Evidence of meeting #56 for Access to Information, Privacy and Ethics in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was fintrac.
A recording is available from Parliament.
4:30 p.m.
Conservative
4:30 p.m.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
Thank you very much.
I'm sure committee members missed your humour in the chair, Mr. Chair.
4:30 p.m.
Conservative
The Chair Conservative Blaine Calkins
Thank you very much for filling in for the chair and the vice-chair, Mr. Vice-Chair.
4:30 p.m.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
You had mentioned earlier that a policy change took place with respect to which institutions are named, and how that's done. Who makes that policy? Is it FINTRAC itself that determines that policy?
4:30 p.m.
Director, Financial Transactions and Reports Analysis Centre of Canada
Yes, it is us.
4:30 p.m.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
Okay, so it's you who decides on the policy of whom to name.
I certainly agree that discretion is sometimes warranted and can be the best policy in certain circumstances. Do you feel, though, that when it's done on a case-by-case basis in the way that it's being done, it can contribute to undermining public confidence in the process if the decisions are seen as being arbitrary, or if certain types of institutions are not being named whereas other types of institutions are?
4:30 p.m.
Director, Financial Transactions and Reports Analysis Centre of Canada
I think, Mr. Chairman, the way for us to make the public understand that we don't do this on an arbitrary basis is to explain over and again the grounds on which the decision was taken. For us, that's the best way of proceeding so that the public can see that the decision was reasonable, given the circumstances at the time. I think that's how our organization will continue to build its credibility.
4:30 p.m.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
Okay, so you don't feel that the kind of non-disclosure agreement you had with Manulife impedes your ability to clearly communicate how decisions are being made and the reasons why?
4:30 p.m.
Director, Financial Transactions and Reports Analysis Centre of Canada
The reason we signed an agreement with Manulife was to avoid a long court proceeding that might have taken years and would have meant that, at the end of the process, people might not remember why the individual was penalized. Moreover, we would have no control over what the court would decide. As I said before, in the choice between that uncertainty—years before it is known, if it is known—and the deterrent effect, we went for the deterrent effect.
4:30 p.m.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
Are you concerned that your reasoning in this case might lead to scenarios in which organizations that are well funded and have the legal means to threaten a long, protracted legal battle will secure a kind of preferential treatment in that, because they're the ones in a position to make that threat, they would be less likely to be named, and that's a consequence of the amount of resources they have instead of other considerations? So players who don't have those same legal resources and financial resources are going to get named because they're not able to threaten delay, whereas larger institutions like large banks who do have that capacity are going to be in a position to protect themselves from being named through threat of lengthy court action.
4:30 p.m.
Director, Financial Transactions and Reports Analysis Centre of Canada
I don't think it would be appropriate for me, Mr. Chairman, to comment on accessibility to the legal system.
4:30 p.m.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
All right. Fair enough. So you don't think—and I'm not speaking to any particular organization's access to the legal system—that access to the legal system, if that's the rationale for your decision, is a consideration in the kind of legal action that could be undertaken?
In the case of smaller clients who don't have those resources.... Do you treat the potential of legal action the same for any organization regardless of their resources? Are you blind to the legal and financial resources of institutions when you make a decision based on the potential for legal delay?
4:35 p.m.
Director, Financial Transactions and Reports Analysis Centre of Canada
Yes, we are blind because, historically, we have seen organizations with different means going to court in response to penalties.
The issue is not as much whether entities have the financial capacity to go to court. The issue is that the court may decide to seal the proceeding and, therefore, the deterrent effect or the transparency effect is nullified by the court process. That's the rationale behind the decision.
4:35 p.m.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
I can appreciate a kind of blindness to access to legal resources as part of a procedural argument, but if the argument behind the policy is that you need to decide these things on a case-by-case basis in order to be able to exercise discretion, doesn't discretion usually tend toward the idea that we want to be able to take into consideration all of the various factors at play?
If you're arguing for discretion on the one hand, why would you then say that you want to be blind to certain aspects of the situation that you're being asked to judge on a case-by-case basis?
4:35 p.m.
Director, Financial Transactions and Reports Analysis Centre of Canada
The decision that an entity may take to go to court or not to go to court is its own choice. They may take that decision for several reasons, including, for instance, because they think they're going to win on the disagreement they have with us on the violations. Their choice is based on their own analysis of their chance of success through a court proceeding. I cannot comment as to size, small or big.
What we know and what the experience shows is that entities of different sizes, of different financial capacities, based on their own assessment, have taken FINTRAC to court.
4:35 p.m.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
Your colleague did mention the fact that the appeal at Federal Court, if I'm correct, was one of the preponderant factors that brought you to negotiate with Manulife in order to reach that agreement.
If Manulife hadn't yet made the appeal to Federal Court or never made the appeal to Federal Court, if you're blind in the way you suggest you are, would your decision not have been the same in the end because there was the possibility of going to court, or did the fact that Manulife in fact went to court bear on your decision?
4:35 p.m.
Director, Financial Transactions and Reports Analysis Centre of Canada
Mr. Chairman, I'm not too sure what the question is. I think it wouldn't be appropriate to go back to try to re-decide what I would do under different circumstances.
4:35 p.m.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
I guess I'm trying to understand for future cases, if it's irrelevant whether companies or institutions in fact mount a legal challenge because you're blind to their ability and resources in that regard. I guess what I'm asking is this. I think that that intention, with the claim that the fact that an appeal had been made, was one of the reasons you decided to negotiate. The fact of their being able to mount a challenge, I think by your account, and this kind of blindness to the extent of their legal resources, would mean that you would have made the decision regardless of whether they had gone to court or not.
4:35 p.m.
Director, Financial Transactions and Reports Analysis Centre of Canada
When we issue our notice of decision to the institutions, the institutions may go to court, and then we have to act according to the position of the court at that moment. Alternatively, they may say that they want to go to court, and until the process is completed and exhausted, we do not name and do not penalize the institution, so there's a timing issue. Whether we know that they will go to court and that changes our decision at that time is not taken into consideration. We tell them what the penalties are, and then we proceed from there.
4:35 p.m.
Conservative
The Chair Conservative Blaine Calkins
Thank you, Mr. Blaikie and Mr. Cossette.
We will now go to Mr. Ehsassi, please.
4:35 p.m.
Liberal
Ali Ehsassi Liberal Willowdale, ON
Thank you.
I'm just going to read a portion of your testimony today. You stated that, “the violations committed by the bank were not in relation to money laundering or the financing of terrorism.” Given that we're talking about a fine of $1 million, what other bases do you have to impose fines under the regulations?
4:35 p.m.
Director, Financial Transactions and Reports Analysis Centre of Canada
We basically look at their obligations to report to us. Under the legislation, they have the obligation to report large cash transactions of more than $10,000. They have the obligation to report international electronic transfers. They have the obligation to report suspicious transaction reports. If they see people coming in and running financial operations that may look suspicious and can be used in the context of money laundering or terrorism financing, we may penalize them for that.
We may also penalize them for not having a compliance regime, which includes policies, training, and processes. Based on the number of violations and the kinds of violations, we then establish what the penalty should be. Then, depending on the size of the organization, we also look at the capacity to pay.
4:40 p.m.
Liberal
Ali Ehsassi Liberal Willowdale, ON
My concern, much like Mr. Blaikie's, is that you're saying you did this to deter the 31,000 other entities from engaging in certain types of activity. To me, the bigger danger is that you really set a precedent whereby every single entity you now try to go after will say, “We're going to go to court”. So not only are you not deterring them, you're encouraging them to go to court in the event they actually have the necessary resources. Let's say that's not true. The next entity that you decide to name could bring a claim against you to say, “We were not dealt with equitably because you're treating us very differently than you did the bank.” How would you deal with those types of concerns?
4:40 p.m.
Director, Financial Transactions and Reports Analysis Centre of Canada
The first thing, Mr. Chair, is that we were taken to court long before we imposed the penalty on Manulife. The situation with Manulife and the fact that we did not name the organization has not necessarily incited other entities to take us to court. We were taken to court long before that. The first time we were taken to court was in 2009, so the idea of taking FINTRAC to court and trying to have the proceedings sealed dates from long before what happened with Manulife.
The second thing is that we look at each case on its own merit, so it's not as if the results of an exam of bank A would be the same as the results of an exam of bank B. What are the violations, in what context were they carried out, is the regime solid, and is the lack of reporting a demonstration or a manifestation that the overall regime is weak? All these things are taken into account before we say it's $1 million or $2 million, or $2 million or five dollars for that matter.
4:40 p.m.
Liberal
Ali Ehsassi Liberal Willowdale, ON
I appreciate that, but just by virtue of the fact that you're saying it's a case-by-case determination, that suggests you're open to charges that you're being arbitrary. I mean, there is a tension there. Given that you're explaining to us the complications with the legal framework and the legal regime, are there any oversights in the regulations that you think are responsible for the manner in which you've had to interpret and apply the regulations? Is there a gap?