Finance Committee on Feb. 26th, 2018

[The Chair, Liberal, Wayne Easter]

I call the meeting to order. The committee will continue its five-year statutory review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

We have our witnesses, who I think want to go in a different order than what is on our agenda.

Mr. Kmiec, you had a point of order first? Go ahead.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Thank you, Mr. Chair.

Just before we continue this study, I want to give notice that I am tabling the following motion, and I have it here in both French and English.

May I continue, Mr. Chair? I'm just giving notice.

[The Chair, Liberal, Wayne Easter]

You can't table a motion on a point of order, but if you want to give notice of the tabling, that's fine.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

That's fine?

Actually, I do have a separate point of order related to a previous meeting, the past meeting, so if you would let me get there. My motion reads:

That pursuant to Standing Order 108(2), the Committee undertake a study of the new mortgage rules introduced January 1, 2018, by the Office of the Superintendent of Financial Institutions, and report to the House on:

(a) The impact of these new mortgage rules on first-time home buyers, young families, single-parent families, new Canadians, and segments of the population who are traditionally under-represented in the real estate market;

(b) The impact of these new mortgage rules on Canadians holding high-ratio mortgages and unconventional mortgages;

(c) The anticipated regional economic effects of these new mortgage rules, acknowledging the disparities between the various real estate markets in Canada;

(d) The impact of these new mortgage rules on homeowners at the time of mortgage renewal or requalification;

(e) The overall effectiveness of utilizing federal financial regulatory mechanisms to address housing affordability when provincial and municipal policy tools are considered.

That the Committee begin this study of the new mortgage rules as soon as the current Statutory Review of the Proceeds of Crime and Terrorist Financing Act study is completed and its report is tabled in the House;

And that the Committee report to the House no later than June 18, 2018, providing in its report, the impacts, effectiveness, and scope of the said new mortgage rules and shall include recommendations regarding the effectiveness of federal mortgage-related policies to be considered by the Office of the Superintendent of Financial Institutions and the federal government-at-large.

[The Chair, Liberal, Wayne Easter]

This will be considered as 48 hours' notice, Mr. Kmiec. It will be distributed to committee and it can be moved after the 48 hours is up.

Okay.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Now to my point of order on something that happened in a previous meeting....

[The Chair, Liberal, Wayne Easter]

I can't deny you a point of order, so the floor is yours.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Thank you, Mr. Chair. You're so kind.

At meeting number 133 on February 14, I asked two questions of Jamie Bell, executive director, international crime and terrorism from the Department of Foreign Affairs, Trade and Development. I remember his being given notice that by this Wednesday we should receive an answer to my questions.

I'm just wondering whether the committee has received an answer. If not, has notice been given that the committee should receive an answer by Wednesday?

[The Chair, Liberal, Wayne Easter]

Yes, I think I remember the intervention, and I think I told Global Affairs it was a fair question. I'm told we'll receive the answer on Wednesday.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Thank you, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

Mr. Dusseault.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

On the same point, can you just also check with the Minister of Finance? His department should also be giving the committee some information about the tax treaty with Barbados. He also committed a while ago to doing this, before Christmas, so perhaps you could follow up with the minister.

[The Chair, Liberal, Wayne Easter]

Okay, we'll follow up with him on that as well.

We'll go back to our witnesses.

We will start with the Department of Public Safety and Emergency Preparedness. We have Mr. Bhupsingh, the director general of the law enforcement and border strategies directorate.

The floor is yours, Trevor.

[Trevor Bhupsingh, Director General, Law Enforcement and Border Strategies Directorate, Department of Public Safety and Emergency Preparedness]

Thank you, Mr. Chair. It's a pleasure to appear before the committee as you review the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

My name is Trevor Bhupsingh, and I'm the director general of law enforcement and borders at Public Safety Canada.

With me today is my colleague, John Davies, the director general of the national security policy directorate.

I want to thank the committee for inviting the Department of Public Safety and Emergency Preparedness, the Royal Canadian Mounted Police, or RCMP, the Canadian Security Intelligence Service, or CSIS, and the Canada Border Services Agency, or CBSA, today. Each has an important role to play in Canada's anti-money laundering and terrorist financing regime.

You will recall that a few weeks ago, representatives from the Department of Finance provided this committee with an overview of the regime and the balance it tries to achieve between protecting privacy rights, minimizing the administrative burden, and combatting money laundering and terrorist financing. The committee has already noted the information and intelligence essential to the country's national security.

The RCMP, CSIS, and CBSA are key to the enforcement of the regime. Effective portfolio coordination means working together to ensure that common priorities are established and addressed, and that the regime integrates the perspectives of our portfolio organizations, because they are on the front lines of detecting, deterring, and disrupting money laundering and terrorist financing in Canada. The Royal Canadian Mounted Police is responsible for investigating money laundering and terrorist financing cases, laying charges, making arrests, and seizing funds or confiscating assets. The Canada Border Services Agency is responsible for the administration and enforcement of the cross-border movement of currency or monetary instruments valued at $10,000 or more. The Canadian Security Intelligence Service has a mandate to collect, analyze, and report to the Government of Canada information and intelligence concerning threats to Canada's national security.

The department and each organization contribute to the advisory committee on money laundering and terrorist financing. The proposals brought forward by the portfolio are summarized in the position paper made public by the Department of Finance last February 7 in support of the work of this committee and toward the improvement of Canada's regime.

The second role played by Public Safety Canada in the regime is to contribute to the policy development efforts led by the Department of Finance. This takes many forms and is integrated in the department's core mandate. It is where we would leverage information, research, and analysis to provide evidence-based advice that will assist the Department of Finance in its lead role.

In addition, Public Safety supports the Minister of Public Safety's statutory responsibilities to recommend terrorist entities to be listed, pursuant to the Criminal Code. The listing regime is an important element of Canada's efforts to combat terrorist financing, as it allows for the freezing and possible seizure, restraint, and forfeiture of assets of a listed entity. It also sets out severe penalties for persons and organizations that deal in the property or finances of a listed entity.

Mr. Chair, thank you for the opportunity to address the committee. We're happy to answer your questions.

[The Chair, Liberal, Wayne Easter]

Thank you, Trevor.

We'll turn to the Canadian Security Intelligence Service, and Ms. Henderson, director general, policy and foreign relations.

The floor is yours.

[Cherie Henderson, Director General, Policy and Foreign Relations, Canadian Security Intelligence Service]

Good afternoon.

First, I'd like to thank the committee for inviting me to appear before you today. It is an honour to be here representing the 3,000 women and men of the Canadian Security Intelligence Service, who work diligently every day to keep Canada safe. I want to take this opportunity to thank the committee for taking an interest in what we do.

I am the director general of policy and foreign relations at CSIS, and I am responsible for the strategic policy issues that impact our organization, our corporate policy framework, and our foreign partnerships. It is my pleasure to speak to you about CSIS's role in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, in which we are named as the recipient of threat-related information.

The service's mandate is clear. We collect information and intelligence and analyze it, and provide advice to the Government of Canada on threats to national security. These threats include espionage, foreign interference, and terrorism and, by extension, terrorist financing.

When CSIS investigates terrorist activity, financial intelligence can play a role in establishing an individual's capability and intent, as well as providing leads for further investigation. Financial intelligence can also aid in detecting domestic attack planning, or plans for overseas travel in support of terrorism. Current CSIS research on mobilization to violence has identified that financial preparations can be a key indicator that an individual is on the path to violence. Unusual spending patterns related to travel, in conjunction with other intelligence, can provide critical leads in an investigation.

Investigating terrorist financing is very much a collaborative effort. Our intelligence assessments are shared with appropriate partners within the Government of Canada as part of the work to keep Canadians safe. CSIS shares information with partners, including FINTRAC, the RCMP, and CBSA. We share information in support of our partners' investigations and mandated activities.

In the area of financial intelligence, FINTRAC is a key partner for CSIS. FINTRAC proactively provides the service with raw financial intelligence when it has reasonable grounds to suspect that the intelligence relates to our mandate. We are also able to request information in support of specific investigations.

Privacy and the protection of information is something we take very seriously. CSIS is bound by Canadian law, including the Privacy Act, ministerial directives, and a robust set of internal policies. At CSIS, we recognize the important responsibility that we have in keeping Canadians safe. The men and women of CSIS do so proudly every day.

With that, I'll conclude my remarks, and I welcome any questions.

[The Chair, Liberal, Wayne Easter]

Thank you very much.

We turn now to the RCMP and Joanne Crampton, assistant commissioner, federal policing criminal operations.

[Assistant Commissioner Joanne Crampton, Assistant Commissioner, Federal Policing Criminal Operations, Royal Canadian Mounted Police]

Thank you, Mr. Chair.

It's my pleasure to appear before the committee as part of its review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

As part of our mandate to protect Canada's economic integrity, financial crime has long been a federal policing priority for the RCMP. As such, the RCMP, working in close collaboration with its Government of Canada partners, plays a fundamental role in Canada's anti-money laundering, anti-terrorist financing regime.

In support of its strategic priority on economic integrity, the RCMP works within the regime to prevent, detect, and disrupt crimes that threaten Canada's economy and security, including those involving money laundering and terrorist financing in Canada. In addition, the RCMP works with law enforcement agencies in an international capacity pursuing these types of investigations.

As a funded partner in Canada's anti-money laundering and anti-terrorist financing regime, which is a horizontal initiative led by Finance Canada, the RCMP receives funding to support its mandate within the regime. The planned spending under the horizontal initiative for fiscal year 2016-17 was $11,219,387, all of which was spent in support of the stated objectives of the regime.

The initiatives the RCMP undertakes with respect to money laundering and terrorist financing are dynamic. They are multi-jurisdictional and multi-faceted in nature, and the complexity leads to investigations that can take several months or even years to complete. For example, in 2014, a coordinated effort by the RCMP and Government of Canada partners led to the successful listing of the International Relief Fund for the Afflicted and Needy, or IRFAN, as a terrorist entity, pursuant to section 83.05 of the Criminal Code. By the time it was listed, IRFAN had transferred funds and resources valued at approximately $14.6 million to a number of organizations with links to Hamas, another listed terrorist entity. Listing IRFAN put an immediate stop to these transfers and empowered the RCMP to seize and restrain associated property, including vehicles, trailers, and office equipment.

Further to terrorist financing, over the past several years the RCMP has taken on a number of money laundering and proceeds of crime investigations in which a common theme has been revealed from the gathering of evidence for complex offences. Project FERODE was an investigation into an alleged fraud, drug offences, and associations to organized crime. The suspect had received up to $15 million from 20 investors and had attempted to secure an additional $10 million from Nexus Investments in Vancouver. On January 15, 2014, an individual was arrested on 15 charges, including fraud over $5,000, identity theft, forgery, possession of property attained by crime, and laundering the proceeds of crime. However, only $20,000 of assets was restrained and forfeited, and only an additional $8,000 was forfeited through the provinces' civil forfeiture programs.

The RCMP has had a great deal of success investigating criminal activity linked to organized crime. However, for a myriad of reasons, the RCMP has been hindered by challenges stemming from Canada's anti-money laundering, anti-terrorism finance regime. In other words, while the predicate offence can be straightforward in terms of its investigation and prosecution, due to time constraints, resource limitations, and the efficacy of prosecuting certain charges over others in these dynamic and complex cases, following through on proceeds of crime or money laundering charges is often not tenable.

These concluded cases demonstrate the particular challenges the RCMP continues to encounter when investigating proceeds of crime, money laundering, and terrorist financing. These challenges have led to somewhat inconsistent results, such as successful investigations on the predicate offence, but a limited capacity to effectively and thoroughly investigate and prosecute the related money laundering and proceeds of crime offences.

Based in part on these types of cases and the inherent obstacles, the challenges have been captured in more detail in the consultation paper published on Finance Canada's web page. Specifically, these challenges include finding effective means of sharing vital money laundering information while respecting the privacy rights of Canadians; the exclusion of lawyers and Quebec public notaries from the Proceeds of Crime (Money Laundering) and Terrorist Financing Act; a lack of transparency around beneficial ownership information; the increased use by criminal organizations of professional money launderers who have a tenuous link to any predicate offence; and a lack of specialized resources and training for investigators to undertake money laundering cases, which are often very complex in nature.

Addressing these challenges as part of the parliamentary review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act could assist the RCMP in achieving greater results.

I'd be happy to respond to any questions you may have on the role the RCMP has within this regime.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Joanne.

Turning now to the Canada Border Services Agency, Mr. Aubertin-Giguère is the director general of the traveller program directorate.

[Sébastien Aubertin-Giguère, Director General, Traveller Program Directorate, Canada Border Services Agency]

Good afternoon, Mr. Chair and members of the committee.

Similar to the other witnesses, I would like to begin my remarks by outlining the role and responsibilities of the Canada Border Services Agency under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, or PCMLTFA for short.

As you are aware, the act was introduced to remedy shortcomings in Canada's anti-money laundering legislation. It put in place specific measures to combat money laundering, including the requirement to report to FINTRAC cross-border movements of currency and monetary instruments equal to or greater than the prescribed amounts. The scope of the act was later extended, in 2001, to include new measures under Bill C-36.

The CBSA is responsible for the administration and enforcement of part 2 of the act, which requires every person or entity to report to a CBSA officer the importation or exportation of currency and monetary instruments valued at $10,000 Canadian or greater. These reporting requirements encompass all inbound and outbound modes of travel, including air, highway, postal, and marine, in both the traveller and commercial processing streams.

The agency has a two-pronged mandate. The first one is to facilitate the voluntary compliance of currency and monetary instruments reporting. The second one is to identify and carry out enforcement on potential money laundering or terrorist financing-related funds at border crossings.

The CBSA collects cross-border currency reports on behalf of FINTRAC from travellers and commercial entities based on reporting that occurs at all ports of entry. Officers may help travellers and businesses comply with the reporting requirements of the act and the associated regulations. The completed reports are sent to FINTRAC.

The CBSA also has the authority to search and seize non-reported currency and monetary instruments greater than $10,000 Canadian or equivalent. We continue to seize a significant amount of suspect currency and monetary instruments from travellers and entities. Information related to currency seizures is also transmitted to FINTRAC, which is responsible for the analysis of the reports.

The act also requires the CBSA to disclose information to the appropriate police force, usually the RCMP, when there are reasonable grounds to suspect that the seizure information would be relevant to investigating or prosecuting a money laundering or terrorist financing offence. In situations where the CBSA has seized currency under the PCMLTFA, but it is deemed required for use in criminal proceedings, custody of the evidence is transferred from the CBSA to the RCMP. When the seized funds are no longer required for the criminal process, the currency or monetary instruments are returned to the CBSA to be remitted to the Receiver General of Canada.

However, in most cases, where seized currency is not suspected to be from the proceeds of crime or financing for terrorist activities, the currency is returned to the person from whom it was seized once the penalty is paid. Penalties range from $250 to $5,000. All seizures are subject to appeal to the Minister of Public Safety and Emergency Preparedness and, ultimately, to the Federal Court of Canada.

The CBSA employs a range of detection tools to find currency. We use X-ray mobile units; fibrescopes, or flexible cameras; density meters; and detector dogs. We also have at our disposal a wide range of other technologies and training to assist in the non-intrusive examination of travellers at the border. Since the start of the cross-border currency reporting program in 2003, we've made about a half-million import and export reports that have been received by the CBSA and then forwarded to FINTRAC. Enforcement of the legislation by the agency to date has resulted in over 26,000 enforcement actions involving more than $530 million.

In closing Mr. Chair, we believe that the implementation of the cross-border currency program has successfully contributed to the international fight against transborder crime, specifically money laundering and terrorist financing. As a direct result of the program, more than $80 million in suspect proceeds of crime were forfeited and thus taken out of circulation.

I would be happy to answer any questions the committee may have.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, all.

Starting our first round, we have Mr. Grewal.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you, Mr. Chair.

Thank you to the witnesses for coming today. It is much appreciated.

My first question is for the RCMP. You spoke about the hindrances to getting convictions on anti-money laundering and anti-terrorism charges. Can you speak a little bit more to that?

[A/Commr Joanne Crampton]

It is not as much hindrances to convictions, but hindrances to the investigations themselves. They're very complex and multi-layered, and as I mentioned, there is a list of different items that hinder our investigations, such as a lack of beneficial ownership. I can certainly go through that if that would be helpful. There is also the problem of professional money launderers, who make things very difficult when they try to separate themselves from the predicate offence. It creates complexities for the investigation.

[Raj Grewal, Liberal, Brampton East, ON]

How many convictions a year do we have on money laundering and anti-terrorism funding charges?

[A/Commr Joanne Crampton]

I wouldn't have an answer for that overall. Obviously it would change from year to year.

Currently we have 53 investigations outstanding, either in the court system or in the process of being investigated, but I wouldn't be able to say how many are concluded each year.