Partial Returns of Money under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act

The Government of Canada through the  Proceeds of Crime (Money Laundering) and Terrorist Financing Act, SC 2000, c 17 (the “PCMLTFA“), has enacted measures to increase the detection of money associated to the proceeds of crime at Ports of Entry.   Part 2 of the PCMLTFA imposes on obligation on every person to report the importation or exportation of currency or monetary instruments of an equal value to or greater than the prescribed threshold of CAD $10,000.

While there is no limitation on the total amount of currency or monetary instruments that may be brought into or taken out of Canada, every person has to report any amount exceeding $10,000.  The Canada Border Services Agency (“CBSA“) may then question person regarding the possession of the currency.

Levels of Seizure and Penalty

CBSA officers who believe on reasonable grounds that the reporting requirement of the PCMLTFA has been violated may seize as forfeit currency or monetary instruments, and impose the prescribed penalty as terms of release.

The Customs Enforcement Manual provides that the following terms of release are to be offered:

  • Level 1 – $250
    • Where a person has not concealed the currency or monetary instruments;
    • Where a person has made a full disclosure of the facts concerning the currency or monetary instruments on their discovery; and
    • Where the person has no previous seizures under the PCMLTFA.
  • Level 2 – $2,500
    • Where a person has concealed the currency or monetary instruments, other than by means of a false compartment; or
    • Where a person has made a false statement with respect to the currency or monetary instrument;
    • Where there is a previous seizure under the PCMLTFA, other than in respect of any type of concealment or for making false statements.
  • Level 3 – $5,000
    • Where a person has concealed the currency or monetary instruments through the use of a false compartment; or
    • Where there is a previous seizure under the PCMLTFA in respect of any type of concealment or for making false statements.
  • Level 4 – No terms of Release
    • Where there is a reason to suspect that the non-reported currency or monetary instruments are proceeds of crime or terrorist finances.

All people importing or exporting currency or monetary instruments to and from Canada totalling $10,000 or greater.

Partial Return

Section 29(1) of  the PCMLTFA provides that:

If there is a contravention

29. (1) If the Minister decides that [the reporting requirement] was contravened, the Minister may, subject to the terms and conditions that the Minister may determine,

(a) decide that the currency or monetary instruments… be returned, on payment of a penalty in the prescribed amount or without penalty [as described above];

(b) decide that any penalty or portion of any penalty that was paid under subsection 18(2) be remitted; or

(c) subject to any order made under section 33 or 34, confirm that the currency or monetary instruments are forfeited to Her Majesty in right of Canada.

An issue that often arises is where an individual does not report currency, and the individual establishes that some of the currency came from illicit funds and some didn’t, whether s. 29 of the PCMLTFA permits the Minister to hold forfeit only the illicit funds.

Traditionally, the Federal Court has ruled that it did not.  However, on 28 June 2013 it released a decision stating that the Minister should return non-illicit funds.

The Court’s reasons included that:

  1. Confiscating legitimate funds does not further the objectives of the PCMLTFA.  In Sellathurai v Canada (Minister of Public Safety and Emergency Preparedness), 2008 FCA 255, the Federal Court of Appeal considered the Minister’s exercise of discretion under s. 29 of the Act. In that regard, it said at paragraph 53 that “The Minister’s discretion must be exercised within the parameters of the Act and the objectives which Parliament sought to achieve by that legislation”.
  2. The penalty for a Level 1 seizure is $250.00. Confiscating potentially thousands of dollars of legitimate funds effectively imposes a draconian penalty.
  3. If the Government of Canada had intended to confiscate legitimate funds it would have stated that fact in unequivocal terms.
  4. To rule otherwise could lead to absurdly punitive results. For example, if $100,000.00 was seized and $99,000.00 was later shown to be legitimate, it would be ludicrous to argue that the Minister has no discretion to return the $99,000.00. In Re: Rizzo & Rizzo Shoes Ltd., [1998] 1 SCR 27 (SCC) at paragraph 27, the Supreme Court of Canada noted that “It is a well established principle of statutory interpretation that the legislature does not intend to produce absurd consequences.” Absurdity is defined in the decision to include interpretations that lead to inequitable consequences and those which are incompatible with the objects of the legislation.

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