Information & Ethics Committee on April 11th, 2017

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

Mr. Cossette, you had said, “I understand that” non-disclosure and withholding the name of the bank “may not have met public expectations in relation to openness and transparency.” Do you still agree with the comments you made?

I take it from the record today that you sort of stand by the decision to withhold the name. I got mixed messages. You say that you understand it may not have met public expectations, but the testimony here today is that “I believe our message of deterrence was heard very clearly”, and in fact, by all accounts, I think the message is that you've acted appropriately with respect to transparency and accountability. How do I square those two?

[Gérald Cossette]

The issue for me at the time was, do you face a potential court proceeding, which might take years before we see the results, or do you send a timely message of deterrence? Uncertainty versus certainty: I opted for the certainty at the time, and the message. Given the results we've seen with the increase in a number of transaction reports we've received, and given the conversation we're having with the financial sector, I think the message was received clearly by all entities under the regime.

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

Thanks a lot.

[The Chair, Conservative, Blaine Calkins]

Thank you.

Mr. Kelly.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Thank you.

Perhaps just to help me, and also to make it clear for the record of the meeting, if I understand correctly, there was a negotiation, an agreement, in this particular case, with the bank. There was an agreed statement of fact or a finding of facts, an agreement to pay a particular penalty, and an agreement to not disclose the name of the entity?

[Gérald Cossette]

Yes.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

You mentioned just at the end of my colleague's questions that it's your belief that the experience of what happened had the effect of modifying behaviour and that you saw an increase in compliance. With the increase in compliance, was there also a difference or a change in reporting that you could determine before or after the naming of Manulife? Or was the announcement of the fine the real attention-getter, if I may so, for industry?

[Gérald Cossette]

It's difficult to assess if it is one for one.

What we know for a fact—and we could provide you with numbers for it—is that we see now and have seen over the recent three to five years a significant increase in the number of the suspicious transaction reports we receive. Last year, we received 125,000 suspicious transaction reports, which are really the bloodline of what financial analysis is all about. Therefore, if the purpose of the regime—and indeed this is the purpose of the regime—is to provide intelligence to our law enforcement partners and our national security partners, the first provider of that information is the private sector. It is the 31,000 businesses that contribute to the regime.

Every increase in quality and every increase in the timeliness of these transaction reports we receive is of greater value to the regime. That's what we've seen over recent years: numbers, timeliness, quality, and openness. If we want to talk about the relationship that we have with the banking sector right now, for instance, we have participated in a project called “Project Protect”. It's not the project that is of interest to us—it's that it was initiated by the private sector, not by us. The relationship is changing, and the credibility of FINTRAC in that relationship is changing as well.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Okay.

That perhaps leads to another point about this, though, in terms of the relationship between FINTRAC and the reporting entities. If there was an agreement not to have Manulife's name disclosed, and yet we all know now that it was Manulife, how is that going to affect future negotiations or future discussions with a future entity that may be facing the same question of fines and disclosure?

[Gérald Cossette]

What's going to happen in the future is that we will look at the circumstances at the time. We will look at the results of the examinations, we will look at mitigation measures, we will look at how the entity behaves in terms of compliance with the regime, and we will take a decision on those grounds.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

I understand that the goal is to increase compliance and increase reporting, not to punish for the sake of punishing, and this is trying to modify behaviour. But I hope we'll continue to have increased compliance and that the fact of not being named and then being named wouldn't affect this.

I'm going to turn it over now. I'm not sure if I have any time left.

[The Chair, Conservative, Blaine Calkins]

Sure, good.

All right, Mr. Jeneroux, do you want to go?

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

Sure. I have just one quick question, if you don't mind, Mr. Chair.

I'm still just a little confused. In the fourth to last paragraph of your statement you said that you “were aware that the name of the entity was known. However, FINTRAC could not confirm this.”

Are you saying that somebody knew it was Manulife, but you...? I'm confused by that sentence.

[Gérald Cossette]

We were receiving phone calls from the media inquiring whether it was this entity, that entity, or this entity, so obviously some journalists—

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

So, were they running through a list of entities?

[Gérald Cossette]

They were just asking, “Is it this one, this one, or this one?” So, obviously somebody either had guessed or got information from somewhere as to who the penalized entity was. Despite the fact that it was out there, and despite the fact that we had a confidential agreement with Manulife, we could not confirm whether it was Manulife or any other entity for that matter.

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

Do you do an internal investigation, then, to find out how that was known?

[Gérald Cossette]

On if the information had been released from within FINTRAC...?

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

Yes.

[Gérald Cossette]

We will look at basically....

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

You will or you have?

[Gérald Cossette]

Well, we have done some work and we'll continue to do some work to establish whether, in fact, the leak came from our organization or not.

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

Do you have a result of that?

[Gérald Cossette]

We have a result of the first phase, which doesn't show anything, and then we'll go to the second phase.

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

There are phases to this. Okay.

All right, I'm good.