New Canadian Identity Regulations Guided by UK Insights, powered by Validient
August 2, 2024
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Recently, Validient explored the Canadian legal and financial markets in and around Toronto ensuring the UK experiences in financial security match the new regulations being instigated in Canada. Validient’s experience was invited through the Global Incubator Programme which is run in partnership between Innovate UK, Toronto Metropolitan University (TMU), and the Legal Innovation Zone (LIZ).
Ieuan Leigh, CEO of Validient, believes it is evident that while both nations face similar challenges, particularly concerning anti-money laundering (AML) procedures, there are distinct differences in their approach and technological advancements. Notably, Canada appears to lag behind the UK, particularly in the realm of digital identification (ID) checks, which are pivotal in modern AML protocols.
Validient’s Compliance Solution: Strongly Placed for Canada
Validient offers global client due diligence solutions and are seen as a market leader for end-to-end compliance in the UK. Given that the Ontario legal system is based on English law, and the challenges routed around compliance are the same, Validient plans to increase their presence in Canada this year to be at the forefront of change. With their links through Wesley Clover, the LIZ, the Ontario Bar Association, and the Law Society of Ontario, their presence will be hard to ignore when the clampdown on client intake and AML procedures increases.
Technological Advancements in the UK’s AML Procedures
The UK has long been at the forefront of implementing stringent AML measures. Over the past few years, the UK has integrated sophisticated technology to bolster its defences against money laundering with many tech startups emerging to offer to support professional services firms at risk. The adoption of digital ID checks and Know Your Customer (KYC) protocols has been a key advancement, significantly enhancing the efficiency and accuracy of AML compliance.
UK regulatory bodies, such as the Financial Conduct Authority (FCA) and the National Crime Agency (NCA), have mandated rigorous AML practices. The emphasis on technology is evident with the increased use of biometric verification and ongoing due diligence to monitor companies, individuals, and transactions and identify suspicious activities. This proactive stance has positioned the UK as a leader in combating financial crime.
Canada’s Recent Developments in AML Procedures
Canada has been slower to adopt similar technological advancements. It was only in January 2024 that Canada required the use of digital ID checks for AML purposes stating that relying just on a Teams call isn’t enough. This delayed adoption highlights a significant gap between the two countries in their approach to leveraging technology for financial security.
The Canadian legal market, regulated by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), has traditionally relied on more conventional methods for AML compliance. This reliance has often resulted in slower processes and a higher susceptibility to financial crimes compared to the UK.
However, with the shift to requiring digital identity methods, it shows Canada’s innovative narrative — one that was obvious to see during Validient’s visit to tech hubs.
The Impact of TD Bank’s Fine on Canadian AML Practices
A notable event that may drive change in Canada’s AML landscape is the recent fine imposed on TD Bank. The bank was fined a C$9.2m for AML compliance failures, underscoring the pressing need for more robust and technologically advanced measures. This fine is the biggest sanction imposed in Canada. This incident has spurred a national conversation on the importance of modernizing AML procedures and could potentially drive faster adoption of digital technologies across Canadian financial institutions.
Looking Forward: Lessons from the UK
As Canada navigates this transformative period, it can draw valuable lessons from the UK’s experiences. The integration of digital ID checks and enhanced due diligence in AML procedures has proven effective in the UK, offering a blueprint for Canada to enhance its own systems.
Fostering a culture of continuous improvement and technological adoption within regulatory bodies and financial institutions is crucial. By embracing innovations such as Validient, Canada can not only catch up with but potentially exceed the UK in AML efficacy.
While the UK and Canada share similar challenges in the legal market, especially concerning AML, the UK’s advanced use of technology has shown what ‘good’ can look like. Canada’s recent approval of digital ID checks marks a significant step forward, but further efforts are needed to close the gap. The fine imposed on TD Bank serves as a stark reminder of the risks associated with inadequate AML measures and highlights the urgency for Canada to modernise its approach. By learning from the UK’s experiences, Canada can develop a more robust and technologically advanced AML framework, ensuring greater financial security and compliance in the future. £