Finance Committee on Nov. 7th, 2006

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

Mr. Chairman, clause 8 of the bill, for those of you who are following in the bill, has a new proposed subsection 9.4(3) containing a definition of “correspondent banking relationship”. This definition refers to certain services provided in the context of correspondent banking relationships, including the provision of foreign exchange services. Since most foreign exchange transactions between banks are conducted outside the correspondent banking relationship, clause 8 would be amended by this proposal to remove the reference to “foreign exchange services”, because they mostly take place outside of the correspondent banking relationship.

The definition is also amended to refer to a relationship created by a correspondent banking relationship.

So this is quite technical, but I think it makes sense. I see nods of agreement.

[The Chair, Conservative, Brian Pallister]

Is there a consensus in support of amendment G-2, as it also includes the provisions proposed in L-2?

Someone has to move the amendment.

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

I so move.

(Amendment agreed to on division [See Minutes of Proceedings])

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

Amendment L-2 is withdrawn.

[The Chair, Conservative, Brian Pallister]

Amendment L-2 is withdrawn, so we move to L-3.

Mr. Pacetti.

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

What we're trying to accomplish here by replacing line 21 on page 6 with “section 2 of the Bank Act and for authorized foreign companies within the meaning of section 2 of the Insurance Companies Act” is to address a problem that insurance companies have. They want even foreign companies to be included within the meaning of the Insurance Companies Act. They felt we weren't being inclusive, I believe, but I have to check my notes.

Could we ask the officials?

[The Chair, Conservative, Brian Pallister]

Would you like to speak to this, Madam Lafleur?

[Diane Lafleur, Director, Financial Sector, Financial Sector Policy Branch, Department of Finance]

Sure. Briefly, I think what we would say is we would be prepared to accept this motion with one small change. Part (a) is acceptable as it makes a necessary technical change, in our opinion.

But on the last line of that motion, we would ask that it now read “with the requirements of sections 6, 6.1 and 9.6”. These refer to some of the requirements that are put on insurance companies in respect of their foreign operations. Proposed section 6 covers the record-keeping requirements, and proposed section 6.1 is the client ID requirement. Not having proposed section 6.1 in here would remove a client identification requirement on these companies, which is very important.

[The Chair, Conservative, Brian Pallister]

Mr. Pacetti, a response to the suggestion?

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

Yes, thank you, Mr. Chairman.

Can you explain why the client ID requirement is necessary?

[Diane Lafleur]

I'll ask Mr. Jalbert to answer that.

[Vincent Jalbert, Senior Project Leader, Financial Crimes - Domestic, Financial Sector Division, Financial Sector Policy Branch, Department of Finance]

As part of the international standards, the Financial Action Task Force actually requires that financial institutions and intermediaries in the country have client identification and record-keeping requirements for their foreign branch subsidiaries.

The client identification portion is important as it allows the institutions to determine whether the activities of their clients may be suspicious, or may not be consistent with their profile. It can help them detect and determine suspicious behaviour and, eventually, potentially report transactions, so it's important to detect. It's part of the know-your-client practices.

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

I don't have anything here in my notes today, but does the rest of the bill require identification? I think it does, is that right?

[Diane Lafleur]

Yes, it does.

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

Okay, that's fine.

That's fine by me.

[The Chair, Conservative, Brian Pallister]

[Inaudible--Editor]...or anyone else can propose to amend. I think you're simply saying that at proposed section 6.1, the last line--

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

I have no problem adding in paragraph (b) the--

[The Chair, Conservative, Brian Pallister]

Someone else has to do it.

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

I'll do it.

[The Chair, Conservative, Brian Pallister]

Mr. McCallum then, so amended.

Monsieur St-Cyr.

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

I agree, but this is not an amendment, as there is nothing to amend. It's a matter of replacing 6, 6.1 and 9.6 with the same. Basically, it's question of deleting paragraph (b).

[A member]

6.1 was added to paragraph (b)...

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

Yes, but it's already in the bill.

[Diane Lafleur]

That's right.

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

Therefore, the purpose of Mr. McCallum's amendment is to delete paragraph(b) from the amendment.