Thank you, Mr. Chair.
I would like to thank the committee for inviting the Canadian Bankers Association to appear today to contribute to its study on terrorist financing in Canada and abroad. The CBA works on behalf of 60 domestic banks, foreign bank subsidiaries, and foreign bank branches operating in Canada, and their 280,000 employees.
I am chair of the Canadian Bankers Association's anti-money laundering and terrorist financing specialists group. Our industry recognizes its key role in combatting money laundering and terrorist financing, while protecting the privacy of law-abiding customers. Banks in Canada have a long history of working in co-operation with the federal government, law enforcement, and intelligence agencies, and the Financial Transactions and Reports Analysis Centre of Canada to develop and implement an effective anti-terrorism financing and anti-money laundering regime. ln addition to the hundreds of millions of dollars that the banking industry spends each year to defend against money laundering and terrorist financing, all the CBA's member banks have policies and procedures in place covering AML/ATF, including key elements such as "know your customer" rules and the reporting to FINTRAC and the Canada Revenue Agency of prescribed transactions. These policies and procedures are designed to help protect Canadians as well as the safety, soundness, and reputation of the Canadian financial system.
We would like to propose some recommendations for the committee to consider that we believe would significantly enhance the ability of banks in Canada to detect and prevent terrorist financing and other criminal activity.
We believe it is important to highlight the distinction between money laundering and terrorist financing. Money laundering involves converting the profits of criminal activity into a seemingly legitimate asset, whereas, on the other hand, terrorist financing is about the intent to use funds for terrorism-related purposes. For terrorists, the origin of the funds, whether legitimate or criminal, is entirely irrelevant. Terrorist financing often occurs in small amounts and the use of those funds can seem entirely ordinary, including things like normal travel and living expenses.
The current AML/ATF regime includes provisions to address the prescribed one-way sharing of information with government and law enforcement. However, there are no specific provisions to allow the sharing of information among Canadian financial institutions or between FINTRAC and reporting entities. We believe that the government should consider allowing enhanced disclosure and information sharing in these areas. Current privacy legislation, with the exception of the investigative bodies regime under PIPEDA restricts the disclosure of personal information without the knowledge or consent of the client. This makes it challenging to restrict a customer who presents a higher risk for terrorist financing. For example, if a financial institution terminates its relationship with a customer for their suspected involvement in terrorist financing, there is virtually nothing that prevents that client from obtaining the same services from another financial institution. By allowing greater information sharing among financial institutions, the AML/ATF regime as a whole would be strengthened.
Furthermore, we believe that Canada's AML/ATF legislation would be enhanced if FINTRAC were allowed to disclose information to banks and other reporting entities. FINTRAC could then request additional information from financial institutions about a specific report and provide feedback on the reports submitted to reporting entities. This would assist reporting entities, such as banks, to more effectively implement a risk-based approach to identifying higher risk customers. This issue was raised in the Senate banking committee's 2013 report on the AML/ATF regime.
There is significant benefit to be gained by having all partners in the regime work more closely together—banks and other regulated entities, policy-makers, regulatory agencies, and law enforcement. If given the opportunity and agility to act quickly, banks can provide greater assistance to the overall effort to combat money laundering and terrorist financing.
ln this regard, we are recommending that the current regime be strengthened to enable an information exchange among financial institutions, FINTRAC, and law enforcement regarding persons of interest, including real-time feedback on terrorist financing activities. This would enable Canadian banks to better detect complex money laundering and terrorist financing schemes.
As part of the effort to ensure that Canada has a consistent regulatory framework applying to all entities that may be vulnerable to money laundering and terrorist financing, we believe that payments services providers and new technology that are currently unregulated should be captured by the current regime. Leaving gaps in the regime only shifts the risk to someone who is likely to be less able to prevent, detect, and report on suspicious transactions.
In closing we would like to reiterate the strong support of the banking industry for the AML and ATF regimes. Banks take very seriously their role in preventing the financing of terrorism, while balancing the need to protect the privacy of Canadian citizens.
We are pleased to have an opportunity to work cooperatively with the government and parliamentarians to ensure that Canada's AML and ATF systems are thorough and effective.
Thank you once again for providing the CBA with this opportunity to offer our views.