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Fintech Regulatory Developments: 2019 Year in Review

McCarthy Tetrault | Ana Badour | Jan 7, 2020

fintech regulatory roundup - Fintech Regulatory Developments: 2019 Year in ReviewAs anticipated in our 2018 year in review, there were significant and notable developments in the Canadian Fintech industry in 2019. The following is a summary of some of the key Fintech developments in 2019 and some noteworthy regulatory developments to keep a watchful eye on in 2020.



  • Department of Finance Canada Consultation Paper on Open Banking: On January 11, 2019, the Department of Finance Canada released a consultation paper (the “Open Banking Consultation Paper”) seeking the views of Canadians on the potential benefits and risks of an open banking system in order for such feedback to be shared with and reviewed by the Advisory Committee on Open Banking (the “Open Banking Committee”). The Open Banking Consultation Paper defined “open banking” as “a framework where consumers and businesses can authorize third party financial service providers to access their financial transaction data, using secure online channels” (“Open Banking”). The Open Banking Consultation Paper sought feedback in relation to the benefits and risks of Open Banking for Canadian consumers and what role (if any) the federal government should play in the implementation of Open Banking in Canada.

The Open Banking Consultation Paper specifically sought stakeholder perspectives on the following risks, in particular: (i) what specific consumer protection elements are needed for the sharing of financial transaction data under Open Banking; (ii) how to manage the risks or enhance the benefits that Open Banking may pose from a privacy perspective; (iii) how to manage the risks or enhance the benefits that Open Banking may pose from a cyber security perspective; and (iv) whether Open Banking presents new prudential risks to financial institutions, and how to mitigate to those risks.

See:  Recent Fintech Reports and Research

Following the release of the Open Banking Consultation Paper, Finance Canada engaged in a consultation process related to Open Banking.

  • Senate Open Banking Report: On June 19, 2019, the Standing Senate Committee on Banking, Trade and Commerce released its report entitled: “Open Banking: What it Means for You” (the “Open Banking Report”). The Open Banking Report examined the potential regulatory role of the federal government in respect of open banking, as well as the benefits and challenges of open banking in a Canadian context. The Open Banking Report: (i) recommended the development of a principles-based framework for open banking, to be developed by industry stakeholders and integrated with existing financial and privacy legislation; (ii) identified industry stakeholders; (iii) suggested coordination between the federal and provincial governments to facilitate initiatives related to an open banking framework; (iv) recommended that the Financial Consumer Agency of Canada (“FCAC”) be given oversight to regulate the risks posed to consumers by the practice of screen scraping; (v) recommended funding consumer protection advocacy groups to bring awareness to the benefits and risks of screen scraping; (vi) recommended that the federal government introduce legislation to establish the scope of open banking in order to ensure the continued stability of the Canadian financial system and protection of Canadian consumers; (vii) recommended the swift modernization of the Personal Information Protection and Electronic Documents Act (PIPEDA) in order to align it with General Data Protection Regulation (GDPR) as the global privacy standard; and (viii) recommended the Privacy Commissioner of Canada and the Canadian Commissioner of Competition as co-regulators of open data frameworks.


See:  Securities Exchange Commission’s Advocate for Small Business Capital Formation – Annual Report 2019


  • New Administrative Monetary Penalties Policy and New Tools in Respect of Compliance and Examination Process: On February 7, 2019, the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) issued a new Compliance Framework and Assessment Manual, as well as a revised Administrative Monetary Penalties Policy (together with sample penalty calculation) and a notice on Voluntary Self-Declaration of Non-Compliance. These new tools provide significantly more insight into the examination and penalty assessment process of FINTRAC and follow the 2016 Federal Court of Appeal decision in Canada v. Kabul Farms Inc. (and other similar decisions), where the court found that the use by FINTRAC of an unpublished formula to assess the amount of an administrative monetary penalty raised procedural fairness concerns.
  • Amending Regulations: On July 10, 2019, amending regulations (“Final Regulations”) were issued amending each of the existing regulations (the “PCMLTFA Regulations”) under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the “PCMLTFA”). These included changes to expand the applicability of the PCMLTFA Regulations to virtual currency activities, prepaid cards and foreign money services businesses. The primary aim of the Final Regulations was to improve the effectiveness of Canada’s anti-money laundering and counter-terrorism financing regime, close gaps in the regime and improve compliance with international standards.
  • Updated Guidance on Verifying the Identity of Individuals and Other Entities: FINTRAC updated its guidance on Methods to verify the identity of an individual and confirm the existence of a corporation or an entity other than a corporation effective October 2019. The updated guidance reflected the change to “authentic, valid and current” documentation and provides greater flexibility to businesses to effectively comply with identification requirements by allowing the use of new technologies to verify identity and authenticate documents.
  • Financial Action Task Force Guidance on Virtual Assets: On June 21, 2019, the Financial Action Task Force[1] (the “FATF”) released Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers as well as a Draft Interpretive Note to FATF Recommendation 15 addressing virtual assets (together, the “FATF Guidance”). The FATF Guidance clarifies a risk-based approach to virtual assets and virtual asset service providers for anti-money laundering and counter terrorism financing purposes (including the application of the travel rule to virtual assets). The FATF has provided member countries (which include Canada) with 12 months to adopt these guidelines, with a review set for June 2020.

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