Evidence of meeting #79 for Finance in the 41st Parliament, 2nd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was isis.
A recording is available from Parliament.
Conservative
Mark Adler Conservative York Centre, ON
Mr. Chair, my understanding is that the committee for public safety is studying C-51 right now, and if Mr. Cullen has any questions regarding C-51 he should take those to that committee. We're here today studying terrorist financing in Canada, and I don't see the relevance.
NDP
Nathan Cullen NDP Skeena—Bulkley Valley, BC
If I may, members of the government benches have asked numerous questions about C-51 as well. I don't remember Mr. Adler making a similar intervention at the time.
The question is, does the notion of terrorist financing and what we're studying here today, which is what we've been doing for a number of weeks, bear relevance to other pieces of legislation moving before Parliament? Bill C-51 would be that relevant piece.
To Mr. Adler's point, perhaps this whole study should have been at the public safety committee, but here we are at the finance committee, so one has a bit of a merging of two issues in one place.
Conservative
The Chair Conservative James Rajotte
The committee has decided to study terrorist financing. Bill C-51 is obviously related in the sense that it is legislation dealing with terrorism. I would say to Mr. Cullen on the legal issues with searches, I think those are better left with the committee that has studied Bill C-51. If he could bring it back to terrorist financing, because my sense is that the witnesses here are not going to have much to say on issues like that. They are going to have a lot to say on terrorist financing, so let's bring it back to that topic.
NDP
Nathan Cullen NDP Skeena—Bulkley Valley, BC
Thank you, Chair.
To Mr. Stephenson, or perhaps any of our panellists here today, if you don't have knowledge of this then let us know. What we've heard from folks who worked with the RCMP in the money laundering and terrorist financing section is that there's a problem with our capacity in Canada. When RCMP officers train up and start to learn the incredibly complicated issue of how to track the money, the way our current system is—as we've heard from folks who worked within the RCMP—is that when they get to a certain level of expertise, the way the RCMP works, they get promoted and transferred out of that division entirely.
A story was related to us about someone who had become quite a proficient expert but was now a detachment commander at a post somewhere because that was the next step of promotion.
Is this anything you have come across in your experience? Mr. Rudner's nodding, so I'll allow him to comment.
Distinguished Research Professor Emeritus, Carleton University, As an Individual
Yes, indeed, and not only in the RCMP, but in virtually the entire Canadian bureaucracy. We like generalists, not specialists. To get promoted, you're promoted as a generalist and not a specialist, which is precisely the point I'm trying to make on enhanced investigative capacity on the part of FINTRAC and the related components of the Canadian security and intelligence community.
Terrorism finance is a highly specialized issue that requires high degrees of special knowledge. I would like to see a career path for the people engaged in investigations of terrorism financing precisely so their learning generates capacity and continuity.
NDP
Nathan Cullen NDP Skeena—Bulkley Valley, BC
Thank you, Mr. Rudner. Forgive me for interrupting; I have very little time.
I have a question for Mr. Fanusie. You've identified one of the avenues of financing as state sponsorship. Saudi Arabia has been identified as a state sponsor of terrorism. We've just made a $15 billion arms deal with Saudi Arabia with no conditions attached. Is there not a way to leverage our influence with groups, countries like Saudi Arabia, to limit such terrorist financing?
Director of Analysis, Center on Sanctions and Illicit Finance, Foundation for Defense of Democracies
Yes. One of the key points that I mentioned is that yes, military support, diplomatic support, all of that should provide a lever for having other states, whoever they may be.... If they're receiving support for security, that definitely provides an opportunity for activity and improved oversight within their jurisdictions. There is an opportunity there.
Conservative
Conservative
Andrew Saxton Conservative North Vancouver, BC
Thank you, Chair.
Thanks to our witnesses for being here today.
My first questions will be for Patrick Johnston of the RAND Corporation.
Mr. Johnston, you mentioned in your opening remarks how ISIS is a threat to North America and specifically to Canada. Can you please expand on that?
Political Scientist, RAND Corporation
Sure. I think that the main threat to the United States and Canada does come from the citizens of North America who went and travelled to Iraq or Syria, continue to hold passports, and can return. I think that this presents a different set of challenges from the ones that I highlighted as kind of the high-level issues about what makes ISIS a particularly potent and difficult adversary to deal with through some traditional terrorist finance instruments.
I think that, in terms of the returning volunteers who have travelled to Iraq and Syria, the previous witnesses are correct that this isn't incredibly expensive, that there are domestic sources of funding, oftentimes, that tend to be very grassroots within the communities that they come from, often within mosques and other areas. I think this is, essentially, a set of law enforcement or intelligence questions, but I think it is correct to say that the main threat probably doesn't come from a 9/11 style of attack, if you will, but rather people who are currently being radicalized within Canada or the United States and their ability to get training and funding from ISIS or other groups in Iraq and Syria.
Conservative
Andrew Saxton Conservative North Vancouver, BC
Okay, but there is concern that these individuals who are being radicalized, if they come back to Canada, could also commit acts of terrorism upon their return. What are your thoughts on that?
Political Scientist, RAND Corporation
There's certainly a risk, and I think that some of it stems from domestic law and particularly the ability of people to move relatively freely when they have a passport. There are border control issues as transit points in the EU countries for returning to the United States and I think to Canada as well. I think that the scenario that you laid out is certainly one to be concerned about. Again, I think it's more than a financial issue; it's largely an intelligence and law enforcement issue that requires information sharing and probably work with financial intelligence units. It can't be considered a financial issue by itself.
Conservative
Andrew Saxton Conservative North Vancouver, BC
How important is military action by the coalition in combatting ISIS and interrupting terrorist financing?
Political Scientist, RAND Corporation
I think the coalition would be able to make a substantial difference in being able to reduce ISIS's ability to access its local funding if it had a larger presence in Iraq and Syria. That said, I'm not here to advocate for any particular policy as much as to analyze different policy options. I think the best option on the table right now that's also realistic, given national politics in most coalition countries, is kind of a strategy of patience and working through local partners in Iraq and, ideally, in Syria as well, which, I think, the key is capacity building, and this requires kind of small footprints, small deployments of troops, to service trainers and advisors rather than large deployments of combat forces.
Conservative
Andrew Saxton Conservative North Vancouver, BC
Thank you.
My next question is for Vivian Krause, who comes to us from my hometown of North Vancouver.
Good morning, Vivian, and thanks for waking up so early in the morning.
Can you explain how charities are being used for illicit purposes, for purposes that were not intended? How are they are being financed by organizations outside Canada?
As an Individual
I'll do my best. There are two parts to your question.
How are charities being used for illicit activities? I don't think that I necessarily see charities being used for illicit activities. I certainly haven't seen anything illegal, and certainly nothing criminal. As for whether some of the rules are being broken in terms of what charities are allowed to fund, perhaps they are.
How can I answer that? Some of the types of activities that raise questions for me are things like how I've seen environmental groups funded to renew the commitment of opposition parties to a ban on oil tanker traffic. Charities aren't allowed to do that sort of political activity. I'd also question, for example, cultivating indigenous opposition on building relationships with communities along a pipeline route. Does that constitute charitable activity? That's obviously something for the CRA to decide.
To the second part of your question on how funds come into Canada, there are the obvious acceptable and normal routes. Charities in Canada can receive funding from any donor anywhere around the world and are required to disclose that on their tax returns. Most do. I have seen some cases where, for instance, U.S. tax returns say that a Canadian charity was paid but in fact the Canadian charity hasn't reported it. I've contacted some of those organizations and they have in fact said that they filed their tax returns incorrectly and would refile with the CRA. That's one route, which is just the normal entrance of money.
The other thing that happens is that sometimes a donor will make a payment to a non-profit society, say, and that non-profit society then funds the Canadian charity, so by the time the foreign funds get to the charity they've been Canadianized, if you will, through the non-profit organization. There are millions of dollars coming in that way that don't show up as foreign.
Conservative
Andrew Saxton Conservative North Vancouver, BC
So that's a type of money laundering, then, basically?
Conservative
The Chair Conservative James Rajotte
We'll have to come back to that. Unfortunately, our time is up. Thank you.
We'll go to Mr. Brison, please.
Liberal
Scott Brison Liberal Kings—Hants, NS
Just when it was getting interesting, Mr. Chair.
Professor Rudner, you've said that in 2003-04, FINTRAC processed reports of $700 million in suspicious transactions, of which $70 million was found to be terrorist finance or threats to national security. Do you think this 10:1 ratio would still hold true today?
Distinguished Research Professor Emeritus, Carleton University, As an Individual
FINTRAC issues an annual report, of course, which was put out just recently. Frankly, I don't remember the precise numbers. At my age, the brain cells don't necessarily respond to the immediate question, but I believe the figures are relatively high.
One of the challenges, of course, is that what FINTRAC is reporting are suspicious reports and reports that have been given to them, as well as things they've been able to intercept through their own methods. We don't know to what extent that constitutes the totality of illicit funding of terrorist organizations from Canada.
Liberal
Scott Brison Liberal Kings—Hants, NS
Saudi Arabia and the Gulf emirates have FINTRAC-type agencies. What are the weak links in these agencies compared to FINTRAC in Canada? Are there ways in which Canada could play a role multilaterally in terms of strengthening governance or working with others to strengthen and create more uniform governance around these issues? Or is that naive?
Distinguished Research Professor Emeritus, Carleton University, As an Individual
I think you've raised a very important question. I think perhaps the Egmont Group may well want to participate both in the answer and in the solution.
There's no question that funds are emerging from private, so to speak, sources or wealthy people in Saudi Arabia, Kuwait, Qatar, and the United Arab Emirates and going to fund activities involving political violence in Canada and elsewhere. The governments of those countries, by the way, are very aware of this and in fact have clamped down under the recent new king. They have clamped down stringently, but I think they lack the capacity to clamp down effectively on all the prospective donors. They're trying, but they have a way to go.
I think one of our possible roles, in cooperation with counterparts at the Egmont Group, could be precisely to build the capacity of those governments to undertake the terrorism financing challenge they face and to prevent, to detect, and to prosecute.
Liberal
Scott Brison Liberal Kings—Hants, NS
Thank you.
The what extent is the whole evolution and proliferation of technology around financial transfers, the rise of shadow banking and non-traditional financial groups doing some of the things and playing the roles that banks traditionally did, the emergence of stored-value cards, and the capacity to e-transfer funds to the extent we can today, making it difficult for traditional FINTRAC-type governance to be effective?
Does this require a significant investment in the kinds of technological advances that those who would be in engaged in terrorist financing have already embraced?