Canada Faces Urgent Call for AML System Reform

Canada’s anti-money laundering (AML) framework is under scrutiny as experts warn of significant gaps ahead of a critical evaluation by the Financial Action Task Force (FATF) scheduled for November. With evolving threats in the gaming and financial sectors, industry leaders are advocating for sweeping changes to modernize outdated regulations.

Growing Concerns in the Gaming Sector

At the recent Canadian Gaming Summit in Toronto, AML challenges dominated discussions. Panels highlighted the need for stronger controls, particularly in online gaming, where vulnerabilities are increasingly evident. The summit, held over two days, underscored the urgency of updating Canada’s AML policies to keep pace with technological advancements exploited by illicit actors.

Paul Burns, president of the Canadian Gaming Association, emphasized the need for risk-based policies suited to today’s digital economy.

“We can’t rely on frameworks that lag behind the tools criminals use,” Burns remarked during the event.

While land-based casinos have made strides in strengthening AML measures, online platforms remain a weak link, exposing gaps that demand immediate attention.

🇨🇦 Canada is a SIGNIFICANT player in the global fentanyl economy

This is a public health crisis, a national security threat, and economic warfare wrapped into one.

Ottawa debates “safe supply” while the cartels and Triad are making billions off of death. pic.twitter.com/v9RgntplCB

— BlendrNews (@BlendrNews) April 19, 2025

Lessons from Across the Border

In the United States, Nevada regulators recently cracked down on major Las Vegas casinos, including MGM Resorts and Wynn, for inadequate AML controls. Fines were issued following a sports betting scandal that revealed how illegal bookmakers funneled millions through casinos to launder funds. This serves as a cautionary tale for Canada, where single-event sports betting, legalized in 2021, has brought similar risks to the forefront.

Ontario has successfully transitioned some grey market operators to regulated systems, but experts warn that vulnerabilities persist. The rise of online gaming platforms has made it easier for bad actors to exploit loopholes, particularly in payment processing systems.

FATF’s Upcoming Review Looms Large

The FATF, a global authority on money laundering and terrorist financing, will conduct its first comprehensive review of Canada’s AML framework since 2016. That earlier report flagged cash-heavy businesses, such as brick-and-mortar casinos, as prime targets for laundering drug proceeds. The 2022 Cullen Commission further exposed significant money laundering in British Columbia, with funds from China flowing through underground networks into casinos and real estate.

Despite recommendations for a dedicated AML investigation unit and an independent commissioner, progress has been slow. The FATF’s 2016 findings also pointed to weaknesses in Canada’s information-sharing systems, a concern echoed in subsequent reviews in 2018 and 2020. With the opioid crisis fueling new laundering schemes, the stakes are higher than ever.

Online Gaming and Fentanyl Trafficking

A January report from FINTRAC, Canada’s financial intelligence unit, raised alarms about online gaming platforms being used to launder proceeds from fentanyl trafficking. Kevin de Bruyckere, director of AML and investigations at the British Columbia Lottery Corporation, highlighted suspicious transaction patterns during a summit panel. Traffickers reportedly move funds through money transfer services to online gambling sites, later withdrawing payouts via processors in Canada, Malta, and the UK.

These transactions are often disguised as e-transfers, bypassing reporting requirements tied to traditional financial institutions. De Bruyckere called for increased federal funding to bolster AML efforts ahead of the FATF review, stressing the need for real-time information sharing to combat these schemes effectively.

A System Overwhelmed

Canada’s AML regime faces additional strain following a major cyber breach at FINTRAC in March 2024, which disrupted operations for nearly a year. During this period, Ontario gaming operators were forced to manually submit approximately 70,000 AML reports, highlighting the fragility of the current system. While FINTRAC maintained system integrity, the incident exposed the need for robust technological upgrades.

Proposed changes under Bill C-2 aim to address these shortcomings. The legislation, tabled recently, could raise penalties for non-compliance to $4 million for individuals and $20 million for corporations. If passed, these measures could take effect before the end of 2025, signaling a tougher stance on AML violations.

Outdated Laws and New Challenges

Derek Ramm, a global AML expert, argues that Canada’s laws are ill-equipped for modern threats. Current regulations narrowly define casinos, creating inconsistencies in reporting requirements. For instance, a sports bet placed at a kiosk may not trigger AML scrutiny, while the same wager online does. “This patchwork approach creates confusion and leaves us vulnerable,” Ramm noted in a recent article.

Canada’s reporting system also overwhelms authorities with excessive data. Unlike the U.S. and UK, where suspicious activity is the focus, Canadian operators report all transactions, generating what Burns calls a “massive haystack” of information. The Canadian Bankers Association estimates that Canadian entities file nearly 100 times more AML reports than their UK counterparts, diluting enforcement efforts.

A Call for Action

As the FATF review approaches, industry leaders are pressing for change. Summit panels criticized the current system’s focus on outputs over outcomes, urging better information sharing and performance metrics.

“We’re not keeping up with the criminals,” one panelist remarked, capturing the frustration felt across the industry.

With the opioid crisis and technological advancements amplifying risks, Canada’s AML framework must evolve. The upcoming FATF evaluation will test the nation’s progress, but without bold reforms, experts fear the system will remain a step behind those it seeks to stop.