FINTRAC Enforcement Is Increasing: What Registered Portfolio Managers and Dealers Should Review

Recent FINTRAC enforcement announcements are an important reminder that anti-money laundering compliance is not simply a banking issue.

Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), the term securities dealer includes entities authorized under provincial securities legislation to deal in securities or to provide portfolio management or investment-advising services. As a result, many Canadian portfolio managers and exempt market dealers are subject to FINTRAC’s AML/ATF requirements. 

FINTRAC continues to publish administrative monetary penalties against reporting entities for deficiencies identified during compliance examinations. The recent enforcement activity is particularly relevant because the federal AML regime was strengthened significantly in March 2026.

Recent FINTRAC enforcement

FINTRAC’s public enforcement notices provide useful examples of the types of deficiencies being identified during examinations. Its public penalty database includes several securities dealers and wealth-management firms.

For example, FINTRAC imposed:

• a $93,390 penalty on an Ontario exempt market dealer, for deficiencies including outdated/inadequately applied written policies, an inadequate documented risk assessment and deficiencies in the prescribed effectiveness review;

• a $544,500 administrative monetary penalty on an investment dealer headquartered in Vancouver for deficiencies including failures in suspicious transaction reporting, gaps in written AML/KYC procedures, an incomplete risk assessment and inconsistent application of enhanced measures for high-risk clients. FINTRAC also identified instances where relevant negative media and other AML indicators were not adequately considered.; and

• a $99,000 penalty an independent wealth-management firm in Ontario, for deficiencies involving written compliance policies and procedures, an incomplete risk assessment, gaps in ongoing monitoring and training, and an effectiveness review that did not adequately test whether the compliance program was working as intended.

  
  

These cases illustrate that FINTRAC’s securities-sector examinations are not limited to whether a firm has an AML manual. The regulator is examining whether required policies, risk assessments, monitoring and effectiveness reviews are complete and are being applied in practice.

A stronger enforcement framework

Amendments effective March 26, 2026 expanded FINTRAC’s enforcement powers. Among other changes, the revised regime provides for:

• increased maximum administrative monetary penalties;

• mandatory compliance agreements for prescribed violations;

• compliance orders as an additional enforcement tool;

• consideration of a reporting entity’s ability to pay when determining a penalty; and

• stronger expectations that AML compliance programs be reasonably designed, risk-based and effective. 

FINTRAC has indicated that violations occurring after March 26, 2026 will be assessed under the new legislative framework. 

What does this mean for PMs and EMDs?

For smaller securities firms in particular, AML compliance can sometimes become a periodic documentation exercise: update the manual, complete the biennial effectiveness review and deliver annual training.

FINTRAC’s current direction suggests firms should be able to demonstrate more than the existence of those documents. A firm should be able to show that its AML program actually operates in practice.

Key areas to review

1. Risk assessment

Does the firm’s AML risk assessment reflect its actual clients, products, jurisdictions, account structures and distribution channels?

The assessment should evolve as the business changes rather than remain a static appendix to the AML manual.

2. High-risk clients and enhanced measures

Where a client or relationship has been classified as high risk, the file should demonstrate what additional measures the firm applied and how those measures mitigate the identified risk.

Recent FINTRAC enforcement has included deficiencies involving inadequate enhanced measures for higher-risk clients and transactions. 

3. Suspicious transaction escalation

Employees should understand when activity must be escalated internally and who is responsible for determining whether reasonable grounds to suspect have been reached.

A securities firm does not need to handle cash to have suspicious transaction reporting obligations.

4. Client identification and verification

FINTRAC has specific requirements governing when securities dealers must verify the identity of clients, including when opening accounts and when dealing with suspicious transactions, large cash transactions or large virtual-currency transactions. 

5. Record keeping

Firms should also confirm that required AML records are being retained and are readily retrievable during a FINTRAC examination. Securities dealers have specific record-keeping requirements under the PCMLTFA and associated Regulations. 

6. Testing whether the program actually works

The statutory effectiveness review should not simply confirm that policies exist.

It should test whether staff are following them, whether required records can be produced, whether risk ratings are supported, whether enhanced measures are documented and whether potential suspicious activity has been appropriately escalated.

The practical takeaway

The emerging regulatory message is relatively straightforward:

An AML program needs to be demonstrably effective, not merely documented.

For registered portfolio managers and exempt market dealers, this means AML compliance should form part of the firm’s ongoing compliance monitoring rather than being revisited only when the effectiveness review becomes due.

With FINTRAC increasing its supervisory focus and operating under an expanded enforcement framework, firms may wish to use their next compliance review to test whether their written AML program matches what is actually occurring in client files and day-to-day operations. 

How SGD can help

SGD can assist registered firms with practical AML/ATF implementation, including:

• reviewing and updating AML/ATF policies and risk assessments;

• conducting the required biennial effectiveness review;

• updating or providing training to reflect current FINTRAC guidance, Ministerial Directives and sanctions-evasion requirements; and

• helping firms document remediation where gaps are identified.

For PMs and EMDs, the objective is to make sure the firm can demonstrate that its AML program is appropriately designed for its actual business and is functioning in practice.

This article is intended for general informational purposes only and does not constitute regulatory or legal advice. Regulatory requirements vary depending on a firm’s registration categories, business activities, clients and circumstances. Firms should consider their own obligations under the PCMLTFA and related Regulations and obtain legal or other professional advice where appropriate.