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.

Proceeds of Crime (Money Laundering) and Terrorist Financing Act

[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.

[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.

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

Mr. Speaker, given the gracious words of my colleague, the parliamentary secretary, not only commending the previous government for introducing FINTRAC but also for praising the unelected Senate for its positive role in this area, I hesitate to ask a question that could in any way be construed to be critical.

However, duty does require me to mention the issue of parliamentary oversight, which, as a consequence of Liberal amendments, supported by the other opposition parties, are now part of the bill, and yet the Conservatives opposed the principle of parliamentary oversight in committee. Once that principle had been passed, we worked together to ensure the appropriate form of parliamentary oversight.

I would like to ask the parliamentary secretary why the government opposed the principle of parliamentary oversight for FINTRAC.

[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.

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

Mr. Speaker, I just want to question the parliamentary secretary one step further.

My recollection of the events was that the opposition introduced the motion and the motion was to the effect that there would be parliamentary oversight. The motion was passed. My hon. colleague asked why the government opposed having parliamentary oversight imposed on a bill that, and pretty well everyone in the chamber would agree, imposes a significant intrusion into the privacy of transactions and affairs of Canadians.

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

Mr. Speaker, I am very puzzled by this line of questioning from the Liberals opposite. The motion, to which both of my friends in the Liberal Party referred, had nothing to do with parliamentary oversight. In fact, the motion would have made oversight by SIRC, which is not a parliamentary body. It is a body that was never intended to do this kind of work. It was intended to have very vigorous oversight over the invasive investigative capacity by entities like the RCMP and CSIS, not an information gathering body like FINTRAC.

The members are well aware that this would have been a serious disruption of SIRC's important work. It would have been inappropriate for SIRC to take on a completely different role in oversight for FINTRAC, which is why the finance minister put forward a more suitable and effective, I might say, method of oversight by Parliament through the Information Commissioner who reports directly to Parliament.

I do not know why my friends over there are being mischievous but I hope the House realizes that any resistance by the government was not to oversight at all. We certainly want oversight and have put a very strong oversight regime in place with the help of all parties.

What was not appropriate was to make SIRC responsible for that oversight and, at the end of the day, I think we would all agree.

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

Mr. Speaker, given that the House had previously agreed there would be one speaker per party on this, I would like to seek unanimous consent to share my time with the member for Scarborough—Guildwood.

[The Speaker, Peter Milliken]

Is there unanimous consent?

[Some hon. members]

Agreed.

[The Speaker, Peter Milliken]

The hon. member for Markham—Unionville will only address the House for 10 minutes.

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

Mr. Speaker, whether the House has agreed because the members look forward to hearing my colleague or because they have less time to listen to me, either way they have accepted and I thank them all.

We on this side of the House certainly support the bill. Indeed, to a large degree, the bill is based on recommendations by the Department of Finance when we were in government, so we certainly agree with the bill as amended.

It is clear that money laundering and terrorist financing have economic and social costs against which we must remain forever vigilant. It is true that we have to seek out this activity in all corners of the world, because if there are corners that we neglect, that is where the criminals and the terrorist financing people will go.

It is clear as well that this kind of legislation has to be continuously reviewed and updated, because in a sense there is a technological race between the terrorists and the money launderers on the one hand and the government on the other. They, of course, are always trying to be one step ahead of the regulators in terms of the technologies and the techniques they use, so we must be involved in this never-ending racing to be ahead of them. I believe that on the whole the bill does make significant improvements and significant progress to this end, an end which I am sure all of us in this House would share.

I would also like to point out, as the parliamentary secretary did, that we were influenced to a significant extent by the good work in the Senate, led by Senator Grafstein, and its report entitled, “Stemming the Flow of Illicit Money - A Priority for Canada”. It is nice to hear praise from the Conservative Party for the good work of the Senate, so I do thank those members for that, but it is also clear that this report made several excellent recommendations, some but not all of which were included in this bill.

One of the areas where the Senate made a good recommendation, which was not accepted, was that the report urged the government to have precious metal and jewellery dealers report large transactions to FINTRAC. This was not in the original bill. This is an open door. Criminals are not stupid. If the cash is covered but the jewellery or the diamonds are not, they can use diamonds instead of cash. I think this is one of the loopholes that this bill ought to have covered off, but it failed to do so.

Nobody wants to put undue burdens on Canadian businesses, and yes, having to report these transactions to FINTRAC is another burden for the businesses involved, but if these types of businesses are identified by the criminal element as safe places to launder money, then that is where they may choose to go. I do think that this is a significant deficiency.

Indeed, my colleague, the hon. member for Saint-Léonard—Saint-Michel, did propose amendments at committee that would have brought precious metal and jewellery dealers into the legislation. Unfortunately, these amendments were found to be out of order by the chair because they were said to be beyond the scope of the bill. When the bill is updated, I hope that this is one area that will be covered off in future amendments.

There is also the very important issue of privacy and parliamentary oversight. I believe the original bill provided a delicate balance between two good things. On the one hand, the bill has to be tough in its ability to go after money launderers and people involved in terrorist financing. On the other hand, the bill has to protect the privacy rights of Canadians. I believe the original bill had a delicate balance between these two sometimes competing objectives.

The new bill correctly strengthens the enforcement side of this equation. We on this side of the House agreed with those measures, but we also think that in order to retain balance, if we strengthen the enforcement side we should also ask the question of whether the side of privacy or the protection of individual rights should also be strengthened.

That is why, right from the beginning, our party, and I believe the other opposition parties, sought to bring parliamentary oversight into the equation, parliamentary oversight being absent from the original bill and from the bill put forward by the government. Throughout the committee hearings, the government side did not display an interest in any form of parliamentary oversight. It was satisfied with the status quo.

Then, at committee, the Liberal side brought in an amendment, based on the work of the Senate committee, to provide oversight by SIRC, but with annual reports to Parliament, and this is the point the parliamentary secretary neglected . This, for the first time, would have brought in the principle of annual parliamentary oversight, which was absent from the previous bill and absent from the government's bill.

The record will show that four Conservative hands went up to vote against our amendment in terms of whether it was in order. It was only when the opposition together combined to bring forward this amendment that the government accepted the principle of parliamentary oversight.

I repeat the point that I made in my question and comment. The government opposed the principle of parliamentary oversight of FINTRAC. Once we introduced our amendment, we had further discussions and agreed with the government side that its alternative form of parliamentary oversight through the Privacy Commissioner rather than SIRC was acceptable.

The main reason why I agreed that this was all right and an improvement was that I consulted Senator Grafstein, the person who originally had recommended parliamentary oversight through SIRC. He thought this was a reasonable proposal by the government, so we on this side accepted that proposal, as did the opposition parties.

That does not negate my central point that parliamentary oversight is important for FINTRAC. There is plenty of scope for individual privacy to be put in jeopardy. The government side had to be dragged kicking and screaming to accept this principle only after the three opposition parties combined to force the issue.

That having been said, I will say that this side of the House does support the bill. We are certainly the creators of this institution. We believe it is necessary. We believe that it has to be updated continuously. My principal reservations are on the diamonds and the jewellery, which is work still to be done in the future, and the parliamentary oversight that the government was forced to accept is also an important part of this amended bill.

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

Mr. Speaker, as my hon. colleague, the member for Markham—Unionville, has said, we on this side of the House will be supporting the bill. It does improve on the work started by the previous government.

There are some things that have been learned over the course of the application of FINTRAC over the past number of years and the bill does address some of the concerns and loopholes identified by the Senate in its very able report under the chairmanship of Senator Jerry Grafstein. I want to start with a review of one of those recommendations, particularly with respect to the legal profession.

When we had witnesses before our committee, Mr. Horst Intscher showed us a chart of the path of the money. Unfortunately, rules prohibit me from showing members this chart, Mr. Speaker, but you would find it incredibly complex and incredibly detailed, following money from one bank account in Kingston. I am sure there are no terrorist or other kinds of suspicious activities going on in Kingston, but it was just a theoretical possibility that there might be. It follows the money from there to other countries, coming back into our country, going off into a country like the United States, then going off to another country, and then ultimately being used for terrorist-like or terrorist activities. Just following the chart was incredibly complex.

The Senate did a very able report on this legislation and, as I have said, made particular recommendations with respect to the legal profession, which was a bit of a gap in the previous legislation. I think that members on both sides of the House are somewhat satisfied that, with negotiations with the law societies of Canada, we have addressed that gap.

I would like to read for members from the views expressed by the senators:

--in their view, solicitors should be subject to the provisions of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. The Department of Finance told us that it “understands(s) (that the absence of coverage of the legal profession) is a serious gap in (Canada's) regime...Certainly the Auditor General has identified it and reinforced that point.

I want to commend the government for working on this issue. I know that in our government we were continuing to work on this particular issue, because it does pit this against a fundamental right of Canadians to assume that when they consult with their solicitor, their barrister or their legal representative they have a confidentiality that cannot be breached.

The Department of Justice told the committee that this was a great difficulty and that the imposition on lawyers would “fundamentally violate the right to counsel, solicitor-client privilege or even fundamental justice”. The RCMP commented that “the exclusion of the legal profession poses a significant gap in Canada's regime”. The Canadian General Accountants Association said “the biggest mistake made was...when the lawyers were not included”.

All members of the committee and all sides of the House actually agreed with those observations, I think, and in some measure the government has actually addressed that issue in the bill. What does concern me is taking it from 35,000 feet down to the average lawyer's office, so to speak. I will use my own community in Scarborough as an example.

As members know, particularly in real estate offices, lawyers flush a lot of money through their trust accounts over the course of a day, particularly over a heavy closing day. There is still some lingering concern. I hope that as this bill gains experience, so to speak, or some precedents, there will be some fleshing out with respect to what constitutes a suspicious transaction.

I do not recollect whether you practised law, Mr. Speaker, but I did. There were times when people would ask me do a particular transaction for them. Frequently, I did not know them, but they could produce identification.

The newspapers have recently reported stories about solicitors who have been taken in by fraudulent mortgage transactions, and it is a relatively easy thing to do. Let me use Mr. Jones as an example.

Mr. Jones gets a commitment from a bank. His lawyer innocently does what the bank has requested him to do. The lawyer prepares the documents, searches the title, gets the insurance in order, checks the taxes, et cetera. Mr. Jones then signs the documents and the lawyer advances the funds to him. A few months later Mrs. Smith, who is the real owner of the house, finds out that Mr. Jones has put a mortgage on her property and she now owes a huge amount of money to the bank. This is a relatively easy fraud to perpetrate upon the real estate system. The solicitor is just as much a victim as Mrs. Smith. There really is no way the solicitor can know who Mr. Jones really is.

The regime for the FINTRAC legislation contemplates that the lawyer knows his or her client. Having practised law for 20 years, that in theory sounds pretty good. At 35,000 feet that sounds pretty good. However, for a solicitor, that will be somewhat more difficult. The way I read the legislation, the lawyer will have a liability for the kind of transaction I just described to the House, which is fraud. It is a very important fraud to the person who owns the property, but there is no necessary connection to terrorist activities or money laundering or things of that nature. The Ontario government has had to move against these kinds of transactions.

I am a bit from Missouri with respect to so-called suspicious transactions. Suspicious transactions will be in the eye of the beholder. Does a law office get into things like profiling? For example, because a person is from a certain area of the world the lawyer should be more suspicious of the transaction that he or she asks the lawyer to do.

Are we going to get into other kinds of client identification? If an individual cannot produce a birth certificate showing he or she was born in Canada but can produce a resident visa or something of that nature, does this constitute a suspicious issue? Will lawyers be required to know their clients even better? Once the cheque is written by the solicitor pursuant to the completion of the transaction, how will he or she know that money will not be used for terrorist activities? How will a lawyer determine that a transaction is suspicious and needs to be reported?

At 35,000 feet, the legislation sounds like a good idea. Our party, the government and the other opposition parties support it. However, I am a little skeptical about how a solicitor in Scarborough, for example, can sufficiently protect himself or herself against the implications of this kind of transaction. How will the lawyer determine whether an individual or a transaction is suspicious? How will the lawyer determine whether the individual has provided real identification that will enable the lawyer to do a proper reporting?

I work on the assumption that if people are admitted to the bar, they are officers of the court and they have a fiduciary duty to not only their clients but a larger duty to society as well. I also work on the presumption that lawyers are not complicit in these kinds of transactions.

Members of the Liberal Party support the legislation. We look forward to the review of it by our Senate colleagues. We thank them for their work, under the chairmanship of Senator Jerry Grafstein, and appreciate any insights they may have with respect to any parts of the bill.

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

Mr. Speaker, I am pleased to speak a second time about the bill that is before us today, which deals with money laundering and financing terrorist activities. The Bloc Québécois will support this bill, as it has indicated and as it has always supported sound bills.

The Bloc Québécois has a history of fighting against crime. Hon. members will recall the work done in 1993 by the member for Saint-Hyacinthe—Bagot with regard to people who were growing marijuana in fields in Saint-Hyacinthe and farmers throughout Quebec. It was a tough battle, which the member for Saint-Hyacinthe—Bagot led very energetically.

We have also talked about the reversal of the burden of proof with respect to proceeds of crime. This is a great victory by the Bloc Québécois. The Bloc Québécois has also helped toughen anti-gang legislation, making it easier for police to fight organized crime gangs. Our commitment to fighting crime extends to money laundering and international terrorism. That is why the Bloc will support this bill.

When I spoke for the first time about this bill in this House, I said that I would be taking a close look at privacy issues. I am fairly happy with what this bill does. We had discussions earlier in this House, and we also had discussions in committee about how we can fight effectively against crime and terrorist financing and yet protect people's privacy. I want to personally make sure that the bill does not have any loopholes. I am very happy that all the parties have reached agreement on this.

I would like to explain how FINTRAC works. This agency collects financial data on transactions in Canada and abroad and will continue to do so. Under this bill, more data will be collected and more companies will be required to disclose information to FINTRAC so that it can do its job properly.

To understand how this works, hon. members need to know that FINTRAC does not conduct investigations. It is not an investigating body, but an agency that gathers and analyzes information and passes it on to the proper authorities.

With respect to collecting information, the legislation provides that banks and insurance companies, as well as other financial institutions and organizations, must report a certain number of transactions to FINTRAC. Obviously, we are talking about large transactions that involve a lot of money. Any transaction that appears odd or suspicious must be reported and added to the FINTRAC database.

Then the information is analyzed. Analysts look for connections that suggest some kind of fraud has been committed. They use two techniques to do this. The first is searching the data for patterns in the volume of financial transactions, which makes it possible to spot activities typical of people attempting to launder money or finance terrorist activities. Clearly, it makes sense to centralize this information.

It makes sense because a single transaction might appear quite ordinary, but finding connections among series of transactions can alert analysts to suspect illegal activity.

The first way to detect illegal activity is to analyze the data collected in order to identify typical patterns.

The second is voluntary disclosure by entities, police forces or security forces that suspect illegal activity. Voluntary disclosure can happen anytime.

I will conclude my remarks after question period.

[The Speaker, Peter Milliken]

I thank the hon. member for Jeanne-Le Ber. He will have 14 minutes to continue his speech when the debate on this subject resumes after oral question period.

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.

[The Acting Speaker, 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.

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

Mr. Speaker, before handing over to other speakers for members' statements and oral question period, I was in the process of explaining the voluntary disclosure mechanism provided for in the legislation.

All things considered, the timing of that interruption turned out not to be too bad, because this mechanism is in fact at the heart of the privacy protection regime, while at the same time promoting efficiency in the work and fight against money laundering.

Let me explain how it works. The reality is that none of the data collected by FINTRAC can be accessed directly by police, the intelligence service, the secret service or other agencies.

These agencies may, however, voluntarily disclose information. For example, someone might say they are with the RCMP and that they are investigating so and so, who is suspected of laundering money in one financial institution or another, and so on, and submit this information to FINTRAC. This centre then checks the information received against its own to determine if it has any additional information worth disclosing to the agency that made the voluntary disclosure. The procedure is pretty tight, with committees ensuring that this additional information is disclosed only if it is deemed necessary for the purposes of the investigation in question.

It is somewhat like a black box mechanism—really quite ingenious—that prevents the organizations from directly consulting the vast data base and the incredible amount of information it contains but that, at the same time, enables this information to be useful to an investigation.

Once FINTRAC has established that the information is pertinent, it is disclosed to the organization in question. However, FINTRAC will not undertake the investigation or legal proceedings. That is not its role.

Earlier this morning, we spoke of the committee's work. I was somewhat surprised and rather amused to see Liberals and Conservatives trying to capitalize on or score political points with the work of our committee.

I believe that the committee's work was useful. An amendment proposed by the Liberals was that an organization report to the committee annually. This organization did not seem to be the most appropriate one because it was under the authority of the intelligence service, with which FINTRAC is not really aligned. We supported the amendment in order to continue debate on this matter. It proved to be a good approach because the Conservatives put forward a proposal which, in my opinion, is much more interesting than the original one. It has two components. Initially, the Privacy Commissioner of Canada will be asked to report every two years on the privacy aspect of the bill. I was very pleased with this because I had placed a great deal of emphasis on this issue. We must carefully examine the privacy aspect.

Under the law, the Privacy Commissioner already has the authority to investigate if she receives a complaint. I did not believe that was sufficient because having the right to conduct a systematic investigation every two years and having the duty to do so are not the same thing.

Indeed, in order to receive a privacy-related complaint, the individual whose rights were violated must be aware of it. Of course, if someone had illegal access to your private files, chances are you will not know about it. Thus, it becomes difficult to file a complaint.

I believe that some work was accomplished by everyone, and the committee was able to achieve a significant result.

The committee also discussed a Liberal amendment to allow the Canada revenue agency to directly consult FINTRAC's files, in order to be more effective. I strongly opposed that amendment, because I felt it would create a major breach in privacy protection, as I explained earlier.

Why, for efficiency's sake, would we allow an organization to directly consult these files, considering that the Canada revenue agency can, like any other government agency, submit a voluntary disclosure to FINTRAC and eventually receive relevant information, if any, from FINTRAC's database? The committee agreed with me that we should not open that breach, and I was very pleased about that.

I think this is a good bill. It has been improved by the committee, and it definitely deserves to be supported by the House. The next logical step for the government would be to work on the issue of tax havens. Tax havens are places where a lot of money laundering is going on. These countries have tax and financial rules that are much more lax than ours. This is why terrorists use them to fund their activities, or simply for money laundering purposes.

By signing agreements with tax havens, we are opening a door and making the work of those people easier. The second reason to work on the tax havens issue is obviously the fiscal inequity. Major companies invest in Barbados, Bermuda or other tax havens of this kind and do not pay taxes in Canada thanks to these little manoeuvres. This makes for a lot of lost revenue for Canada.

By addressing tax havens, we would be killing two birds with one stone: we would be fighting money laundering and terrorist activity financing, and we would be broadening the tax base, and that would create greater fiscal equity among corporations. I believe that the Minister of Finance has opened the door on this matter a few times. He has done so in this House. When I spoke to him about it, he said he would review the issue. Yesterday, in committee, following a question from my Bloc Québécois colleague, the hon. member for Joliette, he also showed interest in this issue.

I am very pleased to see this openness. All that I hope for is that this openness will translate into concrete action in the short term. We have to take action in this matter. In my opinion it would be a natural extension of the bill before us today.

In closing, my colleagues from the Bloc Québécois and I would be pleased to support this bill. In my opinion it demonstrates interesting progress.

[Irene Mathyssen, NDP, London—Fanshawe, ON]

Mr. Speaker, I was wondering if the member would comment, from his experience, on what he believes are the consequences in terms of lost tax revenues for our various communities. When taxes go to these tax havens, what happens to the people at home?

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

Any time the government loses revenue to big businesses and large corporations around the world, this has an effect on the daily lives of Canadians.

For example, this means less money for the Quebec government and other provincial governments. This is really a matter of fiscal imbalance, but the fiscal imbalance is not just an abstract notion. It means less money invested in hospitals and schools.

Our entire society is robbed of revenue when the government does not receive this money. In order to provide good service to our citizens, it is important to cover the entire tax base. Every individual, every corporation and every company must contribute their fair share.

Tax havens trigger some degree of cynicism in Canadians and undermine our tax system. People are honest, pay their taxes, work hard and hand over a large portion of their wages in taxes, and then they see businesses, companies and corporations going to Barbados to avoid paying taxes.

This triggers a great deal of cynicism and must be shut down altogether by immediate action.

[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.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Mr. Speaker, I was quite pleased to hear my hon. colleague talk about the role of the credit union movement.

Where I come from in Timmins--James Bay, my family goes back a long way with the credit union movement. The Anguses were solid members of the Worker's Co-operative, which, in those days, was called the red credit union. My grandfather, Joseph MacNeil, who broke his back in the McIntyre Mine, was the credit manager for the Consumer's Credit Union, which was known as sort of the pink credit union.

These credit unions provided service when no one else would and they kept many people from losing their homes in tough times. In our region now, I am a solid member of the Caisse populaire. I will tell all members that the Caisse populaire in northern Ontario is an essential functioning element in terms of community development.

It seems to me that governments have never paid attention to the role that groups like the Caisse are playing in small towns across the north The government listens to the big banks, to the lobbyists and to the insiders, but it does not listen to the credit unions that are on the ground, doing the work and helping people. Why does the hon. member think that is the case?

[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.

[The Acting Speaker, 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)

[The Acting Speaker, Royal Galipeau]

Pursuant to order made on Thursday, November 9, 2006, the House will now proceed to the consideration of private members' business as listed on today's order paper.