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.
Conservative
The Chair Conservative James Rajotte
But the concern raised, which I know you're well aware of, is that this does not go far enough. So your response....
Does anyone want to respond to that, in terms of TIEAs do not go far enough, you need automatic exchange, so how do you answer that concern that people have raised? Does anyone want to address that?
Mr. Purre, again.
Deputy Chief Anti-Money Laundering Officer, RBC Royal Bank
I'll continue on from there.
I think when we look at the tool itself and how it's used, those are two separate things. I think the tool and the framework that's been established there are ultimately effective, especially when combined with the other information available to FINTRAC and other government regulators here in Canada.
This is a complex base, and ultimately, how we come to terms with putting together those various pieces of information to facilitate the finding of tax evaders, so to speak, is a challenging exercise, but an important one.
Conservative
The Chair Conservative James Rajotte
Let me drill down into that, because there are different actors at play here. There are individuals, there are individuals who may have companies, there are governments and government regulatory agencies, and then there are financial institutions.
In the past year, I went into one of your financial institutions to do an investment property. I was filling out a whole whack of forms and complaining about filling out all these forms, and the lady opposite me, who knew who I was, said, “Well, blame yourself, because it's your own laws that have caused you to do all this.”
Conservative
The Chair Conservative James Rajotte
I said, “Okay, touché.”
Her argument was that it was Canadian domestic law, it was FINTRAC, that was then compelling the financial institutions in Canada to put all this onus on me as an individual to prove that what I was doing was a valid investment.
So that's what you have: individual, financial institution, government, regulatory agency. Some may argue that in certain countries, and I think you're hearing some of that at the committee today, other governments are not as diligent as the Canadian government. FINTRAC obviously does not exist in every country. The regulatory agencies are not as active in other countries in terms of making sure that individuals are doing valid investments, that they're not tax evading.
Can any of you address that question or concern that people would raise?
Ms. York, or Ms. Hughes.
Head, Global Anti-Money Laundering Compliance, TD Bank Financial Group
If I understand your question, I think it is indisputable that not all countries are as good as Canada is in asking the types of questions that you were asked when you endeavoured to open up an account for an investment property, or whatever it was. There is no question there is not necessarily a level playing field out there in that arena and, as a result, there are many who think we overregulate. I'm not among them.
That's unquestionably the case, so I think that the issue for us as financial institutions is how important it is to us to keep that type of activity out of our bank wherever it exists. From my perspective, from TD's perspective, we have a very low tolerance for risk, as I said earlier. We're going to make sure that wherever we're doing business we are employing the right standards and that we're ferreting this out.
Conservative
The Chair Conservative James Rajotte
Following up on that, you've all indicated today that you would have the same sort of baseline standards. If I were doing an investment property, let's say, in any country in which any of your institutions were operating, would I be facing the same sort of standard as an individual or as a company in terms of reporting to that institution and then the institution reporting to the government?
Head, Global Anti-Money Laundering Compliance, TD Bank Financial Group
I can tell you that from the account opening process and from the regulatory requirements that are embedded in this in Canada, we push that throughout the world. Now, in terms of credit or other types of policies, there may be differences, depending upon where that occurs. I can't speak to that. I would doubt it, because we also have a central risk process throughout the bank. From TD's perspective, we try to be as uniform as we can throughout the world.
Conservative
The Chair Conservative James Rajotte
Does anyone else wish to briefly comment?
Do you all have the same policies? Yes?
Vice-President, Enterprise Regulatory Projects, Scotiabank
Yes. If you walked into one of our branches in the Bahamas, we would put you through the same process.
Conservative
The Chair Conservative James Rajotte
The exact same process? Okay.
Thank you. I appreciate that.
We'll go to Mr. Brison, please.
Liberal
Scott Brison Liberal Kings—Hants, NS
I'd like to go back to my previous questions. If a client were to say on the form that he or she had investments outside of Canada, so if he or she answered yes, but then said, for instance, that one of the investments was as a shareholder in a company registered in Panama, would that trigger any additional questions? I'm asking that question because Panama is on the OECD and G-20 tax haven blacklists, as an example.
Deputy Chief Anti-Money Laundering Officer, RBC Royal Bank
I think there's interesting history there with respect to Panama in particular. The first thing we would look at is what type of corporation that is. For example, is it a bearer share company? That has been a challenge historically within Panama.
It's all part of the process of learning the key elements of that client and their financial situation, and whether that makes sense for that client within the context of their investment needs. Ultimately, if we found there was something suspicious within that, it is something we would report via an STR and ultimately decide not to take on the client if challenged by that.
Liberal
Scott Brison Liberal Kings—Hants, NS
How many of you have operations in Panama? Is it just Scotiabank?
How about Montserrat? Scotiabank doesn't have anything in Montserrat?
Liberal
Scott Brison Liberal Kings—Hants, NS
Panama and Costa Rica are both on the G-20 and OECD lists, as are, in fact, a number of other countries within which Canadian banks operate.
First of all, I make the assumption that Canadian banks operate at the highest legal and ethical standards. The challenge is how you discern which is a legitimate investment. A Canadian may own a home in one of these tax havens, for example in Montserrat, hopefully not too close to the volcano, or a Canadian may invest in infrastructure in one of these countries. I go back to this: the existence of investment in a tax haven does not mean that it's tax-evasive investment.
That's where I'd like to have a clearer understanding in terms of your organization's processes to determine what is legitimate investment. These are fast-growing economies in many cases, with a lot of need for Canadian capital, expertise, and infrastructure, as an example.
How do you discern, and I guess the question is—we need your guidance—how do we discern ways to prevent a tax-evasive investment or offshoring and legitimate investment? We could benefit from your guidance on that. It may start with this: how do you do it?
Deputy Chief Anti-Money Laundering Officer, RBC Royal Bank
I think at the outset and returning to my earlier answer, the key element within that, and I think this applies equally to regulatory authorities and government agencies as it does to the banks, is ultimately having an understanding of that individual's financial circumstances. The determinant for us is a witness test on does it make sense given the nature of that client's investments. For example, if you were an engineering firm, it does possibly make sense for you to be investing in the rebuilding of Montserrat at this point in time. That makes sense within the context of that business. If, on the other hand, you were an individual, a retiree from Penticton, to be investing a large portion of your net worth into an investment in Montserrat simply doesn't make sense.
Those are the types of questions we would ask. I would say that within our inquiries we're asking whether you have investments at other institutions, much as on your tax return you're asked whether you have significant assets outside of the country. Those are the avenues to follow up on that in terms of what those are and does it make sense.
Liberal
Deputy Chief Anti-Money Laundering Officer, RBC Royal Bank
The Royal Bank does not have a wealth management branch in Montserrat.
Deputy Chief Anti-Money Laundering Officer, RBC Royal Bank
We may as part of, again, RBC retail banking in the Caribbean, be servicing local residents in Montserrat. I'm not positive one way or the other on that, to be honest.