Finance Committee on Feb. 26th, 2018

[The Chair, Liberal, Wayne Easter]

Thank you both.

We'll go to five-minute rounds, and that way we'll be able to get about eight people on.

Ms. O'Connell.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Thank you.

I'm going to start with the Department of Justice, but if either of you wants to jump in, please go ahead.

Certainly, one of the biggest issues we've heard about already is that involving the legal profession and reporting based on the Supreme Court decision in 2015, I think. In a lot of the reporting that's been done since then, the Department of Justice is working on how, basically, to reframe or rephrase some of the legal definitions to comply with the Supreme Court, and to allow reporting to FINTRAC, for example, or some of these other agencies.

What is the department doing? Where are you in terms of complying with the Supreme Court decision and in trying to close this massive gap, which almost everyone we've heard from has acknowledged, in terms of the legal profession essentially being exempt from a lot of the reporting standards?

[Paul Saint-Denis]

The Federation case, which is what you're referring to, set out a clarified and formalized principle of fundamental justice, which is the solicitor-client relationship. It's not just the solicitor-client privilege but also the relationship. The client has to believe and know that the lawyer is four-square in his corner, and that he will not be acting indirectly or directly as an agent for the state.

That makes it difficult for the PCMLA reporting requirements to apply to lawyers, because if a lawyer is taking information from his client and then reporting some of that to a federal agency, the client would be right to think that maybe there were some things that they shouldn't be telling their lawyer because those might get back to the state in which case it might hamper the lawyer's ability to properly defend his client.

We're certainly aware of the bind, if you wish, that puts the PCMLA in, in the context of fighting money laundering. Obviously, lawyers play a key role in a number of areas relating to transactions, to setting up corporations, and so on. The Department of Justice, along with the Department of Finance and FINTRAC and other departments are looking at potential avenues of trying to set up a system whereby if the lawyers cannot report, at least the lawyers would maintain certain types of records which then might be available to FINTRAC by way of a compliance mechanism. I don't want to prejudge the final results, so I can't say that we will or we will not come up with a regime or a method by which lawyers will be able to report on their clients.We are looking at all of the possible avenues, and I'm afraid I can't go into any further details at this time.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Thanks.

That's somewhat contradictory to some of the reports, and the media reports, in the sense that the idea was that after that court decision, I think the response from Justice was that it would of course review the decision, and then a look at how best to either reword or rework the act to satisfy the Supreme Court decision in regard to privacy issues and client-solicitor privilege, while upholding the intent of this legislation. It sounds like, based on your response, you're not looking at new wording or new recommendations for the legislation to work with the Supreme Court decision. You're looking at different mechanisms after the fact, but that's certainly very different.

One of the areas of concern that I think we've heard is that other jurisdictions, and jurisdictions that have a rule of law not that different from Canada's, are able to have the legal profession, within balance of privacy rights, part of the system to try to prevent money laundering and terrorism financing. So I guess the answer to my question just isn't there. We don't see a legal reframing coming from the justice department, which might now be something this committee has to recommend, or direct the department to do, to ensure some level of compliance with the Supreme Court decision and the intention of this legislation.

The same goes for beneficial ownership. Is the Department of Justice doing anything on drafting language or regulations that it is consulting with all the provinces and territories about? Obviously, they have jurisdiction in some of these areas as well. Is there a legal framework being drafted by the federal government, by the Department of Justice, to deal with beneficial ownership and to have a consistent kind of process across the country?

[Paul Saint-Denis]

Let me just clarify the initial response I gave you with respect to the Federation case. We are looking at ways to allow for the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to operate within the context of what the Supreme Court will give us by way of wiggle room. Based on that case, there just is not a lot of wiggle room, but we are exploring all the different avenues. Plus, we will be speaking with the Federation society, as well as the various provincial law societies, to see what's available for us there.

In terms of the beneficial ownership, the Department of Justice is working with the Department of Finance in looking at setting up in the immediate term a method by which corporations would provide for information dealing with beneficial owners. I think in the longer term there's some thought to creating a registry. This obviously involves the provinces. I think at the last federal-provincial finance ministers meeting, as I recall, I think the provinces and the federal government agreed that there should be action taken on that front. In light of the fact that several provinces have legislation allowing for the incorporation of organizations, it's important for us to work with them so that we can come up with a scheme that will allow us to obtain that kind of information—that is to say, who is ultimately the beneficial owner of a corporation that's being set up.

To your immediate question on whether we're drafting something, no, we're not. We are in the process of developing an approach that will then result in our going to drafting.

[The Chair, Liberal, Wayne Easter]

Thank you.

Mr. Kmiec.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Thank you both for being here.

We were told by previous witnesses that these are typically very complex cases. They're difficult to prosecute. They have multiple agencies involved. Can you give me an estimate on the typical length of a case, the prosecution and hopefully a conviction?

[George Dolhai]

There's no typical length. It very much depends on the nature of the case. I can give you a recent example that I think is at the extreme end, but is illustrative. It's the case of Chun. Chun was a case that began in 2002 when Mr. Chun was stopped at Pierre Elliott Trudeau International Airport with $600,000 U.S. From there, the investigation wound through to Israel, to Cuba, to Cambodia. A witness who was in custody in the United States was made available for trial. The matter went on, and eventually it was also determined that he had two currency exchange companies in Canada. Then in Cambodia the link was a bank that had been created specifically to launder the money in Cambodia.

The matter concluded in 2015 I believe...let's get the exact dates here. Thereafter, there was a forfeiture of the bank, of the $600,000, two properties that were located in Canada, and he and his wife—they were both in the matter together—were sentenced to eight years. March 2015 was the date, so 2002 to March 2015. Again, that's at the very outside range, and there were a number of factors that fed into it.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Can I just ask you, then, the Supreme Court decision, the Jordan decision, which provides for time lengths between the moment you're charged to the moment you're before court to have your case heard, how has that affected the prosecution of these types of cases?

[George Dolhai]

I took a look to see our statistics in terms of cases where there were money laundering or proceeds of crime alone, as opposed to being tied to a drug offence, and were any of those Jordan stayed, and, no, they haven't been. Mind you, we're still in early days in Jordan. Jordan came in, in July 2016.

I can tell you that overall in our caseload we've had 382 cases implicated in respect of Jordan. Out of those, the court has granted a stay in 21%; the court has refused in 37%; and there are applications pending as of January—our current stats are just coming in, but January this year—16%; and we stayed 26%.

As between the court's and our stays, that was 48% of the cases, but the total is 382 cases, so that represents in our total holding less than half a per cent of our total cases.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

How is that affecting your decisions to proceed with a case? How is that affecting your decisions on prioritization of cases?

[George Dolhai]

We don't have a system whereby we have an automatic cut-off. We look at each particular case to see whether or not this is a case where the time limit, even if it's over 30 months.... We have cases that are over 40, 45 months even, but where some of the delay is institutional and some of it is defence, where we will argue it, and we have argued it, and have argued it successfully where in fact those factors are made out. We don't have an artificial cut-off, but we'll assess. That's definitely part of our assessment, because we have to be able to apply the case law and say, will the court find that in fact this is out of time or not?

What I'm referring to there in particular, though, is from the time of charge, because the time before that, the test is entirely different. It isn't covered by Jordan. One of the things we work very closely with the police on is to make sure that when it's ready to go, it's ready to go, so we've got disclosure in place. We can show up to the court essentially and say, we're ready, we can move this forward.

We instituted a very proactive case management process with respect to our major cases, our high-complexity cases, because they're only 2% of our cases, our drug cases for example, but they take up 30% of our time, so we have to measure them well. We've instituted that in order to make sure that we can get through there, but a significant part of that is making sure you're ready when the thing is going, when the charge is laid.

I hope I've been able to answer your question.

[The Chair, Liberal, Wayne Easter]

You have time for a quick one, Tom.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

You mentioned that was for money laundering cases, excluding when there's a drug charge. Is that the case when there is a drug charge associated with it as well?

[George Dolhai]

The 382 figure represents all of our cases. Those are all that have been affected, and the actual number of those that have been stayed since Jordan is 182, in our total. As I said, that represents less than 0.4% of the cases that we deal with in a year. We deal with roughly 70,000 cases, and we close out about 30,000 to 35,000 of them. It depends on the year.

[The Chair, Liberal, Wayne Easter]

Mr. Dusseault.

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

Thank you, Mr. Chair.

I'd like to pick up quickly on an earlier discussion regarding provincial prosecutors. Many offences in the Criminal Code fall under the responsibility of provincial prosecutors. In cases where numerous offences were committed, such as stealing a car, it is possible that police and provincial prosecutors may uncover money laundering and, in rare instances, terrorist financing.

How involved are you in cases that are tied to federal jurisdiction?

[George Dolhai]

There is significant co-operation between prosecution services. When provincial or federal charges are laid, a decision has to be made as to which level of government should handle the prosecution. We rely on the major/minor concept. We establish who has the most significant evidence to decide who will lead the prosecution. That means that we work together a lot. Sometimes, it may be necessary to undertake two prosecutions at the same time because they have evidence in common. However, they are two different prosecutions.

[Paul Saint-Denis]

I'd like to add something, if I may.

Prosecutions of money laundering offences are not exclusively under federal jurisdiction. Provinces have full authority to prosecute such offences, since they are Criminal Code offences. Primary responsibility for prosecution of these offences falls on the provinces.

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

I'd like to ask you about the quantity of evidence that must be gathered and the burden associated with that. Should we explore improvements in that area as part of our study? Do you think gathering evidence is too complex of a process? Is there anything we can do to make your job easier so that charges can be laid sooner?

[George Dolhai]

I think that's a policy question. There's no way to avoid evidence-related issues. There are always people, whether they are police officers or members of the public, who look for the magic bullet, but there isn't one. It always comes down to what you can prove. The prosecution in the Chun case is a good example.

Having studied different cases, I can say that, even with the latest technology, it always comes down to evidence. You have to prove who the person is using the money or assets that you want to seize or freeze.

There are some recent cases, for example, that I was looking at involving bitcoin. It's a new and emerging technology. However, at the end of the day, it's still a question of who the person is on the other end using the computer. How do we establish that?

Some of that is going to be done the old fashioned way. In the cases I'm thinking of, it's about surveillance, for example, so that when the person communicates or does something, we can prove that they did something. Those are the connections that we still have to make. Does the technology pose extra challenges? For sure, it does.

Dark web, bitcoin, and cryptography all pose extra challenges. At the end of the day you have to get the evidence. Intelligence can help. I'm sure the police would tell you that it can help direct them where to investigate, but at the end of the day, you have to have a means to get admissible evidence.

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

You said that crypto currency transactions had resulted in convictions. Do you have a case in mind?

[George Dolhai]

Yes, there is a case involving crypto currency, but I will keep my remarks general, so as not to comment on a particular case.

Currently, transactions are made using bitcoin, but there has to be another way for the parties to communicate, other than bitcoin. To traffic in drugs, for instance, you can use bitcoin, but bitcoin alone won't cut it.

There is cash as well. There was a question earlier in the previous session about cash. Cash is a huge amount. Mr. Chun had $600,000.

[The Chair, Liberal, Wayne Easter]

Thank you.

Mr. Sorbara.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Mr. Chair. Welcome gentlemen.

How is the co-operation amongst the various agencies? I think there are 13 in Canada. There were three pages of acronyms in the book that we were given. How is the co-operation these days amongst all the agencies?