Proceeds of Crime (Money Laundering) Act

An Act to facilitate combatting the laundering of proceeds of crime, to establish the Financial Transactions and Reports Analysis Centre of Canada and to amend or repeal certain Acts in consequence

This bill was last introduced in the 36th Parliament, 1st Session, which ended in September 1999.

Sponsor

Paul Martin  Liberal

Status

Not active
(This bill did not become law.)

Elsewhere

All sorts of information on this bill is available at LEGISinfo, an excellent resource from the Library of Parliament.

Proceeds of Crime (Money Laundering) and Terrorist Financing ActGovernment Orders

October 24th, 2006 / 1:20 p.m.
See context

Bloc

Thierry St-Cyr Bloc Jeanne-Le Ber, QC

Mr. Speaker, on behalf of the Bloc Québécois, I am pleased to state our position on Bill C-25, which is now before us.

At the outset, I would reiterate that the Bloc Québécois plans to support this bill. Obviously, we will take all necessary measures, in committee and elsewhere, to ensure that the right of citizens to protection of personal information is respected.

That said, with respect to the principle underlying the bill, the Bloc Québécois has always felt that fighting terrorist activity funding is one of the greatest challenges in fighting terrorism. The provisions in this bill will also apply to the fight against organized crime, which has been a Bloc Québécois priority for a long time now.

We have introduced a number of bills to make things more difficult for organized crime. As you know, one of our colleagues in this House, the member for Saint-Hyacinthe—Bagot, has been working for a long time now to protect Quebec farmers who have been taken advantage of by organized crime groups that used their land to grow illegal crops. We will continue to pursue our long-standing fight against organized crime.

We also think that this bill will enable Canada to comply with the recommendations of the Financial Action Task Force on Money Laundering.

I will begin by providing some background on the bill to put it into context.

On December 15, 1999, the then Secretary of State, the hon. member for Willowdale, tabled, on behalf of the Minister of Finance, Bill C-22, to combat money laundering. It was quite similar to Bill C-81, presented earlier in 1999, which simply died on the order paper when that session of Parliament prorogued.

The broad purpose of the bill was to remedy shortcomings in Canada’s anti-money laundering legislation, as identified by the G-7’s Financial Action Task Force, FATF, on Money Laundering in its 1997-1998 report.

In addition, the FATF recommended that reporting requirements in Canada be made mandatory—rather than voluntary, as is currently the case—and that a financial intelligence unit be established to deal with the collection, management and analysis of suspicious transaction reports.

Bill C-22 was passed and since then it has been mandatory for regulated financial institutions, exchange offices, casinos and other financial intermediaries to report suspicious financial transactions.

Another of the bill's objectives was to put in place, together with the Canada Customs and Revenue Agency, a system for reporting large cross-border movements of currency. The bill also provides for the creation of a new independent agency, namely the Financial Transactions and Reports Analysis Centre of Canada, which will receive and administer the information reported.

Bill C-22 was enacted on June 29, 2000, and replaced the Proceeds of Crime (Money Laundering) Act then in effect.

We are now going from Bill C-22 to Bill C-25, with which we will try to go further than we did at the time.

The Conservative government is proposing to amend Bill C-22 with the bill we are debating in this House today to increase financial institutions' duties to keep records and report suspicious transactions, with a view to eliminating money laundering and funding for terrorist organizations.

I will come back to that in further detail later in my presentation, but first, the bill extends the application of the act to all organizations that, in addition to dealing in securities, deal in other financial instruments.

So we are also going to add persons and entities that transmit funds by any means or through any intermediary.

Previously, this obligation to report information was provided for in section 83.01 of the Criminal Code, which stipulated that the RCMP or CSIS should be notified of the existence of property belonging to a terrorist group. So we will be going a bit further for any transaction that seems suspicious.

The other new thing in this bill is the prohibition against anyone opening a bank account for a person or an agency if the client’s identity cannot be established; this seems logical. Under this bill, any financial institution dealing with a politically exposed foreign person—I shall come back to this a little later on—should make sure that senior management has given its approval before undertaking a transaction with this type of individual.

We will take the necessary steps to make sure that, if a Canadian bank is dealing with a bank or another institution, it is a real bank, not a fictitious one, a shell bank. That too seems to be quite an appropriate precaution.

Bill C-25 requires foreign subsidiaries of Canadian banks to comply with the same rules as Canadian banks. So we are going to try and extend our actions to the limit of our powers.

Finally an official of the revenue department will now have the power to transfer any information transmitted by another official under the Charities Registration (Security Information) Act to the Financial Transactions and Reports Analysis Centre of Canada. This power is designed to more readily combat the financing of terrorist organizations through so-called charitable organizations or through electronic funds transfers.

To continue this scenario, we must also talk about money laundering. Money laundering occurs when the revenue arising from criminal activity is converted into goods whose origin is difficult to trace, and has, in fact, been deliberately hidden. Thus proceeds of crime are disguised in an attempt to make them look legitimate.

Generally these are goods or assets arising from the illegal drug trade or other criminal activities, such as cigarette smuggling, burglaries and so on.

Since money laundering and the criminal activities it attempts to camouflage are clandestine in nature, understandably it is fairly difficult to get an accurate idea of the situation. The experts estimate, however, that between US$300 billion and US$500 billion worth of criminal funds enter the international financial markets every year.

The federal government estimates that between $5 and $17 billion is laundered in Canada every year. This is a significant amount of money. Although it is difficult to know the exact amount, given the source of the money, this gives us an idea of the seriousness of the problem.

The repercussions of organized crime go beyond mere economic consequences and the violence it causes. The social costs involved are also very high.

Obviously, regarding this area of the problem, we will try to resolve the issue of funding terrorist organizations. Terrorist groups are resorting more and more to the use of charities to ensure funding. Under the guise of charitable organizations, terrorist groups successfully accumulate the funds they need to plan and execute terrorist acts.

Furthermore, since the implementation of measures aimed at fighting large, structured terrorist organizations, such as al-Qaeda, we are now faced with several independent, separate cells. While larger organizations need enormous amounts of money to finance their operations, weapons purchases and international movements, the new wave of terrorism does not need as much money to achieve its ends. Thus, there is a greater need to develop means to fight against this type of funding.

The Financial Action Task Force on Money Laundering—or FATF—was created in 1989 at the G-7 summit in Paris. Its primary objective is to fight money laundering and the funding of terrorist activities. The task force now exists and has 33 members.

I would now like to talk in greater detail about the provisions that amend Bill C-22.

The first thing that Bill C-25 amends in Bill C-22 is the mandatory reporting of suspicious transactions in clauses 5 to 11. Under Bill C-22, the reporting of suspicious transactions, which is currently voluntary, would become mandatory. The obligation to report would extend to non-banking financial institutions and certain other businesses. Therefore, the reporting requirements would apply to regulated financial institutions, casinos, foreign exchange traders, stock brokers, insurance companies and persons acting as financial intermediaries, such as lawyers and accountants.

Bill C-25 will add to the list all organizations that make electronic funds transfers, issue or redeem money orders or traveller's cheques or deal in financial instruments. Departments and agents of the government that sell prescribed precious metals will also be subject to the legislation. These persons and institutions would be required to report certain prescribed categories of financial transactions as soon as they have reasonable grounds to suspect that the transactions are related to a money laundering offence.

Bill C-25 includes a measure pertaining to what are called “politically vulnerable” individuals. An institution will not be able to do business with this category of individuals without first obtaining the approval of senior management. Who are these politically vulnerable individuals, as defined in the bill? They include heads of state or government, members of the executive council of a government or members of a legislature, deputy ministers or people of equivalent rank, ambassadors or attachés or counsellors of an ambassador, presidents of state-owned companies or state-owned banks, heads of government agencies, judges, leaders or presidents of political parties represented in a legislature and holders of any prescribed office or position. All these people are considered politically vulnerable. Before an organization does business with them, its senior management will be informed and will have to act accordingly.

Bill C-25 also sets out more stringent rules and responsibilities for banking institutions. For any interbank transaction, the Canadian bank shall ensure, under sanction of law, that the corresponding foreign counterpart is not a shell bank, which makes sense. In addition, all foreign subsidiaries of a Canadian bank must follow rules that apply to Canadian banks located in Canada.

According to the provisions of the bill, not reporting this type of transaction will constitute an offence subject to a fine of not more than $2 million or to imprisonment for a term of not more than five years on conviction on indictment and a fine of not more than $500,000 or imprisonment for a term of not more than six months for a first offence on summary conviction. In the case of a second offence, there is a fine of not more than $1 million or imprisonment for a term of not more than one year on summary conviction.

Bill C-25 extends these provisions to all new entities governed by this regulation.

The second major set of amendments made by this bill, clauses 12 to 39, covers the declaration of significant transborder movements of currency. Individuals who import or export large amounts of currency or monetary instruments, such as travellers cheques, must report these to a customs officer. Failure to do so may lead to seizure of the currency or instruments transported unless the individuals decide not to proceed further with importing or exporting them. A mechanism is put in place for that purpose, and we will add, in clauses 15 and 16 for example, provisions authorizing customs officers to search a person or the vehicle of a person if they suspect on reasonable grounds that the person has secreted on or about their person currency or monetary instruments not reported pursuant to the law.

Another provision will make it possible for Canada to enter into an agreement with the customs agencies of foreign states which have similar reporting requirements for transborder movements of currency and monetary instruments.

The third important element is the creation of the Financial Transactions and Reports Analysis Centre of Canada covered under clauses 40 to 72. This bill will create this new government agency, which will be independent and will be responsible for gathering and analyzing the reports it receives under the legislation. The Financial Transactions and Reports Analysis Centre of Canada will be a central repository for information about money laundering activities across Canada.

The proposed legislation authorizes the centre to provide key identifying information of suspicious transactions to the appropriate police force if it has reasonable grounds to suspect that the information would be relevant to investigating or prosecuting a money laundering offence.

It is important to note that the role of the centre will essentially be to gather information, process it and determine the potential problems and suspicious cases that will be passed on to the police forces. They will be in charge of determining whether to take action or not. I had a chance to meet, at the Standing Committee on Finance, someone from an existing organization in Canada that does similar work. I imagine the centre and the agency will join forces to try to identify suspicious patterns in a series of financial transactions.

The centre will also raise awareness among and provide information to the public on this type of problem. It will also be authorized to subpoena witnesses and to make an order for the production of documents.

I would like to close with the offences covered in the legislation in clauses 74 to 82. The sanctions for breaching these requirements are described in these clauses.

Bill C-22 implemented tough criminal penalties for serious offences. Bill C-25 will implement administrative penalties for less serious offences in order to ensure that the rules are respected by all players in the financial system.