Finance Committee on May 15th, 2006

[Sandra Wing]

It's a very good question. We've been working with law enforcement and our security partners to try to put in place what we call a feedback mechanism. We disclose to law enforcement--I'll use law enforcement as the example--they investigate, since we're not an investigative agency, and hopefully their investigations will lead to charges and then to prosecutions.

But tracking those statistics through the Canadian judicial system is difficult. We disclose to the RCMP, but also to provincial and municipal police forces. So what we did at FINTRAC was establish, in consultation and partnership with the law enforcement community, through the auspices of the National Coordinating Committee on Organized Crime, a mechanism that would allow us to start collecting feedback on how useful our case disclosures were.

Now, I have preliminary results. We established this mechanism towards the end of the last fiscal year and we put it in place in the fall of last year. We are assembling the results for the case disclosures that we made just in the previous year. We're not finished assembling those results for all of the case disclosures, but we do plan to collect and analyze those results and publish them in our annual report, which is to be tabled in the fall.

We do have preliminary indications that 60% of those who have responded so far have indicated that our information has provided them with new investigative leads, and 74% have indicated that it has been relevant to their investigations.

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

So that sounds like there's value in what you actually do.

How does that relate to the Auditor General's critique, if you will--I was going to say “criticism”, but I don't think it's a criticism, I think it's more of a critique--in her 2004 report, where she talks about legislative restrictions, enforcement mechanisms that are incomplete, and some questions about accountability? How have you addressed the Auditor General's concerns?

[Sandra Wing]

The Auditor General made a number of recommendations. For those that were government-wide, I'll set them aside for the moment, if I can. For those that were specifically focused at FINTRAC, the Auditor General was critical of FINTRAC's ability, if you will, to disclose more information to law enforcement.

What we did in response to that was to work with law enforcement, security agencies, as well as the Department of Finance to come up with proposals--some were legislative--that if Parliament agrees, would enable FINTRAC to disclose more information to make them more useful to law enforcement.

I don't think they're not useful to law enforcement now, but there are difficulties. They referred to issues that law enforcement may have with disclosures we make for money laundering, where because we're not an investigative agency, we may not, for example, know the predicate offence. For law enforcement to investigate and lay charges, they have to know the predicate offence.

Looking at the financial transactions themselves, we may never know the predicate offence. When we pass disclosures that link money laundering networks to law enforcement, there are some times, for example--and this is a small example--when we can make connections on the basis of something like a telephone number. We cannot now disclose to law enforcement how we made that connection.

So there are proposals--they were put forward in the white paper that was issued last June--and we are looking for some legislative amendments that would make it easier for us to disclose more complete information to law enforcement about what it is we're seeing and how we've made our connections.

There are some things that FINTRAC has done in the meantime. We've taken a look at our disclosure packages and have now included i2 charts with all the disclosures, where we draw the linkages for law enforcement in a picture. We've received very positive feedback from law enforcement on the use of that tool. Instead of just listing the financial transactions and where they took place, we actually include an i2 chart.

[The Chair, Conservative, Brian Pallister]

Mr. St-Cyr, you have seven minutes.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Earlier, we talked about statistics on global transactions. Can you tell me how these statistics break down geographically?

In my riding, and elsewhere in the Province of Quebec, and probably in the rest of Canada, Canadians are concerned over international transactions that take place in the Barbados and other tax havens. Many people believe that because these countries have less transparent fiscal systems, there is more money laundering, economic crimes, and even terrorist financing activities going on. It is a comment we hear often.

Based on your figures, is it possible to confirm or disprove these hypotheses? You conduct inquiries on tax havens such as Barbados, a country with which Canada has signed special agreements and where Canadians invest massively. We are talking about a 500 per cent increase over the last 10 years. Billions of dollars have been invested in these tax havens. What are the problems? How can we find out what percentage of these investments is used for money laundering, or financing terrorist activities, for example?

[Paul Dubrule, General Counsel, Legal Services, Financial Transactions and Reports Analysis Centre of Canada]

Yes, we have ties to some 30 countries with which we have intelligence and information-sharing agreements. We are working in close cooperation with these countries so as to determine whether transactions conducted in Canada involving any other country could be related to money laundering or financing of terrorist activities.

You should also note that tax evasion does not directly come under our mandate, that it is an offence created by Parliament but not under legislation regulating our activities. Therefore we concentrate on money laundering. If we suspect tax evasion as well, we may disclose that information to the Canada Revenue Agency.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

The point is whether the two are correlated, because tax evasion in tax havens is often related to the fact that the banking systems in these countries are less transparent. It would be reasonable to presume that money laundering in these countries would be easier.

Can you tell us how many cases per country you refer to agencies for further investigation? Can you see any correlation in this regard?

[Paul Dubrule]

First, there is a correlation among countries with very efficient banking systems in place. I am referring to countries such as Canada, with an electronic system, and in which transactions can be easily completed.

Second, clearly there are countries that lack measures to determine whether money laundering occurs. So, yes, we recognize those countries.

I feel a little uncomfortable, because it is not my job to say that any country is on a list or not.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Did you work in collaboration with Barbados, among others, in order to exchange information?

[Paul Dubrule]

In fact, we have an agreement with Barbados.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

More generally speaking, be it Barbados or any other country, do you have statistics on the geographic distribution of cases you refer for investigation?

[Paul Dubrule]

To date, we have not compiled such statistics, but we are currently doing so in order to determine whether, in the Caribbean, Asia or Europe, there is a real reason to suspect money laundering is occurring, given the country used to send funds.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

A great deal of the massive amounts of information you have must be information that would help you, the agencies, but also legislators, MPs, see what the real situation is and help us determine where we need to put our efforts and the goal we need to reach.

[Paul Dubrule]

Along with our allies the police, we are examining our operations in order to determine where money laundering may be occurring.

As you mentioned, we receive a great deal of information about transactions, for example, electronic funds transfers of $10,000 or more, even if these transactions are legal. So, we need to examine them in order to determine which ones are illegal and why. We are doing this region by region, country by country, in order to determine if there is anything that could help us target operations related to any particular country.

[The Chair, Conservative, Brian Pallister]

Thank you, Mr. St-Cyr.

Mr. Turner, it's over to you.

[Garth Turner, Conservative, Halton, ON]

So you mostly receive reports and review them. You don't do investigations per se. Is that correct?

[Sandra Wing]

We receive, analyze, and disclose, but we're not an investigative agency.

[Garth Turner, Conservative, Halton, ON]

Based on what you receive and what you analyze, can you conclude that there is terrorist activity in Canada?

[Sandra Wing]

Our focus is on terrorist activity financing. We have made disclosures in relation to terrorist activity financing.

[Garth Turner, Conservative, Halton, ON]

Can you elaborate?

[Sandra Wing]

When we have reasonable grounds to suspect that the transactions would be relevant to the prosecution or investigation of threats to the security of Canada, including terrorist activity financing, we must disclose this to the RCMP and CSIS--and we have.

[Garth Turner, Conservative, Halton, ON]

Can you give us an idea of the nature of the terrorist threat you've determined?

[Sandra Wing]

I apologize that I haven't looked at all case disclosures that we have produced--they're very tactical in nature and focused--with a view to analyzing them across a broad spectrum. The threat question is probably more appropriately posed to CSIS.

On the financing side, we have seen patterns of transactions very similar to those in money laundering, but for much smaller amounts.

[Garth Turner, Conservative, Halton, ON]

Okay, but whereabouts are they in the economy? You mentioned a whole range of areas that you monitor. Is there anything we should know about the focus of your activities in that regard?

[Sandra Wing]

Yes, but I think you're asking me to comment on the scope of terrorist activity financing in Canada.