Finance Committee on Oct. 31st, 2006

[Pierre Paquette, Bloc, Joliette, QC]

Thank you.

[The Chair, Conservative, Brian Pallister]

Thank you very much.

Ms. Judy Wasylycia-Leis, you have seven minutes.

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

Thank you, Mr. Chairperson.

It's nice to see you, Madam Parliamentary Secretary, in this new role here. We could probably quickly introduce a lot of motions and win them, because you can't vote when you're over there. Right?

I have several issues to raise. First, I know the bill was probably drafted before the Senate committee completed its final report. I've been trying to find out from Senator Grafstein if the bill reflects their concerns. When we called his office a couple of weeks ago, they still hadn't studied the bill.

I'm wondering if you're able to indicate to us what parts of their report are included in the bill, what's not covered, and if there are areas for amendment, given the timing of the two pieces.

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

That's a good question.

I did meet with Senator Grafstein, who is the chair of the committee studying this matter. He indicated that the provisions of the bill pretty much reflect the recommendations of the Senate and the Senate study.

I'll ask the officials to indicate if there are any areas where the two aren't congruent, but I did have a comparison done and there seemed to be almost 100% congruency, which is pretty good.

Are there any gaps that you're aware of?

[Diane Lafleur]

There are no significant gaps. I would only add a point of clarification.

A couple of the recommendations weren't necessarily legislative in nature. They had to do with funding for FINTRAC and the RCMP specifically. As Ms. Ablonczy has already stated, budget 2006 provided funding for FINTRAC, CBSA, the Department of Justice, and the RCMP in order to meet existing pressures and meet the new requirements that will be imposed on those departments and agencies as a result of Bill C-25.

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

I appreciate and accept the answer. I simply wondered if it would be useful for us to have a representative of the Senate committee appear before us to help us talk about the issue in the context of this bill.

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

That would be up to the committee.

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

Okay. Perhaps we'll propose that later on.

The issue that's been addressed several times, which the law society has raised.... As I understand it, this bill still doesn't accommodate their concerns and the concerns of lawyers in terms of law firms having to report either suspicious transactions or large sums of money passing through their offices, mostly through their trust accounts. I guess what the legal people of the law society is asking for is an exclusion from the bill in those terms. I wonder if there is any way to accommodate their concerns in this bill.

How do you feel about the issue?

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

The legal profession has accepted the need for inclusion in this bill under the terms of the Lavallee decision. As you know, lawyers are already prohibited by law societies from accepting more than $7,500 in cash from any client, so the political profession is well aware of the need to be vigilant in this area. Any disclosure by lawyers is covered by the Lavallee decision and is accepted by the legal profession, so I don't think at this point there's a problem in the way this is structured vis-à-vis the legal profession.

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

I'm not very familiar with the issue. Joe Comartin has been following it, but he's away right now. I'm using as a basis, unfortunately, newspaper articles that suggest that Canada's lawyers are ready to put up a big fight if in fact they are forced to report large cash payments from their clients.

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

The fact of the matter is that they're not required to report; they're only required to ensure that they know who their client is and to be aware of the background. Under certain circumstances, they may be asked for that information. Those circumstances are set out in the Lavallee decision of the Supreme Court, which the legal profession accepts. So the response to that article would be based on a misunderstanding, because there's no requirement to report.

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

The other concern that has been brought to my attention has, of course, to do with foreign access to personal information. I guess this has been raised in light of the U.S. program under which the Bush administration has access to international banking records through SWIFT. I guess the question here is, is there anything in this bill that deals with that concern, or is that an area we should be looking at?

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

That's an excellent question, and we are very anxious to make sure that privacy concerns are met and protected to the greatest extent possible.

The fact of the matter is that there is a very stringent protocol for information sharing. Information can only come from FINTRAC, to begin with, under a court order, and any information sharing can only be with other countries where we have a memorandum of understanding. And in every case, the request will be personally vetted by the minister. So there are some fairly stringent protocols in place for information sharing.

I don't know whether the officials can add anything to that, but we want to make sure this information is very closely guarded and given out on only a very stringent basis.

[The Chair, Conservative, Brian Pallister]

Thank you very much, Madam Wasylycia-Leis.

We continue now with Mr. Dykstra.

[Rick Dykstra, Conservative, St. Catharines, ON]

Thank you, Mr. Chair.

I would like to thank the witnesses today. Ms. Ablonczy, you did a great job on the presentation. I appreciate it.

One of the first enhancements that was completed through, I guess, the updating of this act is the information sharing between the Financial Transactions and the Reports Analysis Centre of Canada.... I wonder if you can expand a little bit on how that relationship is actually enhanced between FINTRAC and other domestic and international agencies.

[Diane Lafleur]

Essentially, what the bill provides for is that FINTRAC, in making disclosures to law enforcement and some of its partners, is proposed to be allowed to share additional information to provide a bit more context for why it is making those disclosures. Therefore, it is hopefully helping law enforcement in its determination as to whether an investigation is required and how to initiate that investigation. So it's to provide more context, but again, we've worked very closely with our partners to ensure that the scope of that information is still within the realm of what is onside with privacy legislation.

[Rick Dykstra, Conservative, St. Catharines, ON]

I guess the second part is creating a registry for money service businesses. I know for a lot of folks in this country, when they hear the word “registry”, their heart skips a beat. Could you put into context what that registry is going to do and what its responsibilities are?

[Diane Lafleur]

The registry is intended to help FINTRAC with its compliance efforts. FINTRAC uses a collaborative approach to compliance.

I should just back up for a second and clarify this a little. The FATF standards require that each member have either a licensing or registration scheme for money services businesses. What we are proposing is a registration system, not a licensing system, so it's not a regulatory system. The idea is to essentially have a better understanding of who the money services businesses are out there.

I don't think you would be surprised if I say there are literally hundreds of thousands of these businesses out there. Some are very large and some are extremely small. It is always a challenge to try to communicate obligations for some of the smaller reporting entities. So this is going to help FINTRAC with its outreach in terms of reaching the smaller organizations and making them aware of what their obligations are under the law, how they can be compliant with the obligations, and doing that in an effective manner.

[Rick Dykstra, Conservative, St. Catharines, ON]

The important part of this is registration, not regulation.

[Diane Lafleur]

That's right.

[Rick Dykstra, Conservative, St. Catharines, ON]

The third change is that the client identification measures are being enhanced. What does that do exactly, from a practical application perspective?

[Diane Lafleur]

A few things are being done in terms of enhanced client ID and record keeping, and the focus really is on higher-risk situations. Basically, in terms of financial institutions, when they are engaging in correspondence banking relationships, they will have to engage in enhanced due diligence in order to know who they actually are doing business with at the other end of the line. As well, there will be an enhanced monitoring of foreign politically exposed persons, as required under the Financial Action Task Force--

[Rick Dykstra, Conservative, St. Catharines, ON]

Excellent.

The fourth and most significant piece of enhancement to the legislation is the administrative and monetary penalty system to better enforce compliance with the act. Could you also comment on how the enhancement is actually better than what was there before?

[Diane Lafleur]

As the parliamentary secretary mentioned, right now, basically FINTRAC has a big hammer, and that is criminal sanctions where there is non-compliance. Consistent with its more collaborative approach to compliance, it's viewed that there should be a more graduated system of penalties. Sometimes non-compliance is not necessarily willing non-compliance. Sometimes you don't understand your obligations and you do want to be fully compliant, but you just need a bit more information. Sometimes it's somewhere in between the two. But you want to have something in between essentially doing nothing and going to criminal sanctions, so this will allow for more tools in the tool kit, if you will, in terms of compliance.

[Rick Dykstra, Conservative, St. Catharines, ON]

One of the questions that continue to come up, both when you present and when we talk about this, is the whole issue of privacy. A lot of folks in the country would think that criminals don't have any need or any right to privacy; others would suggest that they do. At least from my personal experience over the last little while, it seems that one of the things that FINTRAC is very concerned about is the whole issue of privacy. I'm wondering if you could take me through the differences between a criminal who has been convicted and the privacy that FINTRAC is trying to pay attention to.