Budget Implementation Act, 2024, No. 1: proposed legislative amendments relevant to financial services regulation

On April 30, the federal government (the Government) tabled the Budget Implementation Act, 2024, No. 1 (the Bill), which was tabled as a Notice of Ways and Means Motion on April 30th, then introduced for First Reading on May 2 as Bill C-69. In our previous bulletins, we discussed the introduction of consumer-driven banking legislation in Budget 2024 and the Bill. In this bulletin, we discuss other long-awaited key legislative amendments relevant to financial services regulation.

What you need to know

• The Bill sets out several amendments relevant to financial services providers, including regulated financial institutions, reporting entities and non-regulated lenders, in order to implement certain Government objectives set out in Budget 2024.
• Amendments relating to money laundering and terrorist financing aim to strengthen information sharing with respect to potential money laundering and terrorist financing violations and offences, and expand the “money services business” category.
• Additional amendments have been proposed to the criminal interest rate provisions in the Criminal Code (Canada) supplementing amendments proposed in 2023, which would expand the scope of offences to include offering, or advertising an offer to, enter into an agreement or arrangement providing for the receipt of interest at a criminal rate.
• Amendments to the Bank Act seek to clarify and future-proof definitions of “deposit-type instrument” and “principal-protected note”.
• Amendments have been proposed to the Bank Act, the Insurance Companies Act and the Trust and Loan Companies Act respecting diversity disclosure, to be supplemented by regulations.

Amendments relating to money laundering and terrorist financing

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act

In Budget 2024, the Government announced its intention to introduce legislation to combat money laundering, terrorist financing and sanctions evasion through amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the PCMLTFA), the Criminal Code (Canada) and other statutes.

Accordingly, the Bill sets out amendments to the PCMLTFA:

• permitting information sharing by a reporting entity of an individual’s personal information to another reporting entity without the individual’s consent where (a) the information was collected in the course of the person’s or entity’s activities; (b) the disclosure is reasonable for the purpose of detecting or deterring money laundering, terrorist activity financing or sanctions evasion; (c) making the disclosure with the individual’s knowledge or consent would risk compromising the ability to detect or deter money laundering, terrorist activity financing or sanctions evasion; and (d) the disclosure is made in accordance with the regulations to the PCMLTFA (with additional proposed amendments relevant to disclosures of personal information noted below);
• expanding the categories of entities and bodies to whom FINTRAC is permitted to disclose information to include an agency or body that administers the civil asset forfeiture legislation of a province, if FINTRAC also has reasonable grounds to suspect that the information would be relevant to proceedings under that legislation;
• expanding the “money services business” and “foreign money services business” categories (together, MSBs) (and, accordingly, strengthening the registration framework for MSBs) to include armoured car services and cheque cashing businesses, which no longer include cheques payable to a named person or entity;
• allowing FINTRAC to publicize more information respecting its decisions to administer administrative monetary penalties for violations of the PCMLTFA, including the reasons for its decision, as well as the relevant facts, analysis and considerations that formed part of the decision, with the objective of strengthening transparency and compliance; and
• making technical amendments to close loopholes and correct inconsistencies.

We note that consequential amendments have also been proposed to the existing Personal Information Protection and Electronic Documents Act and its proposed successor, the Consumer Privacy Protection Act (currently part of Bill C-27). These amendments are meant to ensure that disclosures of personal information without consent as permitted under the PCMLTFA are also permitted under privacy law.

Criminal Code (Canada)

Amendments have also been made to the Criminal Code (Canada), legislation that broadly prohibits money laundering as a criminal offence.

These provisions:

• allow courts to issue an order to require a financial institution to keep an account open to assist in the investigation of a suspected criminal offence where there are reasonable grounds to suspect that an offence under a federal or provincial act has or will be committed and that keeping the account open will assist in the investigation of the offence; and
• allow courts to issue a repeating production order to authorize law enforcement to obtain ongoing, specified information on activity in an account or multiple accounts connected to a person of interest in a criminal investigation.

These amendments are noteworthy as regulated financial institutions often choose to derisk these types of clients and close their accounts, but courts now have the ability to require financial institutions to keep such accounts open.

Amendments to the Criminal Code (Canada)—criminal interest rates

In our previous bulletin, we outlined amendments to the criminal interest rate provisions in the Criminal Code (Canada) that were set out in the Budget Implementation Act, 2023 and the Criminal Interest Rate Regulations, amendments which have not yet come into force. These amendments, among other things, propose to lower the criminal interest rate from 60% EAR to 35% APR, in furtherance of the Government’s objectives of cracking down on predatory lending.

In the Bill, further amendments to the criminal interest rate provisions in the Criminal Code (Canada) have been set out, which expand existing prohibitions against lending at a criminal rate of interest and demonstrate the Government’s continued objective of cracking down on predatory lending. The provisions currently in force provide for two separate categories of offences: (1) entering into an agreement or arrangement to receive interest at a criminal rate, and (2) receiving a payment or partial payment of interest at a criminal rate. The amendments set out in the Bill propose to expand these potential offences by adding prohibitions against offering to enter into an agreement or arrangement to receive interest at a criminal rate, or advertising an offer to enter into an agreement or arrangement that provides for the receipt of interest at a criminal rate. Such amendments would create the potential for a lender to violate the criminal interest rate provisions even where there is no agreement in place, such as through public advertisements or verbal offers.

Corresponding amendments have also been made to relevant definitions. The proposed amended definition of “credit advanced” includes not only credit actually advanced but also credit that would be advanced if an agreement or arrangement—as offered, including in an advertisement—was entered into, and the proposed amended definition of “interest” includes not only charges or expenses actually paid but also those that would be paid or payable if such an agreement or arrangement was entered into, by or on behalf of the person to whom the credit is, is to be, or would be advanced.

Once in force, these amendments, in addition to the 2023 amendments, will have significant impact on both financial institution and non-financial institution lenders, who should be carefully examining their loans and turning their minds to potential breaches of these tightened prohibitions, where applicable.

Amendments to the Bank Act—deposit-type instruments and principal-protected notes

In Budget 2024, the Government proposed to introduce amendments to the Bank Act that seek to update and future-proof the definitions of “deposit-type instruments” and “principal-protected notes” to ensure that term deposits issued based on interest rate benchmarks such as the Canadian Overnight Repo Rate Average (CORRA) are considered to be deposit-type instruments, and in support of the phase-out of the Canadian Dollar Offered Rate (CDOR) effective June 28, 2024.

Accordingly, the Bill introduces a new definition of “interest rate benchmark”, defining it as “a rate that is determined from time to time by reference to an assessment of one or more underlying interests, is made available to the public, either free of charge or on payment, and is used for reference for determining the interest payable, or other sums that are due, under loan agreements or other financial contracts or instruments”. Additionally, references to the outdated “bankers’ acceptance rate”, including in the definition of “deposit-type instrument” will be replaced with the broader concept of “interest rate benchmark”, and the definition of “principal-protected note” will also be amended to clarify that financial instruments using interest rate benchmarks such as CORRA are treated as deposit-type instruments for the purposes of the Bank Act.

Amendments to FRFI statutes—diversity disclosure and sunset date

The Bill introduces proposed legislative amendments, which were initially announced in Budget 2023, to the Bank Act, the Insurance Companies Act and the Trust and Loan Companies Act to adopt the Canada Business Corporations Act diversity disclosure model for federally regulated financial institutions (FRFIs). These provisions will require FRFIs to make available on an annual basis prescribed information respecting diversity among directors and members of senior management—such prescribed information, and further detail relating to these requirements, will be set out in regulations to come.

Additionally, the Bill sets forth proposed legislative amendments to the FRFI statutes to extend the sunset date (beyond which the financial institutions can no longer carry on business) to June 30, 2026, from the current date of June 30, 2025.