Thank you, Mr. Chair, for inviting us to speak with you regarding our handling of an access to information request in relation to the penalty that FINTRAC levied against a Canadian bank in 2015.
As Mr. Chair just mentioned, I am joined today by Barry MacKillop, our deputy director of operations, and Paul Dubrule, our general counsel.
I would like to take a couple of minutes this afternoon to describe FINTRAC's mandate and the role we play in helping to protect Canadians and the integrity of Canada's financial system. I will then explain our administrative monetary penalty program and the decision I took in relation to the penalty imposed on a Canadian bank.
FlNTRAC was created in 2000 by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. As a financial intelligence unit, FINTRAC facilitates the detection, prevention and deterrence of money laundering and the financing of terrorist activities, while ensuring the protection of personal information under its control.
The legislation creates obligations for financial services entities, real estate brokers, money services businesses, casinos and other business sectors subject to the act to establish an internal compliance program; identify clients; monitor business relationships; keep certain records; and report specific types of financial transactions to FINTRAC, including suspicious transactions and international electronic funds transfers of $10,000 or more.
As part of Canada’s anti-money laundering and anti-terrorist financing regime, FINTRAC houses both supervisory and intelligence functions, which allows it to effectively assess and ensure the compliance of regulated businesses and produce financial intelligence for its police, law enforcement and national security partners.
Over the past year, we provided 1,655 disclosures of actionable financial intelligence to our police, law enforcement and national security partners to assist their investigations of money laundering, terrorism financing and other threats to Canada's security.
Our financial intelligence has become increasingly valued by our partners as lead information to expand or define their investigations, and to obtain search warrants and production orders to gather information in pursuit of criminal charges.
For example, just a few weeks ago, FINTRAC's contribution to Project Silkstone was singled out by the Ontario Provincial Police following the arrest of a number of individuals for allegedly trafficking 11,500 pills containing fentanyl and other illicit drugs in Ontario, Quebec and the United States. This is just one example of many dozens over the past couple of years where FINTRAC’s assistance in helping to protect Canadians was recognized by our police and national security partners.
In December 2008, FINTRAC received the legislative authority to issue administrative monetary penalties to businesses that are in non-compliance with their obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its regulations.
I want to be very clear that as set out in the act, the penalty regime is focused on changing the behaviour of entities to bring them into compliance. It is not to punish them for laundering money.
There are other measures in place should FINTRAC have reason to believe that businesses are facilitating, or are knowingly being used to launder money or to finance terrorism. These include non-compliance disclosures to police. This was not appropriate when we penalized the bank for administrative deficiencies last year.
Under the act, the centre may publish specific details of a penalty imposed once all proceedings in respect of the penalty have concluded. This means that all avenues of review and appeal, including court proceedings, have been exhausted. FINTRAC has established and published criteria to guide its decision-making in relation to the naming of businesses that are subject to a penalty.
These internal criteria, however, do not supersede the authority that Parliament afforded FINTRAC's director under section 73.22 of the act to publish or withhold the name of a business that has been penalized.
When we penalized Manulife for non-compliance with the act, I exercised my discretion to withhold its name. I did this because of the administrative nature of the violations. Again, the violations committed by the bank were not in relation to money laundering or the financing of terrorism. In making my decision, I also took into account the mitigation measures the bank had taken in this case.
At the same time, by deciding not to name the entity, we were able to avoid a potentially lengthy court process. We have found that court proceedings often take many years, with information usually being sealed and outcomes uncertain. By not naming the entity, we sent a timely message of deterrence to the other 31,000 businesses subject to the act.
In responding to numerous access to information requests in relation to this penalty, we had to take into account the fact that the bank's name had been withheld, and that we had signed a legally binding agreement with Manulife in order to conclude court proceedings. This meant that FINTRAC had to exempt details from information released under the Access to Information Act that would potentially identify the bank. The centre also withheld confidential proprietary information that was supplied to it by the entity.
As well, we were aware that the name of the entity was known. However, FINTRAC couldn’t confirm this. As a result, the Centre took care to exempt details of its assessment of the bank's non-compliance that, if released, would prejudice the competitive position of, or cause financial loss to, the entity. This is not the intended purpose of the penalty regime, which, I repeat, is non-punitive.
From the increased reporting that we’ve received from businesses across the country and the discussions that we’ve had with them following the publication of the penalty, I believe our message of deterrence was heard very clearly.
However, improvements can always be made. On that note, I’ve acknowledged the need to work with Finance Canada to review the legislation in relation to our penalty program. We’re also currently examining our administrative monetary penalty policies to ensure they strike an appropriate balance between the need for transparency and the requirements of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
Thank you, Mr. Chair. We’re now ready to answer your questions.