Finance Committee on Nov. 2nd, 2006

[Horst Intscher]

Are we talking about foreign financial intelligence units, or law enforcement?

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

I'm thinking about law enforcement agencies. You gather the information you're giving to prosecuting authorities. Are there times when you actually ask for information from them in doing your original work?

[Horst Intscher]

No, we are not permitted to query police. We have access to some of their databases, which record factual information--Mr. Brown has been convicted three times for X, Y, or Z--but we're not actually authorized to query the investigators as to whether they know anything more about this person or the next person.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

Thank you.

What about real estate? Do you track real estate? There are cases in which people buy real estate to do illegal activities.

[Horst Intscher]

Real estate dealers, agents, and brokers are covered by the legislation and are required to report suspicious transactions.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

Real estate, then, is part of your mandate.

Finally, can you give us a sense of how this change makes it easier? In the international scope, in terms of doing the job, where is Canada now--FINTRAC specifically--versus other countries' agencies? Does this move us up the scale?

[Horst Intscher]

We're already at the top of the scale. We're among the top three or four organizations like ours in the world. This will move us up another notch or two, but others are also moving up. Many of the things that we're proposing to undertake in this legislation are also being undertaken by other organizations; as the international standards rise and new laundering methods are discovered, all of us are having to strengthen and expand the coverage of the legislation.

[The Chair, Conservative, Brian Pallister]

Thank you very much, sir.

We continue with Mr. St-Cyr.

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

Thank you, Mr. Chair.

I'm going to continue by talking about a very important concern, privacy. I'm pleased to learn that this is also one of your concerns and that you really believe in it.

I wanted to know what measures have been put in place, or will be put in place, to ensure that no non-relevant information is disclosed, or to ensure no offences are committed under the act.

In fact, the entire operation of your organization is designed to ensure compliance with the money laundering act and with legislation related to that offence. We're not content to say that money laundering is prohibited, hoping that people will obey the act. Ways have to be found to detect offences.

The phenomenon is the same as regards the provisions of the original bill and those added in this bill. That's not at all saying that it's prohibited to violate privacy and that harsh penalties are provided for. You still have to put mechanisms in place to determine whether offences are being committed.

Are there any mechanisms? Will there be any? Have any cases of prohibited disclosure already been discovered? Has anyone been convicted for that offence?

[Horst Intscher]

The short answer is no, there have not been any convictions and there have not been any allegations of improper disclosure, and to the best of our knowledge--and our knowledge is very good on this point in our organization--there has been no improper disclosure of information from FINTRAC. We have put in place extensive and exhaustive measures to satisfy ourselves that casual disclosures or informal disclosures or nudge-nudge, wink-wink disclosures cannot take place.

A disclosure from FINTRAC can only occur formally and in written form. It can only be made after it is vetted by a disclosure committee, which consists of the senior executives in the organization and is chaired by me, and in this process it is challenged and tested and passed through our legal services to satisfy them as well as us that the information to be disclosed is being disclosed properly and that there are sufficient reasons to disclose it.

I won't go into all the details and technical measures we have put in place, because that would make it easier for someone to circumvent them, but we have a very comprehensive and stringent access control system. It includes biometrics, and we have logging systems that show who accesses what information so that we can monitor and review.

We log the comings and goings in the centre. All the analytic information--in other words, the sensitive personal information--is contained in a vaulted, high-security area of our premises. Not all employees have access to it; only the people who work there have access to the analytic unit, and a few other senior executives like myself. Even I don't have access to their analytic computer system. There's no need for me to have access to it, so I don't have it.

[The Chair, Conservative, Brian Pallister]

We'll continue with Mr. Del Mastro now for three minutes.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you, Mr. Chair.

I have a couple of quick questions. The example you've shown us illustrates the complexity and certainly the ease of moving money around these days; it is quite fluid.

One thing that kind of strikes me from the graph is that this was pre-empted by a tip, albeit maybe an ambiguous tip. But it was still something that put you onto the case.

Also you referred to a sniff test, that something didn't pass the sniff test. The other thing that's on here is that transactions over $10,000 are all reported to FINTRAC. There must be millions of those a day.

[Horst Intscher]

Not millions a day, but there are millions a year. There are about seven million a year of those transactions reported, and similarly about seven or eight million wire transfer reports of $10,000 or more.

We've invested quite heavily in technology, and we've trained our analysts very extensively. Through a combination of those efforts, we are able to sift through a lot of that information to match it, contrast it, look for anomalies, and so on.

Of course, our work is easier if there has been a suspicious transaction report filed. Then there's already a basis for suspicion. Or if we have voluntary information from the police, it's easier. But in many instances, we discover these ourselves, even without others' reported suspicion.

There's also anomalous behaviour, and I'll give you kind of a hypothetical example to illustrate this. If a business purports to be an import-export business and it's regularly making wire transfers in and out of the country in sums that look reasonable in terms of invoice settlement—in other words, they're not rounded sums—they wouldn't attract our attention.

But if a business is identified, say, as a fast food franchise and it's making large cash deposits, this also is not unusual; it happens regularly. But if three or four times a month that same fast food franchise makes substantial wire transfers out of the country to Malaysia, Indonesia, Dubai, or somewhere like that, it would catch our attention. It would catch our attention in two ways. One is that this kind of transaction behaviour is not characteristic of that kind of business. The other is that the money is probably being transferred to jurisdictions that are either of concern to us in money laundering terms or have very poor money laundering controls.

[Dean Del Mastro, Conservative, Peterborough, ON]

Do I have time?

[The Chair, Conservative, Brian Pallister]

No, you don't have time.

Thank you very much.

We'll continue with Mr. Pacetti.

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

Thank you, Mr. Chair.

Welcome to our world, Mr. Del Mastro.

Continuing on what I was asking before in my previous line of questioning, I think you were answering Mrs. Ablonczy's question or Ms. Judy Wasylycia-Leis'.

You say you can't deal directly with the law enforcement agencies or organizations?

[Horst Intscher]

We deal with them directly all the time, but not on specific cases. We are prevented from discussing a case beyond simply saying, here are the transactions we have found, here are the people who are involved, and so on. The information that we're authorized to disclose, we could also say orally to them. But we couldn't, for example, say, you should be looking right over here; this is the really—

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

Why can't you do that? I understand the privacy issue. But are we protecting the criminals? Can we do it so you're able to do it? Why do we have to beat around the bush?

[Yvon Carrière]

Part of the privacy protection measures incorporated in the bill is this idea that FINTRAC operate at arm's length from those receiving information from it.

The sources of information that FINTRAC can access are provided for in great detail in the act. So as the director mentioned, we can access data banks maintained by the federal or provincial government for law enforcement purposes. But aside from those data banks, we can't seek or collect information directly from members of law enforcement. This I think is part of the balance that was struck between the needs of law enforcement and the privacy concerns.

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

You're still able to work within those parameters, from what I understand.

[Horst Intscher]

Where we have a more frequent contact with them, it involves discussion about sanitized or generic issues that illustrate some difficulties arising from their having failed to recognize the value of a particular corner, or—

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

This is quite a complex example, but there are simple transactions where a criminal may conduct only one or two transactions a year and the law enforcement agencies may need your help. Is the act inhibiting your ability to help? I guess I'm focused more on the smaller transactions.

[Horst Intscher]

No, it isn't. When law enforcement is looking for help, they will generally provide a voluntary information report to us. If we have information we judge to be relevant—we make the determination whether it's reasonable to suspect relevance in an investigation—we are then required to make the disclosure. We do this a lot. Probably 65% to 70% of our case disclosures involve some voluntary information that triggers our investigation and identifies the recipient.

[The Chair, Conservative, Brian Pallister]

Mr. Wallace.

[Mike Wallace, Conservative, Burlington, ON]

With the changes, your organization will be able to sanction fines. Have you started getting ready to issue fines? Have you set out a schedule of what constitutes a fine, what attracts a fine, and all those things?