Bill C-25 (Historical)

An Act to amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the Income Tax Act and to make a consequential amendment to another Act

This enactment amends the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to enhance the client identification, record-keeping and reporting measures applicable to financial institutions and intermediaries. It establishes a registration regime for money services businesses and foreign exchange dealers and creates a new offence for not registering.
It allows the Financial Transactions and Reports Analysis Centre of Canada to disclose additional information to law enforcement and intelligence agencies, and to make disclosures to additional agencies.
It permits the Centre to exchange compliance-related information with its foreign counterparts and permits the Canada Border Services Agency to share information about the application of the cross-border currency reporting regime with its foreign counterparts. It also includes a consequential amendment to the Canada Border Services Agency Act.
It creates an administrative monetary penalty regime.
It amends the Income Tax Act to allow the Canada Revenue Agency to disclose to the Centre, the Royal Canadian Mounted Police and the Canadian Security Intelligence Service information about charities suspected of being involved in terrorist financing activities.

Tax Conventions Implementation Act, 2006

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Mr. Speaker, I wish to speak on Bill S-5. Some of the points that I am going to speak about were already addressed by my colleague from the Conservative Party, but I want to speak today on the Liberal point of view.

Bill S-5 is an act to implement conventions and protocols concluded between Canada, Finland, Mexico and Korea, all separate tax treaties from what I understand, for the avoidance of double taxation and the prevention of fiscal evasion with respect to income taxes. It is also known as the 2006 tax convention implementation bill.

While international tax law does not always make for the most exciting of debates, its importance is indisputable, especially as we move toward greater globalization and greater free movement of labour and capital across international borders.

This bill seeks to obtain tax treaties between Canada and, as I said, three other countries, those being Mexico, Korea and Finland. We have had tax treaties in place with these countries for many years. As with most laws, there comes a time when they need to be amended in order to reflect changing times.

Consequently, the bill presents some routine amendments that I believe will help ensure Canada remains a leading participant in the global economy.

Our party will support the updates contained in the bill.

There are two primary areas with which the bill occupies itself. The first is to help combat tax avoidance between signatory countries. The second is to avoid the double taxation of nationals working abroad in these other countries.

I will begin with the issue of international tax avoidance. As an accountant, I can tell the House that combating tax evasion is not an easy task, but it is an urgent one. It is also a task that Canada cannot fight on its own. As the former chair of the finance committee during the last parliamentary session, I can say that this is why our committee looked at how Canada can increase its battle in curbing the increase of tax evasion.

With the call of the election by the opposition parties, our work was never completed, but during this session the finance committee, forced to conduct a parliamentary review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, has hopefully given FINTRAC more tools to help combat tax evasion, through Bill C-25.

Stemming international tax evasion is something that requires the efforts of all countries among which capital and people flow back and forth, and they are perhaps flowing more freely now than at any other point in history. It is therefore not only advantageous for us to close tax avoidance loopholes in order to protect our own tax base, but it also speaks about our commitment to the international community. We have to show our partners, allies and competitors that Canada takes its international responsibilities seriously. We have to be willing to exchange information and work with foreign revenue authorities to help stem the tide.

I will now move on to the second part of the bill, the avoidance of double taxation. We are living in a highly globalized economy. Without international tax treaties such as this one, a Canadian working abroad would likely be taxed twice on the same income, once by the Canadian government and then again by the country in which that income is earned.

There are several ways to ensure that double taxation does not occur when the citizen of one country works in a foreign country.

A tax treaty can ensure that worker's income is taxed solely in the country where the work is done. Conversely, a treaty can also ensure that only the country of which the worker is a citizen taxes that person. Or again, finally, a tax treaty can see both countries tax a worker but at lesser rates, to ensure that the taxpayer who pays in one country will receive a tax credit in the other country in which he or she files his or her income tax return based on global income, to avoid double taxation.

The treaties in Bill S-5 cap the tax rate at 15% on portfolio dividends paid to investors who do not reside in Canada. In the case of dividends paid by subsidiaries to their parent companies, the maximum withholding tax rate is reduced to 5%. The withholding rate reductions also apply to royalty, interest and pension payments.

Each treaty in Bill S-5 caps the withholding tax rate on interest and royalty payments at 10%, which is in line with current trends in this area and current Canadian tax policies.

At this point what does concern me are the recent rumblings by the present government that seem to indicate it would like to rip apart many of the 90 tax treaties that were signed by the previous Liberal government in order to prevent the double taxation of Canadian dual citizens who work outside of Canada.

It was a little over a month ago when the Minister of Foreign Affairs told the Senate committee that the government was considering imposing a tax on Canadians living abroad under a second nationality. This would not only violate our bilateral treaty obligations with dozens of other countries, but it would also go against the fundamental value of what it means to be a Canadian at home and in the world.

Furthermore, it would also represent a complete U-turn from what Bill S-5 attempts to do. Bilateral tax treaties signed between Canada and other countries, such as the one we are discussing today, allow for dual nationals to live and work in one country without having to pay income tax in their country of citizenship. In a world of increasing international movement, these tax treaties have become more and more vital. As such, Canada has been hard at work to extend its tax treaty network for decades.

International arrangements such as these allow for relatively free movement of people and capital across borders, contributing greatly to the rich multicultural nature of our country. Imposing an income tax on dual citizen Canadians living abroad would not only violate these treaties, it would seriously reduce our domestic tax base by opening up the likelihood that foreign dual nationals here would face double taxation from their country of citizenship.

While I am happy to support the bill, which will ensure there is no double taxation between Canada and either Finland, Mexico or Korea, I am very concerned about the government's commitment to respecting the bill over the long term. I am also concerned about what that says about the government's commitment to making Canada internationally competitive in terms of taxing its citizens working abroad and potentially foreigners coming to Canada to work.

There is another aspect of what international tax treaties such as Bill S-5 achieve. It is just as important as avoiding double taxation or stemming tax avoidance. That aspect has certainty. With so much investment, goods, services and labour flowing across international boundaries, it is important for the people involved to hold a fair degree of certainty that the tax situation that exists today will more than likely exist tomorrow.

In short, it is a commitment that the rate of taxation will not change on the whim of a government. It is kind of guarantee to the international community and to Canadians that the government will not, for instance, suddenly decide to tax its dual citizen nationals living abroad like the present government decided to do by taxing income tax after promising not to do so in the last election. I have no idea why the government wanted to erode that confidence by musing about taxing its dual citizens living abroad.

Finally, I am also concerned that the government is not moving important legislation through Parliament as fast as it should. I am told that the bill needs to receive royal assent by January 1, 2007. Fortunately, it is a Senate bill and it has already passed in that place in a very speedy manner, which is why it is before us in the House.

The bill arrived in the House just two short weeks ago. It has taken the agreement of all opposition parties to fast track the bill through second and third readings. In short, it took the three opposition parties to ensure the bill, a bill that may not be tremendously exciting but is nonetheless important to Canada's competitiveness, was passed on time.

That being said, we on this side of the House are happy to support the bill at all stages.

Proceeds of Crime (Money Laundering) and Terrorist Financing Act

[The Acting Speaker, Conservative, Royal Galipeau]

Pursuant to order made on Thursday, November 9, Bill C-25, An Act to amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the Income Tax Act and to make a consequential amendment to another Act, is deemed to have been read a third time and passed.

(Motion agreed to, bill read the third time and passed)

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I thank my colleague from Timmins—James Bay and I thank his ancestors who were founders and leaders in the credit union movement, doing us all a service.

We need to keep in mind that our charter banks were given the exclusive monopoly on certain very lucrative financial transactions, such as credit card transactions, in exchange for providing basic services to all Canadians wherever they are in the country and even sometimes when it is not the most profitable thing to do.

Nobody needs to have a tag day for the banks. They are making record profits every quarter and yet they are abandoning rural Canada and the inner cities, such as this flight of capital, this vote of non-confidence. Fifteen bank branches from the five charter banks have closed in my riding in the last five years and, in the riding of my colleague from Winnipeg North, which borders my riding of Winnipeg Centre, another dozen. That is 27 bank branches.

Who is backfilling that need for financial services? It is the payday lenders, the Money Marts, the Paymax, the scourge on society. I have seen the face of evil and it is the payday loan industry in Canada and in my riding.

The only people who can actually backfill and meet the needs of Canadians is the credit union movement. However, a person needs a fair amount of economic stability to even form a credit union or join a credit union. People should know their banking rights and they should know that the charter banks have abandoned Canadians.

The reason we got onto credit unions, and to get back to relevancy, is that the Credit Union Central of Canada made a very passionate submission to the committee citing its reservations about Bill C-25. It stated that it may be handicapped and hog-tied with this added financial burden of meeting the terms and conditions of Bill C-25 in terms of money laundering and tracking every transaction to monitor for illegal activity.

We all want to do what we can to defeat money laundering and illegal transactions by illegal terrorist groups but let us not put the added burden on the credit unions that may hog-tie their ability to serve the needs of Canadians.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I am pleased to enter into the debate today on Bill C-25 on behalf of the NDP caucus.

I am going to draw on some of the comments made by previous NDP members in this debate earlier and during other stages of the bill. I note many of the thoughtful comments made by our justice critic, the member for Windsor—Tecumseh and our finance critic, the member for Winnipeg North, who analyzed the bill and added some helpful comments that I will try and summarize here.

I should note by way of introduction that the bill comes to us as one of a flurry of bills dealing with justice issues. There has been an entire suite of legislation in recent months, some of it good and some not so good. In the NDP's point of view, we believe that some of the bills go too far and some not far enough. I hope I will have time to develop this somewhat.

We believe that aspects of Bill C-25 do not go far enough given the worthwhile goals and objectives stated in the bill. This is one of those situations where the government of the day could have exercised even more authority to solve some of these issues.

Let me start with that one point that I have introduced to explain. Should the bill pass, this would be one of the few places in the Criminal Code where the reverse onus would be contemplated and allowed. This has been controversial in other aspects. For instance, we just finished debating Bill C-9 yesterday that introduced an element of reverse onus. Should individuals be convicted for a third time of an offence from a list of serious offences, the reverse onus would be put on them to prove why they should not be designated as dangerous offenders and locked up for life.

There were howls of derision in the House because the NDP had the temerity to raise the caution that we should only venture into this notion of reverse onus with our eyes open and with due diligence. We think we were justified in that respect and we are taking political heat as a result of it.

It was not a pleasant sight yesterday when we were debating Bill C-9. I was not proud at all of the tone of the debate that took place just because the NDP had the temerity to question the idea of “three strikes and you're out” and the idea of putting the reverse onus on individuals who are convicted to prove they are not dangerous offenders.

Bill C-25, the bill we are addressing today, deals with a reverse onus as well. This is one case where I think the Conservative government has gone soft on crime. I cannot understand why it did not go farther. Even though those members hurled abuse at the NDP for being soft on crime yesterday because we raised a question, in a more respectful way I ask them why they could not have gone tougher on crime in this bill. I will explain what I mean.

In the context of this flurry of crime and justice bills that we are dealing with, we have to establish the notion that crime does not pay. I would hope this would be one way to deter criminals from activities that we are trying to discourage. The prevailing wisdom and the common knowledge out there is that crime does pay.

An awful lot of bad people are getting away with an awful lot of things and living a very good life right under the noses of our police officers and law enforcement officers whose hands are tied. They may have darn good reason to believe that somebody is enjoying these luxury goods from ill-gotten gains from the proceeds of crime, but because the burden of proof is so onerous on our police officers and on our criminal justice system, it is rare that the proceeds of crime are actually seized.

Bill C-25 does suggest that in the event of money laundering and fundraising for terrorist activities or belonging to an illegal organization, the government can in fact seize bank accounts and cash assets from individuals and apply the reverse onus. I think that is laudable.

I would point out, though, that we could have expanded this notion to include more things than just the bank accounts. In the province of Manitoba we introduced legislation. It was defeated narrowly by the two Liberal members of the Manitoba legislature who would not allow it to pass, but we introduced legislation that was very broad and very sweeping. If a person was a member of a criminal organization and was convicted of a crime, the crown prosecutor could go to a judge who could then assess the material possessions of the criminal.

Let us say the person was a member of an illegal organization like the Hell's Angels and the guy was living in a $750,000 mansion with a tricked out Escalade in the driveway, two boats and a Sea-Doo, and all the tools and jewellery et cetera, the trappings of ill-gotten gains and crime. If that individual could not prove to the judge that the toys were purchased by earnings or by some legally obtained wealth, then we in fact could seize the property. The assets would be liquidated and the proceeds would in fact be dedicated directly to law enforcement, so that we can go out and bust more criminals. I thought that was a great bill and I thought that in the bill before us we could have explored some of those notions.

I note that the private member's bill from the Bloc Québécois in the last Parliament proceeded quite a way down the road before Parliament ended and the bill died on the order paper. I think Richard Marceau was the name of the Bloc member who is no longer a member so I can use his name and give him credit. That garnered a lot of support in the House. We thought it was a good idea.

This notion of reverse onus is not foreign to the NDP nor do we oppose it out of hand, but there was derision heaped on us yesterday for raising the idea that we did not believe reverse onus should be used in Bill C-27, the “three strikes and you're out” bill. We opposed it yesterday, but that does not mean that we oppose it all the time.

Some of the legitimate concerns about Bill C-25 that were raised above and beyond that observation from my own point of view were that it would put a burden on financial institutions to monitor, track, and take note of suspicious transactions or even overt exchanges of money that may indicate illegal activity. I think this is a necessary aspect of the bill. We have to rely on the cooperation of the financial institutions to alert us when these suspicious transactions take place.

However, the burden on smaller financial institutions may be quite onerous. I have an email from the director of the largest credit union on Vancouver Island, Mr. Bob Smits. Mr. Smits noticed that we were raising issues about the bill in the House of Commons and was monitoring it carefully.

He raised a concern that in a smaller financial institution like his, the current regulations, even as they exist today regarding tracking, the FINTRAC legislation, and the financial transactions and report analysis legislation have required his small credit union to hire an enforcement officer. He estimates that the cost of compliance with the current law to be over $100,000 a year.

If we compound that burden even further and make the obligation more onerous, we have to accommodate somehow these smaller institutions who want to comply with the law, but who have served notice that they are legitimately concerned that the burden will be passed on to them. They are asking that the government pay attention to the submission made by the credit unions at committee.

I am not sure how the submission was received in committee but I did not notice any substantial amendment in that regard. The only amendment I could find in my research for my speech today was a committee stage amendment put forward by the member for Markham—Unionville. The amendment stated that SIRC, the Security Intelligence Review Committee, established by section 31, “...shall undertake a review of the operations of the centre in each financial year and shall, within three months after the end of each financial year, submit the annual report to Parliament on those operations”.

That is just a mandatory review process, which is not unusual when we are introducing a bill of this nature. I am not sure we took into consideration the legitimate concerns of the Credit Union Central of Canada in its submission to the bill. I want to recognize today that the NDP did take note of CUCC's concerns and we tried to represent its concerns at every stage of the debate on the bill.

One of the points I highlighted in its submission is where CUCC states that “in the absence of compelling evidence of need, Credit Union Central is concerned that the proposed legislation is largely driven by the perceived need to make Canada's AML-ATF regime formally consistent with the new international financial action task force standards, rather than in response to any substantive threat arising from loopholes in Canada's current AML-ATF regime”.

I suppose CUCC is questioning whether better enforcement in support of the existing regime may have been adequate to plug the loopholes. These are the practitioners in the field who do not want us to pass legislation unnecessarily unless we can have a demonstrated need proven to them. They also point out, and we should take note of this, that they do not necessarily accept that the need is commensurate with the level of activity contemplated in the bill.

The one thing that I do take note of and support in the bill is that the bill does include the foreign currency exchange shops. I think this is a logical extension in terms of financial institutions.

I would also note that a lot of questionable activity can be shielded in the completely unregulated financial sector of the payday loan companies, many of which, in fact, offer this foreign exchange and foreign delivery of currency.

As we know, a lot of money leaves Canada every year, expatriated by people who are working in Canada and sending money to other countries. When the completely unregulated payday loan sector started to explode into our communities and started sprouting up like mushrooms on every street corner, we were very concerned. However, one of the things we have not given too much thought to is that one of the services offered by these payday loan outfits is, quite often, wiring money to other countries.

The wiring of money was normally done in a fairly regulated setting until these shops started popping up in every strip mall across the country, sometimes three, four and five of them in the same strip mall. I think we will need to pay better attention to the activity involved in that because questionable people have entered into that industry sector. When people can get 1,000% rate of return on their money, a lot of people are taking note and it is no wonder these little shops are sprouting up.

In one sting case done by the crown prosecutor for the province of Manitoba, they found that 10,000% interest was being charged by one of these outfits. I believe that is a better rate of return than a person can get selling cocaine. There is no other activity in the country where we can get 10,000% return on an investment, other than these payday loan shops, so it is attracting all the wrong kinds of people. I would suggest that might be one place that officials may want to really look for money laundering, illegal transactions, and bring these payday lenders under tight scrutiny and tight regulation.

I do acknowledge that payday loan legislation is pending in this 39th Parliament, and I welcome that.

This bill deals with the legislation governing money laundering as it exists today and tries to strengthen and improve the performance of the Financial Transactions and Reports Analysis Centre, or FINTRAC as it is known to the practitioners in the field.

FINTRAC, being an independent agency, does report to the Minister of Finance. It places obligations on certain individuals and entities to keep records, to identify their clients and to report certain financial transactions.

The second concern brought to our attention by the Credit Union Central of Canada is the obligation to report activity. First, the onerous burden that may be compounded by this legislation to track activity looking for suspect transactions, but also the obligation to turn in the names of member clients, otherwise seemingly innocent transactions may cross some line where a red flag pops up on a file, the institution would have no choice other than to report that individual. It could be someone who has been a member of that credit union for 20 years. We all know that credit unions are a lot more community driven than are some of the bigger banking institutions. It could put the manager of a credit union, who is a member of the community and who might be the coach of the local hockey team, in the difficult situation of having to turn in one of the parents of the children on that hockey team because of a transaction that was possibly innocent but set off a little red flag.

There are the privacy elements here that we must take into consideration and there is the awkwardness associated with that.

Bill C-25 seeks to improve and strengthen the performance of the Financial Transactions and Reports Analysis Centre. I come back to the point made by Credit Union Central that perhaps all that is needed is a more robust administration of the existing FINTRAC regime.

It would be irresponsible to speak to this bill without taking into consideration the projected costs.

As I see I have only two minutes left, I will restate two of the compelling arguments brought to our attention by people we trust, about Bill C-25, the Credit Union Central of Canada.

The budget for FINTRAC, as contemplated currently, is $64 million. It may be that more resources will be necessary to offset the impact of the costs of administering the further obligations under Bill C-25 for these smaller institutions. As a former activist in the credit union movement, I try to advocate on their behalf. Let us not put this added financial burden on struggling organizations that are trying to meet the financial needs of individuals in places where the banks have abandoned them.

Quite often, the credit union stuck with the tough work of providing basic financial services that the banks should have been providing if they were living up to their obligations under their charters. They have abandoned the inner cities. Credit unions have fallen in to take their place and this bill might add an unnecessary financial burden on them.

[The Acting Speaker, Conservative, Royal Galipeau]

The last time the House debated Bill C-25, the hon. member for Jeanne-Le Ber had 14 minutes remaining.

Resuming debate. The hon. member for Jeanne-Le Ber.

The House resumed consideration of the motion that Bill C-25, An Act to amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the Income Tax Act and to make a consequential amendment to another Act, be read for the third time and passed.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Mr. Speaker, the government did no such thing. I am sorry that partisanship must always rear its ugly head. All members of Parliament are very concerned about ensuring that the privacy of Canadians and the accountable operation of these kinds of activities are jealously protected.

There was a proposal for oversight that simply was not workable. It would have substantially changed the operations of some of the organizations that do important work on behalf of Canadians in protecting their security. However, the Minister of Finance put a proposal forward for oversight, through the office of the Information Commissioner, a proposal that had also been brought to my attention by the members of the Bloc Québécois. We were able to achieve consensus behind that area of oversight.

As I emphasized, all members of Parliament and certainly the government are very committed to oversight, which is why we introduced the federal accountability act, an act that would broaden, to an unprecedented degree, oversight of all operations of government.

We are very grateful that there has been consensus behind this important measure in Bill C-25.

[Diane Ablonczy, Conservative, Parliamentary Secretary to the Minister of Finance]

Mr. Speaker, today we are at third and final reading of Bill C-25. The bill is entitled Proceeds of Crime (Money Laundering) and Terrorist Financing Act. The bill proposes amendments to the existing act against money laundering and terrorist financing. These amendments will toughen Canada's existing anti-money laundering and anti-terrorist financing legislation.

We are aware and we applaud the fact that we are more and more a global economy, that all countries interact together to do what they do best in the global marketplace, and that open borders provide these kinds of opportunities for Canadian businesses to thrive internationally.

However, every upside has certain downsides. This kind of openness in commerce, trade and financial transactions around the world also provides criminals with opportunities. Criminals use these opportunities to launder millions of dollars in illegal cash. The intention of criminal and terrorist elements, of course, is to make these proceeds look legitimate, so they can use them without attracting the unwelcome attention of law enforcement agencies. The funds are also increasingly used to fund terrorist activities. We want to put a stop to this.

Criminal activities, I do not have to remind the House, undermine the reputation and integrity of financial institutions. They distort the operation of financial markets and adequate measures must be put in place to deter this kind of activity.

I want to remind all members, although we have spoken about this issue before, that the proposed legislation is extremely important to our country. I want to take a few minutes to explain briefly what money laundering and terrorist financing is, how it operates, and especially how it can affect our Canadian economy.

Money laundering is the process used by criminals to disguise the source of money and assets derived from criminal activity. This kind of criminal activity is very broad. It runs from drug trafficking, prostitution, smuggling, fraud, extortion, corruption, to criminal activity of all kinds. Most of this activity generates large quantities of cash, untraceable cash, but cash nevertheless, that can raise suspicions of law enforcement agencies. Criminals turn to money laundering and they have to use legitimate financial institutions and systems to do this. This can compromise the integrity of these institutions. It can also facilitate corruption in a country. It can destabilize economies. It is a serious threat to any country.

This kind of criminal activity is nothing new. It has been around for a long time in one form or another. However, there has been a change recently. Money laundering has become an increasingly global phenomenon. This is because of technological advances in e-commerce and the global diversification of financial markets. Because of this, criminals now use very sophisticated techniques to carry out these money laundering activities. These techniques can lead to further opportunities to launder illegal profit and obscure the money trail leading back to underlying crime.

Methods for laundering funds vary considerably and are often highly sophisticated and intricate. However, there are generally three basic stages to the process. I mentioned this before to the House, but some members may not have heard it so I will just repeat it quickly.

First, there is the placement stage. This involves placing the proceeds of crime, usually in small amounts at a time, into the financial system.

Placement is followed by layering. At this second stage, the dirty money is converted into another form through complex layers of financial transactions that disguise the audit trail and disguise the source and ownership of funds. This, for example, can be by buying and selling stocks or by buying and selling commodities or properties. These are some common vehicles for layering.

Finally, there is the integration stage and in this stage the laundered proceeds are placed back into the economy, hidden under a veil of legitimate business activity.

Terrorist financing has an extra wrinkle to all of this because it can involve funds that have been raised from legitimate sources. Unlike organized crime, terrorists can raise funds through legitimate sources such as personal donations, profits from business, or through charitable organizations.

Terrorist financing can also come from funds that have been through the money laundering process that I have just described, that is, it could come from criminal sources such as the drug trade, smuggling weapons and other goods, fraud, kidnapping, extortion, all of these criminal activities in addition to legitimate activities.

Terrorists, like criminal organizations, use sophisticated money laundering techniques to evade the attention of authorities. However, to make the money harder to follow, financial transactions associated with terrorist financing tend to be in smaller amounts than in the case with money laundering by criminal organizations. When terrorists raise funds from legitimate sources, members of the House can appreciate that the detection and tracking of those particular funds becomes very difficult.

To move their funds out of our country or another country, terrorists often use informal money transfer systems such as Hawalas. These exist and operate outside of, or parallel to, what we normally think of as traditional banking or financial channels.

In Canada, in an effort to conceal the final destination of laundered money, FINTRAC is finding that funds suspected of being used for financing terrorist activities are increasingly being moved out of the country through traditional banking centres to countries with major financial hubs.

How big is this money laundering and terrorist financing problem? What are we dealing with? What do we need to be aware of? Because this is hidden activity, it is pretty hard to put an actual dollar figure on it. We do know that this activity involves significant amounts of money. The International Monetary Fund, through its expert sources, has estimated that worldwide the aggregate size of money laundering is between 2% and 5% of the entire global GDP. That is very significant by any standard.

What can we do about it? The bottom line is that criminal and terrorist activity requires money. One of the best ways to put these individuals out of business is to starve them of funds. That is why we are here today with Bill C-25. The bill would improve Canada's ability to act decisively and shut down these criminal operations when they are detected.

We have already taken some steps in this direction. Members will recall that in the recent spring budget there was extra funding for key partners in combating this kind of activity of money laundering and terrorist financing. There is $64 million in additional funding over the next two years for the RCMP, the Department of Justice, the Canada Border Services Agency and FINTRAC.

Just a reminder for those who are wondering, FINTRAC is Canada's financial intelligence unit. It is an integral part of our country's commitment to fight money laundering and terrorist activity financing. FINTRAC gathers information about financial transactions, analyzes it and if it sees something suspicious alerts our security forces to take further action.

As the finance minister said when he introduced this bill that is before us today, “Canada's new Government will continue to be relentless in its battle against money laundering and terrorism financing”.

To build on the measures in the budget to increase funding for these kinds of security activities by the RCMP and CSIS, Bill C-25 will help ensure that Canada continues to be a global leader in combating organized crime and terrorist financing.

It will do that by making our financing regime consistent with new standards that were recently adopted by the financial action task force. Members will know that the FATF is an international standard setting body for developing and promoting national and international policies to combat money laundering and terrorist financing.

We are proud of the fact that Canada was a founding member of this organization. I commend the previous government for the leadership that Canada took in this area.

Canada is committed to implementing the 40 new recommendations of the FATF on money laundering and nine special recommendations on terrorist financing. Canada's response to those revised recommendations have been put into law in the bill we are debating today.

The bill also responds to the Auditor General. In 2004 the Auditor General made some recommendations about how to strengthen our regime. We want to respond positively to her recommendations. In 2004 there was a Treasury Board evaluation of our regime. Treasury Board made some recommendations which we want to put into place as well.

Recently, the Auditor General appeared before the House of Commons Standing Committee on Finance. The Auditor General has confirmed to the committee, and I would like to let the House know, that this bill in the Auditor General's opinion appears to deal with the key findings in the report from the Auditor General's Office in November 2004.

Not only that, we have recently received a report from the Senate Standing Committee on Banking, Trade and Commerce. The Senate committee undertook an extensive study of this whole area of money laundering and terrorist financing. The report called for a number of tougher measures to deal with these activities.

Those of us in the House want to thank the Senate committee members for the insights that they have provided on this issue. They are satisfied and pleased I believe, although they will be examining this bill in some detail in the days to come, that their proposed recommendations have been enshrined in this legislation and in related regulations.

The following are the key proposals in this legislation. First, there is something new in the area of information sharing. Right now, FINTRAC shares information with law enforcement and other domestic and international agencies. This bill would enhance that information sharing in ways that were recommended by the Auditor General and also requested by law enforcement agencies.

Specifically, this would enhance the information FINTRAC can disclose to law enforcement and security agencies on suspicious and money laundering terrorist financing. It is not much good for FINTRAC to have this information if it cannot alert those who could actually investigate it further and do something about it.

Second, the bill deals with the registration system. It proposes to create a system to register money service businesses and foreign exchange dealers. Previously, these entities were not registered and, because they also have been conduits for money laundering, they will now be brought into the system.

With a federal registration system in place for individuals and entities engaged in money service businesses of foreign exchange, FINTRAC would act as registrar and would maintain a public list of registered money service businesses and foreign exchange dealers.

Third, the bill deals with enhanced client identification measures. It would include requirements for reporting entities, banks, insurance companies, securities dealers and money services businesses to undertake enhanced monitoring of high risk situations. In other words, we are heightening the level of vigilance in our country. This would include the monitoring of transactions of foreign nationals who hold prominent public positions.

The current legislation only allows for serious criminal penalties if the act is contravened. In order to take a more balanced and gradual approach to compliance, the bill would allow FINTRAC to levy fines to deal with lesser contraventions or inadvertent breaches of the act. It would also provide FINTRAC with the ability to create an administrative and monetary penalty system whereby fines can be applied for non-compliance. This would better help FINTRAC to do its work.

For those who have made inquiries about this, the regulations for this bill would also include other reporting entities, such as gemstone and precious metals dealers they deal with, and compliance measures that are appropriate to legal practitioners. Discussions are underway with the building industry.

Not only the government but the entire House is very serious about winning the battle against money laundering and terrorist financing. I would like to commend all members of the House from all parties for their united determination to get behind these measures. There has been a very good level of cooperation from all parties in bringing the bill forward and that will benefit all Canadians. Canadians should commend all parties for this cooperation. As Mr. Speaker knows, that does not always happen in the House but, on important issues, members of Parliament can act in a united way.

For the first time ever, the House should know that Canada has assumed the presidency of the FATF. We are very pleased about the leadership role we will have in this area. Our presidency of the FATF is another example of our commitment to national and international security, to collaborative solutions to global threats and to meeting the need for international cooperation and international institutions to deal with this area.

The bill would make Canada's overall regime consistent with international standards. It would continue to help us keep one step ahead of those who would abuse our system to fund criminal and international terrorist activities.

We appreciate the fact that we have all party support for this. I would tell Canadians that they can be reassured that the government, the House of Commons and Canada's Parliament are dealing with this important issue in an expeditious and effective manner.

[Lawrence Cannon, Conservative, Pontiac, QC]

moved that Bill C-25, An Act to amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the Income Tax Act and to make a consequential amendment to another Act, be read the third time and passed.

Bill C-25--Proceeds of Crime (Money Laundering) and Terrorist Financing Act

[Rob Nicholson, Conservative, Leader of the Government in the House of Commons and Minister for Democratic Reform]

Mr. Speaker, as I said earlier, I have a motion regarding Bill C-25, for which I believe you will find consent. I move:

That, notwithstanding the Standing Orders or usual practices of the House, Bill C-25 be amended as follows: Clause 38 be replaced with the following:

“38. Section 72 of the Act is replaced by the following:

72. (1) Every five years beginning on the day on which this section comes into force, the administration and operation of this Act shall be reviewed by the committee of the House of Commons, of the Senate or of both Houses that is designated or established for that purpose.

(2) Every two years beginning on the day on which this section comes into force, the Privacy Commissioner, appointed under section 53 of the Privacy Act, shall review the measures taken by the Centre to protect information it receives or collects under this Act and shall, within three months after the review, submit a report on those measures to the Speaker of the Senate and the Speaker of the House of Commons, who shall each table the report in the House over which he or she presides without delay after receiving it or, if that House is not then sitting, on any of the first 15 days on which that House is sitting after the Speaker receives it.” and

the motion to concur in the report stage shall be deemed put and adopted; and

when Bill C-25 is called for debate on Friday, November 10, 2006 after no more than one speaker from each of the recognized parties have spoken at the third reading stage, the bill be deemed read a third time and passed; and that after Bill C-25 has been adopted at third reading and provided that routine proceedings has already taken place, the House proceed immediately to private members' business.

Business of the House

[Rob Nicholson, Conservative, Leader of the Government in the House of Commons and Minister for Democratic Reform]

Mr. Speaker, we will be calling that debate that the hon. member just mentioned in due course.

Today, we will continue the debate on Bill C-27, the dangerous offenders act.

There is an agreement to complete Bill C-25, proceeds of crime, tomorrow. In a few moments I will be asking the approval of the House for a special order in that regard.

When the House returns from the Remembrance Day break, we intend to call for debate a motion in response to the much anticipated message from the Senate regarding Bill C-2, the accountability act. As well, we hope to complete the report and third reading stages of Bill C-24, the softwood lumber act.

Thursday, November 23 will be an allotted day

I want to inform the House that it is the intention of the government to refer Bill C-30, the clean air act, to a legislative committee before second reading.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

This is an issue we heard about during our hearings on Bill C-25, and I think it's incumbent upon us to deal with them. Can you at least give us some indication of how you plan to deal with them? In particular, is there the possibility—

[Jeremy Rudin]

The amount for which approval is being sought today is for existing pressures on FINTRAC. Bill C-25, of course, has not been passed yet, and so it will be after the passage of the bill that we'll have to come back and ask for any additional appropriation for FINTRAC for its additional costs in relation to new responsibilities arising from Bill C-25.

[Pierre Paquette, Bloc, Joliette, QC]

You increased the budget for the Financial Transactions and Reports Analysis Centre by nearly $9 million. Does that take into account the extra responsibilities that the centre will have if Bill C-25, the money laundering bill, is passed?

Finance

[Brian Pallister, Conservative, Portage—Lisgar, MB]

Mr. Speaker, I have the honour to present, in both official languages, the fourth report of the Standing Committee on Finance respecting Bill C-25, An Act to amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the Income Tax Act and to make a consequential amendment to another Act.