When the Financial Action Task Force (FATF) visits Canada later this year, it won’t just be another policy review. It will be a national stress test of how well Canada detects, deters, and reports financial crime.
For compliance professionals, this evaluation matters more than most realize. It affects how regulators act, how institutions are supervised, and how Canada is perceived in the global financial system.
What Is the FATF Mutual Evaluation?
The FATF is an inter-governmental body that sets global standards for fighting money laundering, terrorist financing, and proliferation financing. Every few years, it reviews each member country through a Mutual Evaluation, assessing both:
- Technical compliance: Do laws and regulations meet FATF’s 40 recommendations?
- Effectiveness: Are those laws actually working in practice?
This evaluation is not a desk exercise, it involves interviews, document reviews, and on-site visits with regulators, banks, MSBs, and enforcement agencies. The result is a public report that rates how effectively a country’s AML regime functions in the real world.
Why the Evaluation Matters for Canada
Canada’s last FATF evaluation in 2016 highlighted critical weaknesses in beneficial ownership transparency, real estate oversight, and enforcement.
Since then, the government has accelerated reforms to close those gaps:
- Bill C-2 (Strong Borders Act): Expands AML coverage and raises penalties for non-compliance.
- Federal Beneficial Ownership Registry: Launched June 2024, requiring disclosure of significant control (≥ 25%).
- New Financial Crime Agency: Announced in October 2025 to centralize fraud and AML enforcement.
- Expanded FINTRAC Scope: Now includes factoring, leasing, and cheque-cashing businesses under PCMLTFA.
The FATF will evaluate whether these reforms translate into tangible results, not just stated intentions.
What It Means for Compliance Professionals
1. Expect Heightened Regulatory Pressure
Leading up to the evaluation, regulators like FINTRAC and OSFI are tightening inspections and requesting more evidence of effectiveness. Institutions should expect:
- More detailed examinations.
- Less leniency for procedural gaps.
- Increased penalties for program deficiencies.
2. Documentation and Proof of Effectiveness
FATF reviewers want to see real-world results: suspicious transaction reports that led to investigations, risk-based monitoring that caught anomalies, and escalation records that show active oversight.
3. Sector-Specific Scrutiny
In 2016, FATF singled out lawyers and real estate as weak links. This time, the spotlight will be on:
- Trade-based money laundering (TBML)
- Crypto and fintech compliance
- Sanctions screening and beneficial ownership
If your business touches any of these areas, expect closer attention.
4. International Reputation & Counterparty Risk
A poor FATF score can have tangible effects. Foreign banks may impose stricter due diligence on Canadian institutions, slow cross-border payments, or reassess partnerships. Conversely, a strong rating enhances Canada’s position as a trusted, transparent jurisdiction.
How Compliance Teams Can Prepare
- Refresh your AML Risk Assessment. Ensure it reflects 2025 realities: sanctions, TBML, crypto exposure, and beneficial ownership controls.
- Review your STR process. Can you demonstrate detection, escalation, and timely reporting?
- Gather evidence of effectiveness. Maintain case studies showing your program has real outcomes.
- Reinforce training. Ensure employees understand red flags and can articulate your institution’s AML responsibilities.
- Audit third-party providers. Confirm EDD, sanctions data, and screening partners meet Canadian standards.
- Monitor FINTRAC guidance. Expect new advisories and typologies tied to FATF’s evaluation themes.
The Bigger Picture
Canada’s FATF evaluation is about more than compliance and credibility. It will determine whether the country’s AML regime is not only aligned with global standards but actually effective in protecting the integrity of its financial system.
For compliance professionals, this is a moment to demonstrate value: that your institution’s AML program is robust, risk-based, and operationally sound.
A strong FATF rating will affirm the years of progress Canadian institutions have made. A weak one could trigger new reforms, tighter regulations, and reputational damage that affects every sector.
Alessa