FINTRAC Fines Primary Capital $93,390 for AML Failures, Signaling Rising Pressure on Securities Dealers

The administrative monetary penalty levied against Primary Capital Inc. in May 2025 by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) highlights how shortcomings in anti-money laundering (AML) practices can leave securities dealers exposed to regulatory action. The Toronto-based exempt market dealer, registered as a designated securities dealer, was ordered to pay $93,390 after FINTRAC found that the firm had breached multiple provisions of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

The enforcement action centered on four major failings within the firm’s compliance program. Investigators determined that Primary Capital did not have a properly documented compliance program, with policies and procedures either outdated, incomplete, or lacking formal senior officer approval. This absence of governance undermined the credibility of its AML framework. The company also failed to carry out a documented risk assessment addressing key factors such as client types, the nature of its products, and the geographic exposure of transactions. Without this analysis, the dealer had no meaningful understanding of its vulnerabilities to money laundering or terrorist financing.

Regulators further noted that the firm had neglected to conduct and document regular reviews of its policies, procedures, and training initiatives, a key requirement to ensure alignment with both changing regulations and emerging threats. In addition, Primary Capital did not implement appropriate processes for identifying politically exposed persons (PEPs), including both domestic and foreign officials, international organization leaders, and their close associates or relatives. As a result, the firm was unable to properly identify higher-risk relationships that would normally trigger enhanced due diligence measures.

These lapses were not treated as minor oversights. FINTRAC emphasized that the failings represented systemic weaknesses that compromised the very purpose of Canada’s AML regime. By failing to meet even the minimum due diligence standard, Primary Capital exposed itself to the risk of being used as a channel for illicit finance. While no confirmed cases of money laundering were found at the firm, the absence of preventive controls created vulnerabilities that could easily have been exploited.

The penalty forms part of a broader regulatory trend in Canada. FINTRAC has steadily ramped up enforcement, particularly in sectors where compliance standards have lagged. Administrative monetary penalties serve not only to punish but also to encourage firms to correct deficiencies and establish stronger compliance cultures. In the 2024–25 fiscal year, the agency issued a record 23 Notices of Violation, with total penalties exceeding $25 million—the largest number of actions in a single year since FINTRAC was granted sanctioning powers in 2008. The Primary Capital case reflects this broader push, underlining that no dealer, regardless of size, can afford to treat AML compliance casually.

Exempt market dealers, such as Primary Capital, face unique risks because they often facilitate private placements and specialized investment products involving smaller pools of investors but larger transaction values. Without strong due diligence frameworks, such businesses can be vulnerable to misuse by bad actors seeking to layer or integrate illicit funds. Public enforcement actions like this one serve as stark reminders that regulatory expectations apply just as much to small and specialized dealers as they do to large financial institutions.

The decision to publicize the penalty also carried a deterrent effect. Other exempt market dealers and securities firms are now under heightened pressure to scrutinize their compliance structures to avoid a similar outcome. FINTRAC has made clear that unless firms close existing compliance gaps, the number and size of penalties will continue to rise.

The review of Primary Capital also provided insight into what could have prevented the firm’s failings. Regulators pointed to several measures that would have protected the dealer from regulatory sanction. Written compliance policies tailored to the firm’s business model should have been developed, regularly reviewed, and formally approved by senior officers, providing clear staff guidance on onboarding, suspicious activity reporting, record-keeping, and escalation. A structured risk assessment, updated annually, would have helped the firm identify high-risk products, clients, and geographies, allocating resources accordingly. Documenting the methodology and findings of such assessments is considered essential, as regulators require proof of a risk-based approach rather than generic claims.

Independent reviews of the compliance program, carried out by internal audit teams or external experts, could also have flagged deficiencies before regulators did. These reviews would likely have identified gaps in PEP identification and risk assessment. Screening tools for politically exposed persons and their associates should have been deployed, enabling enhanced due diligence on high-risk clients, including verifying sources of wealth and monitoring transactions. The absence of such processes was described as a serious blind spot.

Training was another critical area of weakness. Regulators stressed that compliance systems are only effective when staff understand and apply them properly. A comprehensive training program tailored to the firm’s activities, reinforced by periodic refreshers, would have equipped employees to identify suspicious patterns, recognize red flags, and record their actions appropriately. Keeping training aligned with evolving financial crime typologies is seen as vital in maintaining effective AML systems.

Had these measures been in place, Primary Capital would almost certainly have avoided regulatory sanction. Beyond satisfying FINTRAC’s legal requirements, the improvements would have strengthened the dealer’s resilience against being exploited by criminal networks. The costs of implementing robust AML measures, regulators noted, are far lower than the reputational damage and operational disruption caused by public enforcement actions.

The case also offered lessons for compliance professionals and firms across Canada’s securities sector. For senior management, it underscored that compliance is not a back-office formality. Law requires senior officers to approve AML policies, and regulators increasingly expect board-level engagement in compliance oversight. Without leadership from the top, programs risk degenerating into neglected checklists rather than effective protections. For compliance officers, the case highlighted the critical importance of documentation. Informal practices, even if applied in some form, cannot be evaluated by regulators and therefore fail to meet requirements.

For the industry as a whole, the decision demonstrated that the consequences of non-compliance extend well beyond financial penalties. Damage to reputation, erosion of client trust, and intensified regulatory scrutiny are longer-term repercussions that often outweigh the monetary fine itself. In competitive markets, being publicly identified as non-compliant can harm a firm’s ability to attract investors or establish business partnerships.

By learning from Primary Capital’s mistakes, other securities dealers and financial institutions have an opportunity to reinforce their AML regimes and mitigate both regulatory and operational risks. Robust compliance programs are not merely about avoiding fines—they are essential to protecting the integrity of the Canadian financial system, supporting law enforcement efforts, and securing sustainable long-term business growth.

By fLEXI tEAM