Finance Committee on March 8th, 2011

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

I don't believe it was anyone's intention to be delving into specific cases, but when our witnesses indicate that they would have to tailor the responses according to the nature of being in camera or out of camera, it makes me wonder if we might be missing some critical information for the study. So either we go in camera or, as my colleague suggested, we come back to this another time.

[The Vice-Chair, Liberal, Massimo Pacetti]

I'm going to allow that the meeting stay in public, and as we roll along we'll see if we need to be in camera. I'll leave five minutes at the end to see if we need to invite Mr. Rudderham back.

Mr. Szabo, you have seven minutes.

[Paul Szabo, Liberal, Mississauga South, ON]

Thank you, Mr. Chairman.

Mr. Meunier, one of the things you mentioned was that your process has moved from determining a situation to having reasonable grounds. How did that change the way you do your business?

[Denis Meunier]

The change simply occurred on February 14 of this year.

Determining is a much stricter interpretation in law than reasonable grounds to suspect. It is the combination of the July change in the legislation making tax evasion a predicate offence combined with the February 14 change in the act to a lower threshold. Together this will allow us to identify exclusively money laundering cases related to tax evasion. We'll be able to refer those to the CRA, as opposed to prior to last July when the regulations made tax evasion a predicate offence.

Prior to February 14, where, to make it simple, the cases we were referring to the CRA were cases that first identified drugs or fraud, etc., we could not exclusively refer to the CRA cases that were exclusively tax evasion. We had to refer to them cases that included it—for instance, money laundering cases that involved drugs, fraud, or some other predicate offence.

I don't know if I'm making myself clear.

[Paul Szabo, Liberal, Mississauga South, ON]

My impression would be that the intensity at which you have to do your work and the detail all of a sudden hit a lower threshold, and you pass it on probably a little quicker than you otherwise would, which means that the demands on your resources go down.

Do you anticipate that this is going to change the resources you have to do what you do?

[Denis Meunier]

We received additional funding in Budget 2010. We've just hired the analysts and put them through some training, and in the last few months we've been working with CRA.

The additional resources are going to be dedicated to the identification of more cases of money laundering where tax evasion is a predicate offence. We expect the number of referrals to increase in an important way within the next six months once we have our analysts trained, and they are being trained, to identify these things.

[Paul Szabo, Liberal, Mississauga South, ON]

I wouldn't have guessed that. If you have to come up with reasonable grounds as opposed to determining that there is a problem, it would seem that the intensity and need for investigation is that you have to nail the case down before you report it. Otherwise, if you just have a suspicion or some markers out there to say that somebody ought to look at this, that requires less expertise, fewer people, less training, and less money.

[Denis Meunier]

The way it works is that we have about 150 million transactions in our database. It requires the same amount of time to identify which of these transactions and patterns are reported in triggers that we use to start a case. It requires the same amount of time.

That threshold was slightly more difficult to reach in the past to determine, but this will make it a little easier. But the amount of time we spend in going from determining to reasonable grounds to suspect is one of judgment.

All of the work, 99% of the work, goes into analyzing a series of complex transactions. As I mentioned, we have 150 million transactions in the database, but it's still basically putting the case together. We use suspicious transaction reports, large cash transaction reports, EFTs, information from open sources, and volunteered information that we may receive from law enforcement, police, CRA, etc. That's how we put these cases together.

There's not much of a saving, if you will, because all the work is done prior to getting to that point.

[Paul Szabo, Liberal, Mississauga South, ON]

Okay.

Mr. White, the work you do has not been totally dedicated to tax evasion. Do you have, for the committee's purposes, some information that you could give us about some of the signals, the signs in the work that you were able to do, that help in the detection and the approach to it?

[A/Commr Stephen White]

Do you mean the detection of tax evasion?

[Paul Szabo, Liberal, Mississauga South, ON]

Yes.

[A/Commr Stephen White]

Most of what we see and what we refer to the Canada Revenue Agency emerges through our proceeds of crime and money laundering investigations. We're actually investigating proceeds being generated from criminal activity. An example would be drug trafficking. We do an investigation. We identify an individual who we believe is involved in drug trafficking. We identify significant assets related to that individual. It could be property. It could be bank accounts. It could be funds held in offshore bank accounts. Based on the context of the investigation, we will develop grounds on which to believe that all these are criminal funds and that the Canada Revenue Agency is not aware they have these funds either domestically or offshore. We will make a referral to the Canada Revenue Agency. They will do their background due diligence and assessment on the individual.

[Paul Szabo, Liberal, Mississauga South, ON]

Your work is tax evasion, whether that be domestic or offshore, and cases will vary.

On the recovery of the $145 million that you referred to, that is relative to what number of cases, for instance?

[A/Commr Stephen White]

I can't say if it's a recovery of $145 million. We've made referrals to the Canada Revenue Agency of quite a number of cases over that 10-year period. They have done their tax assessment on those individuals to the amount of $145 million. I'm not sure of the exact amount they have recovered out of that assessment.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Mr. Szabo.

Thank you, Mr. White.

Mr. Paillé, you have seven minutes.

[Daniel Paillé, Bloc, Hochelaga, QC]

Thank you.

Mr. White, I think you have submitted 542 cases to the CRA in 10 years. Is that correct?

[A/Commr Stephen White]

We're talking about 542 cases that we have opened. In most cases, it was assistance to the agency.

[Daniel Paillé, Bloc, Hochelaga, QC]

You also said that in the Royal Canadian Mounted Police, you had no team of specialists on tax evasion.

I would draw a parallel with FINTRAC. You say there are 150 million transactions in your database algorithm. You receive 65,000 reports, and I assume that is per year.

[A/Commr Stephen White]

It's per day.

[Daniel Paillé, Bloc, Hochelaga, QC]

For the 287 cases sent to the CRA, is that the number per year?

[Denis Meunier]

No, it's for a period of about two years.

[Daniel Paillé, Bloc, Hochelaga, QC]

It seems to me that over a 10-year period, the Royal Canadian Mounted Police has sent about 50 cases a year. In your case, we're talking about 65,000 reports per day, but you disclose about 140 cases per year. You don't find that figure ridiculously low?

[Denis Meunier]

In we recent years, we have increased the number of disclosures by nearly 200%. In fact, three years ago, the number of disclosures to police forces and the CRA totalled 210. The next year, there were 559, and last year, 576. This year there will probably be more.

[Yvon Carrière, Senior Counsel, Department of Finance, Financial Transactions and Reports Analysis Centre of Canada]

I would like to point out that a disclosure to the CRA may contain thousands of financial transactions, sometimes even tens of thousands. We aren't talking about one transaction per disclosure here.

[Daniel Paillé, Bloc, Hochelaga, QC]

At the Royal Canadian Mounted Police there are no tax specialists. For FINTRAC, there was reference to people being trained. How many people work at your centre? How many tax specialists are there who are able to detect this kind of thing? I'm a tax specialist myself, so I know that you can't make this up. There has to be a foundation, there has to be some training. How many are there at your centre?