Finance Committee on Oct. 31st, 2006

[Mike Wallace, Conservative, Burlington, ON]

Another question arises because I'm new to this legislation. I didn't understand what a “politically exposed person” was. What does that mean in this legislation?

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

Like you.

[Mike Wallace, Conservative, Burlington, ON]

Well, I'm often politically exposed, but I have nothing to do with money laundering. I want to point that out right now.

If somebody could answer that for me, I'd appreciate that. It's in here, but I don't understand it.

[Lynn Hemmings]

There is a definition under the act. Essentially, it's any foreign public official who has access to public funds.

[Mike Wallace, Conservative, Burlington, ON]

That's a foreign official, but a domestic official is not included in this act. Is that correct?

[Lynn Hemmings]

That's correct.

[Mike Wallace, Conservative, Burlington, ON]

Just as a general question, is money laundering a major issue for Canada? Is it an issue that the RCMP have been following up on? Are we really trying to accommodate both FINTRAC, the requirements internationally, and the Auditor General's report that we had in 2004? Just give me a sense of where we are in terms of the problem.

[Diane Lafleur]

I don't have numbers for you in terms of the scope of the problem, because by its very nature, this activity is happening under the table, if you will. But the indication that we have from some international studies is that there is a significant international and global problem in respect of money laundering. Money tends to flow to the point of least resistance. If our regime is not as robust as our neighbour's regime, then we become vulnerable to abuse.

[The Chair, Conservative, Brian Pallister]

Thank you very much, Mr. Wallace.

Committee members, I have four more members who wish to ask questions. I have also received notice of motion from Ms. Wasylycia-Leis, and a point of order from Monsieur St-Cyr that will be dealt with afterwards. I will go with five-minute rounds, but will leave time for dealing with those two issues at the end.

We'll continue with Mr. McKay now, for five minutes.

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

Thank you, Chair.

This legislation is at the height of 35,000 feet, and I want to bring it down to my riding. My riding is possibly the most multicultural, multi-ethnic riding in the country.

[John McCallum, Liberal, Markham—Unionville, ON]

Apart from mine.

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

Well, second only to yours.

There isn't a conflict on the face of the globe that doesn't have groups of people living in my riding. If you want to go to Sri Lanka, I have both sides of that conflict. If you want to go to Afghanistan, Iraq, or Sudan, again, I have all sides of the conflicts, etc.

It would be naive of me to assume that fundraising doesn't occur in my riding. It would also be naive of me to assume that the lawyers in particular, from a variety of ethnic groups, aren't implicitly or complicitly involved in “suspicious transactions”, shall we say, where things would be of interest to various law enforcement agencies.

What I'm having difficulty understanding is how the average lawyer in Scarborough in a small practice, in a one- or two-person practice—we're not talking McCarthy Tétrault here, where lawyers really do know their clients—is possibly going to comply with this legislation. A lot of these folks just walk in off the street. They're buying a house--but the proceeds are just being parked for the purposes of funding something else at some other date.

How does this proposed legislation make a whit's worth of difference to that kind of transaction?

[Diane Lafleur]

A number of things would impact that small law firm. The first, and I think the most important, from that example is that law societies on their own have imposed a cash prohibition rule on lawyers so that they cannot accept large amounts of cash. They can't accept more than $7,500 in respect of any single transaction. That is a huge vulnerability when you're talking about money laundering, which is moving large amounts of cash.

As well, lawyers are now required to keep separate ledgers in respect of what cash they receive and to attest to the veracity of that ledger. The law societies now make that part of their ongoing audits. When they go into a law firm to audit the books of those law firms, they look at that separate accounting of cash transactions. That is an important step forward in terms of addressing a key vulnerability.

The other point is that those who are doing real estate transactions or any financial transaction in respect of their clients will have had to ID their clients so that they know who it is they are dealing with. If there is an investigation subsequently, law enforcement, going through the Lavallee process that we've talked about, will know that there are actually good files on these clients.

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

Even on the issue of ID, which I'm sure you've been following, lawyers feel somewhat vulnerable. Anybody can walk into a law firm, produce ID saying, for instance, “I'm Diane Lafleur,” and put a $150,000 mortgage on your house--not, of course, with your knowledge. Lawyers are having difficulty keeping track of that. In fact, there is some legislation before the Ontario legislature.

So I'm somewhat suspect of the ID part. And in terms of the $7,500 limit, well, here are three or four $7,500 cheques, with a $5,000 cheque from so-and-so. Then you close the transaction and, bingo, after the lawyer is finished, they pay down the mortgage by $50,000.

I don't see how this is going to help with those kinds of issues.

[Diane Lafleur]

I think an important--

[The Chair, Conservative, Brian Pallister]

We don't have time for a response.

We'll move on to Madam Wasylycia-Leis.

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

Thank you very much.

I'd like to go back to the Senate report for a moment and to whether or not this proposed legislation covers all of their concerns.

The first question I have pertains to the second Senate recommendation, which would have the legislation require dealers in precious metals, stones, and jewellery to report suspicious transactions above $10,000 to FINTRAC. Is that included in this bill?

[Diane Lafleur]

As indicated in the consultation paper that the Department of Finance issued last year, that is something we will be moving forward on. It will be done by way of regulations.

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

Why not in the bill?

[Diane Lafleur]

It's just a question of how the legislation is currently structured. We're working with an existing piece of legislation, so those kinds of additions are made by way of regulations.

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

So is the Senate misinformed when it calls for an amendment to the actual act?

[Diane Lafleur]

It's just a technicality in that it's something that is done by way of regulations rather than legislation, but it's something that we're fully in agreement with the Senate on.

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

Okay.

Secondly, going back to the question of law societies, as I understand it, this legislation respects the court case that exempts the law society from the terminology and provisions of the bill, but the question that I think the Senate committee is raising and others have raised is whether or not there is some reporting obligation on the part of the law society. That was specifically mentioned in the Senate report, and I'm wondering if the bill makes any attempt to require that kind of reporting from the legal community.

[Diane Lafleur]

The bill carves out the legal profession from reporting obligations.

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

It carves them out.