FINTRAC Flags North Korea, Iran, Russia as High-Risk Transactions

The designation stems from ministerial directives issued under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). FINTRAC acts as Canada’s FIU, receiving, analysing and disseminating financial intelligence to law enforcement and national security agencies. Its advisories are typically issued following FATF plenary meetings, which assess global AML/CFT risks and identify jurisdictions with strategic deficiencies.fintrac-canafe.

Under the current framework, three countries are subject to mandatory enhanced scrutiny:

The directive applies to all financial transactions “originating from or bound for” these jurisdictions, regardless of amount, and covers both traditional and virtual currency transfers.

Reporting entities—including banks, credit unions, money services businesses, securities dealers, casino operators and virtual currency service providers—must treat any transaction linked to North Korea, Iran or Russia as high-risk. This triggers a suite of enhanced customer due diligence (CDD) and monitoring requirements, including but not limited to:

FINTRAC guidance clarifies that covered transactions may include electronic funds transfers with Russian (or DPRK/Iranian) addresses, ruble-denominated deposits or exchanges, activities of Russian government representatives (e.g., embassy accounts), and virtual currency trades involving these jurisdictions.

Deputy Prime Minister and Finance Minister Chrystia Freeland, who issued the Russia directive in February 2024, stated that the measure was necessary to “protect the integrity of Canada’s financial system” and prevent its misuse for “sanctions evasion, money laundering and the financing of Russia’s war machine.” The directive was framed as part of Canada’s broader response to Russia’s aggression in Ukraine and its alignment with G7 and FATF countermeasures.

FINTRAC, in its public advisories, has consistently emphasised that these directives are “in line with the risk-based approach envisaged by the FATF Standards” and are designed to mitigate reputational and systemic risks to Canadian financial institutions. The agency urges reporting entities to consult FATF public documents at least three times annually (February, June, October) and to apply recommended countermeasures proactively.fintrac-canafe.

The tripartite high-risk designation mirrors the FATF’s “High-Risk Jurisdictions subject to a Call for Action” list, which currently includes North Korea and Iran for long-standing AML/CFT failures, and Russia for strategic deficiencies identified in 2024. FATF recommends that members apply enhanced due diligence and, where appropriate, countermeasures to protect the international financial system from misuse by these jurisdictions.fintrac-canafe.

Other jurisdictions have followed similar paths. For example, Mauritius formally designated DPRK, Iran and Myanmar as high-risk countries under its FIAMLA, mandating enhanced CDD and systematic reporting. Ukraine’s FIU also highlighted Canada’s Russia directive as a model for regional adoption.

Non-compliance with FINTRAC’s directives carries significant legal and reputational consequences. Violations of the PCMLTFA can result in administrative monetary penalties (AMPs), criminal charges and public enforcement actions. FINTRAC has increasingly focused on compliance with high-risk jurisdiction obligations, citing them in several recent enforcement cases against money services businesses and virtual currency platforms.

For compliance officers, the key operational takeaways include:

• Transaction screening: Ensuring systems can flag transactions with any nexus to DPRK, Iran or Russia, including indirect routing through third countries.

• Staff training: Updating AML training programmes to cover red flags specific to these jurisdictions (e.g., use of intermediaries, inconsistent trade documentation, ruble/virtual currency conversions).

• Risk appetite reviews: Reassessing whether to maintain any business relationships involving these countries, given the elevated regulatory and sanctions risks.