Finance Committee on May 15th, 2014

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Okay. I'm glad we got the first part of it anyway, at least for the solvent companies. I know we have to do some thinking about tracing those receivables. It's kind of an interesting thing.

Mr. Lavoie, you're the second person who has brought up the full U.S. harmonization and labelling issue. It came up the other day in the committee meeting when we were talking about labelling in Canada versus prior to importing.

I think Mr. Keddy brought this up the other day when he offered the alternative regarding whether it would be better to handle that through an amendment or by regulation instead. I think the reply to that question was that regulations could handle it. I would like to get your opinion on that.

[Martin Lavoie]

I agree that regulations could handle it. We also feel a lot of pressure to get that bill passed, because June 1, 2015, is going to be the implementation date. I would say it could be handled by regulation.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Okay. So that's a good alternative.

Mr. McGuire, I'd like to go to you. You talked a little bit and I was intrigued by your comment with respect to proposed section 68.1, regarding FINTRAC and how they would seal details regarding a reporting entity. You talked a little bit about being able to protect the reporting entity on that. I wondered what specifically were you thinking about. Did you have a specific amendment in mind on that, which would protect that reporting entity? What was your thought there?

[Matthew McGuire]

Thank you.

The idea is simply that a suspicious transaction report happens when a financial institution or accountant gets to the point where they suspect the client they are dealing with is involved in money laundering or terrorist financing. There's a threshold they get to, and they describe in fair detail within the suspicious transaction report what they found suspicious, the basis of suspicion, and what they've done about it.

It also can reveal a fair bit about the mechanisms the institution used to detect the behaviour in the first place. In my view, having that information become public could be detrimental in a whole number of ways. In the U.S. we've seen lawsuits started by the subjects of the reports against the institutions that filed them.

I think there must be a mechanism to either summarize the information in the suspicious transaction report, or otherwise redact or anonymize it for the purposes of those proceedings.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

The idea of what you were saying in terms of a change was that there would be wording in there to protect those actual entities. It would just say there would be no reporting, or something like that.

[Matthew McGuire]

That's right. It would talk about redacting the information related to the reporting entity that submitted it in the first place.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you.

Thank you, Chair.

[The Chair, Conservative, James Rajotte]

Am I starting with Mr. Rankin or Mr. Cullen?

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Yes, please.

[The Chair, Conservative, James Rajotte]

Mr. Cullen.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Thank you, Mr. Rankin.

This is not for our witnesses, but I want to give committee members a heads-up that we'll be submitting a motion, not on Bill C-31, but to bring Minister Kenney to committee to talk about the temporary foreign worker program. We're hearing a lot of testimony on it, Chair, and I think that would benefit the committee. I know it's a moving target for the minister as well. He's spent some time making modifications or cancelling or suspending certain aspects of the program. More and more I'm of the inclination that the finance committee would do well to hear form the minister for some short time, depending on his availability.

I'm just giving committee members a heads-up on that.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Rankin now, please.

[Murray Rankin, NDP, Victoria, BC]

Welcome, witnesses.

My first question is for Professor Worswick.

Back in October you did an economic analysis. In your paper you commented on the changes made to the temporary foreign worker program last year and on the fact that the government created a blacklist to suspend employers who misused the program.

We know that as of today there are only four companies on the list, and all of them have been added in the last couple of weeks. In light of the numerous concerns of abuse that have been raised across the country—for example, Alberta alone has seen 100 cases of abuse—do you find that the enforcement of those provisions has been stringent enough?

[Prof. Christopher Worswick]

It's hard for me to say. Certainly, historically we've had a significant problem with enforcement. To be fair, I do think the changes that Minister Kenney has implemented have been, as I said, in the right direction.

It's hard for me to comment on whether there should have been more firms on the list. Probably there should have been, but I think we have to be realistic about the situation in that the people who know about the abuse are the temporary foreign workers, and they don't have a very good incentive to bring that to light. That's definitely a challenge for the government.

I think the idea of blacklisting firms, at least the threat of it, is essential. I think the threat of financial penalties is essential. How it's implemented, I don't know.

[Murray Rankin, NDP, Victoria, BC]

Having a threat that's credible, obviously, in most enforcement regimes, is seen as important.

In your October paper, you also stated, “considering the large global pool of less-skilled workers, many of whom might willingly come to Canada to find work, increasing flows of TFWs could have significant negative consequences for less-skilled Canadian workers”.

What kind of negative consequences were you referring to, and by what mechanisms would they come to be?

[Prof. Christopher Worswick]

I've already mentioned that it could eliminate wage growth for these workers. We haven't had a large amount of wage growth over the last 30 years in Canada.

If every time we see wages going up, the firm continues to advertise at the past wage or the current wage without accounting for the growth, then you could see a situation in which these workers really wouldn't see a wage increase.

[Murray Rankin, NDP, Victoria, BC]

You're saying essentially, in simple terms, that it has the effect of wage growth suppression?

[Prof. Christopher Worswick]

Yes.

[Murray Rankin, NDP, Victoria, BC]

Thank you.

My next question is for Matthew McGuire of the Chartered Professional Accountants of Canada.

In the written paper you presented, you say:

Common among reporting entity sectors is a frustration with identification standards, particularly in cases where the client is not physically present at the time of identification. Altogether, the program of client identification is not proportionate to risk, is burdensome compared to the regimes in other countries, and that situation does not appear to be addressed in this bill.

I wonder if you could elaborate on those comments.

[Matthew McGuire]

Certainly.

Increasingly, as you might expect, interactions for financial services and otherwise take place without meeting the client face to face and pressing palms. They happen in online environments, over the phone, and in any number of other ways.

At the moment, the way things are set up, the non face-to-face measures require reliance on, for one thing, six months of Canadian credit history. You can imagine a new Canadian coming in not having that credit history and not being able to satisfy that requirement. The necessary condition is some sort of reliance on a Canadian credit history. The second thing is the sufficient condition. The sufficient condition is that you have to prove you have a Canadian deposit account or you have to clear a cheque. These combinations of methods rely on old systems. They are slow, and sometimes they can become frustrated. In the case of a credit check, if there is not an exact match of the address, for instance, the whole identification can be frustrated.

[Murray Rankin, NDP, Victoria, BC]

You commented that it's burdensome compared to the regimes in other countries. How do other countries do it better than Canada does?

[Matthew McGuire]

Other countries are relying on the new technologies that are available for identification. There are even private sector initiatives whereby you can evaluate the credibility of a passport by electronically scanning it. There are any number of mechanisms that address that concern.

[Murray Rankin, NDP, Victoria, BC]

Nothing in this bill addresses that.

[Matthew McGuire]

I think it needs to provide for a risk-based approach that leaves much of the decision-making up to the financial institution, which isn't the place to understand—

[Murray Rankin, NDP, Victoria, BC]

Is there nothing in this bill to address your concern?