Evidence of meeting #78 for Finance in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was financing.
A recording is available from Parliament.
9:10 a.m.
NDP
Nathan Cullen NDP Skeena—Bulkley Valley, BC
Thank you, both.
I'll quickly go over to our friends in the banking association. Do you get any feedback from FINTRAC once you make one of these reports of suspected activities? Do they tell you what to do, what is working, or what is not working?
9:10 a.m.
Senior Vice-President, Head, Corporate and Canadian Banking Compliance, Canadian Bankers Association
We get general guidance, but we don't get any specific feedback with respect to any of the specific reports we submit.
9:10 a.m.
NDP
Nathan Cullen NDP Skeena—Bulkley Valley, BC
You submit a report and say you suspect there may be wrongful activity here. FINTRAC says “Thanks”, and they move on. Would not some level of back-and-forth between your member associations, such as TD Bank, CIBC, and others, be more helpful in actually determining and eliminating false positives, and not sending law-abiding Canadians' information on and spreading it through the Canadian intelligence organization?
9:10 a.m.
Conservative
9:10 a.m.
Senior Vice-President, Head, Corporate and Canadian Banking Compliance, Canadian Bankers Association
Yes, we believe so, which is partly why we're recommending more information sharing between the various constituents
9:10 a.m.
Conservative
The Chair Conservative James Rajotte
Okay, thank you.
Thank you, Mr. Cullen.
We'll go to Mr. Saxton, please.
9:10 a.m.
Conservative
Andrew Saxton Conservative North Vancouver, BC
Thank you, Chair.
Thanks to our witnesses for being here today.
My first question is for Mr. Black.
Mr. Black, you talked about the Palestinian Authority financing terrorism, but who finances the Palestinian Authority?
9:15 a.m.
Author and Historian, As an Individual
It's the taxpayers of the United States of America, to the tune of about $450 million a year; the taxpayers of the EU; individuals; Qatar; different organizations, but I would say that one of the leading funders of this terrorism is my country.
9:15 a.m.
Conservative
Andrew Saxton Conservative North Vancouver, BC
What efforts are being made by these countries—your country in particular—to make sure that those funds do not end up in the hands of terrorists?
9:15 a.m.
Author and Historian, As an Individual
Originally, I revealed this information at the end of 2013 in my book, Financing the Flames, which I brought a copy of for the committee. In fact, I believe that I actually published in Financing the Flames a copy of the law, the public law, with the amounts of money that would be given to each terrorist. Now, these are not from the Islamic jihad or PLO; these are just ordinary citizens. Sometimes they just need to provide money for their family or a wedding, and it lays this out.
I visited four parliaments in four weeks: the House of Commons in London, the European Parliament, the Knesset, and the House of Representatives, and you are my fifth, and they were in disbelief. In the United States there was a great deal of discussion about it. At the last omnibus spending bill in December, a specific line item was put in that any of this money that goes in to pay these terrorists will be deducted from the overall amount of foreign aid given to the PA. Every banker knows that the concept of fungibility makes that an impossible goal. When the Palestinian Authority heard of this—and they never denied this, there's no denial here, this has been known for years—they said they were going to make an outside commission so they could run the money through several tunnels, and therefore it wouldn't be the PA.
I would like to differ on the concept of charitable organizations. Many of the charitable organizations that I have studied are actually intertwined with the terrorist activity or intertwined with the organizations who are financing terrorist activity in terms of fungibility and support. There's a 2003 report by the Israeli military government—actually it's the foreign ministry—that outlines the various specific charitable organizations that are involved in funnelling a lot of this money. And remember, charitable organizations are now transnational. They're international, they're supranational, and in some cases they bear no allegiance to any nationality, especially when you have organizations, as we do in the United States, that have offices in Switzerland. Nobody knows where the money's coming from. They take money by credit card. They have something called “donor-advised” in the United States. You can just give your money. What we need to do to cure this is not to make better regulations for the NGOs—I think you call them NPOs here—or any of the banks, but to dismantle the actual establishment, the institution—
9:15 a.m.
Conservative
Andrew Saxton Conservative North Vancouver, BC
Okay.
I have very limited time. Thank you very much for your answer, but I do have to move on to some other witnesses. You'll have another chance, I'm sure, with my colleagues.
For the CBA, can you explain what banks are doing currently to help combat terrorist financing?
9:15 a.m.
Senior Vice-President, Head, Corporate and Canadian Banking Compliance, Canadian Bankers Association
The primary activities we have in respect of terrorist financing are twofold. One is screening of names. There are names published by the United Nations, Canada, and other countries that are on the terrorist lists. We screen our client lists globally against those names on the terrorist lists, with the aim of preventing and blocking funds if it exists. The other thing we do is monitor transaction activity looking for typologies of terrorist money.
9:15 a.m.
Conservative
Andrew Saxton Conservative North Vancouver, BC
Very quickly, can you tell me what innovative, new methods are they using today for terrorist financing?
April 30th, 2015 / 9:15 a.m.
Senior Vice-President, Head, Corporate and Canadian Banking Compliance, Canadian Bankers Association
Terrorist financing, as I said in my earlier remarks, is difficult to identify, because often it's about the intent of the use of the money. We've seen some innovative typologies where they've actually employed criminal activities, including credit card fraud, the trans-shipment of goods, and the drug trade. But as often as not, it's legitimate funds that are misdirected to finance terrorist purposes ultimately, which makes it one of the reasons it's difficult to identify.
9:20 a.m.
Conservative
9:20 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
I have a question for the banking industry representatives to begin with.
When we think of shadow banking, often the risks associated with shadow banking are around the prudential risks to the system and credit issues. But what are the risks of shadow banking in terms of potential terrorist financing completely outside the realm of traditional banking? That's number one.
Second, is there a risk that if we do all the right things in clamping down on potential activities within traditional banking and helping to provide the tools to do that, those involved in terrorist financing will simply pursue their activities outside of traditional banking?
9:20 a.m.
Senior Vice-President, Head, Corporate and Canadian Banking Compliance, Canadian Bankers Association
In answer to your second question first, I think the answer is yes. And one of the things that we've observed is that to the extent that we've been successful in our attempts to limit money laundering and terrorist financing, it's an amorphous type of threat and it will change very quickly to adapt and find the path of least resistance.
I think to your first question, whether it's shadow banking or alternative payment systems or other forms of unregulated entities, to the extent that they provide some of the features that can be exploited by the criminal element, they will pass. Very often, criminals are looking first, to place cash, and, second, to move money across borders between various individuals, and so to the extent that they can use mechanisms to move money or transfer value from one person to another, particularly if it breaks an audit trail and it becomes obscure, they will use it. And third, anonymity is something....
Regardless of what type of financial services you are providing, we take a risk-based approach and have to look for those types of vulnerabilities and think how they might be exploited.
9:20 a.m.
Vice-President, Deputy Global Anti-Money Laundering Officer, TD Bank Financial Group
I would agree with what Mr. King said. It's important to keep in mind as we think about how criminals continue to evolve in their methods and techniques that to do this they will look for the path of least resistance to be able to facilitate their means, be it from a money laundering or a terrorist financing perspective. So the things that Ron was talking about are exactly what they're looking to do.
9:20 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
Are there indications or even evidence that, for instance, stored value devices are being used increasingly? Is it an anachronistic rule we have now to report $10,000 or more in cash when you're crossing the border? Does that reflect reality when people could have $50,000 on a stored value device as they cross the border?
Are we effectively handling this in a way that doesn't reflect the technological sophistication of the people who are engaged in this activity?
9:20 a.m.
Vice-President, Deputy Global Anti-Money Laundering Officer, TD Bank Financial Group
I think a challenge that we are facing collectively right now, as a partner in the regime, is emerging technology and different ways to transact in a mobile environment. We have to keep pace with that in the way we construct our policies and procedures to onboard or monitor clients. Law enforcement has to look at that as well.
9:20 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
But increasingly it's possible for somebody to obtain credit, to transfer money, and to receive all the services traditionally associated with banking without being a bank client, both within Canada and particularly within emerging economies in the developing world, where the growth of mobile banking and technologically driven banking is completely outside the realm of a regulatory framework.
Do you have any thoughts on how we, as a country and part of a multilateral framework, could address that?
I'd be interested, Mr. Carter or Mr. Schwisberg, if you had some thoughts on this as well, because it strikes me as something that we've got to be concerned about. I agree with the Senate banking committee's 2013 report that identified the issues of information sharing between the banking system and the Canada Revenue Agency.
We've even heard from earlier witnesses that there are issues in the sharing of data between the Canada Revenue Agency and FINTRAC. Are there some countries that are perhaps doing more on the whole technology side, and how could we participate in or support those initiatives?
9:25 a.m.
Conservative