Finance Committee on March 8th, 2011

[Denis Meunier]

Yes, there is a double threshold for money laundering: you must have reasonable grounds to suspect money laundering and reasonable grounds to suspect tax evasion--

[The Vice-Chair, Liberal, Massimo Pacetti]

Why wouldn't you refer it if it was in the grey area? Wouldn't CRA be able to do their own work and determine the matter?

[Denis Meunier]

Because the legislation requires me to reach that threshold.

[The Vice-Chair, Liberal, Massimo Pacetti]

Okay, that's what I was asking.

Mr. White, in our study on offshore bank accounts—we had some professors and we had some experts—we're still trying to determine whether there is a legitimate need for businesses to carry on operations with offshore bank accounts. You say that the “growing sophistication of criminal activity is abetted by the same techniques and technologies that spur legitimate opportunities for business”. Where is the grey area there? At what point is it legitimate or not for your organization?

[A/Commr Stephen White]

I wouldn't say it's a grey area. Legitimate businesses use offshore bank accounts all over the world. Because those financial systems and mechanisms exist, criminals can leverage that same environment in offshore bank accounts. When they do so in tax havens, it's that much more beneficial to them. It is fairly easy to open an offshore bank account if you want to, but criminals take advantage of it.

[The Vice-Chair, Liberal, Massimo Pacetti]

Is there any grey area...? Do you ever have a legitimate business operation opening up accounts for people running drug cartels, terrorism, or other criminal activity?

[A/Commr Stephen White]

I can't give examples of legitimate companies. Drug trafficking organizations often open up their own businesses to facilitate money laundering activity. They can run a quasi-legitimate business, take their proceeds from drug trafficking, and mix that money with legitimate income. That is a big component of the money laundering process, and it makes it a lot harder for law enforcement scrutiny when you have an entity with mixed income—legitimate income and income from criminal activity.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Mr. White and Mr. Meunier.

Mr. Wallace.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chair, and welcome to the chairmanship. You're doing a fine job today, even though you went over time.

What I find interesting today is I think we've switched gears a little bit. If you had been at our meetings prior to this, where we had, as previously mentioned, professors and so on, in my view, the discussions about offshore accounts and evading taxes were about wealthy individuals or corporations who were not only tax planning but avoiding tax. Today's discussion is about criminal activity, in my view.

They're both criminal activity, but rightly or wrongly, to me, and I think to people on my street, the drug dealer who is cashing in on providing illicit narcotics to individuals and then taking that money and putting it in offshore accounts is in a different realm from somebody who has moved here to Canada and had money in other accounts around the world. We have a volunteer program at the CRA where a person can say, I didn't realize I was making a mistake here, or whatever. People can say, we'd like to voluntarily pay for what we've missed and pay any penalties, but, as Monsieur Paillé mentioned, avoid any penalties other than financial.

I'm assuming at the RCMP the vast majority of the work is to deal with the criminal aspects that I mentioned, whether it's money laundering through organized crime and those types of things or drug dealers--all that piece. But at FINTRAC, does it matter whether it's somebody who's avoiding paying taxes, illegally, or somebody who's actually involved in other illegal activities? You can avoid paying taxes without doing any other illegal activity, and that's basically what we've been talking about up to today. We've suddenly gone--rightfully so--to some other activities.

Do you have any sense of where the bulk of that is, in offshore accounting and all that? Do you have any sense from FINTRAC?

[Denis Meunier]

I don't have a sense of that for one good reason. The legislation has just recently changed, so as a result, all the cases that we referred to the CRA were first money laundering cases involving potentially drugs or fraud, etc., and tax evasion. Because the legislation has now made tax evasion a predicate offence, and there are regulatory changes as well--sorry, that was a regulatory change. There's the other legislative change reducing the threshold, and we can now focus in this area exclusively of tax evasion as a predicate offence.

[Mike Wallace, Conservative, Burlington, ON]

So prior to us changing the law, and maybe since the law has changed--maybe you can explain it--when you referred something to CRA, was that so that they could collect the tax that was owing and it had nothing to do with whether there was any other criminal activity going on, or did you refer the stuff also to the RCMP or any other law enforcement agency to follow up on the criminal activity?

[Denis Meunier]

In the vast majority of cases, there would have been a referral to the CRA as a result of also making a referral to a police force, because we had determined that it would also be relevant to a tax evasion offence, if you wish. So it would have been primarily as a result of the referral to police. However, there have been a few cases where CRA could lay fraud charges, and in those particular cases we would have also referred it to the CRA exclusively--but in very few cases.

[Mike Wallace, Conservative, Burlington, ON]

I don't know the definitions in the law, but really, if somebody's evading taxes, they're committing a fraud against the rest of the taxpayers of Canada, in a sense, because they're cheating them out of the money that should have come.... So with the change now, and I know you're just getting ramped up in that area, can you explain to me again what your expectations are? I'm assuming departments set goals and say, now that we've got this, we're going to get our people in place. That was probably the early work, but a year from now, two years from now, what would the taxpayer of Canada expect from FINTRAC in terms of its ability to go after this tax evasion, principally? Our study is about offshore accounts.

My other question is this. Your organization--

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you. You've run out of time.

If you could answer the last question, we'll then have another round for the Conservative Party.

You can then ask your other question.

Thank you, Mr. Wallace.

[Mike Wallace, Conservative, Burlington, ON]

Would you have given it to me?

Thank you.

[The Vice-Chair, Liberal, Massimo Pacetti]

Do you want to hear the answer or do you want to move on?

Mr. Meunier.

[Denis Meunier]

The cases we refer to the CRA are money laundering cases, which are essentially what we would be referring. Obviously, with the component for reasonable grounds to suspect tax evasion, it's difficult.

As you said, we're only ramping up. I would suspect there will be a significant increase given that we have seven or eight additional analysts. It's too early for me to predict, but I would say it will be a significant increase.

[Mike Wallace, Conservative, Burlington, ON]

Thank you.

Thank you, Mr. Chair.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Mr. Wallace.

Mr. Szabo.

[Paul Szabo, Liberal, Mississauga South, ON]

What do you do with whistleblowers...when it comes to your attention?

[Denis Meunier]

We can receive volunteer information from the public. As long as the information is related to a money laundering offence, we will analyze the information. We will make a determination on whether or not, first of all, we have any information in our database related to that and whether or not, after the analysis, if we reach that level of the legal threshold, we will disclose it to the police or to the CRA, depending on the situation.

[Paul Szabo, Liberal, Mississauga South, ON]

Do you have any idea how many cases of whistleblowing you have received? Are there any stats?

[Denis Meunier]

I may have interpreted “whistleblowing” as informants from the outside, public informants.

[Paul Szabo, Liberal, Mississauga South, ON]

Yes, that's a whistleblower.

[Denis Meunier]

Your question was on how many.