FINTRAC guidance related to the Ministerial Directive on the Democratic People’s Republic of Korea issued on December 9, 2017

From: Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)

Updated on March 22, 2025

This guidance explains the requirements of the Ministerial Directive on Financial Transactions Associated with the Democratic People’s Republic of Korea (North Korea).

This guidance is related to the Ministerial Directive issued by the Minister of Finance that was published in the Canada Gazette and came into force on December 9, 2017.

1. Why this Ministerial Directive was issued

The Minister of Finance issued this directive in response to a public statement from the Financial Action Task Force on November 3, 2017, in which the Financial Action Task Force expressed its particular and exceptional concerns about North Korea's failure to address the significant deficiencies in its anti-money laundering and combatting the financing of terrorism (AML/CFT) regime and the serious threat this poses to the integrity of the international financial system. The Financial Action Task Force reaffirmed the call on its members to apply effective preventive measures to protect their financial sectors from such risks.

Furthermore, pursuant to paragraph 11.42(4)(d) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act), it has been determined that there is a risk that North Korea may be facilitating sanctions evasion, which the Minister is of the opinion could have an adverse impact on the integrity of the Canadian financial system or the reputational risk to that system.

As such, Canada's Finance Minister issued this Ministerial Directive to ensure the safety and integrity of Canada's financial system.

For more information on Canada’s sanctions regime and Canadian sanctions related to North Korea, visit the Canadian Sanctions website and the Canadian Sanctions Related to North Korea webpage.

2. Who needs to apply this Ministerial Directive

This Ministerial Directive came into effect on December 9, 2017, and is applicable to every person or entity referred to in section 5 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

3. Requirements of the Ministerial Directive

Before undertaking any financial transaction originating from or bound for a foreign state, foreign entity or trust companies incorporated or formed by or under a provincial Act that are not regulated by a provincial Act, you must develop and apply, as part of the compliance program referred to in section 9.6 of the Act, policies and procedures to assess the risk of a sanctions evasion offence associated with North Korea.  

• treat every financial transaction originating from or bound for North Korea, regardless of its amount, as a high risk transaction for the purposes of subsection 9.6(3) of the Act;
• verify the identity of any person or entity requesting or benefiting from such a transaction, regardless of its amount, in accordance with Part 3 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (Regulations);
• exercise customer due diligence in relation to such a transaction, with a particular attention to the risk of a sanctions evasion offence, including by ascertaining the:
  • source of the funds or virtual currency;
  • purpose of the transaction; and
  • beneficial ownership (if the client is an entity) or control of any entity requesting or benefiting from the transaction;
• keep and retain a record of such a transaction to and from North Korea, regardless of the amount, in accordance with the Regulations.
  • record the information included in the corresponding record type, even if the transaction is below the threshold.

This Ministerial Directive does not apply to transactions where there is no suspicion or explicit connection with North Korea or there is no evidence of the transaction originating from or being bound for North Korea.

Additional measures required

In addition to verifying the identity of any client requesting or benefiting from such a transaction, under this Ministerial Directive, you must assess the client information to determine whether there are reasonable grounds to suspect the commission or attempted commission of a money laundering, terrorist activity financing or sanctions evasion offence and to report it through a Suspicious Transaction Report or Listed Person or Entity Property Report to FINTRAC.

Correspondent banking

The Ministerial Directive requires that before undertaking any transaction with a foreign financial institution under a correspondent banking relationship, an entity referred to in subsection 9.4(1) of the Act must:

• ensure that the risk of a sanctions evasion offence associated with the Democratic People’s Republic of Korea is taken into consideration when taking the measures referred to in paragraphs 16(2)(h) to (j) and subsection 16(3) of the Regulations and when conducting ongoing monitoring in the context of the correspondent banking relationship; and
• evaluate the measures taken to implement the United Nations Security Council sanctions against the Democratic People’s Republic of Korea by the jurisdiction in which the foreign financial institution was incorporated and the jurisdiction in which it conducts transactions in the context of the correspondent banking relationship.

4. Other

Policies and procedures

Policies and procedures should already include general information on how your organization becomes aware of ministerial directives issued by the Minister of Finance as well as identify what you will do in response. Once a directive has been issued, you are expected to take steps to meet the requirements of each directive.

In response to this directive, FINTRAC expects you to include the fact that transactions to and from North Korea are high risk as part of your documented risk assessment of clients and business activities, and to assess the risk of a sanctions evasion offence associated with North Korea.

Risk assessment

Guidance on how to conduct and document your risk assessment can be found in the Risk assessment guidance. Reporting entities are required to implement certain measures to mitigate risk for any transactions involving jurisdictions that are identified in these Ministerial directives and examples of some of these measures can be found in General information on Part 1.1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act provided by the Department of Finance Canada.

Compliance examinations

During a compliance examination, FINTRAC may assess compliance with any directive in order to verify that you have complied and taken appropriate mitigating measures in relation to these transactions. FINTRAC may also review your overall risk assessment to verify that you have documented and assessed the risk of your entity in relation to your business activities involving these jurisdictions.