Strengthening Compliance: What Canada’s New AML Regulations Mean for Equipment Finance

Canada’s equipment finance sector is entering a new regulatory era. In March 2025 the federal government published final regulations amending the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) to expand it to financing and leasing entities. These regulations came into force on April 1 2025 and mark the first time that financing or leasing arrangements for passenger vehicles, business‑purpose property and any other non‑real‑property asset valued at $100,000 or more fall squarely under Canada’s anti‑money‑laundering regime. The sector has a one‑year transition period to prepare; firms are expected to be fully compliant by April 1 2026.

The New AML Landscape

A financing or leasing entity qualifies as a reporting entity if it finances or leases property for business purposes, passenger vehicles in Canada or property valued at $100,000 or more. These amendments were designed to bring higher‑risk transactions into the AML framework while excluding low‑value consumer products such as rent‑to‑own furniture. Once captured, companies must establish a compliance program and implement a wide range of controls. Key requirements include:

• Compliance program and risk assessment– Financing and leasing entities must develop and maintain an AML compliance program and undertake risk assessments. FINTRAC, Canada’s financial intelligence unit, has the authority to impose administrative monetary penalties for non‑compliance.
• Know‑your‑client and beneficial‑ownership verification– Firms must verify the identity of parties entering into financing or leasing arrangements and obtain beneficial‑ownership information. Enhanced due diligence and ongoing monitoring are required for higher‑risk clients.
• Record‑keeping and transaction reporting– Entities must keep detailed records of each financing or leasing transaction, including payment information, and report prescribed transactions. For example, the regulations require reporting of single cash or virtual‑currency transactions of $10,000 or more and suspicious transactions.
• Discrepancy reporting and third‑party determinations– New rules on discrepancy reporting (where information on a public registry conflicts with the entity’s records) take effect on October 1 2025, and third‑party determination rules apply when someone other than the client is providing funds.

The PCMLTFA amendments are accompanied by outreach and guidance activities; FINTRAC has indicated that the first year of implementation will emphasize engagement rather than enforcement. Nevertheless, FINTRAC can impose administrative monetary penalties on reporting entities that fail to comply, so firms should not delay preparation.

Why It Matters for Equipment Finance

The asset‑backed finance market plays a central role in the Canadian economy. In 2023 new business volumes climbed to $120 billion and the total value of assets financed rose 3.3 % to $389 billion, according to the CFLA’s Annual Report 2024. These volumes include high‑value equipment such as transportation fleets, construction machinery and industrial assets. Small‑ and medium‑sized businesses rely heavily on asset‑backed financing; the federal government reports that small‑ and medium‑sized businesses employ about 64 % of Canadian workers in the private sector, as noted in the Department of Finance’s backgrounder on Growing Small Businesses. The scale and complexity of these transactions make the sector attractive to fraudsters and money launderers.

Recent data underscore the risk. A 2024 survey of 135 financial‑services professionals found that more than 80 % have seen a nearly 14 % increase in lending fraud targeting small‑ and medium‑sized businesses, and 43 % of equipment‑finance professionals were somewhat or not at all confident in their ability to detect false identities, according to an article from Equipment Finance News. Fraudsters are increasingly using sophisticated methods—such as email account takeover and fake documents—to infiltrate financing deals. These trends, coupled with the large ticket sizes typical of equipment finance, explain why regulators expanded AML coverage to the sector.

Tools and Partnerships for Compliance

Achieving compliance will require both process changes and technology. Financing and leasing entities should integrate with specialized AML service providers that offer identity verification, beneficial‑ownership checks, transaction monitoring and record‑keeping solutions. Technology can automate document verification and use artificial intelligence for device fingerprinting, IP geolocation and biometric verification—tools highlighted by industry experts as effective anti‑fraud measures. Human expertise remains essential; staff should receive formal training on AML detection and reporting to complement technological controls.

The Canadian Finance & Leasing Association (CFLA) is developing webinars and best‑practice guides to help members comply with the new regulations. These resources will be released in phases as FINTRAC publishes sector‑specific guidance. Engaging with industry associations and professional advisors can help firms interpret the rules, design compliance programs and share best practices.

Action Steps for Equipment Finance Firms

To prepare for the April 2026 compliance deadline, equipment‑finance providers should:

1. Determine applicability– Assess whether your financing or leasing activities are covered by the PCMLTFA amendments (business‑purpose property, passenger vehicles or property valued at $100,000 or more) and register as a reporting entity with FINTRAC if required.
2. Develop a compliance program– Establish policies and procedures that address risk assessment, client identification, ongoing monitoring, record keeping and transaction reporting.
3. Upgrade contracts and processes– Update credit agreements and workflows to capture client‑identification information, beneficial‑ownership data and payment tracking. Ensure your documentation supports discrepancy reporting and third‑party determinations.
4. Train staff– Provide comprehensive training across credit, sales and operations so employees understand KYC obligations, red flags for suspicious transactions and reporting procedures.
5. Leverage technology– Partner with AML technology specialists to automate identity verification, transaction monitoring and record keeping. Technology solutions such as device‑fingerprinting, AI‑powered document verification and biometric recognition can improve detection and reduce operational burdens.
6. Engage with industry resources– Participate in CFLA webinars and consult FINTRAC guidance. The transition period offers a chance to ask technical questions and incorporate regulatory feedback.

Conclusion

The expansion of Canada’s AML regime to financing and leasing entities is one of the most significant regulatory shifts the equipment‑finance industry has seen in decades. By April 2026, any company financing or leasing business‑purpose property, passenger vehicles or property worth $100,000 or more must implement robust AML controls. Given the sector’s $389 billion in assets financed in 2023 and the rising incidence of fraud, proactive compliance is both a legal obligation and a prudent business practice. Firms that embed compliance into their operations, invest in technology and training and engage with industry resources will be well positioned to meet regulatory expectations, protect their reputations and continue supporting Canada’s economy.