Finance Committee on March 31st, 2015

[Pierre Dionne Labelle, NDP, Rivière-du-Nord, QC]

Thank you, Mr. Chair.

I also want to thank the witnesses for joining us today.

Terrorist financing is broken down into two streams for the purposes of this study—the international stream and the national stream. Regarding the international stream, I will come back to what Mr. Therrien said about FINTRAC.

Since regulations were adopted for the reporting of electronic funds transfers of $10,000 or more, FINTRAC has received 2 million reports. The figure should reach 10 million this year. If the transaction limit for reporting to FINTRAC was lowered, the amount of information would be huge.

How can we make sure that the accumulation of information will not be done at the expense of people's privacy?

[Daniel Therrien]

As I explained previously, objective standards can create a filter—such as the limit currently set at $10,000—before financial institutions could pass information on to FINTRAC.

I am not an expert in this area, but I think it is entirely possible for the limit to be deemed unreasonable or to become meaningless because of how terrorists operate. Under those conditions, if the monetary threshold for obtaining more information was eliminated, objective thresholds would have to be established before FINTRAC could check all the information in its databases. The goal is to make sure only suspicious transactions are investigated, and not people who have done nothing wrong.

[Pierre Dionne Labelle, NDP, Rivière-du-Nord, QC]

Here is what you say in your document: “I would conclude by reminding the committee that the lack of dedicated review for FINTRAC was last raised...”.

What kind of a review would you suggest for FINTRAC?

[Daniel Therrien]

As I was saying, in terms of administration, I am the only person with the authority to review FINTRAC's activities, and only when it comes to privacy issues.

[Pierre Dionne Labelle, NDP, Rivière-du-Nord, QC]

Indeed.

[Daniel Therrien]

I think that what's missing is an administrative body that could carry out a more general review of the legality and effectiveness of FINTRAC's activities.

Some of my colleagues today have mentioned that FINTRAC did a good job of obtaining and analyzing the information submitted to it, but that this did not lead to concrete law enforcement activities. A review body whose mandate would include assessing the effectiveness of FINTRAC's activities could look into these issues in a concrete manner. There is currently no such review mechanism in place.

[Pierre Dionne Labelle, NDP, Rivière-du-Nord, QC]

Thank you very much for your answer.

I would like to come back to Mr. Tupman and discuss self-financing.

You know that we, as Canadian parliamentarians, were victims of an alleged terrorism-inspired attack that was fairly easy to finance. The individual took a rifle, which may have belonged to his grandfather for all I know, and came to Parliament. We were victims of another terrorism-inspired attack, where an individual used his own vehicle to run someone down.

The matter of funding is important, as we do not want to finance terrorists. However, that's not the only important aspect, if we look at how radicalization happens and how few means are needed to commit a terrorist act.

[Prof. Bill Tupman]

That's quite correct. The international terrorist organizations are encouraging individuals to plan their own solo raids. These need very little funding indeed. The smaller groups have been instructed to engage in credit card fraud, theft of debit cards, ATM fraud, skimming of bills in restaurants and garages—very low-level white-collar crime. That has occurred quite frequently in western Europe. We had the Tamils in the eastern parts of England.

This is why I started off by saying that organized crime and terrorism are networking together. If you look at the Charlie Hebdo attack, those guys fell off the radar of French intelligence because they thought they had reverted to criminality. In fact, they were using their criminality to put the money together to buy their guns and gain access to the people who could provide them with guns. It's quite important to be involved with the illegal armourers to get hold of guns in that sort of way.

What I was trying to say right at the start was that we need to look very closely at the interaction between terrorism and organized crime and be very careful not to put a huge boundary between the two and between the investigators of the two.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Dionne Labelle.

We'll go to Mr. Cannan, please.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thanks to our witnesses for providing their wisdom and expertise on this very important subject, which we're investigating in order to come up with some recommendations to provide to the Minister of Finance.

My first question is for Ms. Duhaime.

Could you expand a little on your preamble? In your opening comments you talked about a centre of excellence. I'm looking for a recommendation we could include in our report. How would you envision such a centre?

[Christine Duhaime]

I spent the last two years dialoguing with the private sector mostly and with law enforcement on what they view as some of the issues with respect to not just counterterrorist financing and sanctions but anti-money laundering as well. I think there is a consensus among the groups I've talked to across the country that we need to have some sort of private and public partnership and that what we have done so far hasn't worked, for whatever reason, either globally or nationally, and that they feel they want to participate in the solution.

That solution, in my mind, is something whereby we would establish a financial crime centre of sorts and would have both sides of the table, as it were, sit down to come up with solutions, to study issues such as digital terrorism, which is new and which no one is really looking at. Canada could take the lead on this and come up with suggestions.

We also have a great need in this country for expertise to be developed in counterterrorism, and in sanctions law especially. We look to the United States for that type of expertise and we import it and actually pay to go to conferences all across the country, whereas we have people here and, believe it or not, we go to the United States to teach this.

I think it makes more sense for us to decide that we're going to keep that expertise in Canada and expand it and export it ourselves. If we had some sort of national crime centre wherein we had the expertise in the country, we could have conferences, we could teach the banks, we could take a leadership role, and we could just keep this in house.

I think that's a solution. It seems to be a solution that everyone I've talked to wants to see happen.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you for that.

You mentioned before that there has been a hole in the fight against terrorism from the financing perspective and that you want Canada to take a lead. From your perspective, how big a threat is homegrown terrorism in Canada relative to the U.S. or Australia?

[Christine Duhaime]

Statistically speaking, and proportionately as well, we appear to have more homegrown terrorists in Canada than elsewhere, not numerically, but just proportionately speaking.

We gave a counterterrorism session in Toronto about a month ago at which the OPP spoke. One thing they said which struck me was that they have 200 persons of interest whom they are looking at in the province and insufficient policing and other resources to monitor them.

These could potentially be homegrown terrorists, just in Ontario. I think that if all of those people come to fruition and end up being potential terrorists, that's an issue in Ontario, and of course we probably have some other situations in other provinces as well with insufficient resources to deal with the problem. I think it's going to be a bigger problem for us.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you.

Mr. Leuprecht, you mentioned in your comments that finance and recruitment are diverse and you mentioned the link between organized crime and terrorism, but your notes were not bilingual. Maybe you could elaborate for the committee a little bit what you'd like to share in those notes, what you see as the link between organized crime and terrorism, and what legislative change recommendations you'd like to see in this report.

[Dr. Christian Leuprecht]

I would say that the link is tenuous, because we don't exactly understand the empirical linkages, and that this is an area that deserves much more attention by government, especially with respect to research, because it is an area that is very difficult to research and so requires heavy sunk costs.

We know, for instance, that contraband cigarettes have been linked to everywhere from eastern Europe through to ISIS, and in the United States, for Hezbollah fundraising. I detail those in the report and also have some articles on that particular issue. However, it's not exactly clear what those linkages are, because it seems that the fundraising and organized crime elements operate fairly independently from the actual terrorist elements and that the networks themselves look somewhat different.

I think it suggests the challenge of our needing to make sure we recognize that what we do on the organized crime enforcement side has concrete implications for public safety and national security. I might point the committee to the Cornwall regional task force, for instance, which was established in 1990, and 25 years later we're still here.

We need to be asking some hard questions about why it is that we pour money into task forces when, for instance, in the end they don't seem to be able to get us the sort of payoff we need. Is it an institutional issue, a legislative issue, a sociological issue, or do we simply have the strategy wrong?

I think there is a lot more we can do, both within Canada and in terms of international capacity building, on organized crime that will help public safety in general and in fighting terrorist financing in particular.

[The Chair, Conservative, James Rajotte]

You have time for an extremely brief question.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

I have a quick question, then, for Mr. Tupman.

On the international scene, do you think the UN is taking enough action on ISIL, and on terrorist financing, for that matter, to deal with this issue?

[The Chair, Conservative, James Rajotte]

That's a big question, and we have only about 20 seconds left, Mr. Tupman, so we'll have to return to this.

[Prof. Bill Tupman]

Okay, how about “no”.

[Some hon. members]

Oh, oh!

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

I like that.

[The Chair, Conservative, James Rajotte]

I appreciate it.

We'll go to monsieur Côté, s'il vous plaît.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you, Mr. Chair.

I want to thank all the witnesses for being available even though we have very little time to ask them questions.

Ms. Duhaime, if I understood your presentation correctly, you said that the FATF has not kept itself sufficiently up to date and that it was at least one step behind, especially when it comes to new digital financing platforms. For all we know, it may even be two or three steps behind.

Canadian organizations clearly rely heavily on the FATF to combat terrorist financing. Do you think that trust, that hope, are well founded? Can Canada take concrete action to support the FATF, so that the organization can bring itself up to date?

[Christine Duhaime]

I'll have to give a bit of a complex answer only because I don't really know what happens behind the scenes at the FATF and why, for example, it's not as effective as it should be. For sure, it has been effective in anti-money laundering law. It tried to be on counterterrorism and sort of missed the mark entirely on sanctions.

We are definitely a strong supporter of the FATF and we laud it, as we probably should, for what it does. I think there needs to be some sort of rethink on what it does. I think you noticed, for example, that the U.S. and Saudi Arabia are leading a separate group that met in Rome last week just to deal with counterterrorist financing, of which the FATF is a member. That suggested to me that maybe there's a little bit of lost confidence in the FATF. Why would they not simply go to the FATF since they're all members and have that meeting there?

It may be a suggestion that the FATF either.... Whoever's in charge of it on an annual basis should retain its jurisdiction for a much longer period to get much more accomplished, in a much more in-depth way. We either devote more resources to it, or we cut off the terrorist financing piece and just have a separate FATF, or a different body that just deals with terrorist financing that is much more specialized.

One of those two has to be the solution, but you know, 10 years have gone by and we haven't solved counterterrorist financing. Maybe it's time to find another solution.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you very much

Mr. Leuprecht, unless I am mistaken, you said that the $10,000 threshold has led to too many false positives.

In the 14th recommendation issued as part of a study on terrorist financing, the Senate review committee indicated that the threshold for examining financial transactions did not necessarily have to be excluded and that additional emphasis could be placed on the strategic collection of information and risk-based analysis and reporting.

Would you go as far as to suggest that terrorist financing be tracked through risk-based analysis and reporting? If not, do you think the $10,000 threshold remains valid for all transactions?