Finance Committee on May 15th, 2006

[Pierre Gosselin]

As I explained to your colleague earlier, it is excessively difficult to predict the outcome of the cases that will be heard by the tribunal.

[The Chair, Conservative, Brian Pallister]

Thank you.

There's time for just a quick question, Mr. Pacetti, to wind things up.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you, Mr. Pallister.

I would like to follow up on the question asked by Mr. Gosselin, if possible.

Through you, Mr. Chair, of course, I want to know if Mr. Gosselin can provide us with the details.

I'm not going to be picky at this point, but I'm not comfortable voting for something if I'm not sure what I'm voting on. Somehow you came up with $9.9 million. You made some projections on how you went from $9.4 million to $9.9 million. I understand part of it is labour. I'm willing to be reasonable, but can you provide us with some detail or some backup as to how you expect to spend that $9.9 million. Could you do that at a later date?

[Pierre Gosselin]

Yes, we can probably do that, but I would reiterate what I said earlier on. In real terms we have not had an increase in our budget for seven or eight years. The increases that you see in the gross numbers have to do with collective agreements.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Even if we get a breakdown as to how much it is costing to rent halls, tribunals, how much is for salaries, how much is for administration, whatever you can provide. I'm willing to be flexible. If you like, I can give you a long list of what I need to know. I don't need to go into your invoices and your daily operating budgets, but at least a one-page--

[Pierre Gosselin]

We can give you a gross breakdown of line items.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

And just quickly, on the caseload in your annual report, you had 74 cases referred to you and 47 were cases withdrawn, or not initiated, or dismissed.

[Pierre Gosselin]

Under what heading? What type of case?

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

The caseloads on page 4. I want more or less to know why there were so many.

[Pierre Gosselin]

This is procurement complaints. Is that what you're looking at? That 74, at the bottom of the page?

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Yes, 47 out of 74, in this case, I guess would have been procurement. I'm not sure. It just says “caseloads” on top. Yes, procurement review activities. I'm wondering why so many would have been just dismissed.

[Pierre Gosselin]

These are complaints that have been filed and then later withdrawn because the parties either have abandoned them or have worked things out.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Would your office have a say in that?

[Pierre Gosselin]

No. We encourage people to try to resolve their issues before coming to us. Even after they've filed a case, they can withdraw it.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you.

[The Chair, Conservative, Brian Pallister]

Thank you, Mr. Pacetti.

Gentlemen, thank you very much for your testimony today. The committee appreciates your being here.

We'll allow the witnesses from FINTRAC to make their way forward, please. Thank you.

Pursuant to Standing Order 81(4), main estimates 2006-07, vote 30 under Financial Transactions and Reports Analysis Centre of Canada, referred to the committee on Tuesday, April 25, 2006. I am now calling vote 30 under Financial Transactions and Reports Analysis Centre of Canada.

Welcome, and thank you for that musical chairs challenge you just had to accept.

I understand there is a brief presentation to begin. Who would be doing that?

Madame Wing, welcome to the committee. I'll invite you to proceed with your presentation at your comfort. I don't want to rush you.

[Sandra Wing, Senior Deputy Director, Financial Transactions and Reports Analysis Centre of Canada]

Thank you, Mr. Chairman.

Members of the committee, I am very pleased to appear before you and talk to you about the work we are doing at FINTRAC.

My name is Sandra Wing; I'm the senior deputy director for FINTRAC. Joining me today is my colleague Alfred Tsang, who is the assistant director for finance and administration, and Paul Dubrule, who is general counsel for FINTRAC.

I will begin with a short presentation that will provide a high-level overview of FINTRAC. The first slide is a presentation overview. I'll cover who we are, what we do, our main estimates, our results, and I'll make some remarks on the challenges that lie ahead.

FINTRAC was established in 2000 to facilitate the detection and deterrence of money laundering and terrorist activity financing in Canada and around the world. FINTRAC is an independent agency, reporting to the Minister of Finance, who is accountable to Parliament for the activities of the centre. We are Canada's financial intelligence unit, or FIU, and our mandate is to receive financial transaction and other information, analyze it, and, when appropriate, provide financial intelligence to law enforcement and other investigative agencies, as well as foreign financial intelligence units.

We call our financial intelligence product disclosures. We are required to operate at arm's length from those agencies to which we disclose financial intelligence. This independence ensures balance between the need to safeguard the privacy of personal financial information and the investigative needs of law enforcement and security agencies.

We receive, analyze, disclose, and ensure compliance. The act places obligations on certain individuals and entities to keep records, identify their clients, and report certain financial transactions to us. These reporting entities, as we call them, include financial entities, deposit-taking institutions, banks, credit unions, accountants, casinos, money services businesses, foreign exchange dealers, securities dealers, life insurance companies, and real estate brokers and agents.

Reporting entities must report suspicious transactions related to money laundering or terrorist activity financing, regardless of their value; cash deposits of $10,000 or more; wire transfers into or out of Canada of $10,000 or more; and terrorist property holdings. In addition, anyone crossing the border must report to the Canada Border Services Agency movements of cash or monetary instruments of $10,000 or more into or out of Canada. All such reports are sent to FINTRAC by the Border Services Agency. We also receive from the Border Services Agency reports of any currency seizures.

What do we do with this information? FINTRAC's analysis of financial transactions can be initiated in a variety of ways: by a transaction report, or series of such reports, a voluntary information report from law enforcement or CSIS, by open source information or by information provided by a foreign financial intelligence unit. Whatever the starting point, analysts search through the centre's database using specially designed technological tools to uncover patterns of financial transactions that suggest a suspicion of money laundering or terrorist activity financing or other threat to the security of Canada.

Our analytical success is closely linked to our technological capability. When, as a result of its analysis, FINTRAC has reasonable grounds to suspect that the information would be relevant to the investigation or prosecution of a money laundering or terrorist activity financing offence, the centre must make a disclosure to the appropriate police force. In cases where there are reasonable grounds to suspect a threat to the security of Canada, including terrorist activity financing, FINTRAC must disclose to the Canadian Security Intelligence Service. In some cases, we must also disclose to the Canada Revenue Agency and to the Canada Border Services Agency; however, in these instances we must meet a dual test. The information contained in our disclosures includes details about the financial transactions, where they took place, when they took place, the individuals conducting the transactions, and any accounts, businesses, or other entities involved.

Another key function of the centre relates to our mandate to ensure that reporting entities comply with the act and regulations. We have established a modern and comprehensive risk-based compliance program that includes activities such as providing outreach and assistance to reporting entities to ensure that they are aware of and understand their obligations under the act; assessing the risk of non-compliance for all of the reporting entity sectors; monitoring the quality, timeliness, and volume of reporting; verifying compliance through examination; and disclosing cases of non-compliance to law enforcement for criminal investigation and prosecution.

I'll turn now to our main estimates.

In our main estimates, FINTRAC presents a request for $31.1 million. Our budget is fairly straightforward. It relates to staff costs and expenditures in support of our operations. FINTRAC plans to spend approximately 60% of its budget on employees who are located here in Ottawa as well as in three small regional offices: one in Montreal, one in Toronto, and one in Vancouver.

The remaining $12.2 million of our request represents our operating costs. Our operating costs are in support of such areas as information technology, data collection and analysis, compliance functions, communications, as well as IT and physical security. A large percentage of our operating expenditures is somewhat non-discretionary, for example, just over $4 million for information technology. In addition, close to $4 million of our budget is for lease costs to Public Works and Government Services Canada, as well as to other government departments for services such as legal support and translation.

I'd like to take a minute on our key results. Last November, the Minister of Finance tabled FINTRAC's fourth annual report in Parliament. The report documents FINTRAC's results for fiscal year 2004-05, and lays out our priorities for 2005-06. It is important to keep in mind that FINTRAC's success hinges directly on the quality of the financial transaction information we receive. We receive approximately one million financial transaction reports per month. Our reporting entities send virtually 100% of their reports to us electronically. In 2004-05, we made 142 case disclosures of financial intelligence on suspected money laundering and terrorist activity financing: 110 of these related to money laundering, 24 related to terrorist activity financing, and eight involved both money laundering and terrorist activity financing or other threats to the security of Canada. These 142 cases involved financial transactions valued at just over $2 billion.

With respect to our compliance function, we conducted 190 compliance examinations on site in 2004-05. FINTRAC provided feedback sessions to the Canadian Bankers Association, and individually to major banks, casino regulators, and others, over the course of the last two fiscal years. FINTRAC is expanding the feedback sessions to other large reporting entity sectors and associations representing these sectors.

To minimize the regulatory burden on reporting entities, FINTRAC established partnerships with 15 federal and provincial regulators such as the Office of the Superintendent of Financial Institutions. During the 2005-06 fiscal year, FINTRAC made or held close to 600 presentations and/or meetings with reporting entities, their associations, and these reached approximately 15,000 individuals.

Finally, our success in the international community has allowed us to expand our network of relationships with other countries and international organizations. As of March 31, 2005, we had 20 information exchange agreements with foreign FIUs. To date, we have signed 30 such agreements. We continue to develop and enhance our technology and analytical capabilities to ensure that FINTRAC produces reliable financial intelligence for law enforcement and security agencies. In addition, we continue to develop and maintain sound and cooperative working relationships with all our reporting entities, and with law enforcement and security stakeholders.

I'll just take a quick look at the year ahead.

FINTRAC has many accomplishments, particularly when one considers that we've only been operational for roughly four years. However, there are still a number of challenges and opportunities ahead. When our legislation was passed in 2000, the bill included a mandatory parliamentary review after five years. This review has been scheduled to commence later this week. In preparation for the parliamentary review, the Department of Finance released a consultation paper in June 2005 that put forward a set of proposals to enhance Canada's anti-money-laundering and anti-terrorist-financing regimes.

The proposals are designed to respond to what we have learned through the building and operations of FINTRAC over the last few years, as well as to recommendations of our partners, the Auditor General, and others. As well, they are designed to meet revised international standards set by the Financial Action Task Force on Money Laundering. As we move forward, we will work with the Department of Finance and other partners to strengthen Canada's ability to combat money laundering and terrorist activity financing.

I will conclude my presentation here. I hope you have found it useful, and I would be happy to answer any questions you may have.

[The Chair, Conservative, Brian Pallister]

Thank you very much, Madam Wing.

Mr. McKay, would you like to commence?

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

I'll lead off, thank you, Chair.

Thank you, Ms. Wing.

You're getting $31 million out of Canadian taxpayers on an annual basis. How do we know the Canadian taxpayer is getting value for money?

[Sandra Wing]

We measure our performance on the basis of the case disclosures that we make to the law enforcement and security communities. If the disclosures are adding value to their investigations and prosecutions within Canada for money laundering and terrorist activity financing, we consider that value to the Canadian taxpayers.

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

So $31 million yielded 142 disclosures last year, is that correct?

[Sandra Wing]

Last year.

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

Is there a pattern to it? Is it up, is it down?

[Sandra Wing]

I have a couple of different performance measures I could give you. As of March 31, 2005, we had disclosed 442 case disclosures, and their dollar value was $3.2 billion. As of December 31, 2005, we had disclosed a total of 554 case disclosures, and the value was $6.2 billion in total.

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

Now, how do you measure, or do you measure whether that leads to a successful prosecution? It's one thing to pass on the information; it's another thing to know whether that's useful for the purposes of the intention of the original bill. How do you measure that?