FINTRAC and MONEY LAUNDERING

FINTRAC and MONEY LAUNDERING

Effective April 1, 2025 all dealers who finance or lease passenger class vehicles (or other vehicles valued over $100,000) will be expected to:

  • implement an Anti-Money Laundering compliance program
  • comply with FINTRAC customer verification requirements
  • be required to report a variety of types of transactions to FINTRAC   
  • keep records according to FINTRAC guidelines

A financing or leasing entity is subject to the Act and associated Regulations when they engage in the financing or leasing of:

  • property for business purposes, other than real property or immovables
  • property valued at $100,000 or more, other than real property or immovables
  • passenger vehicles in Canada

A passenger vehicle is a motor vehicle – other than an ambulance, a hearse, a motor vehicle that is clearly marked for policing activities, a motor vehicle that is clearly marked and equipped for emergency medical response activities or emergency fire response activities or a utility truck – that is designed or adapted primarily to carry no more than 10 individuals on highways and streets.

FINTRAC have signaled that, for the first year, they are going to focus on education rather than enforcement:

“In the first year following the coming into force dates, FINTRAC will put emphasis on engagement, outreach and guidance activities related to new regulatory obligations in order to foster greater awareness and understanding amongst new reporting entities. This will include industry consultation to develop guidance so new reporting entities will be well positioned to implement and mature their compliance programs.”

The FINTRAC link contains useful guidance on how you can set yourself up for compliance and avoid the fines and penalties for failing to do so by 2026:

https://fintrac-canafe.canada.ca/re-ed/lease-bail-eng

GOOD NEWS FROM OMVIC

GOOD NEWS FROM OMVIC

For years now, the UCDA has been asking for some flexibility to bring relief to wholesale dealers who cannot source inventory from the public.

Wholesalers are restricted in their ability to buy from the public. There was no solution.

Then along came COVID and the inventory restrictions and supply constraints closed even the normal avenues available to wholesalers. Dealers largely stopped selling wholesale to other dealers at all.

Wholesalers were left struggling and times have been very hard for them.

Now, finally, an option is presented by OMVIC.

A new “dual registration” is available.

You can register as both a “wholesale” and “export” dealer. This will allow you to buy vehicles from the public either for sale to other dealers in Ontario or for sale to buyers, both dealers and non-dealers, outside of Ontario.

Wholesalers with a dual registration may have to pay transaction fees for sales outside of Ontario to non-dealers. 

Premises restrictions apply for those who choose the dual registration.

Please see the whole Bulletin from OMVIC here:

https://www.omvic.ca/update-on-wholesaler-and-exporter-class-registration/

OMVIC says they will provide further details on terms, conditions, and portal access in the coming weeks.

To apply and for questions or assistance contact OMVIC’s Registration Department at registration@omvic.on.ca, or call 1-800-943-6002, extension 2. 

Online registration is currently not available.

OCM WARNING​

OCM WARNING

Since late November of 2024, the UCDA has been receiving calls from dealers who have released vehicles to purchasing consumers who have financed their purchases through OCM Auto Financing Group Ltd. (“OCM”) https://ocmcorporation.com/

The concerns our Members have shared with us, is that OCM is late in paying them, and they are left anxious for weeks or months, as their customers are driving vehicles they sold and released to them, and for which they have not been paid.

We discussed these concerns with OCM at the time, in hopes that funding difficulties would be swiftly resolved, but as we have continued to receive calls and emails, and as recently as this week several more, the time has come to issue a warning to UCDA Members.

If you are considering selling a vehicle to a consumer who is financing their purchase with or through OCM:

Do not release the vehicle to the consumer until you are paid.

The UCDA has always advised dealers not to deliver financed vehicles to consumers until you have the funds in your account, but we realize this is not always practical.  In such cases obtain assurance, in writing, BEFORE you deliver the vehicle as to how long you can expect to wait to receive funding and then make your decision accordingly.

For dealers who have already released their vehicle and have yet to be paid, and despite attempts to get OCM to advance funding, remain unpaid, your options are to retain legal counsel, and get advice as to registering a lien on the vehicle, possibly repossessing it from the consumer or taking legal action.

It is also good practice to explain the situation to the consumer prior to any action so they understand the circumstances and they might be able to talk to OCM as well to avoid the need for further steps.

Desrosiers UCDA SUrvey January 2025 Results

Desrosiers UCDA SUrvey January 2025 Results

In partnership with DesRosiers Automotive Consultants (DAC), the UCDA reached out to members to get a better understanding of trends in the automotive industry. Almost 400 UCDA members responded to the survey giving us a picture of 2024 and beyond.

Vehicle Sales in 2024 and Anticipated Sales in 2025

Overall, dealers, both franchised and independent, expect to sell more used cars in 2025 than they did in 2024.

Sourcing Vehicles

New and used car dealers continue to find it difficult to source used vehicles.

Most franchised new dealers source their used vehicles from customer sales or trade-ins, while most independent used car dealers buy their vehicles at auctions.

Dealers appear to be targeting ‘newer’ used vehicles or used vehicles in the ‘middle’ of their life, but are experiencing difficulties finding these vehicles.

Paying for Used Vehicles

Most customers are approaching independent used car dealers with cash in hand or funding from their own sources. Customers of new car dealers are purchasing used vehicles through loans arranged at the dealership.

Where are Deals Being Completed

Overall, customers continue to prefer to complete deals entirely at the dealership, with some contacting the dealership online first before closing the deal at the dealership. Very few customers complete their purchase or lease entirely online.

Interest in Used Electric Vehicles (BEVs and PHEVs)

Dealers, and their customers, continue to be slow to buy used electric vehicles. Many dealers continue to avoid selling used electric vehicles, battery electric vehicles (BEV) and/or plug-in hybrid vehicles (PHEV), entirely. Overall, BEVs were more popular with independent used car dealers, whereas PHEVs were more popular with customers of franchised new dealers.

You can read the full survey here:

Federal Grinch Brings More Red Tape For Dealers

Federal Grinch Brings More Red Tape For Dealers

As mentioned in a Dealer Alert earlier this week, the Federal Government want to extend reporting and record-keeping requirements to vehicle leasing and financing for business purposes, passenger vehicles and goods valued above $100,000. The $100,000 threshold trigger does not even apply to vehicles, so a vehicle worth less than $100,000 would still require reporting!

Basically, they want to treat vehicle and finance dealers like banks, requiring various record keeping and reporting under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and requiring reporting through the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) system.

All this while there is no evidence this problem even exists in Ontario. We have never seen a massive prosecution or enforcement in the automotive industry involving money laundering or terrorist funding. This has all the earmarks of a solution in search of a problem and worse, an exercise in optics that will add costs, red tape and increase the price of vehicles for consumers.

The UCDA will submit its comments shortly on the proposed Regulatory changes and make points on the:

  • lack of consultation
  • short window for comments (Nov. 30 to Dec. 30)
  • short window for implementation (by October 2025)
  • fact the $100,000 trigger should apply to passenger vehicles too
  • negative effect this will have on many small businesses in Ontario that engage in vehicle leasing and financing

We urge you to do the same, make your voices heard by submitting comments here:

https://canadagazette.gc.ca/rp-pr/p1/2024/2024-11-30/html/reg1-eng.html

… and by contacting your MP before they go home for the Holidays:

https://www.ourcommons.ca/members/en

Holiday Hours

Holiday Hours

Dealers must be closed on December 25, 2024, Christmas Day (a Wednesday this year) and January 1, 2025, New Year’s Day (also a Wednesday). Staff must have those days off, with pay.

While you can be open on Boxing Day (Thursday, December 26, 2024), if you are, another day off must be given to staff or they must be paid their regular pay plus time-and-half holiday pay for working that day.

The UCDA office will be closed on December 25, 26 and January 1, 2025.

UCDA searches can still be performed online at www.ucdasearches.com during the holidays, and the office will be open as usual December 23, 24, 27, 30 and 31st, 2024 and reopen on January 2, 2025 and the days after that as usual.

 

Happy Holidays from the UCDA!

FEDERAL GRINCH BRINGS MORE RED TAPE FOR DEALERS

FEDERAL GRINCH BRINGS MORE RED TAPE FOR DEALERS

On Nov. 30, 2024, the Government of Canada published draft amendments to regulations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the “PCMLTFA”). The stated purpose of the proposed amendments is to strengthen Canada’s Anti-Money Laundering and Anti-Terrorist Financing (“AML/ATF”) framework and address evolving threats to Canada’s financial system while aligning the country with international standards set by the Financial Action Task Force, the international AML/ATF standard-setting body.

This will be the same reporting system banks use for Source of Funds declarations and that sort of thing. The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is Canada’s financial intelligence unit and anti-money laundering and anti-terrorist financing supervisor. Its mandate is to facilitate the detection, prevention and deterrence of money laundering and the financing of terrorist activities, while ensuring the protection of personal information under its control.

Vehicle over $100,000 finance and leasing

The Federal Government want to extend this kind of reporting to vehicle leasing and financing for business purposes, passenger vehicles and goods valued above $100,000.

Part of the problem is this massive document invites comments only until December 30th, and this while the holiday season is upon us! Even the Ottawa bureaucrats are not in the office after this week.

The other problem is we have seen no evidence this problem exists in Ontario. We have never seen a massive prosecution or enforcement in the automotive industry involving money laundering or terrorist funding. This has all the earmarks of a solution in search of a problem and worse, an exercise in optics that will add costs, red tape and increase the price of vehicles for consumers.

The proposed amendments are planned to come into force in two phases. Those related to information sharing would come into force immediately upon publication of the final regulations in the Canada Gazette. The other amendments would come into force on Oct. 1, 2025, to allow businesses to prepare to comply with the new requirements.

Leasing and financing companies will be regulated under FINTRAC and be required to implement compliance measures set out in the PCMLTFA. These include AML/ATF compliance programs, customer due diligence, record-keeping, and reporting of  suspicious transactions. Such companies would also be required to verify identity and keep a record of every transaction of $3,000 or more.

An administrative monetary penalty for non-compliance is proposed with a range of $1,000 to $500,000 depending on the seriousness of the violation.

Strengthening border controls

Ottawa also proposes to grant the Canada Border Services Agency (CBSA) the power to seize and forfeit goods where it has reasonable grounds to believe that the goods are proceeds of crime or related to money laundering, terrorist financing or sanctions evasion.

Traders (persons or entities) would be required to attest to the CBSA that imported and exported goods are not proceeds of  crime or related to money laundering, terrorist financing, or sanctions evasion. They would also be required to attest that the goods represented as being imported/exported are, in fact, being imported/exported, as a means to combat the use of  phantom shipments.

Entities involved in importing and exporting goods would need to implement systems to report transactions to the CBSA, ensuring adherence to the new trade-based financial crime reporting obligations. Record-keeping requirements would also be imposed similar to what is already required for customs and tax purposes.

The UCDA will certainly be making submissions on these concerning developments, and we urge you to do the same here:

https://canadagazette.gc.ca/rp-pr/p1/2024/2024-11-30/html/reg1-eng.html

and let your MP know what you think as well here:

https://www.ourcommons.ca/members/en