Canada Expected to Dodge FATF ‘Grey List’ After International Financial-Crime Review, Sources Say
Canada is on track to avoid being placed on a global watchlist of countries with weak financial-crime controls, according to two sources familiar with an ongoing international review of the country’s anti-money-laundering regime. The preliminary findings come as assessors from the Financial Action Task Force (FATF) hold their plenary session in Paris this week.
What Is the FATF and Why Does It Matter?
The FATF is a 40-member intergovernmental body that sets global standards for combating money laundering and terrorist financing. It conducts in-depth evaluations of member countries and publishes the results. Canada also belongs to the Asia/Pacific Group on Money Laundering, a related 42-member regional body that is co-participating in this review.
Countries that fail FATF evaluations are placed on one of two lists. Those with serious deficiencies land on the “black list” — currently home to Iran, North Korea and Myanmar. Those with lesser but significant shortcomings are placed on the “grey list,” which currently includes more than 20 jurisdictions such as Kuwait, Monaco, the British Virgin Islands and Venezuela.
Grey-listed countries face heightened international scrutiny of their banks, legal systems and supply chains. That scrutiny can deter foreign investment, disrupt trade and negatively affect a country’s sovereign credit rating.
Preliminary Ratings Suggest Canada Is Safe — For Now
Canada’s provisional ratings, assigned by the evaluation team ahead of this week’s Paris plenary, appear sufficient to keep the country off the grey list, the sources told The Globe and Mail. The sources were not identified because they were not authorized to speak publicly about the matter.
The review has not yet concluded, and preliminary findings remain subject to change. The FATF is expected to publish its final report in September or October. Officials at the Department of Finance have received a confidential draft of the assessment’s initial findings.
Both the FATF and the Department of Finance declined to comment on specifics. “The FATF mutual evaluation process is a robust and iterative process in order to ensure a complete picture,” FATF spokesperson Stefanie Mair wrote in an email. “Conclusions should therefore not be drawn until that process is complete.”
Key Weaknesses Identified in the Review
Despite the relatively positive outlook, assessors flagged several areas of concern.
Canada Lobbying for Better Ratings
Canadian officials are expected to hold in-person discussions with the assessment team before a final draft is shared with all FATF delegations later this week. Sources say Ottawa will push to have some provisional ratings upgraded.
The government is also pointing to recent policy announcements as evidence of progress. These include the creation of a Financial Crimes Agency, a proposed ban on cryptocurrency ATMs and the development of a national anti-fraud strategy.
Enhanced Follow-Up Remains a Possibility
Even if Canada avoids the grey list, it could still face enhanced follow-up from the FATF — a less desirable outcome that requires more frequent reporting on remedial actions, though it typically has no direct impact on a country’s banks or financial system.
Canada was previously placed in the FATF’s enhanced follow-up process after its last evaluation in 2016. It returned to regular reviews in 2021 after enacting corrective measures. Securing regular reviews again is considered a point of national pride, and Finance officials are expected to resist any push for enhanced follow-up, the sources said.
The FATF plenary runs from June 17 to 19 in Paris. Canada’s evaluation will then be discussed at an Asia/Pacific Group on Money Laundering meeting in July.
With a report from Bill Curry
