Evidence of meeting #111 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was bank.
A recording is available from Parliament.
9:45 a.m.
NDP
9:45 a.m.
NDP
Raymond Côté NDP Beauport—Limoilou, QC
Mr. Richard, I would like to take you to another area. Two years ago, MÉDAC, which is the movement to educate and defend shareholders, presented a document entitled Plaidoyer pour un système fiscal plus juste.... I know that some of your institutions have been at odds with MÉDAC. That report was submitted at the time when Claude Béland was the president of MÉDAC. Mr. Béland is a man who has a great deal of credibility. At one point, in fact, he was the president of the Mouvement Desjardins. He had a long career there. In that report, MÉDAC called for a number of things, but one thing it revealed was that the big Canadian banks had avoided paying $12.5 billion in taxes by using tax havens and aggressive tax planning. Would anyone like to comment on that?
9:45 a.m.
Conservative
The Chair Conservative James Rajotte
Could we have a brief response to that, please. Who would like to respond?
Mr. Richard, go ahead.
9:45 a.m.
Vice-President and Senior Consultant, Wealth Management Group, BMO Nesbitt Burns, BMO Bank of Montreal
I cannot really comment because it is difficult to determine what the aggressive tax planning in issue is. It is hard to establish figures like that with any certainty. These are evaluations that could be analyzed...
9:45 a.m.
Vice-President and Senior Consultant, Wealth Management Group, BMO Nesbitt Burns, BMO Bank of Montreal
I respect Mr. Béland, but that does not mean I can assess the weight of his claim.
9:50 a.m.
Conservative
9:50 a.m.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
This is a very interesting topic. I want to carry on with what Mr. Côté was saying. We have been discussing this large bill that has to do with implementation of taxes. We've come to the conclusion that in a society, we have to trust institutions. Trust is a basic and essential part of any society that's going to move forward. The very fact is that none of us is able to understand those tax measures. We must look to the finance department, we must look to institutions that give us advice, and we must collectively then come.
I mention that because whenever I've been involved with moving forward in some type of project, I get together with people. I always ask everybody at the table, “What is the motivation?”.
I want to ask you that question, too. What is your motivation for doing the things that you're doing? In this committee, we've often quoted Adam Smith. One of my favourite lines of Adam Smith's, and I will paraphrase, is that the baker doesn't get up at five o'clock in the morning for the benefit of the butcher. That means there is his own self-interest. That's okay. We have to understand that. What is your motivation to make sure that you don't get involved? I don't want to lead the witness but I want to suggest that if we have banks that have proper assets, cash flow that's not necessarily looking for other areas, is that possibly something that will be a deterrent, as well, to not going after illicit funds?
I'll start with you, Ms. Hughes.
9:50 a.m.
Head, Global Anti-Money Laundering Compliance, TD Bank Financial Group
I'll be very brief. I think what I say will be universally held by others.
From a bank's perspective, of course we have an obligation to our shareholders to operate in a responsible manner and to return to them as best a return on their investments as we can. As a corollary to that, one of the reasons none of us wants to be, and TD most certainly doesn't want to be, in a position to do anything that even comes close to the line is the reputational damage we could suffer as a result of any activities that would drag us down into the mud, so to speak. From TD's perspective and from a tax planning perspective, we have a very robust tax policy governance structure. It's on our social responsibility website, which outlines that very clearly. We have been very out-front with the OECD and have participated and continue to participate in activities there in the tax realm in particular. Knowing TD as I know TD and the members of the board as well as senior management, not one of them would want to see TD tagged with any type of reputational risk as a result of this.
9:50 a.m.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
I suspect that all of you will have much the same response. I want you to touch on the second part of my question. We know that we have a strong banking system. How has that enabled you to not be tempted to maybe go after those illicit funds? Does anybody want to talk about that?
9:50 a.m.
Head, Global Anti-Money Laundering Compliance, TD Bank Financial Group
Well, I think it's a business strategy. You have to look at where you are and how you intend to grow your business. For us, to go into risky areas is not part of our strategy. Our risk appetite is fairly conservative. I think that has served us well over the last so many years. As a result, we continue to function very strongly as a North American bank, and that's where we focus our energies.
9:50 a.m.
Vice-President, Enterprise Regulatory Projects, Scotiabank
I can agree with my colleague, and I think all of us would agree that our reputation is key, and none of us would like to see our institutions on the front page of, say, The Globe and Mail. We're in business to serve our customers in a prudent manner. We grow with them and we serve them on a daily basis, but our reputation is paramount to doing business, because it brings customers to us. That's how we grow.
9:50 a.m.
Conservative
9:50 a.m.
Vice-President and Chief Anti-Money Laundering Officer, Canadian Imperial Bank of Commerce
I have an additional comment. I completely agree with what my colleagues have said, but I think it goes even a step further. Many of the witnesses today come from the perspective of anti-money laundering and anti-terrorist financing operations. Part of our mandate is to protect the integrity of the Canadian financial system, and that goes beyond maximizing shareholders' values, and that actually, if anything, could in many cases limit shareholders' values by rejecting the concept of taking on clients who propose undue risk.
9:55 a.m.
Conservative
The Chair Conservative James Rajotte
Thank you.
Thank you, Mr. Van Kesteren.
Mr. Rankin, go ahead please.
9:55 a.m.
NDP
Murray Rankin NDP Victoria, BC
Thank you, Chair.
Thank you, witnesses, for coming out today. I really appreciate it.
Mr. Purre, I was startled to learn that RBC does not work in tax havens, if I understood you properly.
I would therefore suggest you must not agree with the Canada Revenue Agency's definition, in a study called “Using Tax Havens to Avoid Paying Taxes”, where it defines as a tax haven a jurisdiction with one of the following: no tax, or very low rates of taxation; strict bank secrecy provisions; a lack of transparency in the operation of its tax system; and a lack of effective exchange of information with other countries.
You seem to say that if there were a TIEA, or some information exchange agreement, that would be sufficient, but how do you account for places like the British Virgin Islands where there are more than 400,000 corporations and no financial records or personal information records need to be kept whatsoever?
If your definition is predicated on the existence of an exchange agreement where there's no information being exchanged, it seems a little odd and contrary to at least what our government appears to take as a tax haven jurisdiction definition.
9:55 a.m.
Deputy Chief Anti-Money Laundering Officer, RBC Royal Bank
I think my simple answer on that would be that we don't actually have operations within the British Virgin Islands.
9:55 a.m.
NDP
Murray Rankin NDP Victoria, BC
Well, how about Barbados, with a population of 284, 000, where $53 billion was invested by Canadians in 2011, or the Cayman Islands, with a population of 55,000, and $25.8 billion was invested by Canadians in 2011 alone?
RBC does business in those jurisdictions.
9:55 a.m.
Deputy Chief Anti-Money Laundering Officer, RBC Royal Bank
Absolutely. Again, when we talk about...in reference to, I'm thinking, the honourable member's earlier question, those dollars represent the flow of trade that takes place through those jurisdictions. RBC supports, as do all other global financial institutions, global financial transactions.
9:55 a.m.
Deputy Chief Anti-Money Laundering Officer, RBC Royal Bank
Again, when we look at both the Cayman Islands and Barbados, from an information-sharing standpoint, their compliance with OECD standards, I wouldn't define them as tax havens.
9:55 a.m.
NDP
Murray Rankin NDP Victoria, BC
All right. The Government of Canada appears to differ.
May I ask Mr. Bartos a question.
You indicated, I think, in your anti-financial crimes approach, that the key elements are deter, detect, and disclose. You indicated as well that you had new models of compliance assurance, as you termed it. That is, there were policies in place that were simply not being enforced and now there's a better enforcement climate, if I can call it that, within your bank, if I'm understanding you properly.
Do you think it would be, for this committee's benefit, a good recommendation that there be whistle-blower arrangements put in place within the banks? I'll be asking other witnesses this as well. For example, it was only because of a whistle-blower that we became aware of the Liechtenstein tax evasion situation, where a disgruntled employee sold computer discs to German authorities, and that led to hundreds of millions of dollars being recovered, including more than $20 million in Canada alone, as I understand it.
Wouldn't that be a useful addition to your compliance objectives?
9:55 a.m.
Senior Vice President and Chief Compliance Officer, Chief Anti-Money Laundering Officer, HSBC Bank Canada
Yes, Mr. Chairman, we do in fact employ whistle-blower controls within our organization, on a couple of levels.
One is that the parent organization, HSBC Group, operates a compliance disclosure line, as we call it, which is in essence a whistle-blower line. That is staffed by people who are independent of the business line and monitored by the central compliance function.
I guess to have a sort of double check or a fail-safe system, in Canada we also operate our own disclosure line, which feeds in to me and our general counsel and our CFO. There are numerous people who are involved, independent people who are involved in the whistle-blower process to ensure follow-up and action.