-- Businesses operating in Canada and the United States may face anti-money laundering and know-your-customer obligations depending on their industry, services, clients, and transaction activity.
AML and KYC compliance are often associated with banks, but the rules can also affect money services businesses, payment companies, securities firms, casinos, real estate businesses, dealers in certain goods, and other regulated sectors. For covered businesses, compliance is not limited to collecting identification. It can involve client verification, beneficial ownership reviews, risk assessments, ongoing monitoring, recordkeeping, reporting, staff training, and internal controls.
The first step is determining whether the business is subject to AML rules. In Canada, obligations under the federal anti-money laundering and anti-terrorist financing framework apply to reporting entities. These entities may need to identify clients, monitor business relationships, keep records, and report certain financial transactions. Money services businesses and foreign money services businesses may also need to register before operating in Canada.
In the United States, AML obligations are largely tied to the Bank Secrecy Act and rules administered by FinCEN. Covered financial institutions and money services businesses may need written AML programs, customer identification procedures, suspicious activity reporting, training, and independent review.
KYC is a central part of this framework. Businesses may need to understand who their clients are, who owns or controls a corporate client, where funds are coming from, what activity is expected, and whether the relationship presents higher risk. A business that only collects identification without assessing the purpose and risk of the relationship may miss important warning signs.
Beneficial ownership is another key issue. Corporate clients may have layered ownership structures, nominees, trusts, holding companies, or cross-border entities. For compliance purposes, businesses may need to identify who ultimately owns, controls, or benefits from the relationship.
AML and KYC obligations are also ongoing. Covered businesses may need to update client information, monitor transactions, review unusual activity, maintain records, and escalate concerns when activity does not match the client profile. Reporting obligations may apply when suspicious transactions or certain threshold-based transactions arise.
Cross-border operations can make compliance more complex. A company serving clients in both Canada and the US may need to consider which entity provides the service, which regulator applies, how records are stored, whether sanctions screening is required, and how staff escalate concerns across jurisdictions.
Technology can support compliance through identity verification, screening, monitoring, and case management tools. However, software does not replace accountability. Businesses still need clear policies, trained staff, documented decisions, and oversight of vendors and alerts.
For businesses reviewing AML and KYC responsibilities in Canada, the US, or both, the practical goal is to understand which rules apply and whether current policies reflect how the business actually operates.
For guidance on AML and KYC compliance, corporate governance, contracts, and cross-border business matters, click here to get in touch with Pace Law Firm’s Corporate and Commercial team.
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