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.

[Denis Meunier]

We have an evergreen plan to replace our equipment. And we are constantly updating, for instance, analytical tools. We use charts to describe the links. I could bring a chart that would show you all the connections between the people we're looking at. That takes quite a bit of skill by our analysts. We update this regularly.

We constantly update our systems. Just recently we added, about a year and a half ago, as a result of Bill C-25, some new casino disbursement reports. We had to upgrade our systems to receive these new kinds of reports. We're constantly updating our systems, which probably represent over 60% of our budget.

[Hélène Goulet]

I think I'd have to ask the RCMP for that information. What we do know is that we receive more requests for information from them and we have disclosed more and more to them. We have become more timely. We do our work faster, and with the last piece of legislation that came in, Bill C-25, we can give them a lot more information. So our information is seen as much more valuable than it was in the past. So we know that they follow up on more, and the fact that they ask for something means they're already investigating. When they ask us for information, it means they're already looking at something, so we have to assume that they look at most of what we give them.

[Janet DiFrancesco]

Right now FINTRAC is implementing a number of changes related to Bill C-25. We still have a number of changes coming into play in terms of new reporting sectors, of new powers under the proposed AMPs regime, as well as in terms of the MSB registry.

So there are a number of things that are still being implemented. At this point in time, it may be too soon to assess what more could be done, but certainly it's something we'll be looking to in the future.

[Janet DiFrancesco]

What I can tell you is that under Bill C-25 there were some important changes to both what FINTRAC can disclose and to the Income Tax Act.

I don't know whether one of my colleagues from the Department of Finance wants to address that any further. But certainly from our perspective we can disclose, I think, the information CRA needs to further their investigations.

They are providing us with more information, and I think we have a working relationship that is growing.

Tackling Violent Crime Act

[Brian Murphy, Liberal, Moncton—Riverview—Dieppe, NB]

Mr. Speaker, on Bill C-2 and justice issues in general, I heard just recently in the House the term “a revolving door”. The only revolving door is the justice minister and officials in the Conservative Party going in and out of press conferences announcing and reannouncing the same bills on which they pulled the plug.

With respect to Bill C-2, I have reviewed all the material. I sat in on all the committee hearings. What I have recently discovered, through obtaining a bill briefing, is a note from the Prime Minister about Bill C-2, in that it regurgitates all the bills we dealt with in the last Parliament. The message from the Prime Minister is that he is sorry that he pulled the plug on Parliament and flushed all the good work of the justice committee down the drain.

That is what happened. All these bills were well on their way. They were going through the due process of Parliament, which followed the rules of parliaments before, and they were on the way to being in effect.

The reason we are here today is that the Prime Minister prorogued Parliament and those bills were killed in their tracks. It is not true that perhaps that is why the Prime Minister prorogued Parliament but I think it is. In fact, I think that is why we have a new session.

I may be new and I may be in the back row but I read the papers and I know what is going on. Parliament was prorogued and all legislation was stopped in its tracks.

What is important to remind ourselves, and the Canadian public will want to know, is that there were 13 bills in the justice dossier and 7 of them were passed and are now the law of Canada.

As a member of the justice committee, I would expect all parties to tell all members of the justice committee that it was a job well done, that seven out of thirteen justice bills that affect the citizens of Canada are now law. Five of those bills are currently the subject of Bill C-2, which I will turn to, and one, mysteriously, of the thirteen bills, the criminal procedure act, which all parties agreed to unanimously, was a creature of a previous Parliament and which all prosecutors are waiting intently for. These prosecutors are the people who are on the front lines, as well as the police officers, in the criminal justice system. I suppose they are wondering why, despite the offer to fast track the bill by this party and despite the unanimous support by the justice committee, Bill C-23 has not been moved up. Perhaps in the government's haste and the revolving door of the press circle and the press club, it forgot to bring along an important bill.

Overall, the 13 bills, the 7 passed and the 1 dropped by an incompetent justice minister and the parliamentary secretary for forgetting that, and the 5 we are about to discuss, all of these bills need to be enforced. Each police officer, prosecutor, probation officer and corrections official, all those people in the system need to know that if there are 13 new laws, 12 because 1 was dropped by the incompetent ministry, but if there are 12 new bills we need to know we have the resources to put them into effect.

It is urgent for the public to know that despite a promise by the government, the law and order government, the tough on crime government, it is toothless without following up on the promise of 2,500 new police officers and the false promise in the Speech from the Throne for 1,000 new RCMP officers when the RCMP cannot recruit 1,000 officers. It is behind in its recruitment. It is a meaningless, toothless promise to the people of Canada but, even worse, it takes away the hope of the Canadian Police Association, the Canadian Association of Police Chiefs, the prosecutors and the probation officers, all the people who must put into effect, on a daily basis, the laws of the justice system.

I want to emphasize that the party on this side of the House is not so fickle. We support our justice system. We support our judges, our prosecutors, and all of the police officers who are responsible for protecting Canadians.

Over the past 18 months, the Liberal Party has undertaken a thorough review of the legislation pertaining to crime while the Conservatives have been busy playing political games. The Prime Minister put an end to this Parliament's activities and committee work, thereby throwing out the amendments that this bill sought to make to five acts. It is his fault that these five acts have not yet been amended.

We on this side of the House have faith in our justice system and are convinced that it will keep the peace in our communities.

I say that because it should be a non-partisan issue that we all believe in a safe community. We are all here as parliamentarians, surely, to ensure that we have a safe community. We may differ on the avenue to get there, but how much did we, the Liberal Party of Canada and its members on the justice committee, really differ from the plan of the Conservative Party in general and, more importantly, in the organic process which is called the development of criminal law through amendments to the Criminal Code?

I say to the House and to the public: not much.

There were 13 bills proposed. Seven passed and there are five in Bill C-2 that we are substantially in agreement on because they would have been law by now had Parliament not been prorogued, and I must say for the record that there is one that has been dropped by the government and that we are also in favour of.

So how is it that we, in trying to keep the community safe, are against the elements in Bill C-2 and the elements in these bills? I will repeat them: Bill C-9, on conditional sentences; Bill C-18, on DNA identification; Bill C-19, on street racing; Bill C-25, on proceeds of crime; Bill C-26, on criminal rate of interest; and just to add two others that were not part of Bill C-2, Bill C-48, on the implementation of a UN convention against corruption, and Bill C-59, on the unauthorized recording of a movie. These have all been supported.

But there is more. I hear members on the opposite side talk about 13 years of inaction with respect to criminal justice and I think the Canadian public would be interested to know that these laws, while continuing on the evolution of our criminal law and making our community safer, are but part of the Criminal Code of Canada.

On the Criminal Code of Canada, I might say this in a moment of non-partisanship and to congratulate a Conservative politician, albeit a dead one.When Prime Minister John Thompson, a Conservative prime minister, was minister of justice he essentially created and adapted the criminal law of Canada into a code that we would follow in this country. I want to get credit for giving plaudits to a Conservative in this place.

A principal part of the Criminal Code of Canada, which we have been talking about since I have been in Parliament, is sentencing. What is sentencing? The purpose and principles of sentencing are set out in section 718. I hear very often in this place and at the revolving door of the press conference centre for the Conservative Party of Canada that there is but one principle in sentencing, that is, to put the bad guys away.

I know this is a novel concept for those who are directing the Conservative justice agenda, but why do we not refer to what the law says about the purpose and principles of sentencing? They are set out in section 718. I am not going to read this word for word because it tends to be bogged down in particularness and assuredness and literal things that, again, the Conservative justice team really knows nothing about, having adopted and written such sloppy legislation that it had to be sent to committee to be fixed.

However, in general, there are six important factors or principles in sentencing. It is the reason we have sentences for people who have committed crimes. One principle is to denounce unlawful conduct. That is the one I hear about most often from the Conservative justice team. That is a valid principle, but it is one of six.

What are the others? One is to deter the offender from doing it again. That is another one I hear a lot about. The point over here is that those two of the six are very important. We are not shirking the importance of those. The law does not say that any one is more important than the other. It is a guidepost to judges who make our law pursuant to what they read here. It is a guidepost to say that we will denounce unlawful conduct. Yes, we will, by bringing in this sentence. We will deter the person or any person in the public from doing it again. They are two very important objectives.

However, that is where the Conservative justice team stops most of the time. The Conservatives forget that they must separate offenders from society when necessary and that they must assist in rehabilitating offenders. This is not to mean that the criminal gets more justice than the victim. What it means is that if there is a chance to rehabilitate an offender before that offender is reintegrated into society, or after, we ought to take that chance. Society is not safer, and let us remember that this safety is the principal goal of all parliamentarians here, by sending a more dangerous person back into the community after his or her sentence is served. It is a very important principle, as important as deterrence and as important as denouncing unlawful conduct.

The fifth aspect is to provide reparations for harm done to victims. That is very key. I will get into speaking about Bill C-9, which was a failed bill and flawed until it was amended at committee by all parties. One of the key aspects of Bill C-9 was to amend it to allow some white collar criminals, for lack of a better term, who had done a very denunciatory offence, which should be deterred, such as acts of stealing money through a breach of trust from someone, say, the option of a conditional sentence. It was to allow them to make reparations and restitution during the term of their sentence when it might mean the difference between an aged person with a stolen RRSP account getting that money back or not.

It gave back discretion to the judge, which he or she had in the first place, and it was a very necessary amendment to a flawed and hasty bill to make sure that this principle of sentencing, that is, to provide reparation for harm done to victims, was put in place. It was made better law by the intervention of the committee.

The final principle is to promote a sense of responsibility in offenders, an acknowledgement of the harm done to victims and to the community. What that is about is making sure that these offenders are not so divorced from the community in which they live, so that they know when they have done wrong that they have a responsibility to that community to be remorseful, to make amends and, I think very importantly, to reintegrate into that community if possible. We should never forget that.

The overall principle, and it is written as the fundamental principle in section 718.1 of the code, is that of the proportionality, of the gravity of the offence and the degree of responsibility of the offender. This is a very important principle, which judges rely on all the time.

I hear members speak about 13 years of Liberal inactivity. Actually I was not here for any of those 13 years. I was on the outside looking at all of the criminal justice bills that had been brought in during that time. I remember that it was a Liberal minister of justice who brought in the whole concept of mandatory minimums, which at the revolving door of the Conservatives' press circle was as if it was invented by them. I wonder if they invented the laws of gravity and found the North American continent. I suspect not, Mr. Speaker, and I do not suppose you could answer objectively if they say they have somewhere else, but I am not sure that they would not stand here and say that they have.

They did not invent mandatory minimums. The other sentencing principles in section 718.2 were brought in, in successive Liberal governments, by amendments in 1995, 1997, 2000, 2001 and 2005. All of those amendments in section 718.2 were brought in to recognize the changing nature of our society and to allow judges for the first time in the history of the Criminal Code to take into account these factors when sentencing, either in increasing or in decreasing the sentences, and I am very proud of that.

These factors include evidence that the offence was motivated by bias, prejudice or hate. It is the first time that it was codified that a judge should take into account hate crimes when sentencing. For any crimes committed based on someone's ethnic origin, language, colour, religion, sex, age, mental or physical disability, sexual orientation and other factors, is it not correct, right and fair in this society that those sentences were brought in and that judges should be told to take into account those factors in section 718.2, or whether the violence was against a spouse or common law partner?

Is it not important, for instance, that a judge be given that discretion to increase a sentence if the crime was against a spouse or a common law partner, or if the crime was done to a person of tender years under the age of 18? Is it not important that this be taken into account?

Is it not important, as it says in subparagraph 718.2(a)(iii), whether or not the person who committed the crime “abused a position of trust or authority”, or also whether the person was a member of a criminal organization, or that the offence was a terrorism offence?

All of these factors were in judges' hands before 2005. These were not invented by the Newtons over there in the last 18 months. They were there, it was Liberal legislation, and I presume it had all party support because it makes such sense.

Finally, in the principles of sentencing categories, paragraph 718.2(e) has the all important factor of recognizing that if an offender is of aboriginal origin or from a first nations community special circumstances should be put in place. We found during much of the deliberation at committee that this sentencing principle was often ignored.

I look at the amendments in place with respect to Bill C-10 and Bill C-9. It is a particular affront to this established sentencing principle, and it seems to have been completely forgotten by the Conservative government, that these two important sections of the code had existed before the Conservative government took place and certainly will exist when it moves on into the sunset.

About the laws in Bill C-2 and why it is so easy on this side for us to say we support the bill, it is important to remember that we on this side, and the members of the justice committee from the New Democratic Party and the Bloc Québécois will vouch for this, and the members of the justice committee had made Bill C-10 and the mandatory minimum aspect a better bill when it left committee. Arrogantly, and without respect for the work of the all party committee, the Conservative justice team, coming yet again from the revolving door of the press club, suggested that it would put in at report stage the entire bill as it was before.

However, over the summer I think the Conservatives had blueberry festivals and strawberry festivals and must have eaten some humble pie at some festival, as they decided that they would accept the amendments as they came from the committee, reintroducing Bill C-2 with the Bill C-10 amendments to make our community a better place and enlarge upon the mandatory minimums that were already in place under the Liberal justice program before the Conservatives took office.

The other bill that needs clarification on why it is an acceptable bill now, and why it was never acceptable when the amateur Conservative justice team brought the topic up before, is Bill C-22, the age of consent bill.

I have heard well-meaning, honest and forthright members of the House, such as the member for Wild Rose, say that he and his colleagues could never get an age of consent or age of protection bill through the Commons. I was disturbed by that. I asked why we would not protect our young persons. Why would we not get in line with many of the communities around the world which recognize that consent may not be freely given by a 14 year old when the world has become smaller and the age of the predator is upon us?

I looked into it. There were two very fundamental flaws with all bills that were presented as part of a justice package by an opposition entitled the Conservative opposition. They are as follows.

There was absolutely no close in age exemption. This bill, Bill C-22, contains a close in age exemption, making it flexible enough to recognize that not every relationship that is separated by a number of years is a relationship between an innocent young child and a sexual predator.

Finally, as I wrap up, age of consent as presented previously would have criminalized normal adolescent sexual activity which, whether the Conservatives like it or not, is out there, and 14 year olds and 15 year olds having relations are protected by this. It does prevent sexual predators from preying on the young. It is good legislation.

In summary, the five bills in Bill C-2 are good law because the committee made them so. I encourage the Conservative justice team, the Prime Minister and all Conservatives out there to watch what they write, to watch what they present to Parliament, and to not keep going through that revolving door called the press circle to give press releases without having done their homework to ensure that they are passing good laws which will make Canada safer.

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

It's just to go over what I'm asking for in the main estimates. That book is fine. Our job is to study just one or two aspects. In this case, we're studying the estimates that the Canadian International Trade Tribunal and FINTRAC are requesting. That's fine, but they have to come before us and give us the details that they gave Treasury Board.

It's not up to Treasury Board to reprint them. They have to provide us with that. I know FINTRAC provides us with a detailed analysis in their annual report. The Canadian tribunal is not as detailed, if I'm not mistaken.

The other thing, too, is that there's a weakness on our part, because we haven't seen your annual report. But we saw FINTRAC's, because when we were studying Bill C-25, we went over the whole system. That's why I didn't pick on you guys, but the next time around, if we haven't seen you in a year, I'm going to.

So that's part of the weakness, but the idea is that when you come before these committees, you should be prepared. At least with FINTRAC we got speaking notes. With the Canadian tribunal, we didn't get any speaking notes.

[Mark Potter]

It would be more a case of ensuring that some of the provisions in Bill C-25 related to client ID, to knowing your client--due diligence measures--are done. That is a requirement flowing from Bill C-25. That's a new element in the regime, and that's one of the key things they'd be looking at and auditing as law societies, to ensure that this is actually happening.

[Mark Potter]

Thank you.

I can comment briefly, but I think the best place to pose your questions would be the Department of Finance. They have the policy lead for the regime, and I understand they will be here in the next three or four weeks, so that would be a good opportunity to discuss this matter with them.

I think, as some of you may be aware, through Bill C-25, lawyers will be included. They won't be included in precisely the same way as other reporting entities, because we do have to be sensitive to the solicitor-client privilege aspect. So for example, they will not be filing reports, and there will be a degree of self-regulation by the law societies with respect to the provisions that will be put in place. We will be working with the law societies, along with the Department of Finance, to assure ourselves that they are respecting the provisions in Bill C-25.

[Mark Potter]

I think we've always been, for some time now, among the world leaders. I think the standards by the international FATF are evolving because the challenge is evolving. So all of us, as an international community, need to adjust to the new standards and put them in place.

I think what Bill C-25 will do is very much keep us among the very leading agencies like ours around the world. We are also going through an evaluation process by the FATF, which is a very comprehensive examination of where we're at, and I think that will also provide some useful guidance to us in Canada as to further areas we need to develop once we come back to Parliament for another five-year review, or changes in advance of that, if required.

So there are a number of processes in place to maintain our leadership.

[Dean Del Mastro, Conservative, Peterborough, ON]

I have a bit of a supplementary to that. Concerning Bill C-25, which we passed a little while ago, we thought that in passing that bill it would assist Canada in becoming a world leader in tracking money laundering and terrorist financing. Your position, therefore, is that by providing this additional funding, this will assist us in putting FINTRAC as a world leader, or certainly amongst world leaders on this front.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Thank you, Mr. Chairman.

I have a few questions for FINTRAC. During consideration of Bill C-25, we met with you to talk about changes to be made to new roles and responsibilities. I asked many questions, and was particularly interested in the mechanism used to protect private information. You gave a very good explanation of how the mechanism works. You analyze statements provided on a voluntary basis, which are then reviewed by a committee. If the committee decides that it is warranted, it sends complementary information to police services who provide intelligence.

I had also asked if there was a verification mechanism. This would be a good protection mechanism. I was told that there was no follow-up as to whether or not it was necessary to review cases and check if the decision to disclose information was a good one or not.

Since then, have you taken any measures to come up with a follow-up mechanism to make sure that past disclosures were carried out properly?

[Mark Potter]

I'll start briefly by recalling the three broad areas, both for this next fiscal year and as we go forward. The three broad areas are: general increases in workload, the number of reports we've been receiving, the number of cases we've been disclosing, and so on.

The second is the implementation of Bill C-25. As you well know, there are a number of measures there, some fairly big ticket items like an administrative monetary penalty system and an MSB registry, along with a number of others that we'll be in the process of implementing over the next two or three years.

The final one is the contribution to the Egmont Group.

We can certainly give you more detail on those areas, if that's helpful, either now or later.

[Mark Potter, Acting Deputy Director, Strategies and Partnerships, Department of Finance, Financial Transactions and Reports Analysis Centre of Canada]

Thank you very much.

Good morning, Mr. Chairman and committee members. We are pleased to appear before this committee again, to provide an update on FINTRAC's operations and our main estimates.

My name is Mark Potter. I'm the acting deputy director of strategies and partnerships for FINTRAC. Joining me today are my colleagues Alfred Tsang, our assistant director of finance and administration; and Janet Di Francesco, our assistant director of macroanalysis and integration.

I would like to make a brief opening statement.

FINTRAC was created in 2000 to facilitate the detection and deterrence of money laundering and terrorist activity financing in Canada and around the world. FINTRAC is an independent agency reporting to the Minister of Finance, who is accountable to Parliament for the activities of the centre.

We are Canada's financial intelligence unit, or FIU. Our mandate is to receive financial transactions and other information, analyze it, and when appropriate, provide financial intelligence to law enforcement and other investigative agencies, as well as foreign financial intelligence units.

FINTRAC produces financial intelligence that assists the investigation and prosecution of money laundering and terrorist activity financing offences and other threats to the security of Canada. These investigations are carried out by national, provincial, and municipal law enforcement agencies and the Canadian Security Intelligence Service. FINTRAC is an analytic, not an investigative body. FINTRAC sits at the front end of the process, making a contribution of intelligence that assists investigators.

FINTRAC has been very active in the production of case disclosures of financial intelligence, producing 168 such cases in 2005-06, with a total value of just over $5 billion. This financial intelligence is providing value to a growing number of investigations. With each successive year, we have increased our output of these disclosures of suspected money laundering and terrorist activity financing cases.

Our governing legislation, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, places obligations on certain individuals and entities to keep records, identify their clients, and report certain financial transactions to us.

These reporting entities, as we call them, include banks, credit unions, accountants, casinos, money services businesses, foreign exchange dealers, securities dealers, life insurance companies, and real estate brokers and agents.

Recently, as you know, Parliament amended the Proceeds of Crime (Money Laundering) and Terrorist Financing Act through Bill C-25. From FINTRAC's perspective, there are three key thrusts to the legislative amendments. Bill C-25 brings additional business sectors under the ambit of the legislation and regulations, such as lawyers and dealers in precious metals and stones. Their inclusion broadens and strengthens Canada's efforts to combat money laundering and terrorist activity financing.

Secondly, the amendments will augment the deterrence component of the regime by creating a registry, requiring money service businesses to register with FINTRAC and establishing a graduated system of administrative monetary penalties. This will greatly strengthen both compliance with the law and the general deterrence of money laundering and terrorist activity financing.

Third, Bill C-25 will make it possible to enrich the intelligence product that FINTRAC can disclose to law enforcement and national security agencies by including some additional information in our disclosures while scrupulously protecting the privacy rights of Canadians. This responds to the needs of law enforcement to make FINTRAC's core product even more useful to them.

Adjusting to these legislative changes and successfully implementing them will remain a focus for FINTRAC for the year ahead and beyond.

I'll now turn to our main estimates. In our main estimates, FINTRAC is requesting $44.9 million for 2007-08. This represents a substantial increase of $13.8 million over last year's main estimates. The increase for the next few years is required primarily for three reasons: workload pressures; the implementation of Bill C-25 changes; and contributions to the Egmont Group.

Our work has steadily increased since we began our operations about six years ago. This is evident in the significant year-over-year growth in transaction reports received, in our output of financial intelligence, and in the demand from law enforcement and CSIS for our product.

Law enforcement agencies in Canada and financial intelligence agencies in other countries are looking to FINTRAC for more and better financial intelligence to augment their work. FINTRAC is responding to this demand with the production of case disclosures of financial intelligence that assists individual investigations, as well as strategic financial intelligence that takes a longer-term view of areas that may have vulnerability to money laundering and terrorist activity financing.

The implementation of Bill C-25 changes will also expand our workload and require the development and implementation of significant new functions, such as a registry of money services businesses, as well as an administrative monetary penalty system. The operation of these two elements is still being defined in greater detail through regulations, based on ongoing research and consultation. We will keep parliamentarians abreast of our progress in implementing these and other elements of Bill C-25 through our regular reporting documents such as our annual report, and through future committee appearances.

Money laundering and terrorist activity financing are transnational phenomena, and cooperation internationally is essential to any successful effort to curb them. The Egmont Group is an international body comprising the financial intelligence units of more than a hundred countries. In 2006, the Egmont Group selected Toronto as the site of its permanent secretariat for its global operations. This is an achievement for Canada, and an opportunity to help lead the global fight against money laundering and terrorist activity financing. It is the funding of this permanent secretariat that is identified in these main estimates for a contribution of $1.8 million in 2007-08.

As for FINTRAC's overall budget, it is relatively straightforward. It largely comprises two main elements: staff costs and other expenditures in support of our operations, which are very technology-intensive.

FINTRAC currently employs 230 staff, located here in Ottawa as well as in three small regional offices--one in Montreal, one in Toronto, and one in Vancouver. That figure is expected to rise to about 270 staff next year. In terms of other expenditures, they are mainly for information technology, security, and accommodation.

We believe FINTRAC has made and will continue to make a significant contribution, along with our partners in law enforcement and national security, to combating money laundering and terrorist activity financing. This investment in FINTRAC is an investment in the safety and security of Canadians.

I will conclude my presentation here, and we will be pleased to answer any questions you may have.

Thank you.

Bank Act

[John McCallum, Liberal, Markham—Unionville, ON]

--it also leaves me with some concerns about the government's broader agenda.

On the one hand, I am glad to see that the Conservatives have decided to model their bill closely on the Liberal proposals. This bill really is 100% proposals from the previous Liberal government. Naturally, therefore, we do not hesitate very much to support it, but I do have some serious concerns about the government's ability to conceive of any truly new legislation.

Canada's alleged new government is actually starting to look an awful like Canada's used government. If we look beyond the Bank Act to some of the other pieces of legislation put forward by the government, it is hard to see anything that the Conservatives have conceived of themselves. The Conservatives may have promised new government, but they have only delivered borrowed government.

For instance, the EnerGuide retrofit program for homes was once thought a wasteful program by the Conservatives before they looked at the polls on environment. We remember that just three months ago the Conservatives thought spending any money on a clean environment was wasteful. Now they have brought back the old Liberal plan.

However, instead of bringing back the full program, they have eliminated portions of it, particularly the money for energy audits. What will this do? Effectively this will help ensure that low income Canadians are unlikely to be able to afford making use of the program, but low income Canadians are not the base of the Conservative Party so the Conservatives do not really care about that.

This is a shameful act, because I remember very clearly from the time when I was natural resources minister that low income people are particularly hard hit by high energy prices. Low income Canadians pay out 25% of their low incomes on energy, but how has the Conservative government amended and altered our EnerGuide program? It has cut out the audit part, the part that is essential to allow those low income Canadians to access the program.

The Conservatives have deprived these people who are most subject to difficulties from higher energy prices. They have effectively excluded those people from this program. I think it is typical of their behaviour because they do not regard low income Canadians as part of their constituency, so if those people are excluded, that is fine.

If only the government could swallow its pride and reinstate the full EnerGuide program, which I am confident is useful; I am not so confident the Conservatives see it as useful, but that is what is in my speech. Meanwhile, at least they have brought back part of the program, but they have excluded that most critical part, which is the part that is essential to help lower income Canadians.

Another example is Bill C-25, An Act to amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, which we passed last fall. Much like the Bank Act before us today, nearly all of the bill was drawn from proposals drafted by the previous Liberal government. It was a sensible bill, but because of near complete inaction on the part of the Conservatives, Bill C-25 had to be rushed through the House and the Senate in order to make sure it received royal assent in time to be compliant with our international partners.

Today we find the same thing. Once again, we are rushing to get Bill C-37 through both chambers. The Financial Institutions Act was scheduled to sunset this past October, which is why the previous Liberal government began the consultation process over two years ago, but the Conservatives delayed. They dithered. They delayed the release of the white paper and gazed at their navels until they had to ask the House to extend the act by six months, which we of course did. Now we are forced to get this legislation through both chambers in the next 50 days in order to beat the April 24 sunset clause.

So on the one hand, I am impressed that the Conservatives have been, generally speaking, willing to implement the majority of Liberal policies that were waiting for them when they came to power last year. On the other hand, I am a little concerned that they are willing to implement some of them in such a piecemeal and rushed fashion and they seem to have so few ideas of their own in the legislative cooker.

Worse still, and this is perhaps the most important point, when the Conservatives do manage to dig an idea out of their own caucus, it is almost universally panned by everyone else. I do not think it would be a stretch to say that their so-called clean air act was a complete failure, and their reverse onus legislation has been called unconstitutional by the legal community.

Thank goodness for our financial institutions and the millions of Canadians who rely on them that this used Conservative government has decided to stick with Liberal policy on Bill C-37.

Let us hope that when the upcoming budget rolls around next month the Conservatives will remember a few other Liberal programs that they have ruthlessly cut. I am talking about literacy programs. I am talking about funding for Canada's struggling museums. I am talking about the GST visitor rebate program, without which our tourism industry will be at a competitive disadvantage with the rest of the world.

It is truly amazing that the Conservatives cut that visitor rebate program, making Canada the only OECD country that does not have such a program, depriving Canada of the convention business and of foreigners who come to this country as a consequence of that program. Experts have indicated that the government will lose more tax revenue by ending this program than it gained by cutting the program, and it has done so at a time when it is swimming in money. There was no need to cut that program, just as there was no need to cut literacy or status of women programs or museums.

The government is swimming in money but nevertheless has struck out and cut the programs that have provided assistance to Canada's most vulnerable. The Conservative government also struck out and foolishly cut programs like the visitor rebate program, which makes absolutely no sense. I remember this, because when I was doing expenditure review in the previous government the bureaucracy suggested that we cut the visitor rebate program, so I know where the recommendation came from. The Liberal government had the good sense to say no to the bureaucracy. The Conservative government simply followed what the bureaucracy recommended. That turned out to be an extraordinarily foolish and counterproductive move.

Returning now to the white paper that the Liberals commissioned in preparation for the five year review of the Bank Act, one of the most exciting things the Liberals were exploring in that paper was writing electronic cheque imaging into law. The bill states that banks will be required to use new technologies to better serve the needs of Canadians.

As it stands right now, the maximum hold period on a deposited cheque is 10 business days. That can be an excessively long time for some Canadians, especially low income Canadians who need access to those funds much more quickly in order to pay their bills and buy their basic needs. Bill C-37 will immediately lower this hold period to seven days, allowing Canadians faster access to their own money.

This can be done even faster. I am speaking specifically to electronic cheque imaging, which Canada's banks have already begun to implement. By adopting electronic cheque imaging, banks will no longer need to physically exchange copies of cashed cheques with other institutions. Instead, a captured electronic image of the cheque can be sent instantaneously to another financial institution.

Better still, when all of Canada's financial institutions have installed electronic imaging equipment in the next couple of years, the maximum hold on cheques will be reduced from seven days to a mere four days. Furthermore, I hope that as the technology advances we will be able to further reduce the maximum period.

A second aspect of this bill that I approve of is a provision for an increased disclosure regime that will provide Canadian consumers and businesses alike with the information they need in order to make the most informed investment decisions possible. Bill C-37 will ensure that the savings product disclosure regime is just as effective for the millions of online bankers as it is for branch customers. Strong competition and information disclosure are two of the best tools available to ensure that Canadian consumers' needs are being served well by our financial institutions.

As I have said, the official opposition will be supporting this bill. My colleague will expand on my remarks in terms of some other items contained in the bill. But I do hope that Canada's alleged new government will continue to use our ideas to their fullest and can refrain from returning to the dangerous incompetence of the previous Conservative government that was so damaging to Canada's economic well-being.

Perhaps I should expand briefly in my remaining time on that last comment. What do I mean by Canada's last Conservative government being damaging? There is a pattern here, in that Conservatives create deficits and leave those deficits for Liberals to clean up. The most glaring example in our recent economic history was the Mulroney government, which bequeathed to the Liberal government a $42 billion deficit. It took some time to clean that up.

Indeed, the Mulroney government received a credit downgrade in 1992. Since 1951, Canada had consistently had an AAA rating. Then, after a series of deficits that had us, according to the IMF, headed for third world status, the credit rating was downgraded in 1992. It took 10 years of the Liberal government cleaning up the Conservative mess to restore that credit rating to its AAA status.

It is not as if that is an isolated example. Looking south of the border, we saw Bill Clinton running surpluses. Who has been running the huge deficits? George W. Bush and, before him, Ronald Reagan. Or we can look to Ontario. The pattern is always the same. It was the Mike Harris-Ernie Eves government that ran on a campaign of a balanced budget, but when that government lost and the auditors came in, what did it show? It was a $5.8 billion deficit. That is of some relevance here, because three of our most senior ministers were senior members of that government.

Conservatives, whether we are talking about Ronald Reagan or George Bush in the United States, or Brian Mulroney or Mike Harris in Canada, historically have run huge deficits. They have left those deficits for successive Liberal governments to clean up.

What has happened to this Conservative government? It has been bequeathed the largest surpluses in Canadian history. That is why it is particularly incumbent on the government to use that money wisely, but it has not.

As I said, the Conservatives have done the opposite of what Canada needs for a strong economy to take on the 21st century. They have raised income taxes. They have slashed research. They have slashed learning. They have slashed programs for Canada's most vulnerable, the literacy programs, women's programs and the museum programs, and they have done all that at a moment when they have been literally drowning in the hard-earned cash of hard-working Canadians.

That is where I will conclude my speech, by saying that I hope this new government will continue to use our ideas to their fullest and can refrain from returning to the dangerous incompetence of the previous Conservative government that was so damaging to Canada's well-being.

[Rob Moore, Conservative, Parliamentary Secretary to the Minister of Justice and Attorney General of Canada]

Mr. Speaker, the Government of Canada recognizes that organized crime, including gang activity, continues to pose a threat to the safety of our streets and communities. The government is taking both legislative and non-legislative steps to counter it.

For example, with Bill C-10, the government is proposing to toughen minimum penalties for serious repeat firearms offences, tailored in a manner that targets the specific problem that currently exists with respect to guns and gangs.

With Bill C-35, the government is proposing to create a reverse onus for bail for those charged with certain serious firearms offences.

With Bill C-27, we are targeting serious dangerous offenders.

I should point out also that Bill C-25 received royal assent on December 14 and ensures that Canada's anti-money laundering regime more fully complies with international best practices.

The Department of Justice officials are currently undertaking a review of our criminal laws to ensure that Canada's legislative measures appropriately respond to threats posed by organized crime.

Of course, strong laws are not by themselves enough to fully combat the threats posed by organized crime. That is why the government has invested in a range of measures designed to prevent crime before it happens.

For example, we committed nearly $200 million to enhance the ability of our national police force, the RCMP, to combat crime and to keep our communities safe.

We have also invested in crime prevention activities, specifically targeted at youth at risk, and focusing on gangs, guns and drugs.

There are several important reasons why society should be concerned with youth involved in gang activity. Gang members commit a disproportionate number of offences, and commit serious and violent offences at a rate several times higher than youth who are not involved in gangs.

In the 2006 federal budget, the government announced resources in the amount of $10 million per year to prevent youth crime, with a focus again on guns, gangs and drugs.

Last October, federal officials signalled to the provincial and territorial counterparts that resources were available for communities in need.

To date, several proposals have been received and a number of pilot projects that provide programming for youth involved in or at risk of gang involvement have been funded.

Before closing, I would be remiss not to highlight everything Bill C-10 proposes to do to tackle the specific serious threats that repeat firearms offenders pose to our society.

As members know, in spite of a general decrease in gun crimes, the situation across Canada is not looking all that bright and there is a major cause for concern. Serious gun crimes, such as firearm homicides, gang-related homicides, and the proportion of handgun robberies have increased in a number of our larger cities.

The guns and gangs problem is not a concern only in large urban centres of Canada, it is also a concern in some of the rural and other areas across our country. So, this is something that we, as parliamentarians, have to take very seriously.

I should mention what the opposition has done with the government's bill, Bill C-10, that would have had escalating penalties for individuals who commit offences, gang-related offences, and offences with prohibited or restricted firearms. The legislation would have taken a more serious approach with offenders and had escalating penalties for those who were repeat offenders. Unfortunately, the opposition rejected the government's proposal to provide higher minimum penalties for firearms, traffickers and smugglers.

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.

[The Chair, Conservative, Brian Pallister]

The amendment is that Bill C-25, in clause 6, be amended by replacing lines 21 and 22 on page 3 with the following:

under section 8 of the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism shall also make a

(Amendment agreed to on division)

(Clause 6 as amended agreed to on division)

(Clause 7 agreed to on division)

(On clause 8)

[The Chair, Conservative, Brian Pallister]

Clause 3 proposes, among other things, to make an amendment to proposed paragraph 5(l) of the application section of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to include departments or agents of Her Majesty that sell prescribed precious metals. This amendment proposes to also include in this section persons in the business of money lending, including “payday lenders”, persons or entities in the business of selling new and used motorized vehicles, as well as persons in the business of buying and selling precious metals, stones, and jewellery. This broadens the scope of the application of the bill.

According to page 654 of Marleau and Montpetit, “An amendment to a bill that was referred to a committee after second reading is out of order if it is beyond the scope and principle of the bill.” In my view, this amendment goes beyond the scope of Bill C-25 and is therefore inadmissible.

[The Chair, Conservative, Brian Pallister]

Order, please.

Welcome, Mr. Martin. Thank you for being here. I understand that you have some associates who will be joining us shortly, but we'll commence pursuant to the order of reference of Tuesday, October 24, 2006, Bill C-25, An Act to amend to Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the Income Tax Act and to make a consequential amendment to another Act.

My colleagues will proceed. I will ask you whether various clauses that have no amendments attached to them shall carry, but I will stop the proceedings at the point of amendment. We also have an understanding with Mr. McCallum, who is currently drafting an amendment, that we will revert back to the appropriate clause. Even though it may have carried, we will revert back to it if that is indeed where it is determined that that amendment should be placed.

With that understanding, shall clause 1 carry?

Yes, Mr. McCallum?

Criminal Code

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

Mr. Speaker, first, the Conservative member makes an important point about the use of these payday lenders on a more frequent basis, not simply because banks have up and left the town, but because sometimes the hours, terms and conditions for doing banking are not conducive for ready access. In fact in parts of Winnipeg many individuals cannot access a bank because they do not have the right ID or cannot fit into the schedule of the bank.

The member is right. There are other reasons why payday lenders have grown in this period of time and why we need to have regulations in place.

With respect to the question of provincial legislation, I think the Manitoba bill provides a model for the country. I know six other provinces are looking at this as a model. It is a bill that prohibits rollovers. This is the first important principle that is enunciated in Bill C-25, introduced by the finance minister, Greg Selinger.

It also ensures that payday loan companies must operate within a comprehensive regulatory framework. It does this by amending the Consumer Protection Act and by working through the Public Utilities Board as a regulatory body to ensure that all rates are set according to a set of principles in an open, upfront basis, with a publicly administered board, so there can be no questions about how the rates are applied and what penalties are at play.

I could go on at length, but I would recommend Bill C-25 as a blueprint for going forward. The Manitoba government is ready to have it proceed to the final stages in the Manitoba legislature, as soon as there is some guarantee from this place that the Criminal Code provisions have been set aside so the regulatory framework can get up and running.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Mr. Speaker, I listened to my colleague with great interest. There are payday lenders In several communities in my constituency. They provide a greater access when banking hours are sometimes restrictive and when people can not otherwise get their cheques cashed. I can just imagine the horror of having a paycheque in one's hand, having a young family to feed, but not having access to the bank to deposit the cheque or not having a debit card.

However, I am also concerned. When people are in a vulnerable situation like that, they can be taken advantage of, and that is an unfortunate thing. I really appreciate hearing the hon. member say that she and her party fully intend to support these changes. I am glad for that.

Could she elaborate on some of the clauses in Bill C-25, which I just spoke to a few minutes earlier? One area that is of particular concern to me is the ability of payday lenders to rollover, which means that if there is a loan that is not paid back in time, the payday lending organization, because it is unregulated, may charge a second set of fees over and above the additional interest rate. We know the interest rate charged on these is fairly minimal. It is the fees and everything that gets added onto these payday loans that make them quite expensive.

Would she support legislation that would take care of this rollover problem in her province?

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I voted, yes, for Bill C-9 on June 6, and I will vote yes for it again in its amended form.

Bills evolve as they go through the process. I believe Bill C-25, the proceeds of crime bill, is not tough on crime and we are trying to amend it to get tougher.

I do not know why the government is going so light on criminals in being able to keep their luxury homes, their tricked out Escalades and their fancy motor boats. We believe those assets should be seized and put the reverse onus on the criminal to prove they were purchased by legitimately earned monies and not the proceeds of crime.

I do not know why--

[Mike Wallace, Conservative, Burlington, ON]

I appreciate that.

My final question is for the senator. It's fairly simple. And thank you for coming.

You indicated during a couple of responses that we could study this and study that...there are some other areas. Is it not important for our country to have this law in place before we are reviewed by our international partners in the early winter? If there are other areas for improvement in this legislation, that could be done after we pass Bill C-25. Then we can look at other issues, as a finance committee.

[The Chair, Conservative, Brian Pallister]

Thank you very much, Senator.

Thank you all for your comments today.

As a quick item of housekeeping, committee members, have your amendments to Bill C-25 to the clerk by five o'clock on Monday, s'il vous plaît. The meeting will be on Tuesday, with clause-by-clause from 12:30 to 1:30 on Bill C-25, but we'll precede that with an appearance by finance officials in regard to the pre-budget consultations. That will begin at 10 o'clock and go until 12:30.

Very good. We'll continue now with questions.

You have six minutes, Mr. McCallum, to commence.

[Lawrence Boyce, Vice-President, Sales Compliance and Registration, Investment Dealers Association of Canada]

Thank you, Mr. Chairman. On behalf of the association, I'd like to thank the committee for the opportunity to comment on Bill C-25. The Investment Dealers Association is the national self-regulatory organization for full-service investment dealers. As part of our function we have commented extensively on Canadian money laundering law and regulations. We also audit and supervise our members in respect of their compliance with the current regulations. We have an information-sharing agreement with FINTRAC, and we share information with them on the results of those audits.

I also represent the association on the International Council of Securities Associations working group on anti-money-laundering procedures. As part of that, we have been involved in a project by FATF called the electronic advisory group on the risk-based method. It started with a meeting in Brussels last year to examine the application of risk-based approaches in the anti-money-laundering regimes.

We support the legislation. We believe that all of the issues it addresses are important and that it will significantly enhance the anti-money-laundering regime in Canada. I'll speak only about our reservations on a couple of issues. These are broader than the legislation itself, and they reflect our long-standing concern with some of the approaches in the current regulations.

I would like to focus first on proposed subsection 9.6(2). This is the beginning of a risk-based approach to anti-money-laundering provisions. Unfortunately, there is some difficulty with it. Proposed subsection 9.6(3) suggests that financial institutions should assess the risk of specific clients. In the event that they find these clients to be high risk, the institutions are required to take certain measures in dealing with them.

A risk-based approach should in fact work up and down the line. A full risk-based approach, which is what the FATF group is working at delineating, suggests not only that additional measures should be directed at high-risk customers and high-risk transactions, but also, on the other side, that there should be the opportunity to use less rigorous approaches toward lower-risk transactions and clients. In our current regime, the prescriptive nature of the measures that must be taken, particularly on the due diligence front, has resulted in a significant amount of resources being devoted to low-risk transactions or customers. They are considered by many in the industry to be largely a waste of time and resources. They bring about a checklist mentality, which deters financial institutions from bringing their expertise to bear and from placing resources where they would be most properly directed, namely, at higher-risk customers and transactions.

We are concerned about the prescriptive nature of this approach, not only in the legislation itself but also, prospectively, in the regulations. They prescribe procedures or activities that are a continuation of this approach. It will not enable Canada to compete with other countries, many of which are establishing a full risk-based approach to preventing money laundering. We already encounter frequent situations in which Canadian financial institutions, particularly those dealing with institutional customers and foreign dealers, are at a considerable competitive disadvantage. These institutions are required to undertake procedures that are not required in other countries and that in fact prevent them from doing business, simply because the customers in these countries consider procedures of this kind to be unnecessary and frequently intrusive. For example, consider the part of the bill dealing with PEP, politically exposed persons, proposed subsection 9.3(3). It outlines a number of positions that would be required to be approved in dealing with these kinds of clients.

By “senior management” of the financial institution, it's unclear exactly how senior that might be, but for example, if a retired or even a currently functioning family court judge in Buffalo decided they wanted to open an account at a Canadian bank because they have a cottage there and want to pay their utility bills, they would be forced, under these regulations, to meet whatever these prescribed account opening and also monitoring provisions might be, including the specific requirement to have the account approved by some senior management at the bank. One can wonder whether a risk-based look at who the customer was and what they intended to do wouldn't suggest that this was somewhat overboard.

I'll conclude my remarks at this point and welcome any questions.

[Ron Skolrood]

Thank you.

I'd also like to thank the committee for the opportunity to appear here today. I expect I will echo much of what Mr. Varro has said on behalf of the federation.

I'd like to make two points, if I may, concerning the proposed legislation. The first concerns the special considerations that apply when including the legal profession in the fight against money laundering. Second, I'll address briefly the proposed expansion of information sharing with international authorities.

To begin, let me say that the Canadian Bar Association supports the objectives of Bill C-25 insofar as the bill aims to protect society against the threat and impact of money laundering. Indeed, as Mr. Varro has touched upon, the legal profession, through the various governing law societies that regulate it, has voluntarily and proactively adopted regulations to prohibit lawyers from accepting large amounts of cash. This is specifically to address those rare occasions when lawyers might unwittingly be drawn into an illegal scheme. In addition, the law societies are now considering ways to address the government's goal of having a client identification scheme.

Clearly, lawyers have shown their willingness to aid the government to fight money laundering. However, given the importance of an independent bar in the administration of justice, and given the fundamental significance of solicitor-client privilege, we believe the proper approach to ensuring lawyers' compliance is within the sphere of self-regulation. We therefore strongly support and indeed commend the government for recognizing the importance of solicitor-client privilege by explicitly removing legal counsel and legal firms from the reporting requirements of the legislation.

We are also pleased that the recent Senate committee report recommended that negotiations between the federation and the federal government continue, and that it recognized the proactive efforts of the profession to address concerns about money laundering through lawyers by self-regulatory mechanisms. However, one aspect of the Senate committee report that we do take issue with is the suggestion that lawyers are a major problem in the fight against money laundering. The report suggested that lawyers either knowingly participate in money laundering activities or are innocent pawns used by criminals in money laundering schemes. Frankly, we disagree with that assessment.

The overwhelming majority of lawyers in Canada adhere to the highest legal and ethical standards. Like all citizens, lawyers are bound by the Criminal Code and other statutes, and they are rightly exposed to criminal prosecution for any violation of the law. Lawyers are also subject to demanding professional codes of conduct and other law society requirements, and as we have heard, efforts are ongoing to strengthen those requirements.

Briefly, with respect to the information sharing issue, Bill C-25 proposes a significantly expanded regime for information sharing in proposed section 38.1, including sharing information with foreign governments based on a reasonable suspicion of involvement in money laundering. Recent experience has shown that unchecked information sharing can lead to gross violations of the human rights of innocent Canadian citizens. This experience highlights the need for effective independent oversight and the accountability of all Canadian security forces. Our point simply is that there should not be expanded information sharing until effective independent oversight and accountability are in place.

Again, thank you for the opportunity to address the committee. I, too, would be pleased to answer questions.

[Tamra Thomson, Director, Legislation and Law Reform, Canadian Bar Association]

Thank you, Mr. Chair. The Canadian Bar Association is very pleased to have been able to accept the committee's invitation to appear today on Bill C-25.

I'd like to start by telling the committee members about the distinction between the Federation of Law Societies and the Canadian Bar Association, so that you understand the difference between our organizations.

As the body representing the independent regulators of the legal profession, the Federation of Law Societies is the primary party that is negotiating with the government around the application of the money laundering regime as it affects lawyers. The Canadian Bar Association, on the other hand, is the national professional association of lawyers across Canada. As such, our mandate is to assist the government in crafting the best possible law while protecting the rule of law and the rights of all Canadians with respect to their legal rights.

I'm now going to ask Mr. Skolrood, who is chair of the national constitutional and human rights law section of the Canadian Bar Association, to address a couple of issues in the bill.

[James Varro, Policy Counsel, Anti-Money Laundering Committee, Federation of Law Societies of Canada]

Thank you very much, Mr. Chair and honourable committee members.

The federation appreciates the opportunity to address this committee on the subject of Bill C-25. I should say at the outset that normally the president of the federation, or at least the chair of our anti-money-laundering committee, would be before you today, but the entire federation council, including the chair, is in Vancouver for a council meeting. I am your representative today, and I'm policy counsel to the federation's anti-money-laundering committee.

The federation is the coordinating body of the 14 law societies in Canada. The member law societies, as you may know, are statutorily charged by legislation in each province and territory with the responsibility of governing the some 88,000 lawyers, and in Quebec the 3,500 notaries, in the public interest.

The federation supports Canada's effort to fight money laundering and terrorist financing. The federation recognizes the importance of the objectives of the money laundering act and concurs with its basic purposes. The initiatives to fight these crimes, which include the fulfillment of Canada's commitment internationally pursuant to the FATF requirement, however, must be accomplished within the framework of the values and the constitutional principles on which Canadian society rests. This includes the rule of law and, within that, the right of an individual to an independent judiciary and independent legal counsel.

My comments today are going to be limited to two aspects of the bill: proposed section 10.1 and proposed section 6.1.

First, proposed section 10.1 is the new section that exempts lawyers from the suspicious transactions and prescribed transactions reporting requirements. The federation is very pleased that this exemption has been provided in this bill. The federation has implemented its own regulation to deal with the issue of suspicious transactions and prescribed transactions reporting requirements.

As you may know, the law society regulations prohibit lawyers from receiving cash or accepting cash of $7,500 or more, with some limited exceptions, from clients and others. It actually goes further than simply requiring lawyers to report transactions; it prevents lawyers from accepting the money that might have required a report.

The federation appreciates the fact that this exemption is in the bill. The reporting requirements initiated, as you may know, the constitutional challenge to the money laundering act back in 2001. The result was injunctive relief, thus suspending the application of the act to lawyers pending the resolution of the constitutional challenge.

The federation's view is that the public interest, in addressing money laundering and terrorist financing as it relates to the legal profession, is best served by having lawyers, through their self-regulatory authority, address the risks their profession presents. In this way, the independence from government is maintained and the core values of the legal profession, for the benefit of the public, are protected. I've already mentioned the no-cash rule by which lawyers are prohibited from accepting $7,500 or more from clients. They are also required to keep a cash transactions record as part of their record-keeping requirements.

I'd like to move now to proposed section 6.1 of the bill, which is an enabling provision for regulations on the client due diligence and identification requirements. This follows from FATF requirements for enhanced customer due diligence and client identification requirements.

The federation acknowledges the importance of Canada's commitment to the FATF standards and as a matter of principle doesn't oppose these methods to fight money laundering. The federation's position, as it has been from the start, is that the law societies, as statutorily authorized regulatory bodies, must regulate the conduct of lawyers. In this respect, the federation has moved to adopt another model rule on client identification and verification standards, which mirrors the FATF requirements. This model rule would respect the threshold between the constitutional and unconstitutional requirements imposed on lawyers when it comes to gathering information from clients.

The federation is working with the Department of Finance on the issues relating to client ID and record-keeping compliance procedures for legal counsel and is looking forward to a resolution of these issues.

To sum up, the federation's view is this. The no cash rule and the client ID model rule will accomplish three goals. They will impose on lawyers a more rigorous standard than the requirements under the act. The rules will address the activities of lawyers as financial intermediaries, but form part of the extensive statutorily authorized regulatory regime for lawyers through law societies. As rules, law societies' regulations will respect the constitutional principles upheld by the legal profession for the benefit of the public.

The federation supports the goal of fighting money laundering and terrorist financing in ensuring the safety and security of Canadians, and any amendments to the current legislative regime must preserve the rights that have long been recognized as fundamental in Canadian society.

I'll be happy to answer any questions of the committee.

[Nicolas Burbidge, Senior Director, Compliance Division, Office of the Superintendent of Financial Institutions Canada]

Thank you, Mr. Chairman.

I'd like to thank the committee for this opportunity to appear before it as part of your consideration of Bill C-25.

I am the head of the group at OSFI responsible for our anti-money-laundering and anti-terrorist-financing program.

We do not have a legislated role with respect to this bill, but like many other regulators around the world, we are members of international bodies that develop standards to which we must adhere for the supervision of financial institutions. That includes adequate “know your client” standards.

I'm moving very quickly through my prepared remarks, which you will have in writing, because I want to add a couple of comments to what you heard at the earlier session.

The FATF, which you've heard about, sets international AML/ATF standards and uses a peer review system to evaluate implementation in member countries. I have participated in this process personally and I can tell you that I know the importance that will be attached to the contents of Bill C-25 in Canada’s evaluation next year.

A good review will be important to make sure that the perception is reinforced that Canada is a safe place for financial transactions and investments. Strong AML/ATF programs are an important component of a safe and sound financial system. We therefore strongly support the passage of Bill C-25.

I want to emphasize that we have a very close working relationship with FINTRAC, from which you heard earlier. We operate on their behalf in assessing our financial institutions for money laundering--and I'll come back to that in a second.

We're allowed to share the results of our work with our institutions fully with FINTRAC and to receive information about our institutions from FINTRAC. We also work very closely with the Department of Finance and other key government departments on the regime generally and on the financial institutions' role in it.

This legislation raises the bar significantly on AML/ATF standards in Canada and will require more effort and resources by the financial sector to implement it. However, our banks and other regulated entities are already allocating significant dollar and people resources, as you heard earlier, to the fight against money laundering and terrorist financing.

Most of the financial institutions we have assessed have assigned a very high level of importance to getting AML/ATF right. A few institutions have needed more specific guidance and we have been proactive in providing that guidance, both by interventions and by undertaking an extensive program of outreach to the financial sector on money laundering and terrorist financing issues.

I'd like to add a couple of quick comments to the exchanges and subjects you heard from the earlier panel.

First of all, there have been comments from the private sector with respect to the fact that they have not yet seen draft regulations, which will be coming out following the initial legislation. It's true that those regulations have not yet been finalized, because of course there have been extensive consultations. I hope I'm not speaking out of turn when I say that the Department of Finance, with which we work very closely, has been consulting on those regulations for many months. The private sector organizations have all been part of those consultations.

Secondly, with respect to membership in the FATF and the discussion that was held earlier on that part of it, there is a big difference between the standards that are in place in FATF member countries and standards that are in place in countries that are members of these so-called FATF-style regional bodies, which are subsidiaries of the FATF around the world. Those standards are not necessarily as good as the standards in the FATF itself.

Finally, on the issues with respect to extending these requirements to foreign branches and foreign subsidiaries, the bill makes an appropriate distinction between foreign subsidiaries, which are creatures of foreign countries' jurisdictions and of foreign legislation, and branches of Canadian financial institutions, which are Canadian entities. In that regard, we believe we've looked very carefully at the wording in the bill, and as Canada's banking and life insurance regulator we are quite happy with the wording in the legislation as it now stands, because it talks about standards for foreign subsidiaries and does not actually impose any direct Canadian legal requirements.

I believe that Bill C-25, when enacted, will result in Canada's being viewed internationally as having a strong anti-money-laundering and anti-terrorist regime.

Finally, Chairman, thanks again for the opportunity. I will be pleased to respond to any questions the committee may have.

Thank you.

[The Chair, Conservative, Brian Pallister]

We are reconvened.

Welcome to our panel members. Thank you for being here.

We are continuing our testimony and discussion on 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.

I welcome you. I will give you an indication when you have one minute remaining. I don't like to have to cut you off, but of course I take special joy in doing so, and will. It will allow time for exchange with committee members thereafter.

We'll begin with OSFI, the Office of the Superintendent of Financial Institutions Canada. Nicolas Burbidge is here.

Welcome, sir. Five minutes to you.

[Warren Law]

Bill C-25 is certainly useful in making sure that Canada is up to snuff in terms of fighting the good fight. Bill C-25 is very useful with respect to making sure our FATF requirements are met and with respect to what other countries are doing. For example, the fact that we're now addressing attempted suspicious transactions is something that's been done in the G7 countries. I think we need Bill C-25 to continue to fight money laundering and terrorist financing activities.

[Dean Del Mastro, Conservative, Peterborough, ON]

Do you think it's an appropriate title, Mr. Law? Do you think Bill C-25 is addressing what may potentially be a big problem in Canada?

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you.

Mr. Timmins, in 2004 the Auditor General tabled a report called “Implementation of the National Initiative to Combat Money Laundering”. You've indicated that, superficially at least, it seems that Bill C-25 is taking steps toward what the report was recommending. This wouldn't be before Parliament if we didn't think there was a problem, that there weren't potential loopholes that could be exploited. Is that correct?

[Warren Law]

That's an issue of how we define correspondent banking versus how other countries define it. As I mentioned in my opening remarks, there's one area in particular where I think we may be too broad in our definition, and that's with respect to this issue of foreign exchange transactions. As I understand it, under Bill C-25, if a person goes into a bank branch here in Canada and wants to transfer money to a location outside the country, and does not have an account with the bank, you have to have a correspondent banking relationship under Bill C-25. That means that you have to have a formal relationship between the two banks, etc. We think this is going a bit too far. We think that when you look at what other countries have done, this is going too far. We think that as a result, some consideration should be given to amending this legislation to narrow it a little bit, to deleting from the definition the reference to foreign exchange transactions.

Do you have anything to add?

[Warren Law]

I'm going to turn this over to Mr. King for a moment, but I think a very beneficial step has been taken in Bill C-25 in the sense that it's been extended to attempted suspicious transactions. We would certainly support that.

In terms of what is meant by a “suspicious transaction”, do you want to give some examples?

[Pierre Paquette, Bloc, Joliette, QC]

Thank you.

If I still have a bit of time, I would like to ask Mr. Law a more general question. Under Bill C-25, individuals, entities are also required to report suspicious attempted transactions.

What constitutes a suspicious attempted transaction? Do you already have guidelines for determining what constitutes a suspicious attempted transaction, or would this have to be specified?

[Warren Law]

Generally speaking, we're quite happy with Bill C-25.

With respect to this issue, which I raised in my opening remarks and which Mr. Bernier mentioned in his opening remarks, it's a question of competitiveness, for one thing. If you look at Bill C-25, in the case of banks in particular, there's a distinction that's made in the legislation between foreign subsidiaries of Canadian banks and foreign branches of Canadian banks. They're treated differently under the legislation with respect to extending client identification requirements to these entities. We have a problem with this, given the fact that it seems to be a bit of an artificial distinction to say that different requirements should apply to branches and different requirements should apply to subsidiaries.

There's also the issue—and I think this is also something Mr. Bernier touched upon—of the fact that in Bill C-25 the requirement is made that the client identification requirements apply to foreign subsidiaries in non-FATF countries—and that's the Financial Action Task Force. We think this is a bit too narrow. Given the fact there are other FATF-affiliated organizations that cover a wide range of countries in the Caribbean, in Africa, in the Middle East, Europe, and Asia—

[Jean-Pierre Bernier, General Counsel, Canadian Life and Health Insurance Association Inc.]

Mr. Chairman and distinguished members of the committee, thank you for your invitation to participate in this study of Bill C-25.

In the interest of time, I will jump to the bottom of page 3 of my written remarks.

The industry welcomes the committee's initiative to review the proposed amendments to Canada's anti-money laundering and anti-terrorist-financing legislation to ensure that its provisions are consistent with the goals publicly stated by the Minister of Finance in the key recommendations of the Senate banking committee report.

The Senate banking committee, in its October 2006 report, recommended, under the heading "Life Insurance Companies", that the federal government, in considering amendments to the act, employ the risk-based approach in determining the level of client identification, record keeping, and reporting requirements for all reporting entities.

The risk-based approach is reflected in clause 8 of the bill, and in our view these provisions are drafted in an appropriate manner. We are encouraged by the fact that the Minister of Finance has stated twice in his backgrounder on Bill C-25 that the legislative amendments are designed for, and I quote, "minimizing the compliance burden".

This well-stated objective is of paramount importance to all reporting entities under the act, including life insurers and life insurance agents and brokers. A risk-based approach is the appropriate way to achieve the goal of minimizing the compliance burden while also achieving the goal of detecting and preventing money laundering and terrorist financing activities.

In essence, a risk-based approach takes into account the risk profile of the regulated entity's products and transactions and ensures that resources are focused efficiently and effectively. While the life and health insurance industry feels that the risk-based approach is appropriately reflected in Bill C-25, it is noteworthy that the word "prescribed", to mean prescribed by regulation yet to come, appears 54 times in the bill. This is a strong indication that a significant number of provisions will be subject to prescriptive rules, to be set in regulation. The use of the risk-based approach in drafting the regulations pursuant to Bill C-25 is crucial. Only a genuine risk-based approach would enable insurers to concentrate on managing the real money laundering risk they face rather than on simply trying to manage regulatory or compliance risk and worrying, as a result, about the details of the regulator's rules.

To make any compliance program effective and efficient, whether it is mandated by law or otherwise, people must think risk, not box-ticking. Overly detailed regulations must be avoided in order to deliver the three key elements of the risk-based approach: proportionality, flexibility, and cost-effectiveness.

With respect to corporate governance, the existing supervisory framework applicable to life insurance companies in Canada does recognize that institutions will adopt individual approaches to the management of reputation risk. Overly detailed regulations will not only be costly to implement but would provide very little flexibility, if any, to accommodate individual company circumstances.

In conclusion, Mr. Chairman, I would like to suggest, on behalf of the industry, two minor changes of a technical nature to minimize the compliance burden and to provide a global perspective.

First, foreign subsidiaries of Canadian financial institutions should not be obliged to comply with the specific Canadian compliance requirements in a country that has adopted the standards of the Financial Action Task Force.

Second, similarly, authorized foreign insurance companies should be exempted from the extraterritorial effect of Canada's anti-money-laundering and anti-terrorist-financing legislation. As is the case for the authorized foreign banks doing business here, I am referring specifically to the new proposed sections 9.7 and 9.8 of the act contained in clause 8 of the bill. I am providing to the committee possible wording for amendments to these two areas.

The industry stands ready to provide any further input that the committee would find useful in the context of this review. Thank you.

[Brian Fox, Regional Vice-President Canada, Western Union]

Thank you, Mr. Chairman, for the opportunity to appear at this committee.

Before I discuss our position on this important legislation, I would like to give you a brief overview of our business, our clients, and the typical way in which Canadians use Western Union's services. Western Union is a global leader in the money transfer business. We operate a network of over 270,000 agent locations in more than 200 countries and territories. We have been operating in Canada for more than 15 years and today have approximately 3,500 agent locations across the country.

We operate a high-volume business with typically very low sums of money. In fact, the average transaction from one person to another in Canada is approximately $320 Canadian. As you might expect, this is not the first time that Western Union has been a partner with government to ensure safeguards for consumers and the financial system as a whole.

Our industry is not familiar to many Canadians, but we do important work by serving as an indispensable lifeline for the financial viability of tens of millions of people and dozens of developing economies worldwide. We have worked with countries and territories all over the globe to educate and guide the efforts of anti-money-laundering regulators and policy-makers worldwide. We take our role and our responsibilities to this end very seriously.

While our average transaction is only $320, there are people who need to transfer larger sums. We require government-issued photo identification for any sum over $1,000. We further require personal interviews with anyone wishing to transfer sums over $7,500. We also have a strong monitoring system that identifies, analyzes, and reports attempts to split large sums of money into smaller amounts to avoid detection.

I want committee members to know that Western Union supports regulations and efforts to prevent abuse of the global financial system. Much of this bill will succeed in that objective. However, there are a couple of elements of the bill, depending on the outcome of the future regulations, that may impede the well-meaning and normal day-to-day money transfers that take place in Canada. In several key areas, this bill may be unworkable, depending upon the future regulations.

As a responsible company with a history of leadership in this area, we currently have tiers of transfers that require more identification and advanced due diligence based on additional potential risks. Clearly, though, more due diligence will increase cost and may ultimately make it difficult for average Canadians to afford the use of this service.

While we agree that thresholds and compliance measures must be in place, we need to balance those requirements with the reality of the potential risks to Canada's financial system. Let's look closely and realistically at the required thresholds. Let's look at the systems in place to avoid splitting larger transfers into smaller ones. But let's not overburden the large number of Canadians, many of whom are new Canadians, who use these services to transfer small sums of money home to family and friends.

We absolutely support the need to track and report transactions between known public and political figures when it involves significant sums of money. But a requirement to do this for each and every transaction would put an unnecessary financial burden on all players, who would have to track small-sum transactions, which are not the ones we should be concerned about.

Western Union recognizes the value of Bill C-25, but urges the committee to recognize the clear difference between the transmission of small sums and the larger sums typically sent through the banking systems, which require greater scrutiny. We completely support the provisions of the bill aimed at creating a registration regime for money transmitters and foreign exchange dealers. Other provisions of the bill, as well as the pending regulations, must reflect the realities of our industry.

l welcome questions from the committee and the opportunity to work with the government to find the right balance and ensure that money sent home to support families abroad will not be unnecessarily burdened. We will be providing the committee members a more detailed submission regarding our concerns, the bill, and the pending regulations.

We would recommend that this committee review the regulations, given that so much of the bill is dependent on them. We welcome the opportunity to work with the committee on making the regulations in such a way as to balance the importance of a strong anti-money-laundering regime with the need for a safe, reliable vehicle for new Canadians to support their families back home.

Thank you.

[Douglas Timmins, Assistant Auditor General, Office of the Auditor General of Canada]

Thank you, Mr. Chair.

I'm very pleased to be here today to discuss our audit of Canada's regime to combat money laundering and terrorist financing and how it relates to Bill C-25. We completed that audit two years ago.

During our audit we concluded that Canada's anti-money-laundering regime is comprehensive and generally consistent with international standards; however, we also identified a number of factors that impeded the regime's performance. Some factors could be addressed with the existing legal framework; for example, better coordination among the federal agencies responsible for implementing Canada's anti-money-laundering and terrorist policy, and better feedback to reporting agencies on the use of information they supply to FINTRAC.

Other factors involve issues that will likely require changes to legislation.

Foremost among these are restrictions on information sharing. To safeguard privacy rights, the existing legislation limits the information that FINTRAC may disclose to so-called “tombstone” data: when and where the transactions took place, the value of the transactions, the account numbers, and the names of the parties involved.

We found that these restrictions limit the value of FINTRAC disclosures to law enforcement and security agencies.

Law enforcement agencies told us that the “tombstone” information they receive is too limited to justify launching investigations. The exception is when a disclosure is related to an on-going investigation in those cases, the information disclosed can help corroborate findings or provide new leads.

An additional limitation on the effectiveness of the National Initiative is the exemption from reporting requirements that lawyers obtained as a result of successful legal challenges to the legislation.

Finally, we found that unregulated reporting entities, including money service businesses and foreign exchange dealers that are not licensed and do not have a formal body overseeing their activities, posed a significant compliance challenge. Indeed, there are no reliable figures on how many such firms are out there, so ensuring compliance with reporting requirements is obviously a difficult task.

Bill C-25 affirms the lawyer's exemption from reporting requirements. Our understanding is that the government is currently discussing with law societies compliance requirements by lawyers. The bill provides for information sharing and enforcing compliance by unregulated reporting entities. It will increase the type of information that FINTRAC can disclose to law enforcement if it suspects money laundering or terrorist financing.

Specifically, the legislation will now allow FINTRAC to disclose the grounds that led it to suspect money laundering or terrorist financing. The bill will also require registration for money service businesses, a recommendation of the Financial Action Task Force on Money Laundering, which is the international standard-setting body for efforts against money laundering and terrorist financing.

Several countries, including the United States and the United Kingdom, already require these businesses to register.

In short, while we have not studied Bill C-25 in detail, it appears to deal with the key findings reported in our audit of November 2004. We cannot say whether the proposed changes will be sufficient or whether they will effectively resolve all issues.

Further, it is not our role to comment on policy decisions contained in this bill.

This, Mr. Chairman, completes my opening statement. I'd be pleased to answer questions when the time comes.

[Warren Law, Senior Vice-President, Corporate Operations, and General Counsel, Canadian Bankers Association]

Thank you very much, Mr. Chairman.

Honourable members of the committee, I would like to thank you for the opportunity to appear today to provide the views of the banking industry on Bill C-25. My name is Warren Law. I am the senior vice-president and general counsel of the Canadian Bankers Association. With me today is Ron King, who is the chief anti-money-laundering officer at the Bank of Nova Scotia.

I would like to make some introductory comments, and then of course we'd be pleased to answer your questions.

The Canadian banking industry recognizes its key role in combating money laundering and terrorist financing. It has consistently supported the efforts of the Government of Canada in developing an effective regime for these purposes. Indeed, we believe that the enactment of the proposed Proceeds of Crime (Money Laundering) and Terrorist Financing Act provides a solid platform for constructing an effective AML/ATF system.

The banks have invested tens of millions of dollars in the development and implementation of automated systems to meet the regulatory standards placed upon them. The banking industry has been proactive in meeting its obligations. We will continue to take these obligations very seriously, but there is always room for improvement. We recognize that with Bill C-25, the government is planning to implement measures that will address flaws in the current system.

Clearly, one of the most fundamental and vital objectives of AML/ATF measures must be to protect the financial system from criminal activity. We believe this must be done in a balanced way. An AML/ATF regime is unique in that in order to function well, it must interact with a wide range of stakeholders, such as law enforcement agencies, government departments, and financial institutions. We feel that no useful purpose is served, and in fact the effectiveness of the regime itself is diminished, by overburdening any of these entities with too many restrictions, rules, or requirements.

We strongly believe that an AML/ATF measure should be implemented with a risk-based approach. Once amendments are enacted, reporting entities and FINTRAC should be given enough lead time to implement the necessary changes to their systems and to employee training programs. In our view, the efforts to combat money laundering and terrorist financing will be significantly assisted if it is easier for reporting entities to receive more feedback from FINTRAC about their reports and FINTRAC is provided with more latitude to release information. We therefore welcome the enhanced disclosure provisions in Bill C-25.

For several of the measures set out in Bill C-25, we will need to consider the related regulations before we can make a comprehensive response. I would like to make some initial observations about a couple of provisions in the bill. In a short letter to the committee, which we believe has been provided to you, we provide more details about our views on these matters.

We have made recommendations for changes to the bill that will address those matters. For example, there is the issue of the impact on foreign subsidiaries and foreign branches of Canadian banks. Bill C-25 will add a number of new measures to the act, including new requirements on the foreign subsidiaries and foreign branches of Canadian banks. These proposals, particularly the requirement to impose Canadian client identification requirements, could impose extraterritorial legal requirements on Canadian banks. We believe this could cause significant problems for the banking industry.

To the extent permitted by local laws, Canadian banks already apply their internal AML/ATF policies and procedures on their operations in foreign countries. However, imposing specific Canadian regulatory requirements in foreign jurisdictions has the potential to have adverse consequences on the banks. It may place the banks in a disadvantageous competitive position, from a global standpoint. Rather than imposing extraterritorial legal requirements, we believe that a more effective approach would be to make it clear that the requirement to have compliance and risk assessment programs must cover all subsidiaries and branches, regardless of location, to the extent permitted by the local jurisdiction.

We recommend that these measures be enacted.

It's important to note that we are not asking to apply a lower standard to the operations of a foreign branch or subsidiary, only to have it recognized that there are other equally effective ways of achieving what I think we all want to do, and that is to create a balanced, effective deterrence regime.

There is also the issue of correspondent banking. We understand and support the need to enhance requirements relating to the provision of services to foreign correspondent banks. Bill C-25 includes an amendment to the act that sets out a number of specific measures to be followed by Canadian banks before entering into a correspondent banking relationship.

While the banking industry in Canada has already implemented most of these requirements, we do have a concern that the proposed definition of “correspondent banking relationship” in the bill is too broad and could lead to almost all interaction between Canadian banks and a foreign bank being captured by the definition.

[The Chair, Conservative, Brian Pallister]

We are in session.

Welcome, first of all, to our witnesses and committee members.

Pursuant to our order of reference of Tuesday, October 24, 2006, this is 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.

Thank you for your patience in waiting for us to get here, witnesses. We have just come from another discussion that was pertinent to this topic.

We will begin with a presentation from the Canadian Bankers Association, Warren Law, senior vice-president.

Welcome, and proceed. Five minutes to you.

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

Thank you, Mr. Chairman. I guess we're popular this morning.

I'm trying to focus on the job at hand that FINTRAC has. I'm going to try to stay away from the privacy issues. I think some of my other colleagues will probably be interested in that aspect. I want to make sure that FINTRAC has the tools to do the job they need to do.

Are you happy with the amendments in this legislation, Bill C-25? Shouldn't we be looking to put in more amendments so that there's more interaction between departments?

I refer to the audit of the Auditor General, in chapter 2, where we found that the administration would “limit the value” of FINTRAC's disclosure to law enforcement and security agencies, and it goes on and on: law enforcement agents told us the tombstone data they receive is “too limited to justify launching investigations”.

I have a problem with that. I had a problem with it when FINTRAC appeared before the finance committee. I think FINTRAC should be given more ability to exchange information.

What's your feeling on that?

[Horst Intscher, Director, Financial Transactions and Reports Analysis Centre of Canada]

Thank you, Mr. Chairman.

Allow me to briefly introduce my colleagues: Glynnis French, Deputy Director, Strategies and Partnerships; Peter Bulatovic, Assistant Director, Tactical Financial Intelligence; and Yvon Carrière, our Counsel.

I'm very pleased to have the opportunity to make some opening remarks about FINTRAC and what we do. I will also say a few words about why the provisions set out in Bill C-25 are important to FINTRAC and to Canada's overall anti-money-laundering and anti-terrorist-financing efforts.

Following my brief remarks, I will ask Mr. Bulatovic to speak even more briefly to an example of a sanitized FINTRAC case disclosure. I think an illustrative case is perhaps the best way of showing how our intelligence product can capture the complexity of money laundering.

FINTRAC was created by the Proceeds of Crime, Money Laundering, and Terrorist Financing Act as an independent agency, and we are required to operate at arm's length from entities to which we can disclose information. I will touch upon the reasons for those arrangements a little later on.

FINTRAC is Canada's financial intelligence unit, or FIU. Our mandate is to analyze financial transaction information that a wide range of financial reporting entities are obliged to report to us. Upon analysis, and if there are reasonable grounds to suspect that information we have received would be relevant to an investigation of money laundering or terrorist financing, FINTRAC must disclose certain portions of that information to the police or to CSIS for investigation. In short, we provide financial intelligence leads to law enforcement and national security investigative agencies.

It's also worth noting what FINTRAC is not. We are not an investigative body and we do not have powers to gather evidence or lay charges. FINTRAC does not investigate or prosecute suspected offences. Instead, we are an analytical body that produces financial intelligence to be disclosed, if appropriate, to help further investigations conducted by law enforcement and security agencies.

On a day-to-day basis, FINTRAC receives reports on several kinds of financial transactions from financial reporting entities. We analyze these data in combination with information from other sources, such as law enforcement databases, commercially or publicly available databases, and sometimes, information from foreign financial intelligence units.

What we specifically look for are financial transactions or patterns that don't quite pass the sniff test and that give rise to suspicions of money laundering or terrorist financing. As you can imagine, the movement of illicit funds is often a well-hidden and complex affair involving hundreds of transactions as well as dozens of individuals and companies. Using state-of-the-art technology and excellent analytical skills, our analysts piece together the information and create a comprehensive picture of money flows. We draw a map that police or CSIS can use to examine the money flows and the suspected criminal activity.

Although we are required to operate independently and at arm's length from the police and CSIS, our objective is to support and facilitate their work by providing intelligence leads to them. We are one element in a larger constellation of organizations whose collective purpose is to combat money laundering and terrorist activity financing. Other elements include police at the federal, provincial, and municipal levels; security agencies; prosecutors; and the courts.

FINTRAC is situated near the front end of the process, and the information we provide is intended to assist other agencies to achieve the broader objectives of the act.

I'm pleased to say that the regime that has been put in place here in Canada is working. It's robust and successful and is widely recognized as such internationally.

I'm also pleased that FINTRAC makes an important contribution to that success. As we indicated in our annual report tabled a month ago, in 2005-06 we produced 168 case disclosures of suspect financial activity involving more than $5 billion in transactions. In fact, since FINTRAC began its operations five years ago, we have made a total of 610 case disclosures involving transactions valued at $8.2 billion.

The scope and complexity of our disclosures have also grown dramatically over the past few years, from an average of $3 million per case in 2003-04 to $30 million per case last year, and about 10% of our cases last year each involved transactions well in excess of $50 million.

Some 32 domestic law enforcement agencies and 10 foreign counterpart organizations have received disclosures from FINTRAC. I'm gratified that more and more financial intelligence contributed by FINTRAC is being reflected in investigations, charges, and prosecutions.

I'd also like to say a few words about the protection of privacy.

Our act was carefully crafted to provide the highest possible protection for personal information, while also making it possible for some information to be disclosed to law enforcement to facilitate the detection and deterrence of serious criminal activity.

The protections begin with the very nature of the institutional arrangements that establish FINTRAC as an independent and arm's-length entity that receives and analyzes reported financial transaction information and can only pass on such information if particular tests are met.

The information we hold cannot be accessed by any other outside body, except by a court-granted production order, and the act provides for serious criminal penalties to be applied to the unauthorized disclosure of information.

Our mandate entrusts us with a considerable amount of personal information from individuals and businesses across this country. Protecting it is a responsibility we take very seriously.

Members of this committee have expressed some concerns about the potential impact of the legislative changes on upholding privacy rights. I want to assure you that I share your preoccupation with privacy protection and firmly believe that safeguarding personal information is and must be the cornerstone of any effective regime.

Canada has a strong anti-money-laundering and anti-terrorist-financing regime in place, and we can be very proud of it, but we cannot rest on our laurels. Methods used to launder money are constantly changing. International standards that all countries are expected to meet are also rising. Adjustments are necessary to the legislative framework to keep pace with these changes.

In this regard, I want to note that there are three key thrusts to the proposed legislative package that are of importance to FINTRAC. They are: expanding the coverage of the act to new entities and professions; strengthening the deterrence provisions of the act; and expanding the range of information that FINTRAC may disclose.

Bill C-25 will expand the coverage of Canada's anti-money-laundering/anti-terrorist-financing regime by bringing additional business sectors within the ambit of legislation and regulations; for example, dealers in precious metals and stones, and lawyers. These sectors have an identified vulnerability to money laundering, and their inclusion will strengthen Canada's efforts to combat both money laundering and terrorist activity financing.

Second, the bill will strengthen the deterrence component of the regime by creating a registry for money service businesses and establishing a system of administrative monetary penalties. These proposed measures will improve compliance with the reporting, record-keeping, and client identification provisions of the law. This will not only contribute to FINTRAC's analysis, but will greatly strengthen the general deterrence of money laundering and terrorist activity financing.

Third, Bill C-25 will make it possible to enrich the intelligence product that FINTRAC can disclose to law enforcement and national security agencies by including some additional information in our disclosures while at the same time continuing to scrupulously protect the privacy rights of Canadians. This would respond to the needs of law enforcement and make FINTRAC's core product even more useful to them.

In conclusion, FINTRAC is very supportive of the amendments proposed in Bill C-25, which will ensure Canada's anti-money-laundering and anti-terrorist-financing regime remains strong and effective well into the future.

Thank you. I'd now like to ask my colleague, Peter Bulatovic, to give you a very quick presentation of a sanitized case that shows the work we do, how we do it, and what the results are from it.

[The Chair, Conservative, Brian Pallister]

Pursuant to the order of reference of Tuesday, October 24, 2006, we are here today on 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.

Welcome to our witnesses this morning. We'll begin with a brief presentation.

Horst Intscher, director, is here. Welcome, sir, and over to you.

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

I believe we should have witnesses before we table any amendments to Bill C-25, and the witnesses appearing before the finance committee could be in blocks of an hour and a half. One session of three hours would probably suffice, but if you need a limit, we can limit it to 16, with eight witnesses per panel.

[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?

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I want to build on the question my colleague, the hon. member Mississauga South, asked. He made reference to an exchange that took place yesterday between he and I about whether we should not expand in Bill C-25 the idea of reverse onus on the seizure of assets purchased from proceeds of crime. Would my colleague not agree that it makes sense in very narrow circumstances?

In the case where a person is a known member of an illegal organization or a criminal organization, for example, the Hell's Angels, and that person has assets such as a luxury mansion, two cars in the garage, the speed boat, all the trappings of luxury, but has had no visible means of income for the last 20 years, why should we not be able to seize those assets and put the onus on him to demonstrate that he did not purchase them with the proceeds of crime? The province of Manitoba introduced legislation like this which would be law had it not been blocked by two Liberal members of the legislature.

Why should we not use this opportunity to give police and law enforcement officers the tools they need to do their jobs? When we see glaring cases of wretched abuse by known criminals, why should the burden of proof be on us to prove beyond a doubt that they bought that luxury home or whatever with the proceeds of crime? Let us put the reverse onus on them and make them prove they did not, that they earned it honestly.

[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.

The House resumed from October 23 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.

[Roy Cullen, Liberal, Etobicoke North, ON]

Mr. Speaker, I am pleased to speak to Bill C-25, a bill to deal with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the Income Tax Act.

The bill builds on the work that our government did in 2001 when we introduced the legislation, which was passed by the House and the other place, and when the government set up FINTRAC, the financial transactions agency that serves as the financial intelligence unit for various reports that come in from financial intermediaries to track the suspicious transactions that might be laundering activities.

This bill proposes certain amendments to the act and basically builds on a number of themes. The financial action task force, which is the body that sets the standards in the fight against money laundering, came out a number of years ago with 40 recommendations with respect to standards in the fight against money laundering. Given the advent of 9/11 and other events, it added to its 40 recommendations on money laundering a further nine special recommendations on terrorist financing.

What these amendments do in part is they bring the legislation up to date with that but they do a number of other things, and I will be happy to speak to those as well.

Before I do that, perhaps I could talk briefly about the size and the scope of money laundering. People at home might be watching this debate and wondering what money laundering is. Money laundering has many definitions but the one I prefer is the one that says that money laundering is the processing of criminal proceeds in order to disguise their illegal origin.

If someone were a drug dealer or if someone were involved in planning a terrorist activity, the person would be disinclined to take the money he or she had received and put it into a bank account under his or her own name. Criminals try to launder the money through legitimate businesses. They reinvent themselves into some legitimate purpose and deposit the money and try to launder it in that way.

We do not want to have that type of activity in this country, nor is it something we want happening worldwide. It is an international problem of significant scope. In fact, KPMG, the consulting firm, estimates that money laundering is somewhere in the region of $500 billion to $1 trillion annually. I would suggest that is probably on the low side. I think it is probably more than that.

Who are the money launderers? We have basically four major categories. The first one relates to major drug crimes and we are talking primarily about drug related activities. The second category would be terrorist financing, which would be financing done before a terrorist event or after a terrorist event where money would either be accumulated to enact a terrorist event or it would be money that would be used to pay off various terrorists who had committed these offences. The third category is money laundering related to corruption. This is a very serious problem worldwide. The fourth category is money laundering related to tax evasion.

There are many ways and reasons to launder money, which is why our government brought in the anti-money laundering legislation in 2001 and that is why we set up FINTRAC, the Financial Transactions and Reports Analysis Centre of Canada. That organization began making disclosures in the year 2002.

It is quite appropriate for Parliament to review the act. In fact, a committee reviewed FINTRAC in 2005 to see what it was doing, what it was proposing to do, how successful it had been and what kind of changes it wanted to see. There was also a review recently in the other place on money laundering, and the Auditor General completed a report not too long ago.

It is quite timely that the government has introduced the amendments. Generally, I would support the way it is proceeding, but if the bill passes the House and goes to committee, there are a number of issues the committee should examine in some more detail.

We are very privileged that the presidency of the Financial Action Task Force, which is the standard setter in the fight against money laundering, has been assumed by a Canadian, a very distinguished public servant from the Department of Finance, a gentleman by the name of Frank Swedlove. This gives us a unique opportunity to be engaged in the fight against money laundering.

What is FINTRAC? The Financial Transactions and Reports Analysis Centre of Canada is an arm's length agency. It is required to collect all the reported suspicious transactions by financial intermediaries. In 2001 the government defined suspicious transaction as predominantly a cash or near cash type of definition. Any transaction over $10,000 is automatically deemed a suspicious transaction. Then many other types of transactions are covered by guidelines and some of the professional people look at these types of questions. A number of guidelines published by FINTRAC and the Department of Finance define transactions that might be suspicious even though they are below $10,000.

In fact, in its recent report, FINTRAC reported that it had disclosed more than $5 billion in suspicious deals to law enforcement and CSIS last year, which was twice what it had reported in previous years. We are seeing that the laundering of money is not diminishing. It is increasing and it is of particular concern now with the threat of terrorism before us.

I had the great honour, from 1999 to 2001, to serve as the parliamentary secretary to the then minister of finance, our colleague, the member for LaSalle—Émard. I was very proud that we were able to get the support of the House and the other place for the legislation and to establish FINTRAC.

I have also been quite involved with the Global Organization of Parliamentarians Against Corruption. This organization started in Parliament. People from around the world were invited and GOPAC was formed. GOPAC sees its mission as not only being the fight against corruption, but also the fight against money laundering. A large conference was held in Tanzania at which some 300 parliamentarians from 50 countries around the world attended.

I would like to indulge the House, if I may, with the resolutions that came out of the conference with respect to money laundering. I will not read them all. There are six of them. I will highlight some of the more critical ones.

First, it is to seek observer status within the Financial Action Task Force. The request has gone out to Mr. Swedlove to get observer status for the Global Organization of Parliamentarians Against Corruption.

Another resolution was to look at the benefits of an international convention against money laundering and also to encourage GOPAC members of the importance of the 40 + 9 recommendations published by the Financial Action Task Force.

Another resolution was that GOPAC begin a dialogue with the offshore and international banking communities to better understand what the communities were doing to fight money laundering in the financing of terrorism and also to develop protocols specifically on fighting the laundering and recovery of corrupt money and assets. That was done, particularly in the context of GOPAC, which is concerned mainly with the fight against corruption.

In bringing forward this legislation in 2000-01, it was quite a challenging balancing act, balancing the need for Canadians to deal with the blight of money laundering and the risks to which Canadians were exposed while at the same time balancing the privacy needs of Canadians.

There were questions around what kind of information FINTRAC should disclose to law enforcement and to CSIS and on what terms they should disclose it. There were many issues like that.

There was the question of how we define financial intermediaries. We had a lot of presentations by various interest groups, whether they were the lawyers, the accountants, the department stores or the churches. They said they wanted to be exempt because, after all, they were not laundering money.

The tack the government took was to say that it would not create any exceptions, because money launderers being what they are, the money launderers would go to the areas where there were gaps or where exceptions were made. The decision of the government was to set a very big net and basically capture everybody in the sense of reporting requirements, and then, over time, evaluate what could be released and what would not.

As part of this amendment to the bill before us today, there is something that is quite a concern. I am not sure that there are many answers other than what is proposed here, but I think it would be a good discussion within the committee.

So that Canadians understand what is being done here, the lawyers in Canada were included in the reporting requirements of FINTRAC. In other words, any suspicious transactions had to be reported by the legal community to FINTRAC. The law societies of Canada, or whatever organization represents them in this case, took this to court. The court agreed with them that it would create a problem with respect to solicitor-client privilege.

So what these amendments do is take the lawyers out of that reporting requirement. There are ways that the Department of Finance is working to incorporate lawyers, but it is an area of great concern, because once the launderers realize that there are gaps, that is where they will go. We know that, and I will pick this up again--

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.

Canadian Heritage

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Mr. Speaker, I want to thank the member for Bonavista—Gander—Grand Falls—Windsor and the member for Saint-Lambert for the information they are providing us today.

I was a volunteer member on the Workers Arts and Heritage Centre in Hamilton. I was really struck when I heard government members talking today about the fact that money was available, but people were not sophisticated enough to access it. It strikes me that it would be the government's responsibility to help people who are not sophisticated and need access to their government and government programs.

I was extremely disappointed to hear a government member today comparing Bill C-25, Bill C-26 and Bill C-27. These are very serious pieces of legislation. The member was saying this should be minimized debate. It sounds to me as though the government started searching for programs it wanted to cut and unfortunately it chose this one.

[Jim Abbott, Conservative, Parliamentary Secretary to the Minister of Canadian Heritage]

Mr. Speaker, I was wondering if the member might want to comment on the fact that our colleague from the Standing Committee on Canadian Heritage, the member for Saint-Lambert, has brought forward his concurrence motion at this particular time.

I have the highest respect for the member for Saint-Lambert and for his dedication to this question. Considering the fact that the Minister of Canadian Heritage and I on her behalf have made it perfectly clear that we are working toward a new museums policy, I am wondering about the timing of this debate. Today we were supposed to be debating Bill C-25 from the Minister of Finance, a bill regarding the proceeds of crime and money laundering, an important issue, Bill C-26 from the Minister of Justice, an act to amend the Criminal Code (criminal interest rate), and Bill C-27 from the Minister of Justice, an act to amend the Criminal Code (dangerous offenders and recognizance to keep the peace).

We are trying to make Canada a safer place. I am wondering if the member for Peace River would agree with me on the timing of this debate. While I respect the member's intent of trying to keep the pressure on the government, nonetheless, we have to make sure that we are keeping Canada safe, not the issue that the member has brought forward with this motion.

Proceeds of Crime (Money Laundering) and Terrorist Financing Act

[Keith Martin, Liberal, Esquimalt—Juan de Fuca, BC]

Mr. Speaker, it is a pleasure today to speak on 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.

At the outset, I will illustrate for a moment why this is so important. Let us look at a place half a world away where our troops our dying. When President Karzai was here, he said “if the poppy crop is not eradicated, then the poppy crop will destroy Afghanistan”. I believe all members remember that. If we do not eradicate the poppy crop in Afghanistan, it will eradicate Afghanistan.

Why is this important and how does this connect to the bill. The poppy crop is a substrate upon which narcotics are made, in particular heroin. That heroin is processed and sold. It goes on to cause untold hardship, pain, suffering and sometimes death within our country and with many other countries in the world. That heroin also enables organized crime gangs to make enormous amounts of mount.

We could put an advertisement on television, “Use heroin and support the terrorists”. If people use heroin, they are providing the money that enables our troops to be killed in Afghanistan.

Drugs are one of a number of products that are used by organized crime and terrorist organizations. They provide the funds that enable them to buy weapons and infrastructure to carry out terrorist activities against us and our allies, which cause untold instability in various parts of the world.

In fact, if we do not get a hold on the poppy crop in Afghanistan, the mission there will never be successful. That is why it is critically important, and we have heard this recently, that the west not change its approach to drugs. However, if we go in and wipe out vast poppy crops, it leaves farmers with absolutely nothing. That is why some of those people are joining what we call the neo-Taliban. This is not the same group of Taliban that was there in 2001-02. It is a new group. Part of that group is made up of farmers who have had their livelihood removed. As a result, they have joined the Taliban and taken up arms against us.

The failure to deal with the poppy crop not only is a failure to deal with the economic wherewithal to engage in actions against our troops and against our allies, but it also is a poison and does not enable Afghanistan to get on its feet. My personal view is that we need to call a regional meeting to deal with the poppy crop. I personally hope the crop is bought, destroyed and other alternative crops are given to those farmers.

Unless we can provide those farmers with an alternative form of living, when we go in there and wipe out their livelihood, then we have left them with nothing for themselves, their families and their communities. If we do not, they go from being a subsistence farmer to abject poverty. With the Taliban holding out its arms and also some money for these farmers, they take up arms against us.

This is the on the ground reality of why the bill is important and why it is important for us to deal with the poppy crop and the drug trade.

Let us look at South America and Colombia where cocoa is produced. Colombia is the primary cocaine producer in the world. The United States spends $800 million a year in its so-called war against drugs. It is a war that will never be won.

Organized crime gangs and terrorist groups are the ones that feed off the products of cocaine, the FARC, the ELN, the paramilitary. Those groups are not ideological groups. They are organized crime groups, organized militias, that make money from the drug trade. Interestingly enough, those groups in South American are also attached to al-Qaeda. They are all connected again to what we are talking about here, which is trade in money laundering, the trade in various products.

Another point I want to talk about is gems. If we look at west Africa and countries such as Sierra Leone and Liberia, where people live in abject poverty, diamonds can be found on the ground.

One will find in these areas organized crime gangs working with various local warlords, so to speak, in order to take those diamonds, pay a small amount of money and earn huge profits from them. The reason why diamonds are used is that they are very easy to move around. They are very difficult to track. It is very easy to sell them for very high amounts of money, with huge profit margins.

That is what these organized crime gangs rely on. They rely on huge profit margins on products that can be bought and sold very easily to make the large amounts of money that are used in their nefarious activities.

According to the police, the most effective way to deal with these issues and with organized crime gangs, which I would put at the forefront for us domestically, is to cut the money supply out from underneath them. That is what this bill does.

My colleague articulated a number of our party's concerns with the bill. It is not that we oppose the bill. We would like to strengthen it.

What the United States did was very bright. The Americans adopted something called the RICO amendments, the racketeer influenced and corrupt organizations charges. What they recognized is that the best and easiest way to undermine organized crime gangs is to go after the money. If we go after the money, we weaken them.

When the Liberals were in government we actually put together RICO-like amendments for our country. We have proceeds of crime legislation. I think it needs to be strengthened and I would encourage the government to look at it to ensure that we have the ability to take away those resources.

I will give members one example. There is one thing that can be done. If people have made vast sums of money and have been charged and convicted of organized criminal activity, then the onus should be upon their shoulders to prove that their large wealth was actually generated from honest, law-abiding means. If we actually make the change that the police have requested, then we will be able to go a long way in removing the resources that tend to continue to circulate through organized criminal activities.

Getting back to trafficking in gemstones, one of the things the Liberals put together, and which the government should look at, is the Kimberley process. Through the Kimberley process, it was the first time we were able to deal with blood diamonds. Not only diamonds are addressed, but other semi-precious gemstones that can be easily trafficked are as well. We have to do a better job of strengthening the Kimberley process so we are able to ensure that legal gemstones are traded, bought and sold but that we stop the illegal trade in so-called blood diamonds and other gemstones.

It is critically important that this is dealt with, because countries like Liberia, Sierra Leone and Angola will never be able to get on their feet unless those natural resources are actually used and bought and sold legally, with the moneys poured back into the countries that produce them. In that way, these countries can build up their primary infrastructure, health care and education for the benefit of the people. If that does not happen, the people of these countries will continue to live in abject poverty and will never be able get out of their current poverty cycle.

The other issue relates to oil and what is called bunkering. What is happening now in west Africa from Angola to Nigeria is that oil is extracted, but ships come alongside where the oil is produced and a certain percentage of the oil is put onto these ships and disappears. Oil is bought and sold illegally and those moneys can then be used to fund terrorist activities. It is a very lucrative area that is not explored, but unless we deal with this, it is going to be a major problem.

A lot of those moneys wind up in Swiss bank accounts and in other areas where the tax regimes are not as transparent as they are in countries such as ours. These regimes are very opaque even though they are those of western countries. I would encourage the government to work with other countries that currently have opaque tax regimes, to put together and establish agreement on a rules based mechanism and standard in which we could have more transparent tracking of these moneys as they wind themselves inexorably through our current international financial mechanisms.

Again I want to emphasize that a failure to do this will ensure that we will never ever get a handle on organized crime gangs, organized criminal activity, and terrorism, because these three areas rely on these transactions, on taking a product that is sometimes illegal, like narcotics and other illegal drugs, selling it for a vast profit and then laundering those moneys through legal means.

That is why Bill C-25 is so important. That is why my party is supporting it to go to committee so that we will be able to make amendments to strengthen those areas that we feel need to be strengthened.

It is important in dealing with this issue that we also listen very closely to the police. In my province of British Columbia, more than 60% of the illegal activity comes from organized criminal activity, and a large chunk of that comes from the trade in illegal drugs. I know that the government likes the approach of the so-called war against drugs, but I would submit that it is a so-called war that cannot, has not and will not be won. It simply cannot be won.

There are now only two countries in the world that officially support the so-called war on drugs approach: Canada and the United States. If we look south of the border and at the objective parameters on where this war has taken the Americans, what we see is very stark and very frightening. For example, the U.S. has a higher use of both hard and soft drugs. The Americans have higher incarceration rates, higher disease rates, higher death rates, higher sickness rates, higher HIV rates, and higher rates of hepatitis B and hepatitis C, both connected with intravenous drug use.

Why is that so? If the war on drugs was so successful, why has this approach, by any objective parameter, been an abysmal failure? Because it does not work.

So where does it work and how can it work? I think we have to take an approach that marries two groups together. The first is the provisions in this bill that could be strengthened to enable us to track, undermine and undercut the trafficking and money laundering associated with these substances. The other is a rational medical approach toward substance abuse. Where can we find that? We can find that in northern Europe. We can find that in Germany. Frankfurt has an outstanding model. The Swiss have some very good models, as do the Swedes and the Finns.

All of those countries have procedures and integrated approaches to substance abuse that are rooted not in a judicial approach but a medical approach. They involve the following components. They involve harm reduction and, yes, safe injection sites. They involve detox and psychiatric counselling. They involve training programs. They involve housing issues. They involve work.

If we take a look at all those components, we will be able to have an effect because, interestingly enough, many of the people who have substance abuse problems, particularly those we find on our streets, have what we call dual diagnoses. A lot of them also have psychiatric problems, so we cannot disconnect the people who have substance abuse problems from those who have psychiatric problems. They are connected.

To take a judicial approach against those people, I would submit, is not only factually incorrect and will be ineffective, but also it is inhumane. These people do not need to be thrown in jail. They need a medical approach that is going to help them and deal with some of the underlying problems they have, problems that can be dealt with.

I would encourage the government, which in my view has taken a very blunt and very ineffective approach against this problem, to open its eyes, deal with the statistics, look at the facts and adopt those solutions that will have an effect. All of us in all of our communities know that this is an issue that affects all of us, and none of us want to see people get into this death spiral with the use of illegal substances that can ruin lives. All of us have seen on the streets in our communities people whose lives have been destroyed, for many reasons, and it does not have to be so.

It is incumbent upon us to work with the provinces, the managers of health care, in order to be able to use and take that integrated approach. I personally would like to see that in my community, in Victoria on Vancouver Island. I would like us to be able to take on this integrated harm reduction strategy and work on the housing issues, the medical issues, the psychiatric issues, the counselling issues, the skills training issues and the work issues that are at the forefront of solutions to address this problem.

In my city of Victoria, this is a very big problem. The police are looking for help. The police recognize that this is the route to go. The police want help on this. Their hands are open, as are those of the community. I would encourage the government to listen to us and work with us to implement those solutions that will work.

In closing, for the sake of our troops in Afghanistan, for heaven's sake let us start to deal with the issue of the poppy crops in Afghanistan, in a rational approach. The poppy crop can be removed, but we have to replace it with alternative livelihoods. Afghanistan and the southern area used to be a very--

[Judy Sgro, Liberal, York West, ON]

Mr. Speaker, I am quite happy to join the debate on such an important subject as 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.

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 Report Analysis Centre of Canada to disclose additional information to law enforcement and intelligence agencies and to make disclosures to additional agencies.

The bill permits the centre to exchange compliance related information with its foreign counterparts. It also 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.

The bill creates an administrative monetary penalty regime, something which certainly seems to be needed.

It also 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.

Everyone in the House will likely agree that one of the best ways to fight organized crime and terrorism is to starve those involved of the funds that they need to operate. Stemming the flow of illegal money is of great importance, and it is equally important that we protect the privacy and the charter rights of individual Canadians.

Bill C-25 is a step in the right direction and contains much of what the previous Liberal government was in the process of developing. We will certainly support it in principle at this stage of debate.

The proposed amendments in the bill will make Canada's anti-money laundering and anti-terrorist financing regime more consistent with new financial action task force standards. They also follow some of the recommendations made in the 2004 Auditor General's report and in the 2004 Treasury Board evaluation of the regime. I will now turn to some of the key features in this bill.

There are enhanced client identification and record keeping measures for financial institutions and intermediaries. The proposed amendments include requirements for reporting entities to undertake enhanced monitoring of high risk situations, correspondent banking relationships and transactions by politically exposed persons. Banks, insurance companies, securities dealers and money service businesses would be required to take measures to identify and to monitor the transactions of foreign nationals and their immediate families who hold prominent public positions.

There is the reporting of attempted suspicious transactions. All reporting entities currently reporting suspicious transactions would be required to report suspicious attempted transactions to FINTRAC. This is the practice in other G-8 countries and is consistent with financial action task force recommendations.

Another feature in the bill is the registration regime for money service businesses and foreign exchange dealers. The proposed amendments would create a federal registration system for individuals and entities engaged in money service businesses or foreign exchange. FINTRAC would act as the registrar and would maintain a public list of registered money service businesses and foreign exchange dealers. These businesses are already covered by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act; however, given that this is an unregulated sector, the registry will assist FINTRAC in ensuring compliance with the act.

The bill refers to enhancing the information contained in FINTRAC disclosures. As recommended in the 2004 Auditor General's report and at the behest of law enforcement, the proposed amendments enhance the information FINTRAC can disclose to law enforcement and security agencies on suspicions of money laundering or terrorist financing. This will increase the value of FINTRAC disclosures, ultimately leading to more investigations and eventual prosecutions.

The bill creates an administrative and monetary penalties regime. Currently the act only allows for serious criminal penalties if the act is contravened. 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 amendments create an administrative and monetary penalty system whereby fines can be applied for non-compliance. This was a recommendation in the 2004 Auditor General's report.

The bill reintroduces requirements for legal counsel. The government is working with the legal profession, including notaries in Quebec, to finalize requirements for client identification, record keeping and internal compliance procedures for legal counsel when they act as financial intermediaries. The bill removes the obligation for legal counsel to file suspicious transaction reports or other prescribed transaction reports.

The bill expands information sharing between federal departments and agencies. The amendments in the bill would expand FINTRAC's ability to share information with the Canada Border Services Agency, the Canada Revenue Agency and the Communications Security Establishment. In addition, FINTRAC would be able to receive terrorist property reports under the United Nations act regulations.

Internationally, the enforcement of the anti-money laundering and anti-terrorist financing requirements would be strengthened by information sharing provisions on compliance related information between FINTRAC and its foreign counterparts on obligations applicable to the financial sector and between the Canada Border Services Agency and its foreign counterparts on the enforcement of the cross-border currency reporting regime.

This bill proposes to make some necessary changes to the previous government's Bill C-36, the Anti-terrorism Act of 2001. Changes such as these will likely be required every few years as money launderers become more sophisticated and police need new powers to fight them. This is precisely what makes money laundering so difficult to combat. No matter how many safeguards and checks we as legislators put in place, the criminal element will always look for new ways to avoid or to counter them.

Canada's financial intelligence agency reported $5 billion worth of suspected money laundering and financing of terrorist activities last year alone. That total is more than double the one a year earlier. Of that, $256 million is tied to suspected terrorist financing. Of the 143 reports FINTRAC made to law enforcement agencies, there have been no convictions. The Auditor General in 2004 suggested that allowing more information to flow to law enforcement authorities would help in investigating these suspicious activities. This bill provides these powers.

This bill is largely derived from recommendations made by the Department of Finance under the previous Liberal government's tenure. Money laundering and terrorist financing have economic and social costs against which we must remain vigilant. In order to achieve this, we must continually re-evaluate how we monitor and disclose suspicious transactions as the nature of these activities changes and continually becomes much more sophisticated. The government must move to stem the tide of money laundering and terrorist financing and at the same time protect the privacy rights of law-abiding Canadians.

Given that both the Auditor General and the RCMP have expressed concern that exemptions for the legal profession leave serious gaps in this legislation, I am concerned with the government's decision to remove the obligation for legal counsel to file reports of suspicious transaction with FINTRAC.

Our colleagues in the other house recently tabled a report entitled “Stemming the Flow of Illicit Money” which made several recommendations, some of which are in the bill and some of which are not. I would also like to see the Senate Standing Committee on Banking, Trade and Commerce recommendations for Parliament to have greater powers to also scrutinize FINTRAC.

One of the main concerns I have is that we are not bringing some of the businesses that currently do not fall under FINTRAC's guidelines into the bill. As the banking, trade and commerce committee reported, the RCMP believe that as stricter regulations are imposed on businesses in the financial services industry, criminals are seeking alternative methods of laundering the money accumulated from criminal activity.

Various characteristics of the precious metals, stones and jewellery industry make it highly vulnerable to criminal activity. The RCMP has identified these businesses as a likely place for criminals to launder money, yet this bill does not require them to report suspicious transactions as financial institutions must. I strongly recommend that all of us in all parties work together to make sure that we amend this law so that it reflects clearly what is needed.

Another weakness that has been identified by both the Auditor General and the RCMP is that lawyers are not required to disclose suspicious transactions to FINTRAC. This is, of course, another delicate balancing act. On the one hand, we need to give law enforcement the ability to track down those who launder money, using a lawyer as a financial intermediary. On the other hand, we have the issue of protecting solicitor-client privilege. This bill strikes a compromise between the two and I look forward to studying whether this compromise is appropriate under the circumstances.

Another major concern with the bill is that it does not adequately ensure that the privacy of Canadians is protected. The bill will allow FINTRAC to share greater amounts of information with law enforcement agencies. This is necessary in order for those agencies to fully investigate suspicious transactions and to eventually prosecute where appropriate.

Another part of the bill that does not work as effectively as we would like to see is to provide increased protection for the privacy of Canadians, such as by creating an independent review commission with the powers and authority to conduct random reviews of an agency's files and an agency's operations. The Auditor General has also recommended that some such commission be created. In her 2003 report, she wrote:

The government should assess the level of review and reporting requirements to Parliament for security and intelligence agencies to ensure that agencies exercising intrusive powers are subject to levels of external review and disclosure proportionate to the level of intrusion.

It is extremely important that be put in place as this legislation goes forward for the review. Essentially, if we are going to give FINTRAC the ability to share more of Canadians' personal information with bodies like the RCMP and the Canada Border Services Agency, then should we not also move to ensure there is sufficient oversight of FINTRAC to ensure that the information that it is disseminating is appropriate?

As I said before, this is by and large a good bill. It has certain omissions and weak points and I feel that we should all work to amend it at the committee stage, but overall it will provide the police and prosecutors with some of the tools they require to combat money laundering and terrorist financing.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I thank my colleague from Kamouraska for his sensitivity to the needs of these smaller institutions and the burden that the bill might place on them.

As I was speaking to the bill, I received an email from a general manager of a credit union on Vancouver Island. He has pointed out that his small credit union may have to deal with costs of up to $200,000 per year just to track, administer and file the necessary paperwork stemming from Bill C-25.

His second point, which I would like my colleague's view on it, is that in a small neighbourhood community institution, he resents that he may have to turn in activities of his friends and neighbours, which may not quite meet the standards or may seem suspect to some from thousands of miles away. He is not comfortable having to report private information to the government in his function as the general manager of a credit union.

My colleague mentioned the Privacy Commissioner. Is he concerned as well that neighbours may be called upon to blow the whistle on other neighbours?

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Speaker, I rise today to speak to 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.

As I speak today, I am thinking about the reality we have faced for the past several years, that is, the increase in terrorist activities and the tools we have tried to put in place to fight against terrorism. As we all know, the Bloc Québécois took up a major challenge in the past regarding the fight against organized crime.

I would remind the House of the battle waged here, led by the Bloc, to enact anti-gang legislation. Many individuals have continued that battle, including the leader of the Bloc Québécois and hon. member for Laurier—Sainte-Marie and the hon. member for Hochelaga—a young child in his riding was unfortunately a victim of organized crime warfare. My former colleague, Michel Bellehumeur—who is now a judge, but who was the justice critic at that time—successfully led one offensive after another, as did Richard Marceau, regarding the elimination of the $1,000 bill. The Bloc Québécois' credibility is well established here, as it is in many other areas.

We have led battles and we have helped to develop the best laws possible. Today, we are discussing legislation that the Bloc Québécois will support because it will enable Canada to comply with the recommendations of the financial action task force on money laundering. This is a group that was created by the G-7 to examine in depth the issue of the financing of organized crime world wide. The group can make recommendations to all countries on ways of countering criminal use of money. It has been said that money is the sinews of war, and it is the same in the fight against terrorism.

There is a real battle that can be fought on the ground in terms of propaganda, but there is also the whole issue of financing. Let us hope that we can do our share in a meaningful and concrete way.

However, at the same time—this will be a continuing concern for the Bloc—during the committee stage, we must ensure that in the application of the law we are not faced with the excesses we have already seen, such as in the case of the treatment of Maher Arar by the RCMP. We know that the RCMP slipped through the cracks in existing mechanisms to end up accusing Mr. Arar and that he suffered unacceptable treatment. In the final analysis, Mr. Arar suffered harm that will be very difficult to repair.

In the previous instance, it was the case of an individual. Today, we are dealing with the financing of terrorism. We must ensure that in the application of this law that there is no similar hole in the legislation.

I am referring, for example, to the fact that under the law an official of the Department of National Revenue would have the power to forward information that was sent by another official under the provisions of the charities registration act. That information could be forwarded to the Financial Transactions and Reports Analysis Centre of Canada.

This could be done in good faith and be completely legal. It could involve the forwarding of relevant information; however, we must ensure that there are safeguards to prevent excesses.

After they have debated the actual principle of this bill and its general appropriateness, the committee members should pay particular attention to the issue of protection of personal information. I would like the privacy commissioner to appear before the committee so that she could say how the act for which she is responsible applies to the reality of Bill C-25 and to the regulatory framework defining how to track the financing of terrorist groups so that such financing is clearly opposed and minimized, and how at the same time the rights of individuals will be respected.

We should recall that Bill C-22 was the forerunner of Bill C-25, which we have before us. It was tabled on behalf of the Minister of Finance in 1999 and intended to counter money laundering. That was Bill C-22. It was very similar to Bill C-80, presented in May 1999, but died on the order paper when the House was prorogued.

The general objective of the bill was to correct the shortcomings of Canadian legislation respecting money laundering, as they were identified in the 1997-98 report by the FATF, the financial action task force on money laundering, created by the G-7.

In addition, the FATF recommended in its report that any provisions respecting reports in Canada—which at present are voluntary—be made public and that a financial information unit be created with the responsibility of gathering, managing, analyzing and distributing reports of suspicious operations and other relevant information. So it was an international committee that made the recommendations and the 1999 bill was designed to put them into force.

That bill was passed. 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. A lot of money changes hands. We will see a little later that the quantities of money are very significant.

Furthermore, the bill provided for the creation of a new independent agency, namely the Financial Transactions and Reports Analysis Centre of Canada. This centre receives and administers the information reported. Bill C-22 was enacted on June 21, 2000, and replaced the Proceeds of Crime (Money Laundering) Act then in effect.

The Conservative government is proposing to amend Bill C-22 with Bill C-25, which we are debating today. This new bill is designed to increase financial institutions' duties to keep records and report suspicious transactions, with a view to eliminating funding for terrorist organizations. The idea is to achieve greater transparency in the circulation of money. Banks are institutions that are responsible for the quality of their work. In my opinion, in the fight against terrorism, they need much clearer and more specific guidelines and instructions. Let us hope that this bill will clarify the situation.

First of all, the bill extends the application of the act to all organizations that, in addition to dealing in securities, deal in other financial instruments. Targeting securities alone does not go far enough, in light of terrorists' investment methods. The act also applies to persons and entities engaged in the business of remitting or transmitting funds by any means or through an intermediary to electronic funds transfer companies or of issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments. In other words, the framers of the bill became aware of all the actions and the financial and monetary transactions that the bill needed to cover to try and control the circulation of money used to finance terrorist activities. The people who sell prescribed precious metals will be subject to Bill C-25.

The new bill prohibits any entity from opening an account if the bank cannot establish the identity of the client. The bank must be certain that it knows the identity of the client. Furthermore, the bill ensures requires any institution that does business with a politically exposed foreign person, foreign judge, head of state or minister, to obtain the approval of its senior management before entering into a transaction. Thus, safeguards are established. Such requirements apply to all sectors. For example, in the case of electronic funds transfers, the bank or other business must include the name, address, account number and all client reference numbers, whether sending or receiving such transfers.

This is where we must consider the issue of authorization given to officials of the Canada Revenue Agency to disclose information to the Financial Transactions and Reports Analysis Centre of Canada. We will have to be very vigilant to ensure that we do not erode the right to protection of personal information and to establish an appropriate balance so that the legislation falls within the desired framework.

Of particular concern is the laundering of proceeds of crime, which is the conversion of the proceeds of criminal activities into goods making it difficult to trace the proceeds to their criminal origins. It consists of hiding proceeds of crime by making them seem legitimate. It is money laundering. A large portion of these goods and assets are derived from the illegal drug trade and others result from criminal activities such as burglary and cigarette smuggling. The criminal activities that they seek to hide are, by their very nature, clandestine activities. It is difficult to have a precise idea of the extent of money laundering operations.

Experts estimate that, overall, some US$300 billion to US$500 billion in criminally derived funds enter international capital markets annually; $300 to $500 billion is a lot of money.

In Canada, the federal government estimates that between $5 billion and $17 billion in criminal proceeds are laundered in this country each year. There was therefore a need to take action and find a way of shedding light on these transactions in order, at least, to reduce them as much as possible.

There is also the problem of the financing of terrorist organizations. We know that terrorists were going so far as to take advantage of charitable organizations and ultimately use them for purposes other than those they were intended for. We need to re-consider things in this regard as well to be sure that we can also follow the financial transactions.

The financial action task force on money laundering established in 1989 is an international organization which wants to ensure that the different countries around the world have legislation for dealing with this problem. However, we have seen a major increase in terrorist group activity over the last few years. I think that we need to move faster and provide more support. The FATF’s mandate was renewed in 2004 to run until 2012, and it will continue to monitor the situation.

Through the mandatory reporting of suspicious transactions, this bill will ensure that we do not suddenly find ourselves in a situation where a whole series of suspicious transactions have to be identified because they were not being followed. The mechanism being put in place will hopefully take care of this.

In regard to the reporting of major cross-border currency movements, the bill will ensure that certain precious metals are also regulated and included in the currency to be reported.

There are two provisions authorizing customs officers to search people or the vehicles of people when the officers have reasonable grounds for suspecting that the people are hiding on or near their persons currency or monetary instruments that were not reported in accordance with the act's regulations. Finally, a new provision makes it possible to conclude cooperation agreements between Canada and the customs agencies of foreign countries that have similar requirements to report cross-border movements of currency and monetary instruments.

The comparison I made with the Arar affair also applies here. We must ensure that we are not creating a ripple effect by inadequately protecting personal information. When we give information to a foreign agency, we must ensure that we do so in accordance with the law and that the other country uses it in accordance with the law. We must not damage people's reputations because of incorrectly conducted transactions. In this case, it might not end with the kind of torture Mr. Arar suffered through, but it could damage reputations. We must be vigilant in ensuring that, if necessary, this bill is amended in such a way as to guarantee the protection of personal information.

The third important element is the creation of the Financial Transactions and Reports Analysis Centre of Canada covered under clauses 40 to 72. This is the framework, the organization, the structure that will ensure the implementation of this legislation. We hope the centre can operate because it will be responsible for analyzing and evaluating the reports it receives, as well as other information. If necessary, it will provide information to law enforcement organizations. It will also be responsible for making recommendations to the Department of Justice, the RCMP or other organizations. Here, too, we must be vigilant to ensure that the management and analysis of personal information are done correctly.

Bill C-25 sets out guidelines concerning individuals and groups eligible for registration with the centre. Any person whose name appears on the list of terrorist groups, who was convicted of terrorist activity or of participating in, facilitating, instructing to carry out or inciting to commit terrorist activities, who was convicted of participating in organized crime activities, or who was convicted once on indictment or more than once for fraudulent transactions or for an offence under the Controlled Drugs and Substances Act, except for consumption, is eligible to register.

Clearly, what we are seeking is a comprehensive framework that will allow for proper intervention regarding cash flow linked to terrorists. Accordingly, the Bloc Québécois believes that this bill deserves our support.

It also includes serious offences so that criminals are well aware of the seriousness of their actions.

To conclude, I refer back to my comment on privacy. I would like to see this bill passed as quickly as possible, given the study that will be required in committee. Indeed, it must be carefully studied to prevent individual cases from slipping through security and, above all, to prevent honest, law-abiding citizens from being penalized by such legislation.

Significant amounts of money circulate in this area of activity and this legislation could, in due course, have implications for human life. Terrorist activities funded at the source by this type of monetary flow often lead to the deaths of innocent bystanders.

It is a fine idea to create tools to stop this money from circulating, but we must strike a balance with the protection of privacy.

The Bloc Québécois supports the principle of this bill. We will see if, through amendments, we can adapt it more to the reality of these people and make it more compliant with the Privacy Act.

[Chris Warkentin, Conservative, Peace River, AB]

Mr. Speaker, I do believe that criminals who are found to be involved in terrorist activity or in some type of activity that would define them as being in contravention of the law. We do need to investigate what we do with the property that they own.

Like many Canadians, as I am sure we would both agree, criminals should not be able to retain the proceeds of crime. I do not know if Bill C-25 is the right place to put in that measure but I would be supportive of a measure that would require criminals who could not prove that they got the assets in any other way to give up those things.

I believe this government is championing the reverse onus. We have seen it in the dangerous offenders legislation. We are thankful for the member's support on that legislation which would require criminals to prove they will not continue to involve themselves in this type of activity.

The Conservative government has been very active on the file of getting tougher on crime, putting the onus on the criminal and protecting the citizens of our country. The measures the member talks about would protect the citizens from any future types of those activities. I also agree with him that we need to ensure that crime does not pay any more.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I would like my colleague to go a little further in his views on Bill C-25 than just the speech that he was given to read, which I think represents his party's views.

I would appreciate his own personal views on this idea. In the last Parliament and, in fact, in the Parliament prior to that, a private member's bill was floating around dealing with the seizing of assets that were the proceeds of crime. I believe it was under the name of my colleague from the Bloc the last time, Richard Marceau, and prior to that it was a Canadian Alliance member, Paul Forseth.

Those were good ideas in that they would have allowed the government to not only seize bank accounts full of ill-gotten gains, but seize the actual proceeds of crime that may have bought all the toys, the trappings of crime that we see a lot of the high profile criminals use.

Would the member agree that Bill C-25 should be extended to allow this concept, that where it can be clearly demonstrated that the person is a member of a criminal organization, such as the Hell's Angels, Hezbollah, whatever is on that list of criminal organizations, and the person has been convicted of an offence, why should we not be able to seize their assets and put the reverse onus on them that they should need to prove that they did not get it through the purchase of ill-gotten gains, that they had a legitimate means of income? Would that not be a good idea?

[Chris Warkentin, Conservative, Peace River, AB]

Mr. Speaker, I appreciate the opportunity to speak to Bill C-25 at second reading.

The bill proposes to update legislation that will help fight those who would use our financial system to launder money and then divert that money to fund terrorist activities.

We have, unfortunately, seen so many horrible examples of how far terrorists can reach and how close to home they can get. We saw what happened in New York City, London, Madrid, Dubai and Toronto.

We were all shocked this past June when our RCMP, CSIS, the OPP and other Canadian police forces combined their forces to arrest a number of alleged members of a terrorist cell here in the greater Toronto area. The accused are alleged to have been planning a series of major terrorist assaults on targets in southern Ontario, targets that are alleged to have included the House in which we now sit.

Activities like this threaten our safety, our security and very much our own way of life. Canada is a country on the move. We are a country with a G-7 leading economy and under this government a steadfast commitment to meeting our international obligations. We take our global responsibilities very seriously. We know that terrorists need money and that is why we are introducing this bill to make it harder for them to get it.

Canada's financial sector is internationally recognized as stable, safe and sound. Our Minister of Finance knows that it is his responsibility to ensure that it continues to stay that way. That is why we have introduced this bill. The amendments it contains would strengthen the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to ensure that Canada continues to be a global player in combating organized crime and terrorist financing.

This year Canada assumed the presidency of the financial action task force, the intergovernmental body that develops and promotes national and international standards to combat money laundering and terrorist financing.

Holding the FATF presidency is another example of Canada's commitment to national and international security. The financial action task force plays a critical role in stopping terrorist financing activity and money laundering by promoting policies designed to starve these organizations from the funds they use to fuel them.

Terrorist and criminal organizations are becoming increasingly sophisticated in their attempt to move, conceal and launder funds through financial systems and other means. Despite the safeguards in place, terrorist organized crime and other criminal elements continue to find ways to take advantage of our financial system. That is why we are debating Bill C-25 today. The proposed amendments in the bill would improve the government's ability to act quickly and decisively against potential abuses of the Canadian financial sector.

I can assure the House that Canada's new government is being relentless in its efforts to combat money laundering and terrorism financing. One of the tools that we are using is FINTRAC, a system that is widely considered to have leading edge, analytical and technological capacity. This agency receives, analyzes, assesses and discloses financial intelligence on suspected money laundering, terrorist financing and threats to the security of Canada.

Since FINTRAC began making disclosures in early 2002, it has provided law enforcement and intelligent agencies, key financial intelligence on money laundering, the financing of terrorist activities, and the threats to Canada's security by analyzing financial transactions, reports and other sources of information.

FINTRAC recently released its annual report and revealed that it has tipped off law enforcement in Canada and the Canadian Security Intelligence Service to more than $5 billion in suspicious deals last year. It is more than double the figure of the year before. FINTRAC has only been in existence for two years, but it is obvious that its work is paying off.

FINTRAC is a member of the Egmont Group of Financial Intelligence Units whose purpose is to enhance cooperation and information exchange in support of the anti-money laundering and terrorist financing regimes in member countries.

The establishment of the Egmont secretariat in Toronto is yet another example of Canada's commitment to national and international security, collaborative solutions to global threats, and the need for the international cooperation and institutions.

Since taking office, Canada's new government has made safety and security of our citizens, and of global citizens, our priority.

In our first budget in May the Minister of Finance announced significant new funding to enhance the work being done by Canada's financial intelligence unit, the financial transactions and reports analysis centre in Canada, the Royal Canadian Mounted Police, the Canadian Border Security Agency and the Department of Justice.

Bill C-25 would build on these measures and make Canada's overall regime consistent with international standards. The proposed measures in this bill would make Canada's anti-money laundering and anti-terrorist financing regime more effective by making it consistent with the new FATF standards.

Canada has committed to implementing the 40 FATF recommendations on money laundering as well as nine special recommendations on terrorist financing. The hon. members will know that the interim report of the Standing Senate Committee on Banking, Trade and Commerce is calling for tougher measures to deal with money laundering and terrorist financing.

Bill C-25 responds to the Senate committee recommendations. The proposed measures in Bill C-25 would respond to recommendations made in the 2004 Auditor General's report and the 2004 Treasury Board evaluation of the regime.

One of the most important amendments proposed in Bill C-25 is a proposal to enhance client identification and record-keeping measures for financial institutions and intermediaries.

Under this legislation, these institutions would be required to undertake enhanced monitoring of high-risk situations. For example, businesses such as banks, insurance companies, securities dealers and money services would be required to identify and monitor the transactions of foreign nationals who hold prominent positions, along with their immediate families.

Amendments in Bill C-25 would require the reporting of attempted suspicious transactions to FINTRAC. The bill would create a registration regime for money services businesses.

As we know, these businesses are largely unregulated. With the passage of the amendments in this bill, FINTRAC would act as a registrar and would maintain a public list of registered money services businesses and foreign exchange dealers.

As recommended in the 2004 Auditor General's report, and at the request of law enforcement, this bill would enhance the information contained in FINTRAC disclosures to law enforcement and security agencies on suspicions of money laundering and terrorist financing. This would increase the value of FINTRAC disclosures, ultimately leading to more investigations and eventual prosecutions.

Bill C-25 proposes to strengthen penalties in order to allow FINTRAC to better enforce compliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

While current legislation only allows for criminal penalties if the act is contravened, Bill C-25 proposes to create an administrative and monetary penalty system where fines could be applied for lesser contraventions of the legislation. Another component of the regime is the reintroduction of client identification and the record-keeping requirements for legal counsel.

The government is working with the legal profession, including notaries in Quebec, to finalize the details of these requirements and to ensure adequate compliance and enforcement. Information sharing is crucial in the coordinated fight against money laundering and terrorist financing.

Bill C-25 proposes to expand FINTRAC's ability to share information with the Canada Border Services Agency, the Canada Revenue Agency and the Communications Security Establishment. In addition, FINTRAC will now be able to receive terrorist property reports under the United Nations Act regulations.

All of these steps and all of our efforts add up to a better and a safer world for all of us, a world where our financial systems are used as they were intended, to create better opportunities for our citizens and a greater prosperity for our nations.

Criminals do not stand still, so neither can we. As they adapt, we must adapt and as we adapt they do adapt. We must be vigilant and relentless in our pursuit of ideas, innovations and ways to cut them off to make it harder for them to finance their activities.

Through more funds, improved legislation and a relentless resolve to shoulder our global responsibilities, Canada is serving notice that we will put these criminals out of business at every chance we get. I urge all hon. members to accord this bill the quick passage that it deserves.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I thank my colleague from Mississauga South for sharing with us his views on Bill C-25 and am interested in the summation of his speech, wherein he made reference to the idea that we should explore the concept that it should not be just the cash or bank accounts that may have been developed by ill gotten gains that we should be looking at, but perhaps we should be looking at other assets as well.

I would like to share with him that I believe strongly that we, the government and the law enforcement agencies, should in fact be able to seize other ill-gotten gains if it is in the context of this bill, which says it can be done if the person has been convicted and is known to be a member of an illegal or criminal organization. In those circumstances, if they happen to have what is ostentatious wealth, I suppose, and if they cannot show any proof of where those assets came from, why should we not be able to seize them and put the reverse onus on that individual to prove to us that the assets were in fact purchased through work?

I do not believe that is an infringement on anybody's civil rights. It is simply asking the question. If a person is living in a million-dollar mansion, has had no visible means of income for the last 20 years and is known to be associated with the Hell's Angels, then that person should show us where he got the money to buy that mansion. If it was from some rich uncle who died and left the money to the person, then he should show us the will. It should not be that difficult. We would take the person's word for it. But why should we not be able to seize that mansion, sell it for a million dollars, put that money back into law enforcement and use the resources to bust more criminals?

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, I am pleased to participate in the debate on Bill C-25.

A number of members, when they hear money laundering, probably will hearken back to discussions they have had on the subject, whether they be with regard to the underground economy or organized crime. As a matter of fact, I just received a report from the Ontario Construction Secretariat, which calculated that approximately $1.3 billion of federal and provincial government revenue was forgone as a consequence of the underground economic activity within the construction industry.

It is an issue which has been around for some time. A lot of people probably do not know how money laundering works. If someone is paid under the table, the money is received from somewhere but it is not recorded on the books because that money has to be paid out to someone else. It is not reported, nor is a T4 slip issued, nor is any kind of other payment indicated so that paying taxes on it can be avoided.

When 9/11 occurred all of a sudden this entire area, including organized crime, expanded into an enormous consideration. It led to the development of the Anti-terrorism Act. It also led to the creation of a significant variety of jurisdictional bodies and government bodies to look into the aspects of financing terrorists.

I wanted to give credit to the Senate of Canada, which we do not do often enough in this place. In May and June of this year, the Senate conducted a special review and provided an interim report on the subject matter now before us. The report is called, “Stemming the Flow of Illicit Money: A Priority for Canada”. It is a parliamentary review of the proceeds of crime, namely money laundering and the terrorist financing act.

Usually when I look at a report, I look at the beginning and the end of it to find out why the issue was raised, and so what. In looking at the introduction, there was a paragraph which I thought properly characterized the reason we were looking at this. It states:

While witnesses were not able to provide the Committee with consistent or precise estimates of the amount of money that is being laundered each year or the costs of money laundering and terrorist activity financing, we believe that it is probably in the tens of billions of dollars. The human and societal costs associated with money laundering and terrorist activity financing must also be remembered, since the costs are not simply economic. Clearly, the costs are significant, and we must ensure that Canada has the best possible anti-money laundering and anti-terrorist financing regime in place, consistent with the protection of privacy, for the sake of Canadians, the sake of citizens worldwide and the sake of legitimate commerce.

That one introductory paragraph really encapsulates many of the details which hon. members have spoken about in the debate thus far.

I said at the outset that I look at the beginning and the end of a report. I wanted to look quickly also at the conclusion. I can see from the list of witnesses that this touches a broad range of areas. Finance Canada, Justice Canada, and Public Safety and Emergency Preparedness Canada appeared before the committee. The Superintendent of Financial Institutions was involved, as was the Financial Transactions Reports Analysis Centre of Canada, commonly known as FINTRAC. In the speeches on this bill we are going to hear that name. It is an institution which deals with financial transactions and reports. The Royal Canadian Mounted Police were involved, as were the Canada Border Services Agency, the Office of the Privacy Commissioner, the Office of the Information Commissioner of Canada, the Canadian Bankers Association, the Certified General Accountants Association, the Canadian Life and Health Insurance Association, and the Federation of Law Societies of Canada.

Canadians should know that when a study is done in the House or in the Senate, we have the tools to call some of the most important people involved to provide some input. They will be able to tell us not only where we are and how things have evolved, but also how to respond because terrorists and those who finance terrorist activity are like viruses in that they tend to mutate. In order to be resistant, viruses will change into other things. They become moving targets. Terrorists and those who finance terrorist activity also have the tendency to continue to be moving targets. It is vital that we know the techniques and the tendencies that occur within terrorist financing. On behalf of the Parliament of Canada, the Senate has done a very important service by consulting and issuing its report.

I will get to some of the recommendations that were made, but I want to read into the record the Senate's conclusion in this excellent report. Some members may want to include it in their householders. This is a very good report. It lets Canadians know that these are significantly important issues for parliamentarians to deal with on their behalf. It says:

As a global partner in making the world safer and more secure, and as a member of various international fora, Canada's anti-money laundering and anti-terrorist financing regime must meet not only our domestic needs but also reasonable international obligations. Crimes that underlie money laundering and terrorist activity financing--including fraud, embezzlement, drug trafficking, and trade in arms--have harmful human, societal and economic effects, with domestic and international consequences.

The Committee believes that Canada should be an example worldwide--particularly as Canada assumed the presidency of the Financial Action Task Force on Money Laundering in July 2006 and as we undergo a mutual evaluation review by the Task Force in 2007--

It says also:

This regime must respect several principles: the appropriate entities and individuals must be required to report; the appropriate types and values of financial transactions must be reported; and the appropriate balance must continue to exist between providing law enforcement and other agencies with the information they need to do their jobs effectively and efficiently on the one hand, and ensuring that the privacy rights of Canadians are protected on the other hand.

Members have heard this before. When do privacy issues relating to Canadians have to be balanced with our need to deal with problems like terrorist financing? Places have been identified where it can cause some difficulties. The Senate committee made some recommendations in its report to deal with this balancing act that they have to go through. These recommendations are not in the report itself, but are on the website. I will mention some of the key recommendations here.

The first recommendation was the introduction of a reporting requirement for dealers of precious metals, stones and jewellery when transactions are greater than $10,000. The RCMP pointed out that as other avenues become less attractive for money laundering, avenues such as precious metals, stones and jewellery are becoming more attractive. We have always been addressing cash, but other commodities of value are becoming part of this whole activity.

The second recommendation says that there has to be an increase in two-way information sharing. We have heard this often with regard to other areas, even with regard to security on Parliament Hill between the Senate and the House of Commons. In this regard, the committee suggested that FINTRAC should not only be able to disclose more information to government agencies such as the RCMP, but also should provide feedback to the disclosing entities about the usefulness of the information they send to FINTRAC. This was also a recommendation in the 2004 Auditor General's report.

Another recommendation of the Senate committee was that white label ATM machines work with law enforcement and the industry to address the potential money laundering risks associated with white label ATMs, i.e. machines that are not owned or operated by banks. The concerns with these ATMs arise from the possibility for owners or operators to self-load the machine with cash. This is an opportunity for laundering money.

The fourth recommendation was that FINTRAC only disclose Canadians' personal information to authorities in countries which have privacy legislation that is consistent with the Privacy Act in Canada. We are looking at almost like a reciprocity or the same or similar protections in countries that we deal with.

Recommendation 5 was that we increase the ability of Parliament to scrutinize FINTRAC. Currently it is responsible through the Minister of Finance and delivers an annual report in the fall. This is too important to wait for an annual report. We should have the scrutiny process going on more frequently to engage Parliament more fully.

I would think that gives a pretty good idea of the issue we are dealing with. This particular bill actually had its genesis in the last Parliament. The Liberal government started to put this together and now it is before us. Of course, I do not think there is any question in this place that the bill is a significant bill that should get prompt scrutiny by the House of Commons and in the other place so that these laws are in place and we can do the job properly.

In looking at some of the details, I note that Canada's financial intelligence agency reported $5 billion worth of suspected money laundering and financing of terrorist activities last year. That total is more than double what it was a year earlier and $256 million of that was tied to suspected terrorist activities. We have a significant growth. That is why it is important that we deal with this quickly. This is becoming more and more sophisticated. It is a moving target. Our legislation and the tools available to our financial institutions, our government agencies, and the policing authorities and so on, have to be as flexible as possible, again keeping that balance or that respect for the privacy rights of Canadians.

Of the 143 reports FINTRAC made to law enforcement agencies, there have been no convictions. The Auditor General in 2004 suggested that allowing more information to flow to law enforcement authorities would help in investigating these suspicious activities, and the bill before us, Bill C-25, provides those powers. Members probably will be a little concerned to note that there were 143 reports by FINTRAC of suspicious activity and not one conviction.

The bill before us, Bill C-25, has seven broad objectives. I am not going to get a chance to go into all of them, but perhaps I can highlight them.

The first is to enhance client identification and record keeping measures for financial institutions and intermediaries.

The second is the reporting of attempted suspicious transactions. Just to amplify on that, I will note that all reporting entities currently report suspicious transactions, but they would be required to report suspicious attempted transactions. There is a subtle difference, but the experts who were before the committee seem to think that this will give more latitude because it will provide more information.

The third area is the registration regime for money services businesses, referred to as MSBs, and foreign exchange dealers. The proposed amendments would create a federal registration system for individuals and entities engaged in money services businesses or foreign exchange.

The fourth area in the bill is enhancing the information contained in the FINTRAC disclosures. This was recommended in 2004 by the Auditor General. At the urging of law enforcement agencies, the proposed amendments enhance the information FINTRAC can disclose to law enforcement and security agencies on suspicions of money laundering or terrorist financing.

The fifth area relates to creating an administrative and monetary penalties regime. Currently the act only allows for serious criminal penalties if the act is contravened. This was also a recommendation of the Auditor General.

The sixth area relates to reintroducing requirements for legal counsel. The government is working with the legal profession, including notaries in Quebec, to finalize requirements for client identification, record keeping and internal compliance procedures for legal counsel when they act as financial intermediaries. This bill removes the obligation for legal counsel to file suspicious transaction reports or other prescribed transaction reports.

The seventh area relates to expanding the sharing of information between federal departments and agencies, including the Canada Border Services Agency, the RCMP, et cetera.

Having reviewed these, it is the view of those who have prepared the bill and who are speaking today on behalf of the bill that banks and financial institutions should be supportive of this bill. It does not encroach on or somehow provide any significant burden that will not help us all, as vested stakeholders, with the opportunity to protect assets and indeed to protect Canadians. The Liberal caucus certainly will be supporting Bill C-25 when the vote takes place at second reading and hopes that it will receive prompt activity.

I will close by reiterating a couple of points about the concerns Liberals have with regard to the bill, which I believe can be addressed by the committee. The first is whether the scope of the bill should be broadened to include not only cash but other commodities like jewellery, diamonds, et cetera. The bill does not provide that. The Senate committee did, however, recommend this. I believe it probably should be seriously considered by the finance committee when it has the opportunity to address Bill C-25. It should take to heart the testimony before the Senate committee and of course the substance of the recommendation it made in regard to non-cash commodities.

The second issue of concern is that of solicitor-client privilege and whether the invocation of that privilege has not been so strong in the bill that we are not availing ourselves of information that the legal profession has and which could help society track down terrorists and money launderers. This is a very complicated area. It is an area in which I do not have expertise, but as we know, parliamentarians cannot be experts in all things, although we certainly have the tools and resources to bring them forward through expert witnesses in committee, who can advise us on whether these are the kinds of things we can do without compromising the privacy principles we have embraced in our privacy legislation.

Finally, probably the most fundamental item of concern is the balance between, on the one hand, the need to get tough and track down terrorists and money launderers, and, on the other hand, the need to protect the rights of the individual and privacy. I believe the balance has been undone by this bill and that the defence of privacy issues will need to be correspondingly strengthened.

Let me repeat that. It appears that the bill may have sided a little too heavily on getting after terrorist financing, and it may have either inadvertent or unintended consequences where in fact privacy principles may have been pushed to the point where it may be inappropriate. We have to examine that much more carefully. It is an important principle and I hope all hon. members will agree. We have to make sure that this balance is appropriate. We have to make sure that we use all the tools and resources we have and the experts we have to come before the parliamentary committee to give us the information we need so that, in accordance with our prayer, we make good laws and wise decisions.

The House resumed from October 20 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.

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

Mr. Speaker, I appreciate the context in which the member makes her point. Part of the reason we are updating and presenting Bill C-25 is to ensure that we take into account the fact that times change, people change, organizations change.

What criminals want to do is ensure they stay one or, as far as criminals are concerned, two steps ahead of the law.

To get directly at the question, the structure of the bill and how those four pillars enhance it pay particular attention to the member's concerns. They enhance what we are already doing. Since 9/11 and the experience we have gone through, it is incumbent upon us, the House of Commons for the country of Canada, to ensure that we continue to update and ensure that we stay ahead of those who want to and who do criminal activities and laundering money in our country.

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

Mr. Speaker, I am honoured to speak today on Bill C-25. The bill will strengthen the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to ensure that Canada continues to be a global leader in combatting organized crime and terrorist financing. This is just another example of Canada taking the threat of terrorism seriously.

Once passed by Parliament, these changes will make Canada's overall regime consistent with international standards. The bill targets either the financial rewards from underlying crimes, such as drug dealing, prostitution and extortion, or by stopping the flow of funds to terrorist groups.

Money laundering and the financing of terrorist activities are serious crimes that affect all Canadians. Criminals are constantly changing their tactics and finding new ways to avoid and evade the law. Therefore, we need to make laws that will keep up with criminals and, in fact, stay ahead of them.

The National Post has reported that Canada has long been a fundraising base for international terrorist groups, from the IRA and Hezbollah to the Iranian MEK. This can simply not continue.

The background on this is that the foundation of this tax regime was originally set out in the Proceeds of Crime (Money Laundering) Act and then adapted to the changing global reality of terrorism. It was renamed the Proceeds of Crime (Money Laundering) and Terrorist Financing Act in 2001.

I would like to touch on the government's four key amendments that it has set out to accomplish the updating of what it needs to do.

First, we are enhancing information sharing between the Financial Transactions and Reports Analysis Centre of Canada, more commonly known as FINTRAC, law enforcement and other domestic and international agencies. In fact, this group reports regularly through the House's finance committee and did so just this past month.

Second, we are creating a registry for money service businesses. This really speaks to ensuring we have some accountability within that registry.

Third, we are enabling legislation for enhanced client identification measures. We need to ensure we know who we are dealing with.

Fourth, we are creating an administrative and monetary penalty system to better enforce compliance with the act.

There is a need for why we need to do it. Financial Transactions and Reports Analysis Centre of Canada reported in early October, as I mentioned, to the finance committee that terrorist groups funnelled an estimated $256 million through our country last year. This is up from $180 million the year before and $70 million the year before that. We are starting to identify and the bill enhances what needs to be done.

There are up to 34 terrorist financing networks operating within the country. Another $4.75 billion was laundered by crime groups, which is up from the $2 billion in 2005. Recently there was the case of four Canadians with links to the University of Waterloo accused of funnelling money to the Tamil Tigers. This shows that Canada has a responsibility to its international partners to continue to crack down on terrorist financing. Canada will not be a safe haven for those who support terror.

How did we come to this legislation? As a founding member of the Financial Action Task Force, we are committed to implementing its regulations, including new ones released in 2003, which require this update to be made. Canada has committed to implementing the 40 recommendations of the FATF on money laundering and 9 special recommendations on terrorist financing. The bill brings our standards in line with the Auditor General's recommendations of 2004 and the Treasury Board report of 2004.

Finally, it also fulfills demands of the interim report of the Senate committee on banking to implement tougher measures on money laundering and terrorist financing.

In Canada there is a need to balance increased vigilance and monitoring with the fundamental need to protect the privacy of Canadian citizens. This is an issue we take very seriously in Canada.

As we did with this legislation, we will continue to consult widely with Canadians. In the future, we need to ensure that a better system does not come at a price of a loss of privacy for all of our citizens.

As a prelude to the bill, the Department of Finance issued a consultation paper entitled, “Enhancing Canada's Anti-Money Laundering and Anti-Terrorist Financing Regime” in June 2005. Over 50 submissions from stakeholders were received followed by further face to face consultations.

As a result, the proposed bill contains amendments that seek to address industry concerns and minimize the compliance burden by tailoring wherever possible proposed new requirements to existing business practices.

The proposed legislation serves to meet Canada's international commitments to combat money laundering and terrorist financing while ensuring that our domestic regime remains robust and up to date.

Those who benefit from crime and steal hundreds of millions of dollars should not be allowed to drive armoured vehicles full of money and waltz over to their local banks. That is the last thing Canadians want in their country.

Criminals who are laundering money should do one thing. They should stew in jail about it. The government and its law and order package and its agenda will help prevent organized crime and terrorism from organizing in any of our communities.

Speaking to that, I come from a riding that is very close to three access points on the border. One of the commitments that we have made, both before the election and since we have taken government, is to ensure that security, whether it be RCMP or our security officers at the border, is funded, prepared and supported in order to ensure that Canadians, both in Niagara and across the country, are safe.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I thank my colleague from Winnipeg North for sharing her time with me so I too can enter into the debate on Bill C-25 dealing with money laundering and the funding of terrorists, a very pressing issue.

I am glad Parliament is seized of the issue because it is something my constituents and people I know have raised with me, especially stemming from the recent information we have had. We were horrified to learn that research has recently identified that $256 million worth of illegal funds have flowed through Canada to terrorist groups. That is just what we have been able to identify and that we know about for a fact. No one is disputing those facts either, so we can attest to the veracity of those figures. Something has to be done urgently.

Although my colleague has identified some reservations about the bill, I support aspects of the bill, one detail of which I would like to dwell on somewhat, and that is the issue that the proceeds of crime could be seized from someone who has been convicted of a crime. If someone is part of an illegal organization, whether that is an illegal criminal organization or an illegal terrorist organization, the government should have the right to demand to know if the things that person owns are the proceeds of crime. If that person cannot demonstrate by a reverse onus that those items were purchased with other resources, then the government should be able to seize those proceeds of crime and use that money to further resource the criminal investigation of other criminals and terrorists.

That is a good idea and it is a bold idea. The NDP government in my home province of Manitoba is seeking to introduce the very same concept. Somehow we need to make it abundantly clear that crime does not pay. Law enforcement officers have conceded to the fact that under the current regime crime does pay because the burden of proof on the government, the courts and on the police is very onerous at times. Even though we know that some person is up to no good and has no other visible means of support, it is tough to prove that the luxury home in which the person lives or the luxury cars in the driveway are in fact the proceeds of crime.

I say that we should give more tools to the law enforcement agencies and act on the side of the Canadian people in this case and shift that burden of proof onto the crooks. They should be telling us how they bought that luxury home when they have not had a job in 20 years. If a rich uncle died and left it in his will, then they should show us the will. If they cannot show us any other visible means of support, then we want to know how they are able to live in a mansion with all these luxury cars in the garage. We should seize those assets, send the message that crime does not pay, sell those assets and give them back to the law enforcement agencies so they can go out and bust more criminals. That is a good idea.

I should point out that this would be law in Manitoba today were it not for the two solitary members of the Liberal Party in the Manitoba legislature who blocked and opposed the legislation. I do not know what problem the Liberals have with this. I do not think it is any great infringement on civil rights to ask the legitimate question of where a person received the money to pay for the luxury home. If that simple question cannot be answered, then we should seize it.

I have a few other points to raise and I will do so in a way that I hope does not inflame the passions of the Liberals opposite. This idea of offshore tax havens has a broader context than just wholesale tax avoidance. The same logic that allowed these offshore tax havens to flourish gives licence or gives opportunity for people to funnel ill-gotten gains with less ability to track offshore as well.

In the context of the bill, as we go through Bill C-25 and its goals and objectives of limiting money laundering and trying to curb the financing of terrorist activity, we should be revisiting the tax treaties that have allowed Canadian businesses to avoid taxes on a rampant basis. Whatever tax regime we put in place, let us make it fair, let us make it balanced and let us make it favourable to business if we like, but at least let us make businesses pay their fair share once we have established what that rate of taxation shall be.

It is such a contradiction to hear the Conservative government say that it will cut back on $1 billion worth of social spending, but then show this wilful blindness to $7 billion worth of lost tax revenue by allowing, what I call, tax fugitives to avoid paying their fair share of taxes in our country.

There is a polite term for it, and I know my colleague from the Liberal Party is an economist. The polite term is tax motivated expatriation. The street name for it is sleazy, tax cheating loophole. There is only one place we can still do it and it just happens to be where our former prime minister had his companies, his shell companies, his dummy companies, established so he could avoid paying his fair share of taxes in Canada. It is appalling. A Canadian prime minister should be proud to fly the Canadian flag on his ships and to pay his taxes in our country. I cannot understand the thought process that would lead him to believe otherwise. It is beyond comprehension.

My colleague from the Liberal Party is helping me grope for the words to put some kind of definition to this appalling practice of tax avoidance.

The logic, though, about the proceeds of crime element is that any person convicted of an indictable offence at the direction of or in association with any criminal organization must demonstrate that every item of property owned by that person is not the proceeds of crime. That is just common sense to me. That is a burden with which no one in this room would have any difficulty.

If I were driving a luxury car that cost $100,000 and I had no visible means of support for the last X number of years, it is not unreasonable to ask me where I got that car. If I cannot say that I either inherited the money, or I found the money, or I dug it up in the cabbage patch or whatever story, if I am not believed, if I do not meet the test, that should be seized from me. That sends a profound message throughout the community of those who would break the law for their own personal advantage or those who would break the law in order to fund terrorism, which is even worse, that crime does not pay, at least not in Canada. I do not view that as heavy-handed or an infringement of a person's civil rights whatsoever.

Bill C-25 gives us an opportunity to finish a job that was started in previous parliaments. I should recognize and pay tribute to the work done by my colleague from the Bloc Quebecois, Richard Marceau, who is no longer an MP. He managed to get this concept into the House of Commons in the 38th Parliament through a private member's bill. I believe, even prior to that, a Canadian Alliance member, Mr. Paul Forseth, a former colleague of ours, introduced this notion into the 37th Parliament.

It has taken approximately 10 years for us to mature in our thinking about this concept or to be able to embrace this concept and not be threatened or feel afraid of this very worthwhile idea.

When Bill C-25 deals with the proceeds of crime, it also deals with issues pertaining to the Canada Border Services Agency, which permits the new centre of financial transactions and report analysis, FINTRAC, to exchange compliance related information with its foreign counterpart. That, too, is a necessary and commonplace measure if we are to curb the international activity that does threaten our national security. That as well is a concept that we should be able to embrace and not feel threatened by.

My colleague, the member for Winnipeg North, cited some of the reservations NDP members have about Bill C-25. To summarize our view of it, we have to give law enforcement agencies the tools to do their jobs to make the point that crime does not pay in Canada to fund terrorism or self-enrichment.

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

Mr. Speaker, I thank the House for allowing me to split my time with the member for Winnipeg Centre. I see that some members were in a bit of a quandary as to whom they would rather hear. Given that we are in neighbouring constituencies, we have the common characteristic of speaking vociferously and at length about issues of concern to us.

I am pleased to speak to second reading of Bill C-25. Anyone watching this debate will wonder what the debate is about. We are using a lot of acronyms, short forms and technical language. Really this issue comes down to something that is very important for all of us: money laundering. Often we think of that in terms of criminal activity and organized crime.

I am glad that the Bloc raised another dimension to this whole issue. It is pretty hard to deal with questions of money laundering and money lost to governments and to our revenue source without dealing with tax evasion, without dealing with the presence in our society of tax havens, something that has been a problem throughout the last decade of Liberal rule and now does not seem to be on the agenda of the present Conservatives. That is a matter with which we must deal.

We cannot continue to allow Canadians' hard-earned dollars to leave the country by way of tax loopholes and tax havens. I would hope that the government and the Minister of Finance would be prepared to come back to this chamber with some more definitive answers to questions we have been raising for a long time about why the former prime minister, the member for LaSalle—Émard, closed some tax loopholes and tax havens but he did not close the Barbados. He did not choose to definitively deal with the issue. Instead, he provided apparently avenues for some of his numbered companies to continue transactions through such tax havens. He continued to find a way through his steamship company to change the flags conveniently in order to avoid paying taxes and to avoid fulfilling his obligations according to the standards of this country on the environment, workplace safety and proper compensation and income.

Bill C-25 is an attempt to deal with some very serious flaws in our ability as a country to track and deal with proceeds of crime, money laundering and terrorist financing. This issue has been before us for a long time. The Auditor General has been talking about it for a good period of time, specifically since November 2004 when she put forward a report on implementation of the national initiative to combat money laundering. At that time she said that we were far from being able to deal with this problem effectively and she recommended a number of changes.

It is a big problem. Billions of dollars are involved. We are talking about illegal activities and money that could be used to promote illegal activities in this country and terrorist endeavours around the world. It is something we have to address and we need to do it expeditiously.

The Auditor General's report is a very valuable source for analyzing the bill and for determining whether or not Bill C-25 is truly in line with the Auditor General's recommendations. As a side note, it is important to note that the government says that it has respected the wishes of the Auditor General and followed the recommendations through the introduction of this legislation. We will be doing further study and research to ensure that is the case. During the committee process we will be questioning witnesses along those lines.

In addition to that significant study, we now have the benefit of a major study just completed by the Senate. It put a report out this month entitled “Stemming the Flow of Illicit Money: A Priority for Canada”. The study was coordinated by the Hon. Jerry Grafstein and the Hon. David Angus and it is comprehensive look at the issues of money laundering and terrorist financing. We need to know whether or not this bill actually respects and follows some of the recommendations from this report as well.

I want to note that in the conclusion of this report it states that Canada, as a global partner in making the world safer and more secure, must ensure that our anti-money laundering and anti-terrorist financing regime is in line with international standards and obligations.

The study goes on to say:

Crimes that underlie money laundering and terrorist activity financing--including fraud, embezzlement, drug trafficking and trade in arms – have harmful human, societal and economic effects, with domestic and international consequences.

That really sets the context for what we are hoping to achieve with this legislation and why we need to get this bill to committee. We need to begin that thorough scrutiny and thorough analysis to see whether it is in line with the Auditor General's wishes and whether it reflects some of the recommendations from the Stemming the Flow report.

We are prepared to give support to the bill in principle. It may need some changes as we go through it but we certainly believe in its necessity and that it should be studied at committee.

However, a couple of concerns have been identified and I want to put them on the record. First, let me mention the questions raised by Democracy Watch in a release put out on October 12. This important organization, which has been an incredible watchdog for the integrity of our institutions from a democratic point of view, has called on the federal Minister of Finance to deal with a gap in the bill before us. It wants us to add senior Canadian politicians and government officials to the bank account watch list of the Financial Transactions and Reports Analysis Centre of Canada. It says that this change is recommended by the international standard setting task force, the financial action task force and, therefore, if we are bringing our legislation in line with this task force, then surely we must address this particular aspect.

Democracy Watch also says that it has been recommended by article 52 of the UN Convention Against Corruption. It seems that there might be a flaw in the bill that we need to look at very seriously and determine how to amend the bill to bring it in line with these international obligations.

Specifically, I should probably point out that article 52 of the UN Convention Against Corruption states the following:

...each State Party shall take such measures as may be necessary, in accordance with its domestic law, to require financial institutions within its jurisdiction to...conduct enhanced scrutiny of accounts sought or maintained by or on behalf of individuals who are, or have been, entrusted with prominent public functions and their family members and close associates.

Perhaps the government is leery about going this far, ensuring that actual politicians are included in this part of the legislation.

I would conclude by saying that there are many issues to discuss. I thank the House for its attention to this matter.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Mr. Speaker, perhaps my colleague from Hull—Aylmer wanted to ensure that I had a good audience for my speech. Then again, perhaps he asked for a quorum call because I was talking about the Liberal Party, which claimed to be the great defender of citizens' interests because of its fight to protect personal information even though it failed at the task when it was in power.

Under that party's mandate, more personal information than ever ended up in foreign hands, largely because Canadian banks were allowed to do business with affiliates in the United States. Laws protecting personal information are not the same in the United States as they are in Canada.

Honest citizens were sometimes harassed by foreign parties trying to sell them all kinds of products, especially banking services. Canadian banks allowed their American affiliates to make personal information available. This all happened on the Liberals' watch. I hope that the member for Hull—Aylmer wanted more people to hear my speech. I hope it was not because of the part where I said how poorly the Liberal government performed when it was in power.

The Bloc Québécois will support Bill C-25 in order to protect personal information and privacy. Quebeckers and Canadians can count on members of the Bloc Québécois to defend and protect their interests in committee by having the Privacy Commissioner and the Access to Information Commissioner appear before the committee to explain what is good about the bill and what should be added in order to protect personal information. It is all very well to take action against money laundering, terrorist activities and organized crime, but we must also protect honest citizens who could end up under investigation for nothing.

I will provide some background, since Bill C-25 did not come out of nowhere. Despite the Conservative government's good faith, it did not invent the wheel. One thing is for certain, the Conservatives did not invent Kyoto. Everyone agrees on that.

Bill C-25 is a successor to Bill C-22, which was introduced by the Liberal government and broadened the coverage of the act. Bill C-25 amends Bill C-22. In other words, Bill C-22 made it mandatory for federally regulated financial institutions, currency exchange businesses, casinos and other intermediaries to report suspicious financial transactions. Suspicious financial transactions are cash deposits exceeding $7,500.

The former government's Bill C-22 applied to financial institutions, currency exchange businesses, casinos and other financial intermediaries. The Conservative government is broadening this coverage and therefore increasing the responsibility of all agencies which, in addition to dealing in securities, also deal in other financial instruments, and of all persons and entities engaged in the business of remitting funds or transmitting funds by any means or through any person, entity or electronic funds transfer network, or of issuing or redeeming money orders, traveller’s cheques or other similar negotiable instruments.

We can offer our congratulations to the Conservative government for having extended monitoring activities to include not only banks and institutions that transfer money regularly, but also to other entities that are often not openly included. This applies to electronic funds transfers and businesses that sell or purchase money orders, travellers' cheques and other negotiable items. Thus, monitoring activities have been extended. We do not want these organizations used for money laundering. I think we can support this.

It also extends to government departments and agents that sell precious metals under regulation. Members of the Bloc Québécois pointed out that there is some degree of illegal trade in diamonds and gold, among others, which are not necessarily liquid assets, but are precious metals that can be used as currency in money laundering.

I believe that the Conservative government listened closely and covered these potential complaints from various stakeholders.

Previously, all the entities targeted by the legislation had to contact the centre, under section 83(1) of the Criminal Code, which sets out the obligation to inform the RCMP or CSIS of any property that belongs to a terrorist group. The new bill adds section 8 of the United Nations Suppression of Terrorism Regulations. Those entities must therefore contact the RCMP and CSIS.

The new bill prohibits all entities from opening an account for an individual if that person's identity cannot be established. Not only is there no obligation, entities are in fact prohibited from opening a bank account. The bank must then contact the RCMP or CSIS directly to launch an investigation.

Furthermore, the bill states that prior to doing business with a politically exposed foreign person—a judge, head of state, minister or other individual who has held a specific office—the institution must obtain the approval of senior management before entering into any transaction with the individual.

Thus, one cannot do business with exposed persons from another country or who would be likely to carry out types of transfers or financing for terrorist activities. They are required to obtain specific authorizations from senior management of banks.

In addition, if a Canadian organization does business with a foreign bank, it is required to take measures to ensure that the foreign bank is not a shell bank, to obtain senior management approval, and to set out in writing all transactions.

In short, there is an obligation not only to know with whom one is doing business but also to scrutinize the banks with which one is doing business. Consequently, when a client wants to conduct transactions with foreign financial institutions, the bank is obliged to verify the credentials and to ensure that the sales, transactions or other operations are not fictitious. Its responsibility has been increased.

In the case of electronic funds transfers, the bank or other business must include the name, address, and the client's account number or other reference number, whether sending or receiving such transfers.

Electronic funds transfers are very popular now. The old bill was implemented in 2001 by the former government, which, once again, did not do its job. The new bill has been introduced for a reason. The Liberal government did nothing for five years. It did not manage to bring a bill into being. Obviously, things have changed since then, and significant numbers of financial transactions take place through electronic funds transfers. That is why the government introduced this new bill, which covers electronic funds transfers.

This new bill follows the United States' lead by requiring entities to establish a program to evaluate their ability to detect transactions that involve laundering the proceeds of crime and financing terrorist activities.

That is what the Bloc Québécois has trouble accepting. If we want to do what the Americans do, we should not only do what they do right, but avoid doing what they do wrong. That is why the Bloc Québécois is being so careful. This is about the ability to detect transactions that involve laundering the proceeds of crime. It would be nice to have that ability and to intervene, but we have to make sure we protect personal information.

Obviously, we will not be investigating. As we saw with the Maher Arar affair, we have to be careful with our investigations. Even with bank investigations, we have to be sure we have a situation that requires it. We cannot investigate just for the fun of it. We would risk arresting honest citizens who might find themselves under the microscope because we want to be just like the Americans, who figure that while they are at it, they might as well investigate a whole bunch of people. We must also avoid American-style mistakes, like casting too wide a net. They often proceed on the basis of race, religion, gender and so on. We are better off using a case-by-case approach and having really good reasons for investigating. Otherwise it is too easy to make mistakes.

The members of the Bloc Québécois will continue to defend the interests of Quebeckers and ensure that the Canadian government does not make the same mistakes as the American government. Any investigations with respect to detection must be justified, not conducted without good reason. Any evaluation of certain bank transactions cannot be done carelessly, because this could lead to honest citizens being investigated without cause.

Furthermore, we must ensure that no information on citizens who should not even have been investigated is shared with the United States, or any other country. In short, we must ensure that the Canadian government does not make the same mistakes as the Americans. Once again, only the Bloc Québécois can guarantee this to Quebeckers.

Bill C-25 subjects Canadian banks' foreign subsidiaries to the same rules as the Canadian banks themselves. It was high time, because the Liberals made the mistake of allowing our Canadian banks with foreign subsidiaries to share information, even though foreign laws often do not have the same respect for privacy. This is true of American laws.

To that end, Revenue Canada agents will now have the authority to give the Financial Transactions and Reports Analysis Centre any information they receive from another agent, under the Charities Registration (Security Information) Act. The aim of this new authority is to better fight against the financing of terrorist groups through charitable organizations and through businesses that perform electronic funds transfers. Once again, I would like to point out that the registration of charities must be carefully monitored, although charities are normally made up of honest citizens.

That is why the Bloc Québécois will fight tooth and nail for privacy and personal information protection. One may be open to the idea of all categories of organizations being monitored for money laundering, but efforts have to be made to ensure that charities, which bring together law-abiding citizens, not be subject, as they are in the United States, to a systematic analysis of their data bases or have their members subjected to money laundering analyses.

The Bloc Québécois will support Bill C-25, as long as honest citizens, honest Quebeckers are free from undue monitoring by government organizations eager to copy the Americans, who seem to think that, while they are at it, they might as well monitor or investigate just about everyone. We do not want that. That is not consistent with the philosophy of life and values that the citizens of Quebec have chosen for themselves. We want the privacy and personal information of honest citizens to be protected. Once again, they can count on the Bloc Québécois.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Mr. Speaker, I am pleased to rise on behalf of the Bloc Québécois to address Bill C-25. I would like to reread the title of the bill, so that Quebeckers and Canadians clearly understand what this legislation is about.

This bill is entitled 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. As people may have already figured out, I wish to say from the outset that the Bloc Québécois will support this legislation, because of the importance of the fight against terrorist financing.

We feel that this is a major challenge and that such a bill is necessary, particularly since the fight against organized crime has always been a priority for the Bloc Québécois. Hon. members may remember the work done by our colleague Richard Marceau, the former member of Parliament for Charlesbourg—Jacques-Cartier, who succeeded in having this House pass a private member's bill reversing the burden of proof in the case of the proceeds of crime.

As a result of interventions by the Bloc Québécois in this House, the federal government has decided to amend the Criminal Code so that criminals now must prove that the fruits of their labour or proceeds of crime are acquired otherwise, that is, legally. Previously, the onus was on the Crown and the government to prove that criminals' income or assets were proceeds of crime. Today, the onus is reversed, and the accused must prove that he or she worked to acquire certain assets.

Such situations exist in Quebec, and in my riding, I have seen amazing stories that can often turn out to be terrible stories of crime. Reporters and the media have given nicknames such as “Richie Rich” or “Peter Cash” to some criminals, whose personal possessions and equipment include planes, helicopters, luxury cars and waterfront properties. These people were so nicknamed by the community, because others knew that they were involved in illegal activities and had different sources of income from their own. As well, for safety reasons, neighbours do not dare question how some people have acquired certain assets.

Now, when they are charged, the burden of proof rests on them. This is an initiative of former member Richard Marceau, a lawyer who, as the Bloc Québécois critic, introduced a private member's bill and convinced Parliament to reverse the burden of proof in this case. The Bloc Québécois has always been a staunch defender of the interests of Quebeckers, but it has also always fought against organized crime.

Our colleague from Sainte-Hyacinthe—Bagot openly criticized marijuana producers. He even received anonymous calls threatening his life. During the 2000 election campaign, the leader of the Bloc Québécois had to have RCMP officers with him wherever he went because he had received threats after the Bloc Québécois dared to tackle organized crime.

The men and women of the Bloc Québécois will always rise proudly in this House to speak out for citizens who, all too often, are threatened and find themselves powerless in the face of organized crime, the ramifications of which are especially significant since marijuana growing has become an international business supported not only by organized crime, but also by biker gangs and street gangs.

None of that will make the Bloc Québécois members back off from their role as champions or leading experts in the fight against organized crime. Understandably, Mr. Speaker, we will also be championing Bill C-25; in other words, we will be supporting it.

However, in supporting this kind of bill, which deals with terrorist financing, including, of course,money laundering and organized crime, one definitely must respect the privacy rights of citizens. Therefore, it is important to strike a balance between upholding the public interest and fighting organized crime, terrorism and money laundering, while at the same time respecting the rights of individuals, honest Quebeckers who might come under investigation.

That is why it is essential to ensure that any information that may be requested concerning citizens or individuals not be used for any purpose other than the one for which it was requested.

Again, in fighting and defending themselves against organized crime, Quebeckers can be proud to rely on the Bloc Québécois members to stand up for them and ensure that information concerning their private lives will never be used for any other purpose or made public.

We have seen it happen. Earlier, I heard a Liberal member who was a minister in the Liberal government say that the Liberals have always been staunch defenders of interests and privacy. It was under their watch, though, that banks carrying out information processing through subsidiaries outside—

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.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Mr. Speaker, I have a simple question for the parliamentary secretary.

As members know, the Bloc Québécois will support most of Bill C-25, but the way banks and institutions have processed their clients' personal information in the past causes us to worry.

I would like the parliamentary secretary to assure us that the personal information of Quebeckers and Canadians will not be used for purposes other than fighting terrorism. We have seen some banks allow the disclosure of information on individuals to other companies when those banks have entrusted that personal information to U.S. institutions. What can the parliamentary secretary say to assure us that the bill will protect the personal information of the people of Quebec and Canada?

[John McKay, Liberal, Scarborough—Guildwood, ON]

Mr. Speaker, I congratulate the hon. member on her speech. This bill flows from quite a number of the previous government's initiatives. I want to congratulate her and her government on trying to put together some form of bill to address this egregious problem.

This bill has a number of commendable features, but I want to ask my colleague a couple of questions with respect to some of the holes in the bill.

Recently I returned from Moscow, where I met with some Russian officials and talked about this very matter. The Russian officials told us that they are most concerned about the conversion of money into things like diamonds, platinum and things of that nature, other businesses, so to speak. That is how terrorism was being financed in Russia. Of course, regardless of what we think of the Chechen situation in Russia, the Russians regard it as a terrorist situation. Bill C-25 will not deal with this problem. It leaves a very obvious gap, one through which even a not so well-informed criminal organization could take advantage.

I wonder what comfort the Parliamentary Secretary to the Minister of Finance can give those who are watching that this form of conversion from a financial instrument to other valuable commodities might be addressed.

The second issue I have is with respect to the compromise with the legal profession. As I read this bill, it seems that lawyers will essentially be obligated to disclose financial records only if they know the identity of the client. This seems to me to be something of a low threshold of obligation on the part of the legal profession, which transacts massive sums of money on a daily basis.

I would be interested in the member's comments on both of these issues.

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

Mr. Speaker, I appreciate this opportunity to speak to Bill C-25. This legislation contains needed measures to update Canada's fight against money laundering and terrorist financing activities.

This new government is determined to be on the front lines of the important global fight against money laundering and organized crime, and against terrorist financing activities.

Canada's anti-money laundering and anti-terrorist financing regime must be kept up to date and must adapt to evolving money laundering and terrorist financing schemes. Criminals are constantly changing their tactics and finding new ways to evade the law.

The proposed amendments in the bill before the House today are critical in helping to stay one step ahead of these criminals.

Bill C-25 illustrates that Canada's new government is serious about ensuring that Canada's anti-money laundering and anti-terrorist financing regimes both meet revised international standards in this area and also address the areas of risk here at home.

Before I address the specifics of this bill, I would like to take a few moments to provide some background to this proposed legislation to emphasize the importance of Bill C-25.

First, we ought to remind ourselves what exactly are money laundering and terrorist financing.

Members of the House are well aware that the activities of organized crime, such as drug trafficking and prostitution, generate significant amounts of money, usually in cash. The criminal or group must find a way to spend and invest the funds without attracting attention to the underlying illicit activity, lest it be shut down and they lose their source of revenue.

Money laundering of course is very difficult to quantify. However, the International Monetary Fund makes an educated estimate that the aggregate size of money laundering worldwide is between 2% and 5% of global GDP. That is a very significant amount.

How does money laundering work? How does it take place? Money laundering occurs in three stages. The first is the placement stage. In this stage the launderer introduces the illegal profits into the financial system. This is done in a number of ways. One is breaking up large amounts of cash into less conspicuous smaller sums that are then deposited directly into a bank account. Another is using cash to purchase a series of monetary instruments, cheques, money orders, et cetera, from financial institutions that are then collected and deposited into accounts at other locations.

The second stage is called layering. In this stage the launderer engages in a series of conversions or movements of the funds to distance them from the first place they were deposited. For example, this could be through the purchase or sale of investment instruments such as shares or a series of wire transfers to various bank accounts globally.

Having successfully moved the criminal profits through the first two stages of the money laundering process, the launderer then enters the third stage which is integration. It is at the integration stage that the funds re-enter the legitimate economy. The funds can now be invested or used to purchase luxury assets, real estate, securities or other investments.

Money launderers tend to seek out jurisdictions with weak or ineffective anti-money laundering programs. Canada does not want to be on that list. However, because the objective of money laundering is to get the illegal funds back to the individual who first collected them through criminal activity, launderers usually prefer to move funds through areas of highly developed, stable and sophisticated financial systems, and where the large volume of transactions may diminish the risk of suspicious transactions being detected. That is a country like Canada with a sophisticated and stable financial system.

The other element, terrorist financing, how does that fit into this picture? Terrorist organizations require financial support in order to carry out their evil and destructive activities. A successful terrorist group, like a criminal organization, must be able to build and maintain a steady flow of funds. It must develop sources of money, a means to covertly move that money around, and a way to ensure that the money can be used to obtain the materials needed to commit terrorist acts.

Terrorist financing comes from two primary sources. First, there is state sponsored terrorism, sadly. Financial support is provided for these terrorist activities by states or organizations large enough to collect and then make funds available to the terrorist organization. A variation of this is where a wealthy individual provides funding. For example, Osama bin Laden is thought to have contributed significant amounts of his personal fortune to the establishment and support of the al-Qaeda network.

The second source of terrorist financing is money derived directly from various revenue generating activities. As with organized criminals, a terrorist group's income often comes from crime or other unlawful activities. For example, a terrorist group may engage in large scale smuggling, various types of fraud, robbery and narcotics trafficking.

However, unlike organized crime, terrorism can be financed using legitimate funds such as those collected in the name of charitable causes. These loopholes, often exploited by terrorist groups, need special attention in order for Canada to move effectively to deny terrorists the funds they use for their destructive deeds.

It is this second source of terrorist funds that the measures in the bill are designed to detect.

It is important to remember that this activity has an effect on all Canadians because money laundering, major criminal fraud, and financial crimes have the potential to undermine the Canadian economy by impacting the reputation and integrity of individual financial institutions, not to mention the financial sector as a whole.

Members of the House will appreciate that the integrity of Canada's banking and financial services depends on citizens and investors being able to trust that institutions are well regulated and protected from criminal elements.

By extension, a healthy financial system is absolutely critical to Canada's ability to attract investment, and therefore increase and sustain overall economic growth and productivity.

If funds from criminal activity can be easily processed through a particular institution because proper anti-money laundering controls are not in place, institutions could be drawn into unwitting complicity with criminals. As well, evidence of such abuse will have a damaging effect on the perception of other financial intermediaries, regulatory authorities and Canadians themselves.

The potential costs of money laundering are of course serious. If not addressed, organized crime can infiltrate financial institutions, acquire control of large sectors of the economy through investment, create competitive disadvantages for local businesses, and continue to fund harmful criminal activity such as drug trafficking, human smuggling and prostitution which preys on women.

What has Canada done to prevent and deter money laundering and terrorist financing?

Since 2001 Canada has had an anti-money laundering and anti-terrorist financing regime that is in the top tier of our international partners. This legislation has helped ensure that Canada is not a haven for money laundering and terrorist financing activities.

Indeed, Canada has made significant progress in detecting suspected cases of money laundering and terrorist financing. We continue to work closely with our domestic and international partners to improve the regime.

In 2005-06, reporting entities filed upwards of 30,000 suspicious transaction reports with the Financial Transactions and Reports Analysis Centre of Canada, FINTRAC. In turn, FINTRAC made 168 case disclosures to law enforcement agencies. In addition, 10 new domestic information-sharing agreements were signed with financial sector regulators.

FINTRAC now has 30 information-sharing agreements with foreign counterparts internationally.

Canada's new government has committed to a strong and comprehensive anti-money laundering and anti-terrorism regime that is consistent with international standards. That is what this bill, Bill C-25, is all about. It amends the existing legislation in order to update and enhance the legislation to better combat money laundering and terrorist financing activities.

To begin with, the measures proposed in the bill will update Canada's anti-money laundering and anti-terrorist financing regime to be consistent with international standards set out by the Financial Action Task Force, which is the international standard-setting body on this issue. These standards were revised in 2003 and all task force members have had to update their regimes. Canada is now doing so with this bill.

The proposed amendments will require financial intermediaries to undertake a number of actions such as enhanced client identification and record-keeping measures. They will also be required to undertake enhanced measures with respect to certain clients and activities, for example with respect to foreign politically exposed persons and their banking relationships.

The reporting of suspicious attempted transactions will also be required.

Bill C-25 also establishes a new registration regime for money services businesses that remit funds in and out of Canada and for foreign exchange dealers, within FINTRAC. This new regime will provide FINTRAC with a tool to increase compliance with the requirements under this act for money services businesses and foreign exchange dealers. Coupled with the registration requirement, a new offence will be created for operating an unregistered money services business.

The exclusion of legal counsel from the regime has been identified as a gap by both the Auditor General and law enforcement. Over the last number of years, the government has been negotiating with the legal profession on how best to include it in the regime. Through regulations made under Bill C-25 and consistent with the Financial Action Task Force requirements, legal counsel will now be required to undertake client identification and record-keeping measures when acting as financial intermediaries.

These measures complement the prohibition on the receipt of cash over $7,500 by legal counsel that is currently in place and enforced through provincial law society rules of professional conduct. These measures also respect the Supreme Court of Canada's Lavallee decision.

Bill C-25 also establishes monetary penalties in addition to existing criminal sanctions. This will allow FINTRAC to impose graduated penalties that adequately reflect the nature of the violation. The monetary penalties, for example, will be particularly useful for offences that are less advertent or egregious.

An important part of Bill C-25 relates to information sharing. Specifically, the bill proposes to allow the exchange of information between FINTRAC here in Canada and the Canada Revenue Agency, and with Canadian law enforcement agencies, to better prevent and detect the use of registered charities for financing of terrorism.

Moreover, to increase the usefulness of FINTRAC's disclosures, the range of information disclosed will be expanded, as well as the list of disclosure recipients. This list will now include the Communications Security Establishment and the Canada Border Services Agency. Also, the agency will be allowed to share cross-border currency reporting information internally for the administration of immigration legislation.

Amendments are also proposed in Bill C-25 to allow information sharing of compliance-related information between FINTRAC and its foreign counterparts. As well, information sharing provisions are proposed between the Canada Border Services Agency and its foreign counterparts on the enforcement of the cross-border currency enforcing regime.

It is important to emphasize that Canada's government recognizes how essential it is to protect the privacy rights of Canadians. That is why Bill C-25 includes a number of safeguards to protect those rights. The bill strikes the right balance in meeting the needs of law enforcement while respecting the privacy rights of Canadians.

I want to outline for the House these safeguards. First, there is an arm's length relationship between FINTRAC and law enforcement and other agencies entitled to receive information. Second, there is disclosure of only key information regarding financial institutions and publicly available information to police and other designated entities. Third, there are criminal penalties for any unauthorized use of disclosure of personal information under FINTRAC's control. Fourth, there is a requirement for a court order by law enforcement agencies to obtain any other than very minimal information from FINTRAC.

With the proposals contained in the bill, the anti-money laundering and anti-terrorist financing regime will continue to strike an appropriate balance, on the one hand providing law enforcement and intelligence agencies with the tools they need to effectively fight money laundering and terrorist financing, while on the other hand taking appropriate and strong steps to respect and protect the privacy of Canadians.

The bill is consistent with the Charter of Rights and Freedoms as well as the Privacy Act.

In closing, I would be remiss if I did not acknowledge the excellent work done by the Senate Standing Committee on Banking, Trade and Commerce. Its insightful report calls for tougher measures to deal with money laundering and terrorist financing. This bill responds to the Senate committee recommendations.

Canada needs a robust and up to date anti-money laundering and anti-terrorist financing regime to ensure security for Canadians on a number of fronts.

Canada must also continue to meet its global obligations. For the year starting July 1, 2006, Canada will chair the international Financial Action Task Force, the international standard-setting body on this important issue. Taking on this responsibility, along with the measures proposed in Bill C-25, demonstrates the solid leadership of Canada's new government that we are showing in the global effort against money laundering and terrorist financing.

I therefore urge all hon. members to accord swift passage to this bill.

[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 second time and referred to a committee.

Business of the House

[Tom Lukiwski, Conservative, Parliamentary Secretary to the Leader of the Government in the House of Commons and Minister for Democratic Reform]

Mr. Speaker, today we will continue the debate on an opposition motion which gives the government an opportunity to talk about keeping its promise to review our programs to ensure every taxpayer dollar spent is well spent and by reducing the debt by $13.2 billion.

Tomorrow we will begin debate on Bill C-25 , proceeds of crime, followed by Bill C-26, payday lending.

Next week, we will continue with the business from Friday with the addition of Bill C-27, dangerous offenders, Bill S-2, hazardous materials, Bill C-6 aeronautics, and Bill C-28, a second act to implement certain provisions of the budget tabled in Parliament on May 2, 2006.

With respect to my hon. colleague's question on supply day, just like a child waiting for Christmas, he will have to wait a little bit longer. We will get back to him next week.

Proceeds of Crime (Money Laundering) and Terrorist Financing Act

[Rob Nicholson, Conservative, Niagara Falls, ON]

moved for leave to introduce 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.

(Motions deemed adopted, bill read the first time and printed)