The 2024 Fall Economic Statement (the “2024 Statement”) tabled on December 16, 2024 following the resignation of the Minister of Finance, announces a number of new international trade and investment and anti-money laundering (“AML”) initiatives for 2025 and 2026 but provides very few details on the specific forms these measures will take.

Their announcement appears to be aimed at demonstrating the Canada’s commitment to addressing critical issues with regard to government procurement, sanctions, modern slavery, AML initiatives, export controls, and tariffs, at least in part in an effort to defuse the threats made by President-elect Donald Trump to impose a 25% tariff on all goods from Canada.^[1] The 2024 Statement specifically notes that the federal government is “focused on countering the U.S. threat of tariffs while fostering a stable and competitive business investment climate.”^[2]

Given the likelihood of a non-confidence motion when the House of Commons resumes in 2025, it is not clear how many of these measures will be implemented. To the extent that they are, they are likely to represent significant changes with respect to trade and procurement regimes.

The AML measures announced follow the recent fast-paced trajectory of amendments intended to strengthen Canda’s AML regime, tracking recommendations of the Cullen Commission, as well as the recommendations of the Financial Action Task Force (“FATF”) ahead of Canada’s upcoming evaluation in 2025-2026.

Tariffs, export controls, and friendshoring: more anti-China measures

The 2024 Statement refers to the broad suite of trade measures in relation to Chinese electric and hybrid vehicles, and steel and aluminum products implemented in 2024. It further announces Canada’s intent to impose tariffs on semiconductors, permanent magnets, and natural graphite,^[3] to “ensure that no one can use Canada as a back door to the North American market”.^[4] Although no details are included, these measures are presumably based on the recently-concluded consultations on further potential measures in relation to “critical manufacturing sectors including batteries and battery parts, semiconductors, solar panel, and critical minerals.^[5] The language of the announcement appears framed to address U.S. concerns that Chinese product will be make its way into the U.S. market through Canada.

In addition, the 2024 Statement indicates that the government will propose legislative amendments to the Export and Import Permits Act that would allow the government to restrict the importation or exportation of items in response to actions of another country that harm Canada, or to create more secure and reliable supply chains. No further details are provided.^[6]

Sanctions: new mechanisms for civil seizure

Canada is enhancing its sanctions regime by expanding measures that can be used to divert Russian-owned assets to assist Ukraine in its war efforts and rebuilding.

In the 2024 Statement, the government indicates that it would introduce its own version of the European Union's windfall profit mechanism that captures profits from frozen Russia assets (such as interest earned).^[7]

The government states that this "Made-in-Canada" mechanism will involve levying “a targeted charge on the profits financial institutions earn from holding frozen Russian assets…and will prevent financial institutions from unduly profiting from their sanction obligations”, although the 2024 Statement does not indicate whether or how any Canadian financial institutions are currently profiting from any property they have frozen under the Canadian sanctions regime.^[8]

To the extent that Canada follows the European Union’s framework, financial institutions would be required to account for net profits, and pay them to the government on a bi-annual basis for payment on to Ukraine.^[9]

Canada was the first G7 nation to provide for the forfeiture and redistribution of sanctioned assets. Further details of the civil asset forfeiture and redistribution mechanism, which has now been used twice, are discussed in our "Canada announces first use of seizure and forfeiture mechanism against sanctioned persons" and "Canada Initiates Second Forfeiture of Property of Russian Sanctioned Persons, This Time Targeting Russian Aircraft" client alerts.

AML: FINTRAC’s powers enhanced and fines for non-compliance increased

• As expected, the 2024 Statement proposes another wave of amendments to the Proceeds of Crime (Money laundering and Terrorist Financing Act (“PCMLTFA”) and its regulations. These changes are further to draft amendments that were published in November, which we summarize in our blog post, “Canada’s AML Framework Broadens its Reach with Regulatory Amendments, including New Import/Export Declarations and Records”. To continue strengthening Canada’s AML regime, measures contained in the 2024 Statement, if implemented, should improve the monitoring and enforcement tools available to the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) and discourage regulated entities from non-compliance by:
• Requiring all entities regulated by FINTRAC to register with the agency. It is unclear how this will impact firms that are reporting entities but do not have a registration requirement, which include banks, credit unions, securities dealers and other financial services providers that are otherwise regulated in Canada.
• Bringing businesses or individuals that provide services relating to the formation, operation or management of other companies into the scope of the AML regime as such service providers can be used to form entities to obscure transactions and facilitate money laundering and terrorist activity financing, as well as sanctions evasion.
• Permitting FINTRAC to disclose information to support the Office of the Commissioner of Canada Elections to detect and deter illicit financing and foreign interference in Canadian elections
• Advancing the coming into force date of mandatory disclosure by FINTRAC to provincial civil asset forfeiture offices, which generally work in conjunction with provincial law enforcement (including the RCMP, if providing provincial policing services) and provincial Crown offices to apply to the court for seizure of property...
• Amending regulations to:
  • clearly prohibit the opening of anonymous accounts;
  • clarify the enhanced authorities announced in the 2023 Fall Economic Statement (“2023 Statement”) to the CBSA to combat trade-based financial crime in the 2023 Statement.^[10]

In addition, the 2024 Statement announces exponentially severe fines for non-compliance with AML regulations compared with the current scale of monetary penalties. These include:

• Increasing all individual administrative monetary penalty (“AMP”) amounts by 40 times the current amount;
• Requiring FINTRAC to take into account a reporting entity’s ability to pay when issuing an AMP and require that accurate financial information is provided when making this assessment;
• Establishing a new aggregate penalty limit for all AMPs issued in a single Notice of Violation; specifically, the greater of:
  • $4 million for an individual and $20 million for an entity; and,
  • 3 % of annual worldwide gross revenue;
• Enabling FINTRAC to refuse or revoke a money service business registration if there is an outstanding AMP;
• Increasing fines for all criminal offences by 10 times the current amount and providing additional guidance to courts by increasing undefined prison terms to up to 1 year;
• Introducing a criminal offence for false, misleading, or incomplete information by a reporting entity to FINTRAC, which would not apply to the passing on of unsuspicious information provided by a client;
• Creating a new overarching requirement for reporting entities to establish and maintain an effective, risk-based, and reasonably designed compliance program. It is unclear how this will differ from the existing fines levied against a regulated entity’s failure to develop and implement an effective AML/ATF compliance program proportionate to its business model, but one can only surmise that this new requirement would give FINTRAC with broader discretion to note deficiencies;
• Increasing AMPs for the violation of existing compliance program requirements by re-classifying them as ‘very serious’;
• Requiring a reporting entity and FINTRAC to enter into a compliance agreement following the issuance of an AMP, which likely means that any recipient of an AMP will be required to adopt a set of corrective actions within specified timelines to remediate the deficiencies that resulted in the AMP; and
• Introducing a requirement that, if the compliance agreement is not adhered to, the FINTRAC Director issue a public compliance order with a corresponding AMP, being the greater of up to:
  • $5 million for an individual and $30 million for an entity; and,
  • 3% of annual worldwide gross revenue.^[11]

In addition, the 2024 Statement proposes to make FINTRAC a member of the Financial Institutions Supervisory Committee (“FISC”) through amendments to the PCMLTFA and the Office of the Superintendent of Financial Institutions Act.^[12] As a FISC member, FINTRAC will have access to information sharing and co-ordinated efforts among Canada’s federal bodies responsible for overseeing and supervising federal financial institutions from other vantage points. Theoretically, that should allow FINTRAC to avail itself of additional channels of information to assist in the detection of illicit transactions.

Modern slavery: new supply chain regime and oversight agency

The 2024 Statement provides some further details on new measures to eradicate forced labor from Canadian supply chains, as originally set out in Budget 2024 and summarized in our client alert "Canada Proposes New Measures to Combat Modern Slavery – Latest Developments on the Supply Chains Act and Preparing for 2025 Reporting":

• Introducing legislation to create a new supply chain due diligence regime requiring government entities and businesses to scrutinize their international supply chains for risks to fundamental labour rights and take action to resolve these risks; and
• Establishing a new oversight agency to ensure ongoing compliance with the regime

New funding of $25.1 million (over two years), beginning in 2025-26, to Global Affairs Canada and the Canada Border Services Agency (“CBSA”) to implement and ensure compliance with the new supply chain regime and Canada’s existing ban on imports of goods produced with forced or child labour.^[13]

Procurement: enforcing obligations and a potential move to protectionism

The government procurement section in the 2024 Statement is framed in terms of fairness to Canadian businesses and appears to signal a retrenchment in the face of U.S. trade threats.

Beginning in spring 2025, the government will strictly enforce its procurement trade obligations to limit access to Canada’s federal procurement market to Canadian entities and “trading partners who provide access to Canada.”^[14] The government will also look at imposing domestic content conditions on federally funded infrastructure projects, as well as creating a program to prioritize doing business with small Canadian entities. No further details are provided, and it is unclear how the government plans to take these steps while remaining compliant with Canada’s international trade obligations.

Border security

The 2024 Statement announces an addition $1.3 billion in funding for border measures, $81 million of which are due to be spent by March 2025,^[15] but provides limited details beyond that the funds will be provided to the CBSA, the Communications Security Establishment, and the Royal Canadian Mounted Police (“RCMP”).^[16] Separately, however, the government released “Canada’s Border Plan” built around five pillars providing certain specifics regarding these measures: ^[17]

• Detecting and disrupting the fentanyl trade: the CBSA will be training new detector dog teams and deploying chemical detection devices at high-risk entry points.
• Significant new tools for law enforcement: equipping the RCMP with an Aerial Intelligence Task Force, comprised of helicopters, drones, and mobile surveillance towers, to conduct 24/7 surveillance and counter-drone measures. Legislative changes are proposed to ensure port owners offer CBSA the necessary facilities for export inspections. Investments in RCMP and the Communications Security Establishment are set to bolster intelligence collection, targeting organized crime and fentanyl trafficking. In conjunction with the proposed amendments to the PCMLTFA discussed above and set out in the 2024 Statement, a new taskforce will foster collaboration between law enforcement and the financial sector, sharing intelligence on money laundering and cutting off funding to organized crime.
• Enhancing operational coordination: creating three regional hubs having federal, provincial, and local law enforcement officers, and proposing to the U.S. the creation of a new North American Joint Strike Force to target transnational organized crime.
• Increasing information sharing: building on information and intelligence sharing between federal, provincial, territorial authorities, the U.S., and other international partners.
• Minimizing unnecessary border volumes: ending the practice of ‘flagpoling’ (requiring temporary residents to leave Canada and immediately return to a port of entry to obtain immigration services); amending the Immigration and Refugee Protection Act to secure and extend new authorities to cancel, change or suspend immigration documents and to cancel, suspend or stop accepting new applications; and imposing new restrictions on countries that do not rapidly facilitate the return of their citizens in the event of fraudulent entry or a removal order.

In conclusion, the 2024 Statement signals significant changes ahead for Canada's economic sanctions, tariff and export controls, modern slavery, AML, procurement, and border security measures. While the specifics of these initiatives largely remain to be announced ― and perhaps developed ― they underscore the government's stated commitment to addressing critical issues in trade, procurement, and financial regulations. The McCarthy Tétrault International Trade and Investment team will continue to monitor these developments and provide insights on their implications for Canadian businesses.

[1]      Reuters, “Trump vows new Canada, Mexico, China tariffs that threaten global trade”, Costas Pitas (26 November 2024).

[2]      Department of Finance Canada, 2024 Fall Economic Statement (16 September), p..2

[3]      Department of Finance Canada, 2024 Fall Economic Statement (16 September), Chapter 2.4, p. 151.

[4]      Department of Finance Canada, 2024 Fall Economic Statement (16 September), Chapter 2.4, p. 150.

[5]      Department of Finance, Canada, Consultations on potential surtaxes in response to unfair Chinese trade practices in critical manufacturing sectors (11 October 2024).

[6]      Department of Finance Canada, 2024 Fall Economic Statement (16 September), Chapter 2.4, p. 151.

[7]      Department of Finance Canada, 2024 Fall Economic Statement (16 September), Chapter 3.2, pp. 169-170.

[8]      Department of Finance Canada, 2024 Fall Economic Statement (16 September), Chapter 3.2, p. 170.

[9]      Council of the European Union, “Extraordinary revenues generated by immobilised Russian assets: Council greenlights the use of net windfall profits to support Ukraine’s self-defence and reconstruction” (21 May 2024).

[10]    Department of Finance Canada, 2024 Fall Economic Statement (16 September), Chapter 3.2, pp. 170-172.

[11]    Department of Finance Canada, 2024 Fall Economic Statement (16 September), Chapter 3.2, pp. 172-173

[12]    Department of Finance Canada, 2024 Fall Economic Statement (16 September), Chapter 3.2, pp. 173-174.

[13]    Department of Finance Canada, 2024 Fall Economic Statement (16 September), Chapter 2.4, p. 157

[14]    Department of Finance Canada, 2024 Fall Economic Statement (16 September), Chapter 2.4, p. 152.

[15]    Department of Finance Canada, 2024 Fall Economic Statement (16 September), Chapter 2.4, p. 179.

[16]    Department of Finance Canada, 2024 Fall Economic Statement (16 September), Chapter 3.1, p. 162.

[17]    Public Safety Canada, “Government of Canada announces its plan to strengthen border security and our immigration system” (17 November 2024).