Budget 2026: Ottawa plans to shift oversight of banks’ anti-money-laundering efforts from FinTRAC to OSFI

Ottawa is planning to shift the supervision of banks’ efforts to fight financial crime from Canada’s anti-money-laundering watchdog to the federal banking regulator.

The federal government announced its plan to transfer that oversight role from the Financial Transactions and Reports Analysis Centre of Canada, known as FinTRAC, to the Office of the Superintendent of Financial Institutions, or OSFI, in the federal budget released on Thursday.

The budget document said the change is intended to “enhance the anti-money laundering and anti-terrorist-financing supervision and compliance of the largest financial institutions.”

Department of Finance spokesperson Marie-France Faucher said the transfer of responsibility is not linked to any report or specific enforcement matter, and will result in “stronger, more integrated supervision of federal financial institutions under a single regulator.”

“OSFI can leverage its expert knowledge of and existing relationships with federal financial institutions to facilitate improved anti-money laundering and anti-terrorist financing outcomes,” Ms. Faucher said in a statement provided to The Globe and Mail.

She added that supervising financial institutions’ compliance with anti-money-laundering and anti-terrorist-financing rules aligns with OSFI’s objective of bolstering public confidence in the financial system.

The proposal follows the publication of a report late last month by the federal Auditor-General, which found delays in FinTRAC’s production of financial intelligence. The report also stated that the anti-money-laundering watchdog is overseeing too many businesses to effectively monitor their compliance with financial-crime laws.

FinTRAC previously told The Globe that it has processes in place to produce financial intelligence on an urgent basis, and that it has taken “extensive action to strengthen its supervision program.”

The federal government has been expanding FinTRAC’s scope in recent years, bringing additional sectors such as mortgage brokers and title insurers under the watchdog’s purview. There are currently 38,000 businesses subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, according to FinTRAC.

The Auditor-General’s report found that as the number of registered businesses under FinTRAC’s supervision ballooned, the watchdog started performing more “light-touch” and automated assessments. While these evaluations were completed faster, they provided the watchdog with less assurance that businesses were complying with laws and regulations, the report said.

OSFI already has some responsibility for supervising banks’ anti-money-laundering compliance. Those duties include ensuring that federally regulated financial institutions have policies and procedures in place to protect themselves from threats to their integrity and security, a spokesperson for the organization previously told The Globe.

The change proposed in the budget follows a global review of Canada’s financial-crime regime by the Financial Action Task Force, an intergovernmental body that establishes international standards for anti-money laundering. The outcome of the review was published earlier this year.

The task force gave Canada a passing grade but identified a number of weaknesses. It criticized FinTRAC’s supervisory activities, including its examinations of large domestic banks, calling them “not sufficiently frequent and not commensurate with risks.”

Alana Scotchmer, a partner at Gowling WLG who specializes in financial-services regulation, said that the proposed change only applies to federally regulated institutions, not securities dealers, provincially regulated credit unions or trust companies. That means there would be two anti-money-laundering supervisors in the financial sector, “and consistency between them will matter.”

“OSFI is a prudential regulator and supervisor, not a financial intelligence unit like FinTRAC. It has largely moved to principles-based supervision, and the FATF itself notes that OSFI doesn’t do hands-on [anti-money-laundering] examinations today. How it operationalizes this … will be the real test,” Ms. Scotchmer said in an e-mail.

The Canadian Bankers Association said in a statement that it “welcomes the continued risk-based evolution” of Canada’s anti-money-laundering framework, including the new proposal to transfer oversight responsibility.

In 2024, Toronto-Dominion Bank became the first lender in U.S. history to plead guilty to conspiracy to commit money laundering, after a decade of moving money for criminal organizations. The bank was fined US$3-billion by the U.S. government for gaps in its American anti-money-laundering measures.

FinTRAC, which only oversees the activities of Canadian banks domestically, has levied some of its largest-ever monetary penalties against financial institutions in recent years. In 2024, the watchdog ordered Toronto-Dominion Bank to pay nearly $9.2-million for faulty anti-money-laundering controls, while RBC was fined $7.5-million and CIBC was ordered to pay more than $1.3-million.