Finance Committee on Oct. 31st, 2006

[Diane Lafleur]

It carves them out in respect of transactions.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

That's my point.

I think the hope was that there could be some way to keep the reporting aspect, to keep some reporting element in the bill, while carving out the law society in terms of the broad provisions around terminology and provisions of the act.

[Diane Lafleur]

I'm not quite sure what you're--

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

I'm referring to page 14 of the Senate report:

The federal government complete its negotiations with the Federation of Law Societies of Canada regarding the client-identification, record-keeping and reporting requirements imposed on solicitors under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

[Diane Lafleur]

I don't want to read between the lines too much here, but my reading of that is that there's a gamut of issues on which we've been negotiating with the law societies. Those touch on record keeping, client ID, and reporting requirements.

I don't think this recommendation is specifically saying there should be reporting requirements. I think it's saying, please come to an agreement on what you're going to do about reporting requirements. At least that's how I read it, but I don't want to speak for the Senate.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

I was reading it the other way, that in fact since we are carving out the law society, there still needs to be some meaningful reporting.

[Diane Lafleur]

My reading of that next sentence, which says, “These requirements should respect solicitor-client privilege, the Canadian Charter of Rights and Freedoms,” and so on, would suggest to me that actually the reporting should be carved out.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

So even though keeping the law society protected in terms of client confidentiality, you don't think there needs to be some way for us as a government to know, in an indirect way or a subtle way, what transactions are going on. I think that's what some people are calling for, that there be some reporting requirements that don't breach the agreement with the lawyers but allow for some knowledge to be passed on.

[Diane Lafleur]

The real challenge for us is to have a regime that is both effective and constitutionally sound. So we're having to walk that line.

Ultimately, though, if a lawyer believes they have taken part in or have witnessed a transaction that is suspicious, that they don't feel right about, they can voluntarily report to FINTRAC, if they want. They're simply not required to, because of the constitutional challenges.

[The Chair, Conservative, Brian Pallister]

Thank you very much.

We'll continue with Mr. Del Mastro now.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you, Mr. Chair.

We've certainly seen reports in the U.S. media, be they right or wrong, that somehow Canada is a haven for terrorist activities and money laundering. One of the things you outlined in your speech this morning, Madam Ablonczy, was specifically that the measures we've taken “will increase the value of FINTRAC disclosures, ultimately leading to more investigations and eventual prosecutions.”

So it would seem to me that, in lieu of this bill, essentially what we're saying is that there may be some things falling through the cracks, if not pouring through the holes. Could you comment on that a little bit?

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

That concern is exactly what motivated the FATF to upgrade their recommendations and their special recommendations so that member countries would have a strengthened regime, given some of the innovations that the criminal element has come up with. By putting those recommendations into our own regime through this act, we will again be in the top tier of international countries fighting terrorist financing and international money laundering. So the whole purpose of this bill is to make sure that any cracks are solidly filled in with cement.

[Dean Del Mastro, Conservative, Peterborough, ON]

Ms. Lafleur, I saw an example of a recent investigation that was followed up by FINTRAC. I agree with Mr. McKay that it's important we bring this down to the people's level so they can understand exactly what we're hoping to accomplish with Bill C-25.

The example I saw involved some 11 or 12 companies with electronic transfers that went both internationally and domestically and chased each other around. But when it was actually put on a flow chart, it looked like something a computer engineer might use in designing a computer system—very complex and multi-faceted.

In today's electronic age, how difficult is it for them to do that?

[Diane Lafleur]

When you say “for them”, do you mean the criminal element? Not being in that business myself, I'm not sure if I can answer that question. I think you're right that crime is getting increasingly sophisticated. It certainly is borderless when we're talking about terrorist financing and money laundering. What's really important is to ensure that we have the legislative and regulatory provisions in place to stay one step ahead and adequately resource the people who are on the front lines of this fight in law enforcement, FINTRAC, and the other partners. That's what we've done.

[Dean Del Mastro, Conservative, Peterborough, ON]

When we talk about money laundering and so forth, there may sometimes be a perception that money is being handed around in envelopes. But in reality these types of sophisticated criminals are actually making electronic transfers into shell corporations, some of which may not even really exist or have so much as an office. It's changed quite a bit, hasn't it? It's really not intensive work. They may be planning it, but you're not talking about any money ever actually touching anyone. It's all electronic.

[Diane Lafleur]

Some of it is, for sure, and it is constantly changing. That's why the FATF devotes so many resources to what it calls its typologies working group, which tries to identify new trends and techniques for money laundering and terrorist financing. It tries to identify vulnerabilities and see if there's more that needs to be done to address them.

[Dean Del Mastro, Conservative, Peterborough, ON]

Can you talk about the cooperation of the Canadian chartered banks? I know there's a propensity sometimes amongst politicians, if not the media, to beat up on the chartered banks, but they've been a pretty solid partner in helping us combat this type of illegal activity.

[Diane Lafleur]

Absolutely. They're on the front lines of this fight, and they are absolutely willing partners in this fight. They understand the risks and vulnerabilities of not taking this seriously. It's a reputational issue for them as much as anything else, so it's real bottom-line dollars and cents. We work very closely with the Office of the Superintendent of Financial Institutions, the prudential regulator, and the individual financial institutions to ensure that we develop a regime that makes sense, conforms to some of their business practices, and is solid.

[The Chair, Conservative, Brian Pallister]

Thank you very much, Mr. Del Mastro.

We'll conclude with Mr. Pacetti.

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

Thank you, Mr. Chairman.

I'm not sure if you had a chance to verify or give me an answer on the question I had.

[Lynn Hemmings]

The expanded information and disclosures are in clause 27.

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

And clause 26 as well?

[Lynn Hemmings]

Yes.

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

Okay. That leads me to my next question.

I was saying that money laundering techniques and terrorist financing techniques were two different ones. FINTRAC would have to work more closely with CRA. I remember that when FINTRAC was before the committee in the last parliamentary session, there wasn't that much cooperation between the two because some of the information couldn't be transferred from one to the other.

In clause 26 you seem to provide the opportunity for CRA to get more information, but then subclause 26(4) mainly speaks about registered charities, and again that relates mainly to terrorist financing. So are we okay with that?

[Diane Lafleur]

I'll let Monsieur Jalbert—