Thank you, Mr. Chair.
I'm very pleased to be here today to discuss our audit of Canada's regime to combat money laundering and terrorist financing and how it relates to Bill C-25. We completed that audit two years ago.
During our audit we concluded that Canada's anti-money-laundering regime is comprehensive and generally consistent with international standards; however, we also identified a number of factors that impeded the regime's performance. Some factors could be addressed with the existing legal framework; for example, better coordination among the federal agencies responsible for implementing Canada's anti-money-laundering and terrorist policy, and better feedback to reporting agencies on the use of information they supply to FINTRAC.
Other factors involve issues that will likely require changes to legislation.
Foremost among these are restrictions on information sharing. To safeguard privacy rights, the existing legislation limits the information that FINTRAC may disclose to so-called “tombstone” data: when and where the transactions took place, the value of the transactions, the account numbers, and the names of the parties involved.
We found that these restrictions limit the value of FINTRAC disclosures to law enforcement and security agencies.
Law enforcement agencies told us that the “tombstone” information they receive is too limited to justify launching investigations. The exception is when a disclosure is related to an on-going investigation in those cases, the information disclosed can help corroborate findings or provide new leads.
An additional limitation on the effectiveness of the National Initiative is the exemption from reporting requirements that lawyers obtained as a result of successful legal challenges to the legislation.
Finally, we found that unregulated reporting entities, including money service businesses and foreign exchange dealers that are not licensed and do not have a formal body overseeing their activities, posed a significant compliance challenge. Indeed, there are no reliable figures on how many such firms are out there, so ensuring compliance with reporting requirements is obviously a difficult task.
Bill C-25 affirms the lawyer's exemption from reporting requirements. Our understanding is that the government is currently discussing with law societies compliance requirements by lawyers. The bill provides for information sharing and enforcing compliance by unregulated reporting entities. It will increase the type of information that FINTRAC can disclose to law enforcement if it suspects money laundering or terrorist financing.
Specifically, the legislation will now allow FINTRAC to disclose the grounds that led it to suspect money laundering or terrorist financing. The bill will also require registration for money service businesses, a recommendation of the Financial Action Task Force on Money Laundering, which is the international standard-setting body for efforts against money laundering and terrorist financing.
Several countries, including the United States and the United Kingdom, already require these businesses to register.
In short, while we have not studied Bill C-25 in detail, it appears to deal with the key findings reported in our audit of November 2004. We cannot say whether the proposed changes will be sufficient or whether they will effectively resolve all issues.
Further, it is not our role to comment on policy decisions contained in this bill.
This, Mr. Chairman, completes my opening statement. I'd be pleased to answer questions when the time comes.