Canada’s anti-money-laundering watchdog is planning to instruct banks and other regulated businesses to increase their scrutiny of funds flowing to or from Iran as it records a sharp increase in suspicious transactions from the sanctioned country.
The Financial Transactions and Reports Analysis Centre of Canada, or FinTRAC, told The Globe and Mail it expects to imminently publish updated requirements for those companies to conduct enhanced monitoring, due diligence and recordkeeping – marking its second such advisory about Iran this year.
Financial intelligence agencies in Canada and other countries are intensifying their attention on Iran at a time of heightened geopolitical risk. Tensions continue to run high in the Middle East in the wake of Israeli and U.S. bombing of Iranian nuclear sites and Tehran’s missile attacks on Israel.
FinTRAC’s directive to businesses will be based on new recommendations from the Financial Action Task Force, the global body that sets standards to fight financial crime. The FATF, as it is known for short, recently issued a “call for action” regarding countries on its “black list,” including Iran, North Korea and Myanmar.
Those high-risk jurisdictions are deemed to have “significant strategic deficiencies” in their regimes that elevate the hazard of money-laundering, terrorist fundraising and the financing of weaponry.
When issuing its call for action on June 13, the FATF stressed that Iran has failed to complete an action plan that was devised in 2016 to address issues including lax customer due diligence and the improper scrutiny of wire transfers by banks.
The FATF has also called on Iran to identify and freeze terrorist assets and demonstrate how its “authorities are identifying and sanctioning unlicensed money/value transfer service providers.”
“Until Iran implements the measures required to address the deficiencies identified with respect to countering terrorism financing in the Action Plan, the FATF will remain concerned with the terrorist-financing risk emanating from Iran and the threat this poses to the international financial system,” its statement said.
For its part, FinTRAC is expected to issue updated guidance reflecting those concerns over the coming days.
Canadian companies, including banks, credit unions and money services businesses are already required by federal law to treat all financial flows originating from, or bound to Iran, as “high-risk transactions” – no matter the amount – and report them to FinTRAC, according to an advisory dated March 21.
Businesses are also required to verify the identities of clients who send or receive value via those transactions and ascertain the source of funds or virtual currencies among other obligations.
The instructions contained in FinTRAC’s advisory are based on a directive by former finance minister Bill Morneau that took effect on July 25, 2020.
Canada, which announced additional sanctions against Iran earlier this year, designated that country’s Islamic Revolutionary Guard Corps as a terrorist entity in 2024.
FinTRAC is already recording a sharp increase in the number of Suspicious Transaction Reports from regulated businesses regarding money flows involving Iran, according to new data.
During its 2024-25 fiscal year, FinTRAC received 19,572 STRs filed in response to the ministerial directive on Iran, based on preliminary data compiled by the regulator. That compares with 6,866 STRs filed in 2023-24 and 142 STRs filed in 2020-21 (the first year the ministerial directive was in force).
Transactions involving Iran, however, occur both inside and outside the regulated system, creating regulatory blind spots.
For instance, the Cullen Commission of Inquiry into Money Laundering in British Columbia noted there are significant money-laundering risks associated with money services businesses, also called MSBs, and more informal value transfer systems including the money-exchange practice of saraf in Iran.
When banks shutter the accounts of MSBs, some “operate underground” to evade the authorities, the commission’s 2022 report stated.
As of March 31, there were a total of 2,778 MSBs registered with FinTRAC. Businesses that fail to register risk being flagged to police.
“We’ve significantly ramped up our non-compliance disclosures to law enforcement – with an eye particularly on MSBs," Darren Gibb, FinTRAC’s head of communications, said in an e-mail.
In fiscal 2024-25, FinTRAC made 32 of those disclosures to police, up from 14 in the prior year.