Canada’s efforts to combat money laundering and other financial crimes have shown some improvement but continue to face significant challenges, according to a recent evaluation by the Financial Action Task Force (FATF), a global body that sets standards for anti-money laundering and counter-terrorist financing. The assessment, which took place over 14 months and included a three-week on-site visit in November 2025, involved input from international experts and over 700 stakeholders from federal and provincial governments, the private sector, and non-profit organizations.

The FATF placed Canada in the regular follow-up category, indicating progress since the country’s previous evaluation in 2016 when it was placed on an enhanced review process. However, the report highlighted that Canada must improve its investigation and prosecution of complex money-laundering cases and adopt a more risk-based supervisory approach. This includes strengthening oversight not only of financial institutions but also of non-financial sectors deemed vulnerable, such as real estate and dealers in precious metals and stones.

Despite these gains, the evaluation underscored persistent challenges in prosecuting money laundering effectively. During the five-year review period ending in 2024, nearly half of cases involving money laundering charges resulted in convictions for either money laundering or predicate offences like drug trafficking or fraud. Yet only about 10 percent of money laundering charges led to guilty findings, with the majority being withdrawn or dismissed. The FATF noted that this pattern weakens efforts to disrupt organized crime networks, for which money laundering is a critical enabler.

FinTRAC, Canada’s lead financial intelligence unit and regulatory body, came under particular scrutiny. The report identified shortcomings in FinTRAC’s supervisory framework, especially its risk assessment model, which lacks sufficient sophistication to reflect the complexities of large banks and securities firms. The watchdog’s frequency and depth of on-site examinations were found insufficient relative to the risks, with many institutions failing to adequately report suspicious transactions. Follow-up inspections revealed that nearly half of required remedial actions were not fully addressed.

Additional operational challenges at FinTRAC, including resource constraints and a lack of a permanent leader since May 2025, were noted. The penalties it imposes were described as insufficiently deterrent, highlighted by Toronto-Dominion Bank’s case. TD pleaded guilty in 2024 to conspiracy to commit money laundering in the United States and paid over US$3 billion in fines, while only facing a relatively small administrative penalty in Canada. The U.S. Federal Reserve Board has since placed parts of TD’s anti-money-laundering program under U.S. oversight.

Provincial differences emerged in corporate beneficial ownership transparency and asset seizure practices. Some provinces, such as British Columbia and Alberta, showed strong civil forfeiture capabilities, while others were more conservative. Ontario is considering unexplained wealth orders to enhance asset recovery linked to criminal proceeds.

Government officials welcomed the report’s findings as a validation of ongoing efforts to improve Canada’s anti-money-laundering framework. Federal Finance Minister François-Philippe Champagne emphasized recent legislative actions, including bans on crypto ATMs and plans to establish a specialized federal financial crimes enforcement agency. He pledged to review and implement the FATF’s recommendations to enhance regulatory supervision, transparency, prosecutions, and asset recovery.

Meanwhile, the Canadian Bankers Association stated that its members invest significant resources in improving financial crime controls and remain committed to collaborating with the government to develop a more risk-focused system.

The report’s release comes amid heightened tensions between Canada and its largest trading partner, the United States, where concerns over illicit drug trafficking, including fentanyl, have influenced trade relations. The FATF stressed that money laundering in Canada is largely linked to transnational criminal activities, including drug trafficking, fraud, and tax crimes, facilitated by the openness of Canada’s financial and commercial systems. Observers note that effective regulation and enforcement are crucial to maintaining the integrity of Canada’s financial system and protecting its international economic standing.