Finance Committee on April 29th, 2010

[Rachel Grasham]

There are two measures in here, two authorities. There's a directive-making authority, which is not a statutory instrument for the purpose of the Statutory Instruments Act, but the legislative amendments here are saying that it will nonetheless be gazetted exactly for that purpose. The second instrument is regulation, which would go through the full regulatory process, including pre-publication and final publication.

[Thomas Mulcair, NDP, Outremont, QC]

I do not want to take you outside your area of expertise. There might be other opportunities in the next few days to get that information, but I would still like to ask you this question.

In some ridings, including mine, we see more and more businesses with a storefront that offer to send money to another country for a fixed fee plus a commission. For example, people working here will use this service if they do not have access to a bank. Generally speaking, it seems to work. However, if things go wrong, they really go wrong. Recently, there have been several cases of large scale fraud where the money was never transferred. The RCMP has been called in in some cases and tried to shut down these businesses. Sometimes there were suspicious transfers.

Here we are talking about our banking institutions. There is nothing more structured and formal in our society than a bank. But how will the proposed regulatory framework be able to capture these storefront businesses?

[Rachel Grasham]

Money services businesses are really covered under the legislation, and they're required to register with FINTRAC, the Financial Transactions and Reports Analysis Centre of Canada. They are subject to the full legislation, so all the customer identification requirements. They're required to report certain transactions to FINTRAC, to keep records, to have an internal compliance function, and they are subject to compliance and audit examinations by FINTRAC. So that is the way the legislation treats that.

[Thomas Mulcair, NDP, Outremont, QC]

It is for money laundering.

[Rachel Grasham]

It is for both money laundering and terrorist financing.

[Thomas Mulcair, NDP, Outremont, QC]

It is for money laundering and the funding of terrorism.

Who is responsible for the other aspect, fraud?

[Rachel Grasham]

That would be a law enforcement issue. If there isn't a question of money laundering or terrorist financing per se, this act doesn't apply.

[Thomas Mulcair, NDP, Outremont, QC]

This act cannot do anything about it, nor does any other — and many have been passed — nor can any government agency responsible for monitoring the probity of financial institutions. These businesses are regulated in some way. They can claim to follow the rules, but they are also able to accumulate large sums of money. Recently, we saw a classical case where people sending money overseas found out after some time that the crooks had kept it all and disappeared, in contrast to a bank which cannot disappear, at least we hope. There is a gap in the regulations.

[Rachel Grasham]

I can't really answer beyond the scope of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

[Thomas Mulcair, NDP, Outremont, QC]

I will see if other witnesses are better able to answer.

Thank you for your answers.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Mr. Mulcair.

We are done with part 14. I suggest that we not start on part 15. There will surely be many questions on parts 15 and 16. What do you say?

I want to thank the witnesses for being here.

So I guess we're back on Tuesday at our regular scheduled time.

Merci. Thank you.

The meeting is adjourned.