller MSBs demonstrated a weaker understanding of their business models’ money laundering risk.
• FATF recommends intensified FINTRAC supervision for those reporting entities.

The Report also points to a tougher enforcement environment. Nearly half of the 57 follow-up examinations conducted during FATF’s review period were only “partially remediated,” and FATF found that improvement rates in sectors it considered high-risk—banks, MSBs and VASPs—were less than satisfactory. FATF therefore recommends broader supervisory responses, greater use of sanctions and, where appropriate, higher monetary penalties.

Canada has already moved in that direction: as discussed in our blog, Canada’s AML Reform Advances: Bill C-12 Brings Hefty Penalties and Higher Compliance Expectations into Force, amendments enacted in March 2026 increased FINTRAC’s ceiling for administrative monetary penalties by 40 times and gave FINTRAC new enforcement tools, including compliance-agreement powers.

Non-financial sectors: expect more FINTRAC reviews and enforcement

For higher-risk non-financial sectors, FATF’s message is clear: expect more FINTRAC scrutiny. The Report points to more targeted supervision, more information gathering and a tougher enforcement posture for DNFBPs.

The DNFBPs considered by FATF include casinos, real estate businesses, DPMS, accountants, British Columbia notaries, trust and company service providers and the legal profession, although lawyers and Québec notaries remain outside the PCMLTFA framework and FINTRAC supervision.

What this means:

• More FINTRAC engagement: FATF found that FINTRAC understands DNFBP risks at the sector level better than at the individual-entity level. That points to more examinations, more risk questionnaires and more efforts to gather entity-specific information.
• More focus on real estate and DPMS: FATF identified these sectors as higher-risk but comparatively under-supervised. Businesses in these sectors should expect more targeted reviews, more questions about business models and controls, and greater scrutiny of suspicious transaction reporting.
• Greater enforcement risk: FATF recommends more effective use of sanctions, including more penalties and higher penalty amounts where appropriate. It also emphasized the deterrent effect of timely public disclosure.
• Possible structural reform for DPMS: FATF again raised concerns about the lack of a comprehensive licensing or registration regime for DPMS. This issue should be at least partly addressed once Bill C-12’s universal FINTRAC enrolment regime comes into force and all reporting entities are required to register with FINTRAC. MSBs are currently the only type of reporting entities subject to FINTRAC registration and related notification requirements. Universal enrolment will add compliance obligations to all AML/ATF regulated sectors, and at the same time, should improve FINTRAC’s visibility into the entire reporting population of over 38,000 businesses.  
• Continued pressure around the legal profession: FATF reiterated its concern that lawyers remain outside FINTRAC supervision. Any reform in this area would need to account for constitutional and solicitor-client privilege constraints.

Beneficial ownership transparency: progress, but still a patchwork

Canada has made meaningful progress on BO transparency, including by standing up two new government registers that maintain BO information, introducing broader record-keeping rules and expanding trust reporting. But the system still falls short of a consistent national standard.

Since Canada’s last FATF evaluation in 2016, it has established central corporate BO registries at the federal level and in Québec, introduced BO record-keeping requirements in almost all provinces and territories, and expanded reporting requirements for trusts. However, the problem is uneven provincial implementation. Not every province has the same verification tools, central registries or record-keeping requirements, which leaves an incomplete picture of BO across Canada. FATF also noted limited compliance data and inconsistent use of sanctions for BO-related deficiencies.

Ontario and Alberta are the clearest gaps. Ontario accounts for roughly 38% of Canadian incorporations but does not have a central BO registry, though one is planned for 2027. Alberta accounts for about 11.7% of incorporations and does not have BO record-keeping requirements.

What this means for businesses: Businesses should expect continued pressure for a more harmonized national framework and more consistent rules on how BO information is collected, verified and shared across Canada.

Strong investigative capacity for money laundering prosecutions but lack of prosecutions

Canada received a moderate rating for the effectiveness of money laundering investigations and prosecutions. Despite “strong investigative capacity” and “material money laundering risks,” the Report found that “Canada faces persistent challenges” in prosecuting money laundering offences.

Notable strengths in asset recovery but room for improvement

Canada was described as identifying and tracing criminal property “to some extent,” with “clear improvements in prioritisation and capacity during the assessment period,” including the implementation of unexplained wealth orders in certain provinces, which are detailed in our blog, Explaining the unexplained: Consultation on unexplained wealth orders in Ontario. 

Canada’s sophisticated capability in cryptocurrency seizure, the more than CAD 1 billion in assets seized and restrained during the review period, and the strength of civil forfeiture regimes (particularly in British Columbia, Alberta, Manitoba and Saskatchewan) were noted as positives. Although improvements have been made, FATF noted that operational and legal constraints in Canada continue to limit asset recovery, particularly in complex cases. Compensation flowing to victims remains inconsistent, according to the Report.

The operational structure of the Financial Crimes Agency (FCA) is still being developed, but the legislative intent is for this new agency to sharpen Canada’s overall record in financial crime deterrence and enforcement. For more on the FCA, see Bill C-29 and Canada’s Proposed Financial Crimes Agency: What You Need to Know.

Trade-based money laundering: a more visible enforcement priority

Trade-based money laundering (TBML) is one of the clearer areas for future focus in the Report. Canada’s 2025 NRA identifies commercial trade fraud and TBML as one of the country’s highest money laundering threats, alongside drug trafficking, fraud and tax crimes. FATF noted that TBML is particularly difficult to detect because it sits at the intersection of cross-border trade, customs reporting, financial flows and corporate opacity, and is often used alongside shell companies, bulk cash smuggling and professional money laundering networks.

At the same time, FATF points to Canada’s progress. Since 2024, the Canada Border Services Agency (CBSA) has been given expanded powers and capabilities to address border-related and trade-based financial crime, including through new PCMLTFA authorities and the establishment of the Border Financial Crime Centre and, in 2025, a Trade Transparency Unit within that Centre. FATF found that these changes have significantly strengthened Canada’s ability to gather trade data, identify discrepancies between goods and payments, and generate proactive intelligence. But FATF also found that the current number of money laundering investigations into TBML does not yet match Canada’s risk profile.

What this means for businesses: Businesses involved in cross-border trade should expect greater scrutiny of trade documentation, payment flows and the consistency between commercial activity and the movement of funds.

What should Canadian businesses expect next?

Overall, FATF’s 2026 assessment shows that Canada has made meaningful progress in strengthening its AML/ATF framework, but important gaps remain in supervision, enforcement, asset recovery, and corporate transparency. For businesses, the message is clear: more legislative, regulatory and supervisory change is likely in the near term as Canada works to address FATF’s priority recommendations.

McCarthy Tétrault draws on the combined expertise of our Financial Institutions Regulatory Group, Fintech Group, White Collar Defence and Investigations and International Trade & Investment groups to deliver coordinated advice on Canadian AML/ATF compliance and related legal issues. If you have questions about how these developments may affect your business or organization, please contact one of the authors or another member of our team.