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.
Liberal
Scott Brison Liberal Kings—Hants, NS
Thank you very much.
In terms of know your client rules, at most or I think all of your banks, either the private wealth management or the private banking arms, your client forms have a question: Do you have investment accounts anywhere else, and if yes, where?
What happens if they say yes? What's the next question you ask these people?
Deputy Chief Anti-Money Laundering Officer, RBC Royal Bank
Maybe I could take a stab at that.
Liberal
Scott Brison Liberal Kings—Hants, NS
That's if in fact you.... You said your bank doesn't do business in tax havens, Mr. Purre, but depending on who you ask, some people would define the Bahamas, Bermuda and Panama as tax havens.
Deputy Chief Anti-Money Laundering Officer, RBC Royal Bank
As I said earlier, I think we do need to be careful about where we use terms, because where we have information-sharing agreements and those governments are fully transparent in terms of their laws and regulations with us, whether that is or is not a tax haven, per se, is I think a point of contention.
To the question we ask about accounts elsewhere and where those might be, traditionally that's something that is captured within a brokerage account agreement. Historically, the origin of that was looking at trading activity in the marketplace to give securities regulators insight on trading activity.
Liberal
Scott Brison Liberal Kings—Hants, NS
Thank you very much.
The point is that once they answer “yes“ to the question and then say where, if it happens to be a country that some people may consider a tax haven, there is the possibility that they have legitimate investments in those places that are not tax-evasive investments. How do you determine...?
We do not want to create approaches that penalize or prevent Canadians from making legitimate investments in those countries. How do we determine and create rules that enable Canadian companies and individuals to make legitimate investments but avoid the tax-evasive vehicle? How do you go further on that?
I'd really appreciate your help in understanding that.
Liberal
Scott Brison Liberal Kings—Hants, NS
There are a lot of Canadians with legitimate investments in some of these places. We want to ensure that whatever regimes we recommend do not prevent them from making those investments.
Vice-President and Chief Anti-Money Laundering Officer, Canadian Imperial Bank of Commerce
Thank you, Mr. Brison and Mr. Chair.
The approach by CIBC is twofold in that regard. First of all, we will ask, to the extent that we are asking the initial question and the answer is positive, the purpose of the investment overseas, the account overseas, to better understand the nature of the client relationship and better position CIBC to monitor whether or not there's any unusual activity.
If there is something identified that's unusual about the fact that this individual has an account overseas, an offshore account, then we would certainly, to the extent it's suspicious, report it to FINTRAC.
In the Canadian context, as well, if a client presented themselves and suggested that they were based in an offshore jurisdiction, our methodology for risk assessment would immediately put that client into a higher threshold for monitoring. We would monitor the activity of that client to a greater extent than we would a non-offshore jurisdiction.
Liberal
Conservative
The Chair Conservative James Rajotte
Mr. Brison, your time is up. Could we just get a nod of the heads. Yes.
Thank you.
We'll go to Mr. Hoback.
Conservative
Randy Hoback Conservative Prince Albert, SK
Thank you, Chair, and my thanks to the witnesses for being here on this nice snowy morning in Ottawa. I'd like to ask a three-part question, probably to all of you.
I'm trying to understand how you go about identifying if somebody is a potential tax evader or terrorist. Once you've gone through the process of saying the person could potentially do that, what is the next step? Whom do you contact? Do you contact local authorities? Do you contact FINTRAC, or the RCMP? If it's a Canadian or non-Canadian, do you use a different process for different authorities, depending on where they originate from?
Based on that, as we see new technologies, creative ways of money laundering and different things, do you have any suggestions on improving the system and making it better that we could add to our report?
Head, Global Anti-Money Laundering Compliance, TD Bank Financial Group
I think you've already heard that one of the things we all do, and we have an obligation to do, is to know our customers from the front end. We determine what we expect to be the baseline type of activity as well as the purpose of the account. We look into other aspects of the customer such as where the customer resides, if it's an individual. If it's a company, we look into the type of company structure and how you get to ultimate beneficial ownership. We all identify under Canadian law our beneficial owners at a 25% threshold.
At TD we have two tiers. For those we judge to be high-risk customers, we identify down to a 10% threshold, as do all IIROC regulated businesses in Canada. We've taken that standard and we've made it worldwide. In particular, in the United States there are now no beneficial ownership rules enshrined in regulations.
Conservative
Randy Hoback Conservative Prince Albert, SK
If there's a customer you've identified in your organization, do you share that person's name across all the other organizations?
Head, Global Anti-Money Laundering Compliance, TD Bank Financial Group
For what purpose would we identify the customer?
Conservative
Head, Global Anti-Money Laundering Compliance, TD Bank Financial Group
If it's a high-risk individual, we have centralized enhanced due diligence groups in Canada and in the United States, as well as in other locations, such as the U.K. We try as best we can to have a global view of our customers, but it's not always possible, for reasons that have already been stated, such as privacy considerations and things like that. Because of the way we're structured, we do have a money-laundering reporting officer in each of the jurisdictions. Through our governance structure, we have regular meetings and we discuss high-risk activities, high-risk customers, and suspicious activities.
If we do identify activity that we think is tax evasion, which I will tell you is very difficult to detect, we certainly file in the appropriate jurisdiction a report with the authorities. If it's something like terrorist financing, and it's imminent, and we think it really does pose a threat to us or to the citizenry, we certainly contact law enforcement directly.
Conservative
Head, Global Anti-Money Laundering Compliance, TD Bank Financial Group
Yes, in whatever country.
Is there anything else that I missed?
Conservative
Randy Hoback Conservative Prince Albert, SK
Just some suggestions, but maybe that's too much of a question, so that's fine.
Vice-President, Enterprise Regulatory Projects, Scotiabank
Much like my colleague at TD, we would report suspicious transactions in the local jurisdiction in which they apply. Because of privacy and data issues, we would not necessarily report back up into the Canadian head office. In each of our jurisdictions we have what are called FIUs, financial investigation units, where transactions of a suspicious sort are referred, and further enhanced due diligence is undertaken.
With regard to sharing the information among the other banks, privacy dictates that we cannot share. I can tell you that in my previous role, I have had off-the-record conversations with some of my colleagues at other banks to give them a heads-up about an account transferring to them. At Scotiabank we have walked up the street to the OSC or to OSFI with information that we felt they should have in order to undertake investigations.
Conservative
The Chair Conservative James Rajotte
There are 30 seconds left in your round, Mr. Hoback, so perhaps one other witness can comment on this question.
Mr. Bartos.
Senior Vice President and Chief Compliance Officer, Chief Anti-Money Laundering Officer, HSBC Bank Canada
The only thing I would add is that, like my colleagues, we have very much the same process. I would like to emphasize how you flag this sort of activity. I put it in two large categories: it's people and it's systems. We train our front-line staff, our relationship managers, and people who interact with customers to be attuned to behaviour, actions, and transactions that don't make sense. They then escalate those up to an FIU, which is a team under the compliance function, which then investigates matters. We employ former law enforcement, etc. We use a system that monitors account activity for specified types of rules to see if people are behaving outside of those rules, which may suggest something unusual. That is then escalated through the system and further investigated. Those two processes help us identify behaviour.
Conservative
The Chair Conservative James Rajotte
Thank you.
Thank you, Mr. Hoback.
Mr. Caron, you have the floor. You have five minutes.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
Thank you, Mr. Chair.
I have a number of questions to ask. I would like to address Mr. Purre first.
I am still not able to understand what your definition of a tax haven is. A former economic adviser for the island of Jersey gave me one. He identifies a tax haven as when you see the existence of a tax structure established deliberately to exploit a worldwide demand for opportunities to engage in tax avoidance. Does that definition seem adequate to you?