Canada introduces enhanced financial due diligence measures against the RF

On February 24, 2024, following the FATF Public Statement, Chrystia Freeland, the Deputy Prime Minister and Minister of Finance of Canada, issued a Directive on Financial Transactions Associated with Russia for Entities Regulated by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (https://www.gazette.gc.ca/rp-pr/p1/2024/2024-02-24/html/notice-avis-eng.html#ne5).

The Directive requires that every financial transaction related to Russia, regardless of its amount, be treated as a high-risk transaction and establishes corresponding enhanced obligations for due diligence, monitoring and record-keeping of such financial transactions. It applies to all transactions originating from or bound for Russia, and covers transfers using national and virtual currency.

This decision is due to the fact that the anti-money laundering and anti-terrorist financing measures that Russia has implemented are ineffective and insufficient and, as a result there could be an adverse impact on the integrity of the Canadian financial system.

In this regard, Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) issued guidance explaining such financial transactions and measures for their verification and monitoring (https://fintrac-canafe.canada.ca/obligations/dir-rus-eng). In particular, transactions originating from or bound for Russia may include, but are not limited to:

• electronic funds transfers, remittances or other transfers that include a Russian originating or destination address - this may include transactions where the ordering person or entity, beneficiary, or third party details are Russian
• the activities of representatives of the Government of Russia (for example, transactions on an Embassy of Russia's bank account in Canada)
• receiving Russian ruble as a deposit to an account or for a virtual currency transaction
• conducting a foreign currency or virtual currency exchange transaction that includes Russian ruble (for example, Canadian dollar to Russian ruble, Russian ruble to US dollar, virtual currency to Russian ruble, etc.); and
• issuing or redeeming bank drafts or other negotiable instruments that include a Russian ruble component.

As of today, the Directives of the Minister of Finance of Canada under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act apply to transactions with three countries - North Korea (since 2017), Iran (since 2020) and, since February 24 this year - Russia. These measures are in line with the risk-based approach envisaged by the FATF Standards, are aimed at protecting against reputational risks and threats to the integrity of the Canadian financial system, and more broadly implement the decisions and calls of international organizations.

The SFMS expresses sincere gratitude to the partners from Canada, including the Financial Intelligence Unit of Canada (FINTRAC) for their consistent position on protecting the Global financial system from risks and threats emanating from Russia.

In this context, we also note that on the eve of February 23, 2024, the U.S. Department of State published important guidance for businesses on the Risks and Considerations for Doing Business in the Russian Federation and Russia-Occupied Territories of Ukraine (https://www.state.gov/russia-business-advisory/).

The SFMS, together with national and international partners, continues its work and calls up on other jurisdictions to take enhanced measures against Russia in relation to its risks and threats in the field of prevention and counteraction to money laundering, terrorist financing and financing the proliferation of weapons of mass destruction.