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.

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

Is this something new, or did I miss something? We had 50 witnesses before Bill C-25. I think this is normal. I don't understand.

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

We move to allow witnesses to appear before the finance committee so that we can have further discussions on Bill C-25.

[The Chair, Conservative, Brian Pallister]

You have a strong indication of my feelings on the issue, so if you wish to present a motion, please do. Otherwise I'm going to try to expedite discussion on Bill C-25 among committee members. If the committee members wish to do further research on the issue, I welcome that, and I encourage them to do that. However, I won't entertain discussion on this unless it's a motion, and we'll move immediately to Madam Wasylycia-Leis. If you'd like to make a motion, I'll allow you to do that.

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

It's not a motion. I think it's a request, as is normally done. When we're studying Bill C-25--

[The Chair, Conservative, Brian Pallister]

I'm trying to expedite the work of the committee, obviously. This is my responsibility. Mr. Pacetti has expressed the desire to have witnesses appear on Bill C-25. Do we take that in the form of a motion?

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

I didn't want to interrupt you while you were going through a list of work the committee has to do, but I was looking for a deadline for when you would like to see the list of witnesses on Bill C-25, because we may want to have a list of witnesses for Bill C-25, and you're looking for amendments already. I'd like to first hear from witnesses and then decide whether we're going to present any amendments. It's usually in that order.

[The Chair, Conservative, Brian Pallister]

Thank you, Madam Ablonczy. Thank you, all. Thanks to committee members for their attention, despite their chocolate levels here this morning.

We will excuse the panel now, and the cameras will be off momentarily so we can continue our civil discussions this morning.

I think I can deal, actually, with Monsieur St-Cyr's issue in advance. It may save us time, and we'll then move to Madam Wasylycia-Leis's motion. Also, I should notify the committee that we've received notice from Mr. Paquette of his desire to present a motion on Thursday.

I want to quickly give you an overview of the work we have before us. This Thursday we will continue dealing with Bill C-25. I will encourage all committee members, if they have amendments to this bill, to bring them forward in advance of the discussions. It would facilitate discussion of the bill. I would encourage you to give those to the clerk by 5 p.m. tomorrow, knowing, of course, that you can bring amendments during the discussion if you so desire. It would facilitate our discussion at that time.

Also, we have C-28, the budget implementation bill, before us, which we must deal with by.... When? Is there a deadline on that? It should be as soon as possible.

We also have Bill C-294. Supplementary estimates also have to be dealt with by December 5. We have the fall fiscal forecast. And the minister will be appearing, we think, but not until the week after, we hope, the Remembrance Day recess.

We also have, of course, the priorities that I've asked you to identify and forward to us, because we want to get those over to Finance so they can come to speak to those and provide us with further information. That process will begin next Tuesday. So those priorities, I'd remind you.... When did we say we wanted those in by? They should be in by tomorrow at noon. Please do so, because we do want to make sure that Finance officials have a bit of lead time to prepare fully for your questions.

As well, we have private members' bills and the tabling of reports on the pre-budget consultations. We need to prepare that as a result of our weeks of deliberations. That has to be done by December 4. As well, Mr. McCallum has a notice of motion on the record in regard to GST rebates.

We have 10 meetings to do all of that. That being said, Mr. St-Cyr has raised with the chair his concern about--

[Dean Del Mastro, Conservative, Peterborough, ON]

Ms. Lafleur, I saw an example of a recent investigation that was followed up by FINTRAC. I agree with Mr. McKay that it's important we bring this down to the people's level so they can understand exactly what we're hoping to accomplish with Bill C-25.

The example I saw involved some 11 or 12 companies with electronic transfers that went both internationally and domestically and chased each other around. But when it was actually put on a flow chart, it looked like something a computer engineer might use in designing a computer system—very complex and multi-faceted.

In today's electronic age, how difficult is it for them to do that?

[Rick Dykstra, Conservative, St. Catharines, ON]

As for the four enhancements that we've done to Bill C-25, how does this put us with respect to our colleagues around the table at the UN? Have we significantly advanced? Is there some satisfaction that we're on the cutting edge, or at least that we're keeping pace with what we should be doing internationally?

[Diane Lafleur]

There are no significant gaps. I would only add a point of clarification.

A couple of the recommendations weren't necessarily legislative in nature. They had to do with funding for FINTRAC and the RCMP specifically. As Ms. Ablonczy has already stated, budget 2006 provided funding for FINTRAC, CBSA, the Department of Justice, and the RCMP in order to meet existing pressures and meet the new requirements that will be imposed on those departments and agencies as a result of Bill C-25.

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

Thank you, Mr. Chairman.

It's always a pleasure to be in committee, this time wearing a little bit of a different hat, but I'm pleased to be here nonetheless to give some background to the committee about Bill C-25. Then I and officials from the department, who've been working very hard on this for a long time, can answer any questions you may have.

Mr. Chairman, this bill strengthens the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to ensure that Canada continues to be a global leader in combating organized crime and terrorist financing. As you know, Minister Flaherty recently addressed the first plenary meeting of the 18th session of the Financial Action Task Force, or FATF, an international body, held in Vancouver this year. He assured the delegates there that Canada takes its global responsibilities very seriously.

We can be proud that for the first time ever, Canada has assumed the presidency of the FATF, the international standards-setting body whose purpose is the development and promotion of policies to combat money laundering and terrorist financing. We are a country on the move, a country with a G7-leading economy, and we are a country committed to meeting our international obligations, including the global fight against terrorism.

We live, as we all know, in an increasingly interconnected world, where terrorists and criminal organizations are becoming more sophisticated in their attempts to move, conceal, and launder funds through financial systems and by other means. I know you can appreciate that abuses to our nation's financial system can have a serious ripple effect well beyond our own borders. The FATF has made great strides over the years in working with regional bodies and international financial institutions to develop a more fortified international system.

Canada must do its part in preventing criminals and terrorists from using our financial systems to fund criminal activities. Canada wants to be relentless in its efforts to combat money laundering and terrorist financing, and Bill C-25 reflects that.

We're committed to playing a stronger role at home and internationally, and we have already been doing so through a number of initiatives. We are committed to making the safety and security of our citizens, and our fellow global citizens, a priority.

The May budget, as you will recall, announced significant new funding for anticipated initiatives and to bolster existing capacities to combat money laundering and terrorist financing. The budget announced funding of $64 million over the next two years for the Financial Transactions and Reports Analysis Centre of Canada, called FINTRAC, funding for the RCMP, for the Canada Border Services Agency, and for the Department of Justice.

This additional funding will help in a number of ways. For example, it will increase the number of RCMP officers working within the anti-terrorist financing and anti-money-laundering units. It will also expand the capability of the Canada Border Services Agency to detect unreported currency at airports and border crossings. Furthermore, the new funding will ensure that FINTRAC can better analyze financial transaction reports and monitor the compliance of the unregulated financial sectors, such as money remitters.

Bill C-25 implements measures that will improve Canada's ability to act decisively against money laundering and terrorist financing. What part does the bill play in the fight against terrorism? Of course, one of the main things terrorists need is money. The measures in Bill C-25 will make it harder for terrorists to get funding. The fight against money laundering and terrorist funding is one where we must stay one step ahead of criminals by continuing to develop ways to defeat them, wherever and however they operate. These proposed amendments will make Canada's anti-money laundering and anti-terrorist financing regime more effective by making it consistent with new FATF standards.

As a founding member of FATF, Canada is committed to implementing forty recommendations on money laundering, as well as nine special recommendations on terrorist financing. In addition to these recommendations from FATF, we have now had the interim report of the Standing Senate Committee on Banking, Trade and Commerce. The Senate is calling for tougher measures to deal with money laundering and terrorist financing.

Mr. Chairman, I'd like to thank the Senate banking committee, on behalf of our committee, for their guidance in shaping the requirements of Bill C-25.

The proposed measures in Bill C-25 also follow recommendations made in the 2004 Auditor General's report and, in addition to that, in a 2004 Treasury Board evaluation of the regime. So we have a number of expert voices calling for some upgrades to our regime.

For example, as recommended in the 2004 Auditor General's report, and at the behest of law enforcement, these proposed amendments enhance the information FINTRAC can disclose to law enforcement and security agencies on suspicious transactions that point to money laundering or terrorist financing. It's important to mention here that the bill proposes an amendment to the Income Tax Act that would allow the sharing of information between FINTRAC, the Canada Revenue Agency, and law enforcement agencies regarding charities where there are reasonable grounds to suspect they are being used for terrorist financing.

Mr. Chairman, these measures will increase the value of FINTRAC disclosures, ultimately leading to more investigations and eventual prosecutions.

The amendments proposed in Bill C-25 also include the creation of a registration regime for money service businesses. FINTRAC would act as registrar and would maintain a public list of registered money service businesses and foreign exchange dealers. These businesses are already covered by the existing legislation; however, given that this is an unregulated sector, the registry will assist FINTRAC in ensuring compliance with the regulation.

What's more, Bill C-25 provides for enabling legislation for enhanced client identification measures. What this means is that banks, insurance companies, securities dealers, and money services businesses will be required to take measures to identify and monitor the transactions of foreign nationals who hold prominent public positions.

Finally, Bill C-25 proposes to create administrative and monetary penalties to better enforce compliance with the Proceeds of Crime and Terrorist Financing Act. Current legislation only allows for serious criminal penalties if the act is contravened. But FINTRAC requires the ability to levy fines to deal with lesser contraventions in order to take a more balanced and gradual approach to compliance.

The government believes that the act strikes the right balance between protecting the privacy rights of Canadians and providing law enforcement with the necessary tools to fight serious crimes such as money laundering and terrorist financing. The act contains a number of safeguards designed to ensure privacy rights are protected, such as criminal penalties for unauthorized disclosure.

Officials in the Department of Finance have met with the Office of the Privacy Commissioner and continue to work with them to ensure privacy rights are protected.

In sum, Mr. Chairman, the steps I have outlined here today add up to a better, safer world for Canadians, a world where our financial systems are used only as they were intended, to create better opportunities for our citizens and greater prosperity for our nation. The measures contained in this bill today will help win the battle against terrorist and criminal activity by making our regime smarter, more resourceful, and more tenacious. Mr. Chairman, criminals don't stand still, and neither can we. We need to take decisive action and Bill C-25 does just that.

We would now be pleased to answer any questions from the committee and we look forward to our examination of this bill.

Thank you, Mr. Chairman.

[The Chair, Conservative, Brian Pallister]

Welcome to our witnesses, and Madam Ablonczy, in a different role from the normal role in committee, welcome to you.

Pursuant to the order of reference of Tuesday, October 24, 2006, the committee is considering 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.

We will begin with a statement from Madam Ablonczy.

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 the second time and referred to a committee.

Proceeds of Crime (Money Laundering) and Terrorist Financing Act

[Joe Comartin, NDP, Windsor—Tecumseh, ON]

Mr. Speaker, Bill C-25 would expand programs that we have already. To some degree, from that experience, we are plugging some loopholes and expanding the use of these programs to deal with money laundering and proceeds of money laundering and with terrorist financing.

As has already been expressed by some of my colleagues from the NDP, we will be supporting the bill at second reading. As opposed to a half dozen or more other crime bills that have come from the government, this bill at least makes sense. It would address some real problems in the country with regard to money laundering by organized crime and terrorist financing from either potential terrorist groups in the country and, as often as not, from outside the country who are using Canada, as we know, mostly as a conduit.

Some of the money is raised in Canada but a great deal of both the money laundering from organized crime and from the terrorist groups outside the country is coming from outside, moving through Canada and on into the United States or back to other countries where it is used to finance terrorism in those countries.

We do have some concerns about the bill and my colleague from British Columbia just raised one of them. We do not seem to be able to figure out a way to accommodate the legal community in terms of the lawyers and the law firms having to report either suspicious transactions or large sums of money passing, mostly through their trust accounts but through their offices. That has been an ongoing problem.

The bill originated, I would say, at least two years ago and maybe three, and has been held up all that time because of the ongoing dispute between the law societies across the country and the federal government. The law society, in a previous piece of legislation, actually challenged the government in court and was successful in having itself excluded under the terminology and provisions of that particular law. We were hoping that this bill, which we hope will eventually become law, would have included at least some meaningful reporting from the legal community.

We will explore this more at the committee to see if there is some possibility of that happening and, if not, an explanation as to why not and also what types of negotiations have gone on between the federal government and the legal community, the law societies in particular, to try to resolve this issue.

One of the very good points about the bill is that it does include the foreign exchange shop. We know from a number of reports that we have had from police sources and our intelligence sources that repeatedly, because they are not covered by the existing law, people have gone to foreign exchange shops, exchanged large amounts of money from one currency into Canadian currency and oftentimes go to another shop to exchange that into another currency, oftentimes U.S. currency, and the money moves on out of the country without any formal recording. This will cease with this legislation coming into effect. It is one of the major holes that we have in our system of protections, both against organized crime and potential terrorist groups, and it badly needs to be plugged.

There is also a concern about the cost of the administration of this program as it is now, and that will become somewhat more onerous, because again, we are bringing in more private sector companies which will be responsible for additional reporting.

I know from my colleague from Winnipeg that there has been some expression of concern from small credit unions about their ability to provide sufficient resources, both in terms of technology and in terms of personnel to meet the requirements of this reporting.

That is another matter that needs to be explored at committee, and in particular, to see if the federal government could be doing something to assist smaller operators who are affected by this legislation. It may be by providing them with a software package that would let them track the funds or it may be suggestions on how small financial institutions can streamline their process and still meet the requirements of the act without making it too onerous for them to perform their responsibilities.

I want to raise one additional problem, which concerns how this information is used, and I will do it in two contexts. The Auditor General, Ms. Fraser, issued a report on the central agency, FINTRAC, which is the intelligence gathering organization in this country that sifts all this information and helps identify whether in fact it is coming from organized crime or from some terrorist activity.

In her report, which I believe was for the 2003-04 period of time, she found that although a number of transactions had been identified and had been, as permitted under the legislation, reported to both the RCMP and CSIS, neither of those agencies appeared to have used the information, either for investigation purposes or for laying charges. That appears to be an ongoing problem and it is of concern. FINTRAC was running in that year on a budget of about $31 million annually. If we are spending that amount of money on this intelligence gathering program, we should be seeing some results.

In the two subsequent years of 2004-05 and 2005-06, again there appears to have been limited use made of this. This is something that will need to be explored at committee to ensure Canadian taxpayers receive good results from their tax dollars that go into these services.

The other context where I would like to address the use of this is the issue of privacy and, in particular, the risk that some of this information will find its way into the United States and, under the patriot act, be disclosed to a number of agencies in the U.S. I have not been convinced that we have closed all the loopholes so that this information, the intelligence and results of the investigation which are badly needed in Canada, does not go into the United States.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I will narrow down my original question. It was a former member of the Bloc Québécois, Richard Marceau, who promoted the idea that we should be able to seize the assets of a convicted criminal, who is a member of a criminal organization, and put the reverse burden of proof on the individual when it was a proceed of crime.

Would he not agree with his former colleague, Richard Marceau, that we should expand Bill C-25 to do that, while we have this opportunity?