Budget 2026: Ottawa plans to shift banks' anti-money-laundering oversight 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 the plan in Budget 2026, tabled on Thursday, November 5: oversight of anti-money-laundering and anti-terrorist-financing compliance at the largest financial institutions would move from the Financial Transactions and Reports Analysis Centre of Canada, known as FinTRAC, to the Office of the Superintendent of Financial Institutions, or OSFI.

Finance says supervision will be "stronger, more integrated"

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." She said 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," and that supervising compliance aligns with OSFI's objective of bolstering public confidence in the financial system.

The backdrop: an Auditor-General report and a FATF review

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 and that the watchdog is overseeing too many businesses to effectively monitor their compliance with financial-crime laws. There are currently 38,000 businesses subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, with the scope expanded in recent years to bring in sectors such as mortgage brokers and title insurers. The Auditor-General's report found that as the number of registered businesses ballooned, the watchdog started performing more "light-touch" and automated assessments: completed faster, but providing less assurance that businesses were complying with laws and regulations. A global review of Canada's financial-crime regime by the Financial Action Task Force, published earlier this year, gave Canada a passing grade but identified a number of weaknesses, criticizing FinTRAC's supervisory activities, including its examinations of large domestic banks, as "not sufficiently frequent and not commensurate with risks."

Federally regulated institutions only; experts flag execution as the test

Alana Scotchmer, a partner at Gowling WLG who specializes in financial-services regulation, said 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." She added that 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," she said. 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.

The background: TD's guilty plea and recent heavy fines

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. OSFI already has some responsibility for supervising banks' anti-money-laundering compliance, including ensuring that federally regulated financial institutions have policies and procedures in place to protect themselves from threats to their integrity and security.

(Sources: The Globe and Mail, Department of Finance Canada, Auditor General of Canada, FATF.)