Finance Committee on April 29th, 2010

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

We are.

Thank you, Chair, for that helpful comment.

[The Vice-Chair, Liberal, Massimo Pacetti]

It's part 14.

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

With respect to the change in Quebec legal counsel, what's the issue there?

[Rachel Grasham, Chief, Financial Crimes - Domestic, Financial Sector Division, Financial Sector Policy Branch, Department of Finance]

It's actually just a housekeeping measure. The Department of Justice had done a review and noticed that there were some inconsistencies with the existing measures in the legislation. This was an opportunity to make those housekeeping changes. It doesn't change anything in the legislation or the intent.

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

So for the purposes of the reporting and the purposes of disclosure, what's the difference between a member of the Law Society of Upper Canada and a member of the Quebec Bar?

[Rachel Grasham]

There is no difference in terms of what the legislation says. As I said, there was a definitional difference between the English and the French. Currently, although the legal profession is included in the act, those provisions are not enforced because of an injunction dating back a number of years.

So there is no effect.... As I said, it's very much a definitional issue.

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

So legal counsel in Ontario and legal counsel in Quebec are treated exactly the same for the purposes of this legislation?

[Rachel Grasham]

Yes, that's correct.

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

Concerning the changes to the legislation, the notes say:

Canada has a comprehensive regime to combat money laundering.... Currently, we are not able to take legally enforceable measures to protect the financial system from threats emanating outside of Canada.

Could you give me a description? What does this actually mean? Give me an example of it.

[Rachel Grasham]

Right now, for example, when the Financial Action Task Force on Money Laundering, which is the international standards-setting body, draws attention or issues a concern regarding a particular jurisdiction, it will call on its members to take graduated proportionate measures against that jurisdiction.

There is nothing in the act right now that allows Canada to take legally enforceable measures. That is a gap in our system that these amendments would rectify.

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

For example...?

[Rachel Grasham]

For example, the FATF might call on members to conduct enhanced customer identification on transactions between its members and a particular jurisdiction.

Right now the legislation includes all those sorts of customer verification issues as a matter of course, but there is no way for the minister or for the government to say, we want you to enhance them vis-à-vis that particular jurisdiction. It might be, for example, that if somebody who wants to conduct a transaction sends however much money to that jurisdiction, we might want to say “produce your ID again”, just to verify, or there might be a provision for having a bank manager verify the transaction to make sure it's clear that it's a legitimate transaction.

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

To pull out a random example, would this apply to money either coming from or being sent to Pakistan or Afghanistan? Would that attract an enhanced attention from the financial institution?

[Rachel Grasham]

Right now there is a risk-based approach, so that if a bank, for example, thinks there is an enhanced risk in dealing with a particular customer, the legislation calls for enhanced measures.

But it's left up to the discretion of the bank. What these amendments would do would allow the Minister of Finance to say, now I'm telling you that there is an enhanced risk with this jurisdiction.

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

So you're taking away the discretion of the bank manager or the institution.

[Rachel Grasham]

Yes. This enables the minister to safeguard the Canadian financial system by identifying where there is a particular enhanced risk.

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

And can the minister do this based upon any code? Is it entirely at the discretion of the minister, in other words?

[Rachel Grasham]

The legislation has two triggers in it. One is when there is a call by an international body, such as the Financial Action Task Force or perhaps the United Nations. It would be a situation in which a particular jurisdiction has been deemed to be high-risk because it lacks effective or sufficient anti-money-laundering or anti-terrorist financing measures: it hasn't criminalized money laundering, it hasn't criminalized terrorist financing, it doesn't have a financial intelligence unit, it doesn't require mandatory suspicious transaction reporting—all of those things that make up the comprehensive set of standards that most jurisdictions have agreed to implement.

That's the first trigger. We would take from the Financial Action Task Force, for example, a sense of the gaps in that regime. For example, the FATF does comprehensive evaluations of jurisdictions, and we would see that.

The other trigger is a domestic trigger: maybe the FATF hasn't come out with a call, but there is a jurisdiction of concern, and Canada, maybe with a number of other like-minded jurisdictions, has decided that given the need to safeguard our financial sector, we should take action independently.

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

So absent this legislation, the individual institution or the manager can simply ignore the minister.

[Rachel Grasham]

That's correct.

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

Okay, thank you.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Mr. McKay.

Mr. Mulcair.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you, Mr. Chairman.

I would like to follow up with Mr. McKay's line of questioning. We have several bills before us right now. Government is trying to draw up all sorts of lists. The question has to be asked: is it appropriate? A bill on the status of refugees has been introduced that would establish a list. A bill on terrorism was tabled last week. It is a third draft because the original bill died because of last winter's prorogations. This too allows lists to be drawn up under regulatory powers.

You are saying that this one is a little bit more volatile. Where can this list be consulted? Is it kept secret? Can the minister decide that country x, y or z belongs to this category and tell the banks? Does the public have access to it?

[Rachel Grasham]

Yes, in every case the directive will be public. It would appear in the Canada Gazette.

[Thomas Mulcair, NDP, Outremont, QC]

We are talking about a statutory instrument.