Finance Committee on Feb. 28th, 2018

[Daniel Therrien]

I think it would likely be an iterative process. I can't say to you today, without having looked at the risk factors, what they would be, but we would like to sit down with FINTRAC, discuss with them whether they think there are certain risk factors that are more indicative of the activities that they must identify—and I'm sure there are. We would work with them to identify these risk factors and potentially not collect information that would not lead to these risks.

In other words, we want to work with FINTRAC to get to the right place.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

I certainly appreciate that recommendation, and I'm glad you're here to explain it in full detail.

In regard to British Columbia, an obvious area that is under a lot of question is real estate transactions. One of the questions is whether someone should be able to purchase property without actually disclosing their ownership in it, or beneficial ownership. Do you have any issues with privacy concerns when someone purchases a piece of property but does not disclose their information?

[Daniel Therrien]

We don't have a problem with rules that would provide greater public information about beneficial ownership in principle. Of course, the data that would be made available to others, particularly the public, should be only limited to what is necessary to achieve the purpose of informing another potential contractual party to know with whom they are dealing, for instance. In principle, we don't have a problem with that.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Okay, thank you.

In regard to FINTRAC, obviously a great amount of money goes into making sure the system runs well, a lot of compliance costs as well, but it does create an overall, overriding societal benefit, I believe.

On the flip side, they're collecting a lot of information that could be aggregated in a way that does not compromise anyone's individual privacy and may help decision-makers, for example CMHC, OSFI, or even the Minister of Finance. For example, Mr. Grewal raised an issue in our housing study about cash purchases.

Do you think there's any risk in the government's looking to aggregate that data so that we have a better picture of some particular markets vis-à-vis real estate transactions?

[Daniel Therrien]

If you're talking about information that would be aggregated and intelligence derived from that information would then be provided to others presumably on an anonymous basis not on a personal information basis, that again is possible in principle. There may be problems with anonymizing information. Often when you anonymize information you can re-identify the individuals so care would obviously need to be taken to do that rigorously. But in principle, yes, I think it's doable.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

This goes back to your recommendation that being consulted as part of any upgrades to regulations would be helpful.

[Daniel Therrien]

Yes.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Okay. That's very good to know.

The Minister of Finance has recently started discussing the concept of open banking. Open banking can be a variety of different things. For example, in the United States there's a service called Mint.com, which allows people at no charge to be able to directly link up to their financial data through their financial institution and be able to draw everything from low-cost loans that are available based on their credit score or based on their income as well as suggestions on potential vehicles for them to save for retirement as well as to save or to manage their expenses. That's all done free.

Obviously, that technology exists. It's being used in the U.K. as well as the European Union. We haven't seen that level of offering here, although I've met with Intuit, and they said that while they have some similarities, they are operating off a very old technology.

The question would be first of all privacy. Obviously, banks and financial institutions owe their clients privacy and protection. On the flip side, do you think therefore Canadians who would utilize such services, because it is their information, would they then own that information and could use it for their own purposes? Do you think there are any questions for your office in the question of open banking and ongoing retaining of that information by financial institutions, or that someone should be able to say they own that information, and it shouldn't be shared without their permission?

[Daniel Therrien]

I will start by saying that I don't think my office has looked at the question of open banking with any details. I think we're outside the scope of the PCMLTFA here. We're probably dealing with the interactions between consumers and an organization subject to PIPEDA, the federal private sector privacy legislation. There is a relationship, of course, between the individual whose personal information is collected by the bank, an organization; and the data, if it is personal information, needs to be handled according to PIPEDA.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

I would suggest, though, that there is again a public purpose in FINTRAC monitoring those accounts. I would also say there is a personal interest because that is that person's information. If a bank or third party was to utilize their information for purposes other than what maybe they have allowed, or perhaps they leave that financial institution, should they have a right to basically pull that information because it is their data and their financial transactions.

I think actually it does relate to the study we're talking about right now. I wanted to make sure we're identifying that there is a government need, obviously, to provide protection, but there is also an individual.... Privacy is not just in terms of disclosure of information, but retaining the information, and what's done with it.

[Daniel Therrien]

If I understand the premise correctly, then the bank and the system would provide or would somehow facilitate FINTRAC or a government agency to have access to that information. If that is the premise, then I think we need to look at the question of proportionality. What harm are we trying to address by having the government have access to that information. It may be that there is an important harm, but I would want to look at the question of the harm quite seriously.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

In your opinion, you would own that information.

[The Chair, Liberal, Wayne Easter]

Dan, we're well over unless it's finishing this line of thought.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

I'm just getting his opinion. There's a difference between someone's disclosure of their identity, let's say, under FINTRAC, or of their financial transactions. The actual data itself, the transaction itself, is it owned by the financial institution, in your opinion, or is it owned by the consumer?

[Daniel Therrien]

I think we're talking about personal information of the individual consumer, but that does not mean you cannot create a system whereby the state would have access to some of that for important public policy reasons.

[The Chair, Liberal, Wayne Easter]

Thank you.

Mr. Dusseault.

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

Thank you, Mr. Chair.

Thank you all for being here today. This may surprise my fellow members, but most of my questions, which I think are important ones, will be for the Canada Revenue Agency officials. My intentions are good, so I want to try to find solutions that will help you.

I don't agree with your assessment that the criminal investigations into tax evasion are effective and going well. Allow me to refer to an article published not that long ago, just before Christmas, in fact. According to the article, of the 78 convictions handed down in the past two years—one of the Minister of National Revenue's talking points—none, or at least very few, involved offshore tax evasion. I don't think that's exactly a stellar result.

Would you say not having a national public registry of individuals who are company owners, in other words, beneficial owners, hinders the work of investigators at the criminal investigations directorate? Would you like Parliament to fix the problem tied to beneficial owners so that your organization and others can quickly access information on individuals who own a company in Canada?

[Stéphane Bonin]

Thank you for the question.

The absence of public registries listing ultimate beneficiaries or real owners does hinder our investigations, of course. However, I believe the provincial ministers of Finance have agreed on the development of a framework likely to lead to solutions. This may take the form of a national registry to be created in July 2019. I think that the Canada Revenue Agency would view such a public registry favourably. For the time being, we are working with existing legislation.

I will now talk about the 78 convictions you just mentioned. The CRA Criminal Investigations Program is conducting 42 ongoing investigations involving foreign transactions. Changes to the program can take a certain time, naturally, but we are conducting 42 offshore investigations. The searches which occurred in the past two weeks show that we are headed in the right direction. I also want to mention that we are also conducting 23 tax investigations into the laundering of the products of crime.

Our objectives are really aligned with the goals of the program's initial transformation.

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

Thank you for those answers. I hope that the registry of final owners will be ready by the end of July 2019. I also hope that the committee will join me in asking that the government act in this file.

You stated that the 42 ongoing investigations are related to offshore tax evasion cases, but we are still far from seeing results; you are still at the investigational stage. At this stage, your department often does a cost-benefit analysis, and in some cases decides not to go forward with prosecution and to settle cases outside of court. Consequently, the case does not go before a judge, and yet these are often tax evasion cases.

In the KPMG affair, a settlement was reached involving large amounts, albeit, but the case was not taken as far as it could have gone, which would have sent a signal to Canadians that offshore tax evasion is not acceptable and that it has consequences. This sends a contradictory message. Are you reviewing your practices?

[Stéphane Bonin]

First, it would be helpful to distinguish between CRA audits and investigations. Today, I am here to talk about investigations.

According to the guidelines we received, myself as director of criminal investigations included, we have to conclude our investigations and send them to the Public Prosecution Service of Canada, the PPSC, so that it can eventually launch suits. There are no settlements in connection with the criminal nature of tax evasion cases we investigate. It may happen that when cases are brought before the courts, there are negotiations between the PPSC prosecutors and the lawyers, as can happen in any criminal investigation brought before the courts. I am not here to talk about the civil cases processed by the agency.

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

I see. Thank you for the clarification.

You referred to the Panama Papers. We know that several countries have managed to recover funds in that dossier. You are still at the criminal investigation phase.

Can you give me some estimate of the time it will take for the Panama Papers case to be handed over to the Public Prosecution Service of Canada, and for penalties to finally be imposed by the court?

[Stéphane Bonin]

If I understood correctly, there are currently 990 ongoing audits of Canadian taxpayers who have money abroad. For the cases specifically linked to the Panama Papers, there were 150 audits ongoing as of December 31. We also carried out several criminal investigations, some of which led to searches a few weeks ago.

To answer your question, I would say that the Canada Revenue Agency has adopted a global approach, both for civil cases and for criminal investigations. As for the criminal investigations, I am sure that this will lead to some legal proceedings. Our investigations always take a certain time. I cannot discuss the amounts we may be able to recover following the audits. In addition, different countries use different methods in that regard.

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

I'd like to ask a brief question to see how we could help you.

Sometimes a very opaque secrecy surrounds banking transactions when it comes to the very existence of these tax havens, which we could say spring from legislation of convenience. Does this represent a major challenge for your investigators? How do you find solutions to penetrate the opacity that characterizes these tax havens?

[Stéphane Bonin]

This lack of transparency is a real problem, I can't deny it. Over the years, however, Canada has, together with various countries, concluded 93 tax treaties. In addition, we concluded 23 agreements on the sharing of tax information with various countries, some of which are known tax havens.

I would also like to mention the role of FINTRAC. When we began to examine the Panama Papers in the context of our investigations, one point became obvious; it is not illegal for taxpayers to have some connection with the Panama Papers. The CRA then developed its investigative approach. When we believe that a Canadian taxpayer is connected to the Panama Papers, we check certain things. For instance, did the person submit the T1135 form, the Foreign Income Verification Statement? If someone is mentioned in the Panama Papers but did not disclose the fact that he has over $100,000 in a foreign account, we check to see whether an investigation is being carried out. We have a structured approach: we do internal audits, and then we submit the results to FINTRAC, which provides us with the information on the transactions. At that point, we can have a good idea as to the nature of the transactions, that is to say whether this is tax evasion. If that is the case, we continue our investigations. The opacity surrounding these transactions causes problems, but it is not insurmountable.

[The Chair, Liberal, Wayne Easter]

We'll have to cut it there. We're substantially over.

Mr. Sorbara, go ahead, please.