2024 Fall Economic Statement

What a time to be alive. Pausing from yesterday’s unprecedented fall economic statement day, the following is a short summary of certain measures proposed in the 2024 Fall Economic Statement (“Statement”).

Cracking Down on Hidden Fees

Coincidentally, on a client call this morning discussing the new criminal rate of interest and NSF fees, we discussed the likelihood of the provincial and territorial governments following the federal government’s proposed ‘crack down on hidden fees’. In the Statement, the federal government is calling on the provinces and territories to address hidden fees in consumer transactions in their jurisdictions including in respect of concert tickets and sport tickets.

?Criminal rate of interest

The federal government will amend the payday lending exemption in the Criminal Code to prohibit the sale of credit insurance products in connection with a payday loan. Further amendments to the payday lending exemption would require the minimum term on payday loans of 42 days and for lenders to accept payment in installments (as 12 month transition period would be provided for the payday lending industry to comply).

?Credit card fees

The federal government is considering enacting laws to compel payment processors to fully pass credit card transaction fee savings on to small businesses.

Money Laundering and Terrorist Financing

Proposed changes to Canada’s federal anti-money laundering and anti-terrorist financing regime include:

• Requiring all reporting entities to register with FINTRAC (i.e., expanding the money service businesses (“MSBs”) registration requirement to all other reporting entities).
• Allowing FINTRAC to disclose information to the Office of the Commissioner of Canada Elects to deter and detect illicit financing and foreign interference in Canadian elections.
• Including company service providers as reporting entities.

?A new task force is proposed for law enforcement and the financial sector is proposed to exchange and analyze information concerning high-end money laundering schemes, including fentanyl trafficking.

Stronger Penalties for AML/ATF Financial Crimes

The administrative monetary penalty (“AMPs”) amounts under Canada’s federal anti-money laundering and anti-terrorist financing regime will be increased, as to individual AMP amounts, by 40 times the current amount, and an aggregate penalty limit is proposed for all AMPs issued in a single Notice of Violation (the greater of: $4 million for an individual and $20 million for an entity; and 3 per cent of annual worldwide gross revenue.

Additional AMP measures include:

• Enabling the refusal or revocation of registration for an MSB with an outstanding AMP.
• Increasing fines for all criminal offences by 10 times the current amount.
• Introducing a criminal offence for false, misleading, or incomplete information by a reporting entity to FINTRAC, which would not apply to the passing on of unsuspicious information provided by a client.
• Increasing AMPs for the violation of existing compliance program requirements (re-classifying such AMPs as ‘very serious’).
• Requiring a reporting entity and FINTRAC to enter into a compliance agreement following the issuance of an AMP, obligating the reporting entity to undertake specific actions to address the deficiencies that led to the AMP.
• Creating a new overarching requirement for reporting entities to establish and maintain an effective, risk-based, and reasonably designed compliance program.
• Introducing a requirement for the FINTRAC Director to issue a public compliance order if a compliance agreement is not adhered to, with a corresponding AMP, specifically, the greater of up to: $5 million for an individual and $30 million for an entity; and 3 per cent of annual worldwide gross revenue.

To implement the proposed stricter penalties for financial crimes, the federal government intends to increase the coordinated exchange of regulatory and supervisory information among federal agencies with financial sector responsibilities.

Sanctions

Amendments are proposed to the Special Economic Measures Act to allow the federal government to levy a targeted charge against the windfall of profits generated on frozen assets held in Canada, such amendment being referred to as the “Made-in-Canada version of the European Union’s windfall profit mechanism. This EU mechanism prevents financial institutions from profiting from their sanction obligations and finances the repayment of new loans to Ukraine by the windfall profits from interest accrued on frozen Russian assets.

Consumer-Driven Banking

The federal government intends to introduce legislation to address the remaining elements of the consumer-driven banking framework, including providing the Minister of Finance with the authority to designate a provincial or territorial authority to supervise prescribed institutions, establishing an intergovernmental advisory committee, and addressing Canada’s national security mandate in the context of protecting Canadian’s financial information from “hostile actors”.

The federal government intends on launching the consumer-driven banking framework in early 2026.

Predatory debt advisors

Monetary penalties and civil remedies, including restitution, for non-compliance with the Bankruptcy and Insolvency Act are proposed to address unlicensed debt advisors (also known as lead generators) who falsely market themselves as licensed insolvency trustees regulated by the Office of the Superintendent of Bankruptcy. Such unlicensed debt advisors may suggest a consumer file a consumer proposal or bankruptcy, without disclosing to the consumer the implications of such actions.

?Securing Canada’s AI advantage

On the heels of Budget 2024’s $2.4 billion in AI support, the Statement introduces the Canadian Sovereign AI Compute Strategy, to provide support to researchers and innovative AI firms.