Non-Financial Institution Mortgage Lenders May Soon Become Subject to Anti-Money Laundering/Anti-Terrorist Financing Regime

Proposed amendments to certain regulations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) purport to subject non-financial institution mortgage lenders to the PCMLTFA regime (the “Proposed Regulations”). Among other regulatory initiatives, and to support a more effective anti-money laundering/anti-terrorist financing (AML/AFT) regime, the Proposed Regulations are intended to ensure mortgage lending entities are adequately supervised for AML/AFT purposes.

A consultation period regarding the Proposed Regulations is now open to the public. Comments can be submitted until March 20, 2023.


Mortgages issued by “financial entities” designated under the PCMLTFA (e.g., banks and foreign banks, credit unions and cooperatives, trust and loan companies) are already subject to AML/ATF requirements. In recent years, though, an increasing number of mortgages have been issued by unregulated mortgage lenders. The Department of Finance notes that these unregulated mortgage lenders can be highly vulnerable to misuse for receiving funds that are proceeds of crime (such as a down payment or repayment of the loan) and for lending potential proceeds of crime to clients.

To mitigate the risks of money laundering and terrorist financing activity in the mortgage lending sector, the Proposed Regulations capture as reporting entities under the PCMLTFA, entities of all sizes involved in the mortgage lending process. This would include brokers responsible for mortgage origination, lenders responsible for underwriting the loan, and administrators responsible for servicing the loan, as more specifically defined below.

The Proposed Regulations would support Canada’s implementation of the international Financial Action Task Force (FATF) Standards, which require all mortgage lending businesses to comply with AML/ATF requirements.

Highlights of the Proposed Regulations


The persons or entities to which the Proposed Regulations apply are broadly defined as follows:

  • Mortgage lender” is “a person or entity, other than a financial entity, that is engaged in providing loans secured by mortgages on real property or hypothecs on immovables”.
  • Mortgage broker” is “a person or entity that is authorized under provincial legislation to act as an intermediary between a mortgage lender and a borrower”.
  • Mortgage administrator” is “a person or entity, other than a financial entity, that is engaged in the business of servicing mortgage agreements on real property or hypothec agreements on immovables on behalf of a lender”.

Obligations of Mortgage Lenders, Brokers and Administrators

The Proposed Regulations, once in force, would require mortgage lenders, brokers and administrators to:

  • develop an AML/AFT compliance program;
  • apply customer due diligence measures (e.g., identity verification and beneficial ownership requirements);
  • maintain appropriate records (e.g., client identification records);
  • report transactions, including suspicious and large cash ($10,000 or more) transactions, to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC); and
  • follow ministerial directives and transaction restrictions when funds go to or come from certain countries.

FINTRAC can impose administrative monetary penalties or take other enforcement actions against the reporting entities for non-compliance. Administrative monetary penalties will be added to existing PCMLTFA regulations, the range of which will depend on the harm done by the violation and the reporting entity’s history of compliance. The penalty for a minor violation would range from $1 to $1,000 per violation, a serious violation would be from $1 to $100,000 per violation, and a very serious violation would be from $1 to $100,000 per violation for an individual and from $1 to $500,000 per violation for an entity.

Coming Into Force

Recognizing businesses will need time to implement these changes, the Department of Finance indicates it will allow eight months of transition time for businesses to comply with the new requirements after the Proposed Regulations (as may be amended) are enacted.

FINTRAC intends to undertake outreach activities, publish specific guidance that sets out how reporting entities should meet their obligations, and work with industry representatives to establish typologies that can help reporting entities gain a better understanding of potential scenarios and appropriate courses of action.

Looking Forward

The Proposed Regulations would align requirements for unregulated mortgage lenders with existing AML/ATF requirements for federally regulated mortgage lenders, real estate brokers/sales representatives and developers, with a view to enhancing the effectiveness of Canada’s AML/ATF regime.

For further information about the Proposed Regulations or how to ensure compliance with the new regulatory framework once in force, please contact any member of our Financial Services Regulatory Group.