Finance Committee on March 8th, 2011

[Scott Brison, Liberal, Kings—Hants, NS]

Post-September 11 we've seen a greater level of collaboration between agencies and jurisdictions in the war on terrorism. The same types of financial malfeasance or fraud that may be used or money laundering that may be used to finance the drug trade could also be used to finance terrorism. Has this been a factor? Have you seen that the post-September 11 increased efforts--and I guess multilateral efforts--on terrorism have impacted and augmented your resources on the financial side?

[A/Commr Stephen White]

After 9/11, under the federal government's money laundering anti-terrorist financing program, the RCMP was given resources specifically related to terrorist financing.

[Scott Brison, Liberal, Kings—Hants, NS]

And other jurisdictions have moved similarly, so this has helped. That has actually helped your capacity to address financial malfeasance that could be used in other areas such as the drug trade and so on?

[A/Commr Stephen White]

It has to some extent.

[Scott Brison, Liberal, Kings—Hants, NS]

To what extent are multilateral groups like the G-20 engaged in this? We're seeing more of a multilateral and coordinated approach to international financial issues. Are we seeing a similar multilateral effort between enforcement agencies on the whole issue of financial crime and malfeasance? Are we seeing the same kind of integrated approach, and is there a multilateral body that is becoming the leader in the same way the G-20 has become the leader on the post-financial crisis?

[A/Commr Stephen White]

There are probably two entities.

There is a law enforcement working group under the G-8. Within that group, a number of the issues they look at on a regular basis are related to financial crime, especially money laundering activity. Under the umbrella of the G-8 law enforcement working group, we've done a number of activities in partnership with other countries in terms of international cash interdiction. For example, during a certain period of time, a number of countries that are part of the working group will make a concentrated effort to look at cross-border currency movements in their areas.

The other big entity is obviously the financial action task force. A lot of work is taking place in terms of developing methodologies related to money laundering. They regularly put out reports on new methodologies related to money laundering.

Those are two that come to mind in terms of international multilateral agencies.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Mr. Brison.

Thank you, Mr. White.

Mr. Carrier, you have five minutes.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Thank you, Mr. Chair.

Good afternoon, gentlemen.

Mr. White, one part of your presentation that you read in French caught my attention more; I don't know whether it's a matter of language. You said: "When the RCMP does identify activity related to income tax matters, it is almost always incidental to an investigation we are conducting on another matter." You know we are here to study tax evasion. In other words, that isn't your primary concern, but when you learn of the existence of such activities in the course of an investigation, you refer the case to the Canada Revenue Agency. Is that right? So it isn't a priority for you to combat tax evasion.

[A/Commr Stephen White]

When I say it's not a priority, the Canada Revenue Agency has its own enforcement program specifically for that. In terms of identifying tax evasion, as I mentioned earlier, it could be through a proceeds of crime investigation related to drug trafficking, a money laundering investigation, or fraudulent activity, for example. Those all generate income where we may identify bank accounts and property that, during our investigation, we have reason to believe have not been reported to Revenue Canada. Those are the referrals we will give to Revenue Canada.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Thank you.

I'm now going to talk about FINTRAC, where we ultimately find people who analyze cases. You were clear, in fact, that since last year, with Bill C-9, tax evasion is being more formally targeted and it is more your responsibility to monitor it. You also said that you have had special training from the Canada Revenue Agency for analyzing those cases.

Since you have been doing a precise analysis of it, has that opened up a new area of activity where there is the potential for picking up on cases that should be examined in depth?

[Denis Meunier]

We have just hired the analysts, with the funds we received in the 2010 budget. It hasn't started yet, we are in the process of finalizing the training for our analysts, but we expect to start seeing results over the next six months, perhaps. So we are expecting just that, to see an increase in the number of cases we would be disclosing to the Canada Revenue Agency.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

That is precisely one of my questions. How many employees have you assigned specifically to studying tax evasion cases?

[Denis Meunier]

In fact, all our employees have been trained and are all tasked with targeting those cases. So there isn't a special unit; it's in the course of their work. Because we have hired about eight additional employees, that should greatly improve things.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

But you aren't training people specially to do that analysis, although it's something specific.

People talk to us about tax evasion, but it's in the abstract, they don't know the details. Surely there have to be specialists to analyze the financial results, etc.

[Denis Meunier]

In fact, we analyze the financial transactions. We don't go into the companies' books and records. We analyze the transactions that come to us from banks, wire transfers, etc. We thought it was much more beneficial to educate 60 or so analysts who are on the lookout for this kind of financial conduct than to have a special unit assigned to that job.

Obviously, if we see that the results are lower than hoped, we may change our practice, but not for the moment.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

It concerns me a bit when you say that all the employees are trained. That is really a broad generalization.

[Denis Meunier]

No, not at all.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

You know that some countries are recognized as tax havens. Those tax havens are legal, but there is an opportunity for tax evasion in some countries about which there is a lack of information. They are countries that are part of the grey area defined by the OECD. Are you going to target those countries in your analysis? Without necessarily considering them guilty from the outset, will you identify them as places to monitor particularly?

[Denis Meunier]

You said it, the fact that it comes from a particular country doesn't mean that it is necessarily money laundering or that there might be tax evasion. But it is one indicator, among others.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Mr. Carrier.

Ms. McLeod, five minutes, please.

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

Thank you, Mr. Chair.

I think to start I need to follow up on some comments that my colleague Mr. Mulcair made. He was focusing on tax evasion, securities fraud. We do know that Ponzi schemes often use loopholes and that investigations can be very, very challenging. I find it a little bit difficult, but perhaps I am wrong, that when you have 13 separate securities regulators and jurisdictions, it doesn't add some complexity to the investigation.

I'm just wondering if perhaps Mr. White or someone could comment on that particular issue.

[A/Commr Stephen White]

In terms of the issue with individual or national securities regulators--again, obviously, a bigger policy issue for the Government of Canada--our interest comes in terms of sharing of information, exchange of intelligence. If we only have to go into one location or go into multiple locations, in terms of asking for information, would it take a bit longer? Yes, it's not impossible. I guess I would leave it at that.

I don't think I'm really in a position to offer any comment at this point whether or not a national regulator would expedite our work.

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

I appreciate that, absolutely, it's a broader policy issue, but I think in that sort of narrow perspective, which of course is one piece of probably a complex puzzle.

For criminals, money laundering is a big issue. To what degree is it focused into tax havens?

[A/Commr Stephen White]

I wouldn't be able to give a percentage. Do we have cases? Yes. Proceeds from criminal activity are housed in bank accounts and tax havens. We also have a lot of criminal activity where criminals move their funds offshore to non-tax havens as well. So it's a mix.

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

From what I was hearing earlier, there is some part of the workload that is focused on tax havens. To what degree are you actually laying charges related to criminal activity and tax havens versus...? You talked about so many cases. Would all those be ones where you are also actually laying criminal charges, or are some just referred to CRA? Can you talk about that a little bit?