Information & Ethics Committee on April 11th, 2017

[Gérald Cossette]

The regulations are what they are for the time being. We're working with the Department of Finance right now on whether there is a best way to manage the compliance regime, including the penalty program. One of the issues we have faced is basically that there were two cases—two court decisions—that are forcing FINTRAC to review its compliance program. That's what we're doing. We're working with the Department of Finance on that.

What we're trying to do right now is to better connect the compliance violations with their value from an intelligence standpoint, so right now the two programs are a bit disconnected, so to speak, or disjointed. Where we're going with the process is to try to mesh these two things, so that our program, from compliance to financial analysis to disclosure, follows the same logic. Right now, our legislation flows from the Criminal Code, and the administrative monetary policy program flows from the civil side, so there's a little bit of a disconnect. There's a circle we're trying to square here, from a regulatory standpoint.

[Ali Ehsassi, Liberal, Willowdale, ON]

Thank you.

[The Chair, Conservative, Blaine Calkins]

Mr. Erskine-Smith, there are a couple of minutes left.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

Thanks.

When it comes to improving compliance by, in this case, agreeing to not to disclose the name, do you think our regime in Canada ensures greater compliance than the one in the United States, where they do name institutions that have had significant fines levied against them?

[Gérald Cossette]

The two regimes are similar, but they're not the same. The Americans do penalize for money laundering. We do not penalize for money laundering. We penalize for non-compliance with the legislation. If we were to see, through an examination, facts that are so egregious, we have the capacity to disclose to the RCMP. Then the RCMP would decide whether a criminal investigation on money laundering is warranted.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

I'll just read the following:

I'm in the United States, and they are saying, “What kind of Mickey Mouse system do you have? We name our large institutions!” said Garry Clement, a retired 30-year RCMP veteran who now specializes as a financial crimes investigator, trainer, and policy adviser.

What do we say in response to Mr. Clement?

[Gérald Cossette]

The two regimes are different. FINTRAC cannot penalize for money laundering. That's the first thing.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

That's not my question. My question is about naming institutions.

[Gérald Cossette]

In the American regime, the institution may be named and the amount may be named. We don't know if that is the final result. What we know is that this is what is being announced. Are there then negotiations in terms of what the final amount of money will be? We don't know.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

That's exactly why this 30-year RCMP veteran is suggesting that they're more powerful in the United States by naming institutions. If we talk about deterrents, naming has an incredibly powerful deterrent effect. Do we not see that?

When you say, “I believe our message of deterrence was heard very clearly,” we've removed a significant deterrent power by not naming this institution. Have we not?

[Gérald Cossette]

The American regime is not our regime. When they penalize for hundreds of millions of dollars, they penalize for money laundering, not for not complying with institutions' obligations to report. They pay a fine for acting criminally.

[The Chair, Conservative, Blaine Calkins]

That's the end of that particular time slot.

Mr. Cossette, you're exactly right. You're simply carrying out the legislation that the folks at this table or our predecessors thereto have passed, so we shouldn't hold you to account for the law that you didn't make.

Are there any other colleagues who want to ask questions as we go through? We have a few minutes left. Are you guys finished?

Next on the list is Mr. Jeneroux, and then we'll go to Mr. Bratina.

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

Thank you.

To follow up, part of the reason you're here is the leak about what happened. You've finished phase one of your investigation of the leak. You're now in phase two of the leak investigation.

What's your capacity to do this, and do you report this to Finance? Is it internal? If the culprit does belong to FINTRAC, is it then, “Okay, great, we addressed that,” and you move on? Walk me through where the next steps are going with some of this.

[Gérald Cossette]

The first thing we need to do, and we've done, is to establish whether there are technical means of confirming that the information came from FINTRAC. We've been told that the information came from FINTRAC. I cannot assume that this is necessarily the case. So before going after—

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

Sorry, who told you that? Is it from part of your investigation, or is it the media who told you that?

[Gérald Cossette]

No, it's not from part of the investigation. The fact that the leak came from FINTRAC was provided to us by somebody from the outside who said, “I know the name of the bank, and it was confirmed to me by a member of FINTRAC.” In all conscience, I cannot assume that, so I have to proceed cautiously to make sure we don't accuse people before having all the facts.

As a first phase, we're trying to establish the facts. Secondly, if we have a sense that, yes, the leak might come from our organization, we will proceed to determine or to find clearly who it might be. A limited number of people are involved in this case, so it's not as if the whole organization might have leaked the information, but we have to proceed as cautiously as possible because we need to confirm a certain number of things instead of launching a witch hunt that might lead nowhere. That's why we're so cautious.

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

What are we talking about, 100 people, five people? Those are two different numbers—

[Gérald Cossette]

No, we're talking about a number of people who have been working on this file.

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

Again, is that 100 people, or is it five people—ballpark?

[Gérald Cossette]

It's people who conducted the investigations, people who reviewed the case, people who reviewed the appeal, the lawyers, me, and senior staff—

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

I'll try again. Was it under 30? Was it under 20? Let's assume it was under 20.

[Gérald Cossette]

It was under 20.

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

It was under 20, great. Then in phase two, you determine who this is.

[Gérald Cossette]

Mr. Chair, I'm very sorry. I just hate the last line, “who this is”. We have no proof as we speak that the leak comes from FINTRAC. I would like that fact to be very clear. There is no proof, and I don't like insinuations that there may be. If we find who it is, there are measures in our legislation, and we will follow those measures. But until then I will not speculate in public about the fact that there may be somebody in FINTRAC who committed an act of that nature, which is very serious under our legislation. I'm very sorry.

[The Chair, Conservative, Blaine Calkins]

Fair enough. That's fine.