Canada is about to make doing business far more expensive for companies that stumble on anti–money laundering (AML) rules. Under Bill C-12, penalties for failing to meet reporting obligations could jump as much as 40 times current levels. On paper, that sounds like a tough, no-nonsense response to dirty money. In reality, it risks creating more paperwork, more fear, and more legal battles without meaningfully strengthening Canada’s ability to fight financial crime.
There’s no doubt the intent is serious. The bill, which has already passed the House of Commons and awaits Senate approval, would dramatically expand FINTRAC’s enforcement muscle. In theory, that should push banks, jewellers, crypto firms, casinos and others to take compliance more seriously. A fine that runs into the hundreds of millions of dollars has a way of getting the attention of boardrooms.
But severity alone does not equal effectiveness.
Take a hypothetical example that’s already being discussed in legal circles. If a large bank were again found to have failed to report a relatively small number of suspicious transactions, penalties could soar from millions into the hundreds of millions. Faced with that kind of exposure, companies will not become more thoughtful or precise in their reporting. They will become defensive.
The predictable response is overreporting. When the downside of missing something is catastrophic, the safest strategy is to report everything whether it’s truly suspicious or not. As one compliance professional put it bluntly: “Smile and file.” That approach may protect firms from penalties, but it floods the system with noise.
And noise is the last thing Canada’s AML framework needs.
FINTRAC already receives enormous volumes of data, and higher fines will only accelerate that trend. More reports do not automatically translate into better enforcement outcomes, especially when law enforcement agencies lack the capacity to act on them. Several experts have been warning about this for years: Canada simply does not have enough trained financial crime investigators, prosecutors, or dedicated infrastructure to turn raw data into real-world consequences.
The result is a system heavy on compliance theatre and light on enforcement impact.
To be fair, the escalating fines have had one positive effect. They have strengthened the hand of compliance officers inside companies who have long struggled to justify the cost of proper oversight. When the risk of a massive penalty looms, budgets suddenly become easier to approve. In that sense, the threat of punishment does change corporate behaviour.
But it also changes it in ways that may not serve the public interest. Overreporting can bury genuinely dangerous activity under mountains of marginal or irrelevant filings. If enforcement agencies can’t separate signal from noise, criminal networks don’t get disrupted they just get better at hiding.
There’s also another consequence that’s being underestimated: litigation. When fines rise to nine-figure territory, companies will fight back. Court challenges will multiply, slowing enforcement and draining public resources. FINTRAC has been down this road before, including a Supreme Court ruling that once forced it to pause penalties altogether. Bigger fines almost guarantee bigger legal battles.
All of this is happening against the backdrop of international pressure. Canada has faced repeated criticism for being a soft target for money laundering, and the government clearly wants to send a message to global partners, to criminals, and to voters that the era of lax enforcement is over.
But tough talk and tough fines are not the same as tough enforcement.
Without a properly resourced financial crimes agency, without trained investigators, and without seamless coordination between regulators and police, higher penalties risk becoming a blunt instrument. They may look impressive on a balance sheet, but they won’t necessarily lead to more arrests, more prosecutions, or more criminal networks dismantled.
If Canada is serious about combating money laundering, fines should be the final lever not the first. The real work lies in building capacity, investing in expertise, and ensuring that the system can actually act on the information it collects.
Until then, Bill C-12 may succeed in making compliance more expensive but not necessarily in making Canada safer.
