The administrative monetary penalty imposed on Primary Capital Inc. by FINTRAC in May 2025 illustrates how gaps in anti-money laundering compliance can expose a securities dealer to regulatory sanctions. The Toronto-based exempt market dealer, operating as a designated securities dealer, was fined $93,390 after FINTRAC determined it had breached multiple provisions of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
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Money laundering compliance failures at Primary Capital
The case centered on four major failings. First, Primary Capital had no properly documented compliance program. Policies and procedures were either outdated, incomplete, or lacked the required senior officer approval, leaving the firm without a credible governance framework. Second, the firm had not carried out a documented risk assessment that considered key prescribed factors such as the type of clients served, the products offered, and the geographic exposure of transactions. Without this analysis, the dealer had no clear view of its exposure to money laundering or terrorist financing risks.
Third, the company failed to conduct and document regular reviews of its policies, procedures, and training programs. Periodic reviews are essential to ensure that compliance programs remain aligned with both regulatory changes and emerging risks. Fourth, Primary Capital neglected to implement proper procedures for identifying politically exposed persons (PEPs), including domestic and foreign officials, heads of international organizations, and their close associates or family members. This meant the firm could not adequately identify high-risk relationships where enhanced due diligence would be required.
These failures were not minor oversights. They represented systemic weaknesses that undermined the very purpose of Canada’s AML framework. By failing to apply even the minimum standard of due diligence, Primary Capital left itself exposed to the possibility of being used as a conduit for illicit capital. While there is no evidence that actual money laundering occurred through the firm, the absence of preventive safeguards created vulnerabilities that could easily have been exploited.
FINTRAC enforcement and the growing AML pressure
FINTRAC’s decision to impose a penalty reflects a broader regulatory trend in Canada. The agency has been steadily increasing its enforcement activities, particularly in sectors where compliance has historically lagged. Administrative monetary penalties are designed not only to punish but also to encourage firms to correct deficiencies and embed stronger compliance cultures.
In the 2024–25 fiscal year, FINTRAC issued a record 23 Notices of Violation, worth more than $25 million in total. This represents the highest number of actions taken in a single year since the agency gained authority to impose penalties in 2008. The Primary Capital case is part of this wider pattern, where FINTRAC is signaling that no firm, regardless of size, can afford to take a lax approach to AML compliance.
Securities dealers, especially those operating in the exempt market, face unique risks. These firms often facilitate private placements and investment products that involve smaller groups of investors but larger transaction values. Without strong due diligence, it becomes easy for bad actors to use such vehicles to layer or integrate illicit funds. FINTRAC’s public enforcement actions serve as reminders that regulatory expectations apply equally to large institutions and smaller, specialized dealers.
The decision to publicize the penalty also plays a deterrent role. Other exempt market dealers and securities firms are now under pressure to evaluate their own compliance programs to avoid similar outcomes. FINTRAC has made clear that penalties will continue to rise in frequency and value unless the industry closes the compliance gaps that leave the Canadian financial system vulnerable.
What could have prevented the failures
The violations identified at Primary Capital provide a clear roadmap of what was missing and what could have been done differently to avoid regulatory action. A stronger compliance culture, combined with practical tools and governance, could have ensured the firm met its obligations.
First, the company should have developed and maintained written compliance policies tailored to its business model. These documents must be reviewed regularly and approved at the senior officer level to ensure accountability. Effective policies provide staff with clear guidance on client onboarding, suspicious transaction reporting, record-keeping, and escalation procedures. By embedding these into daily operations, the firm would have demonstrated both awareness and commitment to AML responsibilities.
Second, a structured risk assessment should have been conducted and updated at least annually. Risk assessments allow firms to identify high-risk products, services, clients, and geographies, and to allocate resources accordingly. For an exempt market dealer, this could include heightened scrutiny of clients using offshore structures, high-value private placements, or accounts with unusual transaction patterns. Documenting the methodology and findings of such assessments is essential, as regulators expect evidence of a risk-based approach rather than generic or unsubstantiated claims.
Third, the firm needed an independent review of its compliance program to test its effectiveness. These reviews, which can be performed by internal audit teams or external consultants, help identify weaknesses before regulators do. A properly documented review cycle would have flagged deficiencies in PEP identification and risk documentation, allowing the company to correct them proactively.
Fourth, PEP screening tools and due diligence processes should have been implemented. Technology solutions exist that allow firms to screen clients against databases of PEPs, heads of international organizations, and their close associates. Once identified, enhanced due diligence measures, such as verifying source of wealth and monitoring ongoing transactions, can be applied. The absence of such measures at Primary Capital represented a serious blind spot.
Training was another area of concern. Compliance programs are only as effective as the staff who apply them. A comprehensive training program tailored to the firm’s business lines would have helped employees recognize suspicious patterns, understand red flags, and properly document their actions. Regular refreshers ensure that knowledge stays current with evolving typologies of financial crime.
If these measures had been in place, Primary Capital would likely have avoided regulatory sanction. Beyond satisfying FINTRAC’s requirements, they would have strengthened the firm’s resilience against being misused by criminal networks. The cost of implementing such measures is far lower than the reputational and operational damage caused by public enforcement actions.
Lessons for compliance officers and regulated firms
The Primary Capital case offers a cautionary tale for compliance professionals across Canada’s securities sector and beyond. It highlights the consequences of underestimating AML obligations and the importance of proactive oversight.
For senior management, the key lesson is that compliance is not just a back-office function. Senior officers are required by law to approve and maintain AML policies, and regulators increasingly expect board-level involvement in compliance governance. Without visible leadership, compliance programs risk becoming neglected checklists rather than effective defenses.
For compliance officers, the case emphasizes the value of documentation. Even if risk assessments or PEP checks are performed informally, failure to properly document them creates regulatory exposure. Regulators cannot evaluate undocumented processes, and firms that rely on informal practices inevitably fall short of requirements.
For the industry as a whole, the case demonstrates that the cost of non-compliance extends beyond financial penalties. Reputational damage, loss of client trust, and increased scrutiny from regulators are long-term consequences that can outweigh the size of any fine. In competitive markets, being identified as non-compliant can harm a firm’s ability to attract investors or business partners.
By learning from Primary Capital’s mistakes, other firms can strengthen their compliance regimes and reduce both regulatory and operational risks. Strong AML programs are not only about avoiding penalties but also about protecting the financial system from abuse, supporting law enforcement, and ensuring long-term business sustainability.
Related Links
- FINTRAC Official Website
- Proceeds of Crime (Money Laundering) and Terrorist Financing Act
- Government of Canada – Department of Finance
- Canadian Securities Administrators
- Public Safety Canada – National Security
Other FinCrime Central News About FINTRAC’s Crackdowns
- Vancouver Investment Firm Faces $500k FINTRAC Penalty for AML Breaches
- FINTRAC Penalty on Hub Capital Sparks Renewed Focus on AML Compliance Failures
- FINTRAC Cracks Down on AML Failures at Cambrian Credit Union
Source: FINTRAC
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