The federal and provincial governments share jurisdiction over various aspects of the financial services sector in Canada. While the federal government has sole jurisdiction over banks, the provinces and territories regulate credit unions, mortgage brokers insurance brokers, securities markets, dealers and advisors, mutual fund companies and distributors, credit unions and caisses populaires, and other financial services providers such as payday lenders. Both levels of government regulate insurers and trust and loan corporations. The allocation of responsibilities is as follows:

1. The Department of Finance Canada is the branch of government responsible for federally regulated financial institutions, including banks, trust and loan companies, insurance companies, and credit unions. The Department of Finance is principally responsible for proposing changes to legislation and adopting new regulations governing federally regulated financial institutions.
   
   
2. The Bank of Canada is Canada’s central bank. It is an independent Crown corporation with considerable autonomy to manage the country’s financial system. The Bank of Canada is responsible for monetary policy in cooperation and consultation with the Department of Finance for central banking services, bank rates, currency, foreign exchange reserves and the administration of public debt. However, the Bank of Canada does not play any part in the regulation or daily administration of commercial banks in Canada.
   
   The Bank of Canada is also taking on a new role. The recently published Retail Payment Activities Act (RPAA) creates a new regulatory regime in Canada for persons who perform retail payment activities. The new regime will impose substantive requirements related to operational risk management, end-user funds safeguarding, reporting, recordkeeping and supervisory information on persons who engage in payment processing activities. Those subject to the RPAA will be required to apply to the Bank of Canada by 15 November 2024 for registration as a payment service provider.
   
   
3. In Canada, banks are federally regulated under the Bank Act and carry on business under the federal supervisory authority of the Office of the Superintendent of Financial Institutions (OSFI) and the Financial Consumer Agency of Canada (FCAC). Banks operating in Canada may be licensed as Schedule I (domestic Canadian banks), Schedule II (foreign bank subsidiaries in Canada) or Schedule III (foreign banks with branch establishments in Canada). A foreign bank that does not have a branch in Canada can conduct limited business in Canada consisting of the promotion of the services of the foreign bank and acting as a liaison between the foreign bank and its customers in Canada. The foreign bank may establish a representative office in Canada for this purpose, which must be approved by OSFI.

   OSFI is responsible for prudential regulation and establishing guidelines for capital, reporting and business practices of federally regulated financial institutions. It conducts regular reviews of those institutions and issues review letters that may require or recommend that they implement certain improvements. OSFI determines a confidential risk rating for each federally regulated financial institution (on a scale from low to high) and shares it with the institution. OSFI has the power to intervene in the affairs of federally regulated financial institutions. The objective of the intervention process is to enable OSFI and the Canada Deposit Insurance Corporation (CDIC) (where CDIC member institutions are involved) to identify areas of concern at an early stage and intervene effectively so as to minimize losses to depositors for OSFI and to minimize the exposure of CDIC to loss. If an institution is no longer considered to be viable or its insolvency is imminent, OSFI may: assume temporary control of the assets of the institution and the assets under its administration; take control of assets of the institution and the assets under its administration; take control of the institution unless the Minister of Finance advises OSFI that it is not in the public interest to do so; and/or request that the Attorney General of Canada apply for a winding-up order in respect of the institution under the Winding-up and Restructuring Act where the assets of the institution are under the control of the Superintendent of Financial Institutions or the institution is under the control of the Superintendent of Financial Institutions.

   The FCAC has a mandate to protect and inform consumers about financial products and services. It is also responsible for oversight of compliance with certain voluntary codes of conduct, such as the code of conduct for the Credit and Debit Card Industry in Canada, which applies to the payment card industry and provides many measures to protect merchants that accept payments other than cash and/or cheque.

   Both OSFI and FCAC also have the power to impose administrative monetary penalties for violations of their enabling legislation. In 2020 amendments to the Financial Consumer Agency of Canada Act significantly increased the maximum monetary penalties that can be imposed by the FCAC as part of its consumer protection mandate. The FCAC has the power to order the following:

   • Impose a penalty of up to CAD 10 million on banks per violation of their legal obligations (or CAD 1 million for a natural person)
   • Direct banks to take actions to comply with their legal obligations
   • Direct banks to undergo a third-party, independent audit to comply with their legal obligations

   An entity can also face penal sanctions under the relevant financial institution legislation. For example, under the Bank Act the fine for a contravention is up to CAD 5 million (CAD 1 million for a natural person and imprisonment for up to five years).
   
   

4. The Financial Transactions and Reports Analysis Centre (FINTRAC) was established under the Proceeds of Crime (Money Laundering) Act (PCMLTFA). Unlike many countries, where the central financial intelligence unit is part of the enforcement arm of the government, FINTRAC reports to the Ministry of Finance, and efforts have been made to ensure that it remains independent from law enforcement. FINTRAC is mandated 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. It analyzes the information it collects from financial entities, intermediaries and other reporting entities to identify patterns of suspicious financial activity and to uncover associations among people and businesses linked to the patterns of suspected money laundering and terrorist financing. FINTRAC shares its intelligence, analysis and data with Canadian law enforcement authorities, and it is responsible for registering money services businesses (MSBs).

   Penalties for noncompliance with the PCMLTFA and its associated regulations can be severe, and they are classified as either criminal or administrative monetary penalties. Criminal penalties include fines of up to CAD 2 million and five years' imprisonment. Separately, under the Criminal Code, the criminal offence of laundering proceeds of crime carries a punishment of up to 10 years' imprisonment and forfeiture of any property involved in the transaction or traceable to the proceeds of the money laundering.
   
   

5. Payments Canada (PC) is created under the Canadian Payments Act to establish, operate, and maintain systems for the clearing and settlement of payments among member financial institutions. It is Canada’s main financial market infrastructure for payments. The Bank of Canada and all chartered banks operating in Canada are required to be members of PC. Trust and loan companies, credit union centrals, federations of caisses populaires and other deposit-taking institutions, life insurance companies, as well as securities dealers and money market mutual funds that meet certain requirements are also eligible to be members. PC develops, implements, and updates the rules and standards that govern the clearing and settlement of payments between member financial institutions, and facilitate the interaction of its systems with other national and international payment systems and allow for the development of new payment methods. The Payment Clearing and Settlement Act gives the Bank of Canada the responsibility to oversee clearing and settlement systems for the purpose of controlling systemic risk or payments system risk.
   
   
6. Deposit-taking institutions are members of the Canada Deposit Insurance Corporation (CDIC). CDIC is a statutory corporation that provides deposit insurance for certain types of small deposits to member institutions. Membership in CDIC is mandatory for Canadian banks as well as for certain trust and loan companies that accept deposits.