Ottawa gave its failing financial crimes watchdog a spanking. That’s not enough

John Turley-Ewart is a contributing columnist for The Globe and Mail, a regulatory compliance consultant and a Canadian banking historian.

Minister of Finance François-Philippe Champagne declared early last week that “fraud and money laundering are serious crimes that harm Canadians.” He went on to say that the federal government is “taking bold action against these threats” by introducing tougher anti-financial crime legislation, Bill S-8.

Mr. Champagne is accountable for the Financial Transactions and Reports Analysis Centre of Canada, or FinTRAC, the country’s financial intelligence unit that helps enforce anti-money laundering and financial crime laws across thousands of businesses, including Canada’s chartered banks.

The Auditor-General’s recent audit of FinTRAC, released just days before Mr. Champagne tabled Bill S-8, details a dysfunctional agency that celebrates busy work while obscuring from Parliament and public view what matters – outcomes. The Auditor-General concluded that FinTRAC “did not effectively carry out its role in overseeing compliance with Canada’s anti-money laundering laws or producing financial intelligence.”

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

The penalty for its incompetence was buried in the fine print of Thursday’s federal budget: FinTRAC will no longer supervise Canada’s chartered banks. The responsibility will be restored to The Office of the Superintendent of Financial Institutions, where it belongs.

But that is not enough. Before Bill S-8 is law, Mr. Champagne, who has promised bold action, must explain how he is going to fix FinTRAC.

The revelations – some of them startling – in the A-G’s report deserve particular attention by Parliament and the public because FinTRAC’s incompetence is chronic.

The OECD noted that in 2022 a British Columbia commission concluded that law enforcement “cannot rely on FinTRAC to produce timely, useful intelligence about money laundering activity that they can put into action.”

FinTRAC’s remediation efforts since then didn’t offer the OECD any material comfort. The Canadian anti-financial crime agency offered up as progress membership in working groups that on inspection the OECD said were “not strictly connected to . . . developing FinTRAC expertise.”

The A-G’s report suggests that FinTRAC’s own self-assessments used in its annual reporting are not strictly connected to reality, limiting the ability of Mr. Champagne’s Finance Department to properly assess the agency’s effectiveness and Parliament’s ability to hold the Minister and FinTRAC leaders to account.

FinTRAC’s weak IT systems causing delays in sharing financial intelligence, Auditor-General says

Its annual reporting in 2024-25 gave the A-G much to write about. FINTRAC presented statistics about financial intelligence disclosures, financial transaction reports and supervisory assessments. Evidence that the financial intelligence disclosures, transaction reports and supervisory assessments offered any value to law enforcement was absent.

It’s one thing to obscure oversight in a sea of statistics, and another to subject Parliament and the public to a snow job, which is what FinTRAC did when it reported in 2024-25 that “95 per cent of its financial intelligence was actionable” – meaning concrete leads supporting law enforcement investigations.

When the A-G examined this claim, it discovered that FinTRAC relied on feedback forms from its financial intelligence users. But that “only about 3 per cent of recipients provided feedback, limiting the representativeness of these results.”

Moreover, the A-G concluded that FinTRAC ignored comments in the feedback form that in some instances suggested the intelligence it delivered “was difficult to follow, lacked sufficient information to support an investigation, or arrived after they had already obtained the information through other means.”

Fraud accounts for rising share of money-laundering offences, FinTRAC reports

All of this raises the question: What is it that FinTRAC leaders are afraid Parliament will learn if they plow through its statistical blitz in its annual reports?

Consider FinTRAC’s IT modernization and automation project that began in 2020-21, an operational necessity given FinTRAC received over 65 million reports in 2024-25 to assess. The 2022 federal budget allotted almost $30-million to support this initiative over five years and promised an additional $2.6-million annually in funding after that.

When the A-G examined FinTRAC’s IT modernization program it found just $13.3-million spent and that FinTRAC believed the actual cost would exceed its original IT budget. The A-G also learned that FinTRAC “did not know how much the modernization project would ultimately cost. [FinTRAC] also did not know when the project would be completed.”

Banks know exactly how much they spend on anti-financial crime IT systems and when upgrades will be complete because they must.

Worse still, the A-G found that 70-plus countries, including Germany, Switzerland and New Zealand, use goAML, anti-money-laundering software developed by the United Nations. Installation would take about a year and cost less than US$250,000. Annual maintenance costs would amount to roughly US$100,000 to $US250,000. But “FinTRAC never considered or inquired about goAML.”

Meanwhile, it took FinTRAC typically 112 days between January 2023 and June 2025 to produce and distribute financial intelligence reports because “significant manual intervention” is required.

The A-G report offers eight recommendations to improve FinTRAC. If they are not implemented with pace and oversight, Mr. Champagne’s Bill S-8 will be yet another snow job, this time by Finance pretending legislation FinTRAC is incapable of enforcing will make Canadians safer from financial crimes.