‘There’s a better way to approach compliance’
It was a move that marked a major shift for compliance and reporting in Canada’s mortgage sector: a 2024 federal decision to bring administrators, brokers and lenders under the country’s anti‑money‑laundering (AML) and terrorist‑financing regime, subjecting them to mandatory FINTRAC registration and expanded reporting obligations.
That change meant brokerages were treated more like banks and other traditional financial institutions on AML requirements, mandating the establishment of a formal compliance program, comprehensive client identification and verification procedures, and recordkeeping and reporting requirements to FINTRAC.
Part of a broader tightening of Canada’s AML regime, the adjustment put mortgage brokers under greater scrutiny and sparked a huge effort by brokerages to make sure their systems were up to scratch ahead of the October 11, 2024, deadline.
More than a year since the change came into effect, brokers have had time to adjust – but it’s still been no easy task for many to navigate the new world of compliance and reporting requirements on top of other duties.
“The new FINTRAC requirements have definitely been a challenge for brokerages,” Terry Kilakos (pictured top), president and senior mortgage broker at North East Real Estate and Mortgage Agency, told Canadian Mortgage Professional. “I’ve personally gone through a FINTRAC audit myself – luckily, we passed – but I can tell you it’s a significant process.
“Brokerages are being asked to implement complex compliance programs, track and report client information, and monitor transactions in ways that go well beyond what most of us were set up to do.”
Under the requirements, reporting entities – including mortgage administrators, brokers and lenders – must perform ongoing monitoring for business relationships based on risk.
FINTRAC compliance expectations: reasonable or excessive?
At the onset of the new regime, some brokers highlighted the strain brokerages could come under, viewing the requirements as onerous and excessive.
Beyond the conceptual burden, the operational impact has been significant for many firms. Brokerages have had to invest in new technology platforms, rewrite policies and procedures, and dedicate staff time to documentation and training. For smaller shops, that has meant diverting resources away from growth activities just to stay compliant.
Another criticism of the change was that it was not communicated well enough to the industry by regulators, leaving brokerages scrambling to meet the new rules without being fully aware of certain nuances.
Others, however, viewed the new requirements as largely reasonable and felt the prospect of heavy fines was the only aspect that could mark a game changer for mortgage brokers.
Kilakos still sees gaps and some unreasonable expectations in the compliance framework as it’s currently structured.
“The problem is that mortgage brokers are intermediaries, not lenders,” he said. “We connect clients to financing – we don’t hold the funds or take on the lending risk. Yet under these new requirements, it often feels like the responsibility, and even the liability, is being placed squarely on brokers.
“There’s a real concern that if something were to go wrong, brokers could be positioned as scapegoats, even though we’re not the ones ultimately approving or funding the loans.”
‘The risk-reward balance feels off’
Real estate has become an increasingly attractive channel for money launderers over the past decade, a trend that led federal regulators to move more of the real estate ecosystem into the AML framework.
That marked a growing awareness among lawmakers that brokers and non‑bank lenders interact with clients whose files may never come across the desk of a Big Six lender in Canada – and that if only banks and a limited set of entities were reporting, key intelligence could be lost.
Kilakos said he doesn’t dispute the need for clear and effective rules to safeguard Canada’s financial system, but believes steps are required to reduce some of the demands being made of brokers under current regulation.
“I think the intention behind the rules is valid – protecting the financial system is important – but in practice, the burden on brokers is heavy and the risk‑reward balance feels off,” he said.
“There’s a better way to approach compliance that keeps oversight strong without putting intermediaries in such a vulnerable position.”
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