AML Consultations in Canada – What’s Next for the Gaming Sector?: Insights from Donald Bourgeois of Fogler, Rubinoff LLP

In an exclusive article for Gambling.Re, Donald Bourgeois, Counsel on Gaming and Gambling at Fogler, Rubinoff LLP, sheds light on the intricate landscape of Canada's gaming sector. Unraveling the complex threads of the Anti-Money Laundering (AML) framework, Mr. Bourgeois delves into the amendments and regulatory developments shaping the future of the industry.

Canada has been a member of the Financial Action Task Force since 1990, shortly after its establishment. Since then, measures to combat money laundering and terrorist financing have become a substantial and material part of the gaming sector. Together with data protection, cybersecurity measures and Responsible Gambling, AML is a driver of change increasing the focus on KYC.

Integrity of gaming equipment and services and those who provide them will always be a regulatory objective. Interjurisdictional collaboration and changes within the gaming sector and its suppliers have largely addressed “integrity” issues of the past. There will always be work to be done on that front, but the regulatory focus has evolved as it has in other sectors of the economy – integrity of information and the appropriate use of that information to address other societal issues is the main public policy dynamic and, thus, critical to the sector.

FATF’s 2016 Mutual Evaluation Report on Canada did not identify the casino sectors as being a compliance issue. While improvements can always be made, such as addressing online gambling activities, the “regulated” sector was largely compliant. Ontario’s move in April 2022 to a competitive and regulated market has meant that a substantial proportion of the “illegal” online market has been channeled to the regulated market and compliance with AML obligations.

Mr. Bourgeois underscores that while FATF would appear to have been generally satisfied about Canada’s compliance in the gaming sector, Canada’s unique approach to gambling means that others also express an opinion. While operators of “lottery schemes” may be private sector operators, the “conductor and manager” of those lottery schemes are the Government-owned “Crown corporations” – who are subject to “value for money audits” by provincial Auditors General and who report to legislatures. These reports implicitly become political in nature, which raises the political risk profile.

Recent Auditor General reports in Ontario and a series of reports in British Columbia have increased the profile on AML. Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) is also scheduled for review. A Committee of Parliament is conducting a Parliamentary Review of the legislation, as required every five years under section 72(1) of the Act. This requirement provides the opportunity to keep the AML/ATF Regime current in response to market developments, as well as new and evolving risks. The Parliamentary Committee will release a report of its review that will inform future policy measures to strengthen Canada’s AML/ATF Regime.

To support the 2023 Parliamentary Review of the PCMLTFA, the government has released a consultation paper to review Canada’s AML/ATF statutory framework and sought feedback to support the development of policy measures to strengthen the AML/ATF Regime. The Government’s consultation paper asked the following questions with respect to the gaming sector:

·       Should the PCMLTFA definition of a “casino” be shifted to one that is more activity-based? If so, what should a new definition encompass and what are the implications of such a change?

·       Should the PCMLTFA cover a broader range of gaming activities and betting types?

·       Should pari-mutuel betting and horse racing be scoped in under the PCMLTFA?

·       Are any changes to the PCMLTFA or compliance requirements needed to ensure better visibility into high-risk gaming activities and appropriate reporting to FINTRAC?

·       How can information sharing around money laundering risks in the casino sector be improved?

Not too surprising, it is understood that there is not unanimity amongst stakeholders in the answers to these questions. Some in the gaming sector have suggested that the Crown corporations should no longer be the “reporting entity” to FINTRAC if they use private sector operators, which include most provinces with land-based and online casinos. The argument is that the “operator” has the direct relationship with the customers and should be the reporting entity. Crown corporations do not have that operational relationship and, arguably, do not have the same level of visibility into the areas of risk that the operators have.

Others have argued that the underlying public policy objective of minimizing the use of gaming for money laundering purposes and to prevent underlying unlawful activities (such as human trafficking, drug dealing, fraud, etc.) is best served by strong Crown corporation oversight. In Ontario and some other provinces that would include the regulator and law enforcement collaboration – with appropriate information sharing agreements in place.

Mr. Bourgeois explains that the process does not end with the Government’s consultation. As noted above, the consultation is intended to assist the Parliamentary Committee in its 5-year review. The Committee will no doubt hold public hearings and prepare its report in 2024. The gaming sector may want to participate in or monitor the Committee’s review to ensure that the Committee’s recommendations are both effective in achieving public policy objectives – objectives that are shared and consistent across jurisdictions – but also efficient. The sharing of information and the protections around doing so will be of particular relevance given the evolution of data protection laws.

Donald Bourgeois

Counsel on Gaming and Gambling

Fogler, Rubinoff LLP