The maximum fine for failing to report suspicious mortgage activity just jumped from half a million to twenty million dollars. That is not a typo. Welcome to the new reality of Canadian mortgage lending compliance.
British Columbia's Bill 29 and expanded federal AML requirements are reshaping how mortgage lenders, brokers, and administrators operate across Canada. The changes stem from the Cullen Commission's 2022 findings that money laundering was distorting B.C.'s economy and inflating housing prices. Now, regulators are closing loopholes and casting a much wider compliance net.
The New Landscape Takes Shape
The Mortgage Services Act replaces B.C.'s decades-old Mortgage Brokers Act with a modern registration framework. Unlike its predecessor, Bill 29 captures virtually anyone providing mortgage services, including private lenders who previously flew under the radar by claiming they were not "carrying on business."
The legislation comes into force in October 2026, and the B.C. The Financial Services Authority has begun releasing guidance on the transition. While broker rules are being developed, lender-specific requirements are still under development.
Simultaneously, federal AML requirements expanded in October 2024 to include mortgage brokers, administrators, and lenders under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. If you are authorized under provincial legislation to participate in mortgage lending, you are now subject to the whole federal AML regime.
Foreign Lenders Face a Particular Challenge
The legislation presents a challenging issue for non-Canadian institutions. Exemptions exist for banks and insurance companies regulated under Canadian law. However, the definitions specifically reference the Federal Bank Act, leaving foreign entities in a gray area.
Consider a U.S. bank making a single real estate-secured loan in British Columbia using its American parent entity rather than a Canadian subsidiary. Under the current formulation, that lender would need to complete the entire B.C. registration process for one transaction. The compliance burden could significantly outweigh the economic benefit.
One practical solution gaining traction is the use of authorized collateral agents in B.C. to hold mortgages on behalf of foreign lenders. This approach may provide exemption from direct registration requirements while maintaining lending flexibility.
The Compliance Program Reality
For organizations newly caught in the AML net, building a compliant operation requires substantial effort. The requirements include conducting a risk assessment that evaluates your business, clients, products, geographic footprint, and delivery channels. You need to implement comprehensive KYC procedures covering identity verification, beneficial ownership determination, and politically exposed person screening. Organizations must establish transaction monitoring systems and suspicious activity reporting protocols. Training staff to recognize money laundering indicators and understand their obligations is essential. Appointing a Chief Compliance Officer and conducting biennial program effectiveness reviews completes the framework.
This is not a checkbox exercise. Regulators expect a genuine culture of compliance to be embedded in how organizations onboard clients and evaluate transactions.
The Penalty Escalation
The Strong Borders Act fundamentally changes the enforcement calculus. Administrative penalties under the AML regime previously maxed out at C$500,000 for the most serious violations. Bill C-2 multiplies these amounts by forty. Failing to file a suspicious transaction report now carries potential fines up to C$20 million. Even minor violations start at C$40,000.
The message from Ottawa is unambiguous: half-measures on AML compliance are no longer economically rational.
What Smart Organizations Are Doing Now
Despite uncertainty around final lender registration rules, proactive organizations are taking concrete steps. They are assessing whether their current structure triggers registration requirements under Bill 29. For foreign lenders, evaluating whether authorized collateral agents could provide a compliance pathway makes sense. Building or enhancing AML compliance infrastructure before deadlines hit allows for thoughtful implementation rather than rushed adoption. Preparing standard disclosure materials and adapting them for B.C.-specific requirements positions organizations well for whatever the final rules require.
The Opportunity in Compliance
Here is the perspective that often gets lost in regulatory discussions: robust compliance infrastructure is not just a cost center. Organizations with mature AML programs can process transactions more efficiently because they have established clear procedures. They attract institutional partners who value working with compliant counterparties. They avoid the reputational damage that comes from enforcement actions.
Lenders who view October 2026 as an opportunity rather than a burden will emerge with competitive advantages that their less-prepared peers cannot match.
The question is not whether to invest in compliance; the question is how to invest in compliance. The question is whether you want to build it thoughtfully over the next eighteen months or scramble when the deadline arrives.