Thank you, Mr. Chair.
I am a partner with the law firm of Fasken Martineau. My perspective on terrorist financing legislation is primarily as an adviser to financial institutions and others that are subject to this legislation. My comments today are not on behalf of any particular clients but simply reflect my own experience in this area.
The types of clients I would advise in relation to this would be banks, trust companies, life insurance companies, credit unions, and various types of businesses that would fall within the category of money services businesses.
A general concern of the financial institutions' clients I deal with is regulatory burden. A lot of that has nothing to do with terrorist financing; it's about other types of regulation and risk management requirements, but it does extend to anti-money laundering and anti-terrorist financing requirements.
Every few years, since the current form of the legislation was introduced, there have been significant changes to the legislation and an expansion of the requirements to include filling gaps and articulating the requirements. These have led to what is currently a fairly onerous regime.
I think there is a general recognition that terrorist financing is a problem. I think that taking that problem seriously entails requiring financial institutions to obtain a lot of information about customers and to do a lot of monitoring of transactions, but it needs to be kept in mind when examining these requirements that there is a real cost to the institutions.
In particular, there's a cost to smaller institutions. Larger financial institutions have large teams of personnel dedicated to this area. Smaller institutions don't have the resources to do that and can find themselves in a very challenging situation whereby they are subject to essentially the same requirements as big banks but without the resources.
The reason for that is that to a large degree the legislation is one size fits all. Elements of it are risk-based and the expectations of regulators such as OSFI will vary, depending on the nature of the institution, but a lot of the legislative requirements are minimum requirements. They have to be met regardless of the size of the institution, and doing that can present a significant challenge to an institution's ability to compete. I suggest that fact be kept in mind in any review of these requirements.
A related point would be that in examining the requirements and considering changing or introducing new requirements, we should give careful consideration to the business practices of the types of firms that will be affected. We need to make sure the requirements introduced are practicable, that they're workable in light of what the firms subject to these requirements are actually doing, so the firms won't need to greatly distort business models simply because the legislation was written in a particular way.
Finally, another area I encounter on a fairly regular basis involves businesses with some kind of fund transfer aspect as part of their models. They are being caught within the scope of money services businesses.
There are a lot of businesses doing various things in the payment space—a rapidly developing and growing area—that are caught or potentially caught by the definition of money services business, even though they're certainly not the traditional type of MSB.
Consideration needs to be given to these types of businesses to make sure that firms that are not intended to be caught by these requirements are not being picked up and caught by them, and to make sure there's an appropriate balance so that innovation in this area is not unduly stifled.