Finance Committee on May 5th, 2015

[Vivian Krause]

Those are very charged words. What I am trying to say is that just because an organization.... If you look at the tax returns of a Canadian charity and you see that it has reported zero foreign funding, that does not mean it hasn't received foreign funding, because it is possible to Canadianize the money through other organizations, as in the exact case I just gave you.

[The Chair, Conservative, James Rajotte]

Okay, thank you.

We'll go to Mr. Cannan, please.

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

Thank you, Mr. Chair.

Thank you to our witnesses.

I apologize to our witness from British Columbia, as a fellow British Columbian who brought Mr. Rankin in. He is not normally on the committee. I think it is very inappropriate to attack you.

We are not dealing with this aspect. As you indicated, this isn't an issue of the funding for environmental groups. They are legitimate, in the sense that you feel they have nothing to do with terrorism. You are upfront with that. I want to gear my questions toward the terrorism study that we are dealing with.

My first question would be to Mr. Rudner. In your opening comments, you said you have some examples of Canadian organizations that are diverting and transferring funds to terrorist organizations. Could you provide some examples?

[Prof. Martin Rudner]

Yes, we have examples. One of the leading examples was and is Hezbollah, which we know from law enforcement and court cases has a particular presence in Canada. We also have from Hezbollah sources—I've published on this, and I believe I circulated the article, which is in print, to members of the committee—a list of Hezbollah organizations that in fact raise funds abroad and use the funds for Hezbollah purposes, including payments—call it subsidies—to families of martyrs. Those are Hezbollah people who have been killed in terrorist attacks abroad, and their families are supported, if you will, on martyred pensions by these funds, as well as operational expenses of Hezbollah in the Middle East and abroad.

We have Hezbollah as a classic example of that process of raising funds through front organizations, channelled to a terrorist organization. A major study on this was done, by the way, in Germany, which is cited in my article.

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

Thanks.

I had a chance to speak with you earlier and you mentioned you had lived in the Middle East. One story you shared but didn't have time to elaborate on in your opening comments was that it's not just money that's always the front per se to terrorism, but also some of the strategy.

You mentioned that in a eulogy to the late Crown Prince of Saudi Arabia a statement was directed toward Canada.

[Prof. Martin Rudner]

Yes, this was a eulogy at the death of Crown Prince Sultan who passed away several years ago. It was mentioned how he was a very strong supporter of environmentalism, particularly environmental activism abroad, especially in jurisdictions that were producing oil and gas in competition with Saudi Arabia. The discourse focused on Canadian oil and gas development in Alberta, which at the time—we're talking three or four years ago—was seen by Saudi Arabia as a distinct threat to their market share in the United States. The discourse on this was that Saudi Arabia was using, and I'll use this phrase, “front organizations” as financial intermediaries between Saudi Arabia and Canadian activist organizations to try to prevent the development of competition from Alberta and elsewhere in Canada to Saudi exports to the United States market. It's a classic example.

One other example I might mention is Iran. The Iranian leader, Ali Khameini, the Supreme Leader, recently introduced what he calls the resistance economy with a strategy that is specifically directed at a pivot to Asia and which also calls for active measures to prevent other countries, specifically Canada, from accessing the Asian market in competition with Iranian intentions. As we speak, Iranians are making a major effort to access Asian markets: China, India, and elsewhere. They see the Canadian effort to export oil and gas through British Columbia as competition for market share. I believe we know that the Iranians have a very strong intelligence capability to commit sabotage through Hezbollah directly under Iranian aegis as well as through the Iranian Revolutionary Guards organization and the Quds group within it to commit and support political violence directed at preventing competition. The resistance economy, to use Ali Khameini—

[The Chair, Conservative, James Rajotte]

You have 30 seconds.

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

You mentioned the word “resistance”. In the text of your comments you mentioned Deep Green Resistance and the import of funds for terrorist activity. Is that tied in with that as well then?

[Prof. Martin Rudner]

No.

I wouldn't tie deep green resistance necessarily to the Iranians. We do know that an organization exists in British Columbia and Alberta called Deep Green Resistance. It's on the web, it is well known, and it is explicitly dedicated to political violence to overthrow capitalism, and specifically the oil and gas economy. As a politically violent organization, I think Deep Green Resistance would accept this. Where their funding comes from I don't know. I do hope that the Canadian security and intelligence community does know but they're not going to share their methods of sources and means to tell us.

[The Chair, Conservative, James Rajotte]

Okay.

Thank you.

Thank you, Mr. Cannan.

Ms. Boutin-Sweet, the floor is yours for six minutes.

[Marjolaine Boutin-Sweet, NDP, Hochelaga, QC]

Thank you, Mr. Chair.

Gentlemen, thank you very much for your presentations. They were very interesting.

I would like to focus more on Canada, for a change.

The committee has heard from a number of witnesses who talked about Canada's ineffectiveness in prosecuting cases in the fight against terrorist financing. For instance, FINTRAC receives a huge amount of information, but very few cases come before the courts.

I will quote Ms. Vonn, who is a policy director at the British Columbia Civil Liberties Association. She said the following:

... what little evidence is available can only suggest either that there is considerably less terrorist financing than feared or that the regime is not very effective at addressing it. However, much of the response to that situation of genuinely failing to understand the need and advocacy of the regime is simply repeated or just for more invasive powers; broader disclosures of sensitive, highly prejudicial personal information; a more onerous administrative burden on the private sector; and more resources for FINTRAC and its partners.

How do you think we could combat terrorist financing more effectively? For instance, should criteria be established to target more at-risk transactions or should changes be made to the current $10,000 threshold?

My question is for Mr. Stephenson, Mr. Johnston or Mr. Rudner.

[Kevin Stephenson]

Thank you.

I think FINTRAC, the RCMP, and the other competent authorities can best answer those questions specifically dealing in the Canadian context.

But I think when you look within the context of the international standards, it says that each jurisdiction is supposed to identify and understand its risk. By doing that you have to bring in or involve a private/public sector partnership in identifying the risk to include the TF risk. Then you're supposed to spend your resources trying to deal with that risk accordingly.

You mentioned the cash transaction reporting. When you're dealing with terrorism financing, there's not a cookie cutter that can fit everywhere. Basically, as I tried to mention before, there need to be different agencies working more closely together and bringing their own expertise, which is one of the things that the FATF has tried to do in changing the standards recently in 2012. I mentioned this earlier in my opening remarks. It's basically looking at how you deal with financial intelligence throughout the chain.

You mention that you don't have a whole lot of convictions. Well, a lot of jurisdictions don't have a lot of convictions. A lot of jurisdictions don't have confiscations, and there are challenges. We need to be doing much better, but a lot of that has to do with better understanding of financial intelligence, better working with the private sector so they can make the reports to FINTRAC, better working with RCMP investigators to follow the money, and better disrupting of terrorism finances. It's a chain. It's not necessarily one entity or one particular thing that you can do, but you have to do it all across the board.

[Marjolaine Boutin-Sweet, NDP, Hochelaga, QC]

There are two points I would like to raise.

First, we have been told that the reporting entities were not too sure what to look for and were providing much more information than necessary. Second, we were told that the system was much more effective in the United States. I believe you know a lot about that—for example, the links between banks and the FBI.

Could you briefly tell us how things work in the United States and whether they have tools that could be useful to Canada?

[Kevin Stephenson]

Both FINTRAC, and FinCEN in the United States are members of my organization, so I don't want to get into a debate on who is doing a better job. I think both of them are doing an excellent job overall. Of course, there is always room for improvement.

You would have to ask FINTRAC specifically if they think they needed to compare themselves with FinCEN, but overall, as I mentioned before, I think globally that reporting entities in almost every jurisdiction are always asking for more information. But it's not an exact science. You can give them red flags, but it's not like someone walks into a bank and has on the front of their forehead a sign that says, “I'm a money launderer” or “I'm a terrorist and I'm moving money”. It's not that simple; it's not that easy. You can give information to the reporting entities and say “Look at these kinds of things. You should know your customer. These should look suspicious; these should look unusual, and you should report that to your FIU.” I think a lot of reporting entities just want to be able to check the box.

I think that FINTRAC does an excellent job here, and also FinCEN as a regulator in the United States, in communicating with the private sector and saying, “These are the red flags to look for”. But there is a responsibility on the reporting entities that a lot of them are not comfortable with. We're not investigators or intelligence experts, but there is a relationship or partnership that's building the trust and communication that's required. I think overall that FINTRAC and FinCEN are doing an excellent job along those lines.

[Marjolaine Boutin-Sweet, NDP, Hochelaga, QC]

Thank you.

As I have only one minute left, I will ask my question quickly. Mr. Rudner or Mr. Fanusie could perhaps answer it.

Do you know about the case of the Lebanese Canadian Bank, in Beirut? Apparently, a system has been dismantled rather adequately. So the rules have been applied properly.

Could you please tell us more about that?

[The Chair, Conservative, James Rajotte]

Very briefly, Mr. Rudner, please.

[Prof. Martin Rudner]

Yes, I think there was an example of—

By way of background, it was a Canadian branch of the Royal Bank of Canada that was taken over by Lebanese interests and was prosecuted in a private litigation—that's the important thing, that it was private—on the basis of an argument that that ex-Canadian bank, Lebanese-Canadian bank, was used to funnel resources to Hamas and Hezbollah. There was a settlement that's not public. It was a private settlement between the private litigants and the bank where, in effect, they admitted culpability.

I have to say that I was involved as an analyst for the litigants in that case. That's my declaration of interest. Let me just say that the issue there was analysis, that there was sufficient material to be properly analyzed to show evidence that would have convinced the courts. Therefore, the bank realized its culpability and was willing to achieve a private settlement.

I'd like to just go back to this point on sources and methods. One of the reasons why so few prosecutions arise in Canada, I believe, is that the sources and methods are so sensitive that one doesn't want to necessarily bring them before an open court by way of prosecution lest sources and methods be compromised. Therefore, the preference is what we call disruption. In other words, if we can't prosecute, let's detect and disrupt the terrorism financial effort.

[The Chair, Conservative, James Rajotte]

Colleagues, please allow enough time for answers to your questions. Otherwise I'm always cutting witnesses off when they're making points here.

Mr. Adler, please.

[Mark Adler, Conservative, York Centre, ON]

Thank you, Chair.

Mr. Johnston, I just need a very quick answer to this.

This is not a traditional war that we're fighting. We know that radical jihad has declared war on Canada, but this is not the kind of war where we suit up in uniforms and go to fight another enemy in uniforms, and then someone sues for peace at the end. This is a very different kind of warfare that we're fighting now, and we have to fight it on a number of fronts. One front is through financing and there is also military action, but we also have to have a humanitarian component too, for the victims who are finding themselves displaced over in that part of the world.

Could you comment on that quickly, because I want to move on to other topics, please. Thank you.

[Patrick Johnston]

First of all, I agree with all of your points. It's a set of trade-offs and dilemmas, but to the last point, the humanitarian aspect, I think that is a critical issue now throughout the Middle East, in terms of how to disburse aid and other humanitarian assistance in a way that doesn't compromise national security. These are extremely at-risk populations that often have close ties, through families, friends, or others who have been displaced, to terrorist groups. So I think the close monitoring of camps is important. We've seen this in a number of cases before.

[Mark Adler, Conservative, York Centre, ON]

All of that doesn't preclude military action too, correct?

[Patrick Johnston]

No, I don't think it should preclude that.

[Mark Adler, Conservative, York Centre, ON]

Okay, thank you very much.

I do want to move on to Mr. Rudner, if I may. The radical mosques, for example, here in Canada, Wahhabi mosques, do they receive funding from foreign sources, that you're aware of?

[Prof. Martin Rudner]

Many of the so-called radical mosques originally were funded by Saudi sources, including Saudi public organizations such as the Muslim World League and other such organizations, and they cultivated a Wahhabi perspective, which itself became radicalized in the diaspora into support for some of the missions of al Qaeda and other groups. But the Saudis experienced a backlash to this, and in the past five or six years the Saudi government itself, under the late King Abdullah, has clamped down fiercely—and I'll use that word—on that syndrome within Saudi Arabia and also tried to prevent its dissemination of those kinds of, call it, theological guidelines abroad. So that period is in effect over.

The worry I would have as a scholar studying terrorism and terrorism financing is that if the funding channel from Saudi Arabia has now been curtailed, are there other channels, and one suspects, for example, Qatar, in the Middle East itself, and the Egyptians and others, who are very much involved in the dissemination of Muslim Brotherhood radicalism?

Are they involved in Canada? This is something we would want a terrorism financing investigation organization—FINTRAC, CSIS, the RCMP—precisely to track to see if there's a new source of funding for radicalization of Islam in Canadian institutions.

[Mark Adler, Conservative, York Centre, ON]

Mr. Stevenson, I'd like to follow up with you on this.

In Montreal there's the Al Sunnah Al Nabawiah mosque.

Mr. Rudner, you're familiar with it?