Attention: The Honourable François-Philippe Champagne and Sarah Paquet, Director and Chief Executive Officer

Dear Minister Champagne and Ms. Paquet,

Re: Unintended financial exclusion of under housed and other vulnerable Canadians under the AML compliance regime

I am writing to request targeted, public FINTRAC guidance that clarifies how reporting entities should apply Canada’s anti money laundering and anti-terrorist financing requirements when serving under housed and under banked Canadians and other vulnerable people who cannot reasonably produce or retain standard identification.

CAPL represents private mortgage lenders and mortgage market participants. Industry members may serve consumers, including borrowers who may be under housed, under banked, or otherwise unable to meet standard identification expectations. We see the practical impact when customers are unable to open or keep bank accounts or are repeatedly asked for documents they cannot reasonably provide. These barriers disrupt legitimate housing related financial activity and can push transactions toward cash and informal workarounds. Clear, operational FINTRAC guidance would support consistent risk-based onboarding and help keep legitimate activity in regulated channels. This is not a request to weaken AML standards. It is a request to make the rules work the way they are meant to work. We get better AML outcomes when legitimate people and legitimate activity stay in regulated banking, where transactions can be monitored and suspicious activity can be reported.

Context and urgency: unclear rules are leading to refusal of service and weaker transparency

This issue needs attention now because, in practice, many institutions do not feel safe using current FINTRAC identification methods. When guidance is not clear, the easiest decision for a business is often to say no. That is especially true when staff are worried about regulatory pressure, such as a FINTRAC examination where they are criticized for not accepting anything other than a standard document set. The result is that un-banked clients can be turned away, repeatedly asked for documents they do not have, or have accounts restricted or closed. In plain terms, this is de-banking or de-risking.

This problem also shows up for legitimate businesses in sectors that some financial institutions treat as higher risk. These are sometimes called vulnerable sectors because they are more likely to face refusal of service, even when they are trying to comply. Examples can include remittance businesses, fintech businesses, digital asset and payment service providers, small money services businesses, and certain cash intensive or platform-based businesses. When banks refuse to provide accounts or basic payment services to legitimate businesses in these sectors, it can force them into workarounds that reduce transparency. It can also damage competition and push activity away from regulated channels.

De-banking can seriously harm legitimate people and legitimate businesses. It can also make AML outcomes worse. If people cannot use regulated accounts, they rely more on cash, informal help from others, and unregulated channels. That reduces transparency and makes it harder for the AML system to spot and stop money laundering, terrorist financing, and other serious crime.

Canada needs clearer guidance so the risk-based approach is applied consistently. The goal should be to manage risk with practical controls and good records, not to avoid risk by avoiding vulnerable sector customers.

The current imbalance: strong transparency for complex wealth, less clarity for basic access needs

Canada has measures aimed at sophisticated money laundering schemes, including beneficial ownership and control requirements for entities and enhanced expectations around complex ownership structures and higher risk segments. These measures are often most manageable for large institutions and clients with stable documentation, fixed addresses, and administrative continuity.

At the same time, many Canadians who are low risk and who have simple and traceable sources of funds, such as wages, pensions, CPP, OAS, and provincial income and disability supports, still struggle to open basic banking services because identity verification frameworks often assume stable housing, safe storage of documents, reliable digital access, and the ability to repeatedly re verify identity on demand.

Undeserved vulnerability in tangible terms: who is excluded and why this is not a risk signal

The people affected are not hypothetical. They show up at branches and onboarding desks every day. Many are trying to get back on their feet and need a bank account to receive wages or benefits, pay rent, and avoid carrying cash.

This includes under housed and under banked Canadians getting back on their feet, Indigenous peoples facing barriers to documentation and verification, survivors of domestic or family violence, people transitioning from incarceration or institutional care, people living with serious mental health conditions or cognitive impairment, and vulnerable seniors. Across these groups, the common issue is not secrecy or criminal intent. It is that their lives are not set up to keep documents safe, keep addresses stable, or complete multi step verification easily.

Why this is an anti-money laundering effectiveness issue

Excluding people from regulated banking does not reduce money laundering and terrorist financing risk. It increases cash handling, pushes transactions into informal arrangements, reduces transaction visibility, and makes monitoring and reporting harder.

Australia’s model: what AUSTRAC does specifically that Canada is missing

Australia has addressed these implementation problems by publishing dedicated guidance on assisting customers who do not have standard forms of identification, and by publishing guidance on de-banking and de risking for sectors assessed as higher risk. Australia’s approach is designed to create a shared understanding of the risk-based approach so businesses and banks do not treat unclear guidance as a reason to refuse service.

Several features of AUSTRAC’s approach are relevant to Canada:

• Australia publishes standalone public guidance in plain language that is meant to be used operationally
• Australia explicitly names vulnerable cohorts, including homelessness, Indigenous customers, domestic violence, and long term barriers
• Australia explains that vulnerability and lack of standard identification are not, by themselves, a money laundering and terrorist financing risk signal
• Australia provides practical examples of alternative identification pathways and expects institutions to document and apply them consistently
• Australia clarifies that alternative identification does not automatically mean a customer must be treated as high risk
• Australia ties the guidance to financial inclusion as supportive of AML outcomes, because it keeps people in transparent and monitored channels
• Australia aligns expectations so frontline staff, compliance teams, and regulators have the same understanding of what good looks like

Requested action: specific and implementable changes within FINTRAC guidance

I respectfully request that Finance Canada direct FINTRAC to publish a standalone guidance note modelled on AUSTRAC’s approach which is focussed on serving clients who cannot reasonably provide standard identification, under housed and other vulnerable clients. This guidance should be designed to create a common understanding across reporting entities and to reduce inappropriate refusal of service driven by misunderstanding, reputational concerns, and perceived regulatory risk exposure.

At minimum, the guidance should:

• Recognize foreseeable vulnerable circumstances
• Confirm that vulnerability is not itself a money laundering and terrorist financing risk indicator
• Require a documented and consistent alternative verification procedure
• Provide regulator endorsed alternative verification pathways using existing FINTRAC methods
• Provide an AUSTRAC style non exhaustive list of acceptable evidence types
• Clarify ongoing use of alternatives for long term barriers
• Publish a standardized Alternative Verification Record template
• Align examiner expectations and confirm the examination lens

Conclusion

Canada already has many of the legal tools needed to serve vulnerable clients within a risk based anti-money laundering framework. What is missing is clear guidance that gives staff and institutions confidence to use those tools consistently.

Australia’s experience shows that clearer guidance can reduce inappropriate de-banking and can strengthen AML outcomes by keeping legitimate activity in regulated channels. Canada can do the same through a practical guidance note that supports managed inclusion with strong documentation and proportionate controls.

Thank you for considering this request. I would welcome the opportunity to provide further input or participate in any consultation or working group on vulnerability aware anti money laundering guidance.

Respectfully,

Samantha Gale
CAPL Chief Executive Officer
s.gale@privatelenderassociation.ca