Thank you, Mr. Chair, for inviting the Canadian Jewellers Association to this meeting regarding your review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
My name is Brian Land, and I'm the general manager of the Canadian Jewellers Association.
For 100 years, the CJA has been the voice of the Canadian jewellery and watch industry, providing leadership in ethics, education, and communication; building trust, awareness, and desirability for Canadian jewellery products. The CJA promotes consumer confidence and assists its members in following best business practices. We have over 1,000 locations in Canada, and our members consist of retailers, manufacturers, wholesalers, and goods-and-services providers.
In 2017, the CJA acquired Jewellers Vigilance Canada. With the acquisition came the JVC crime prevention program. This 18-year-old program has delivered to industry and law enforcement valuable information on crime against jewellers, including organized crime in the form of gangs. This program also trains law enforcement in the specific attributes related to jewellery crime.
Joining me at the table is my colleague Phyllis Richard, representing Jewellers Vigilance Canada.
I would like to take a few minutes to give you a brief overview of the jewellery industry in Canada. For the purposes of the act, we are known as dealers in precious metals and stones, or DPMS, although not all of the industry is covered under the act. A 1997 Ernst & Young study commissioned by the CJA states that 90% of 4,400 jewellry firms in Canada employ less than 20 people, and 65% have fewer than five employees.
The significance of these statistics defines the fabric of the Canadian jewellery and watch industry, 20 years ago. Our industry was, and is even more so today, an industry of mostly small businesses. Many of these small businesses exist in smaller communities across Canada. Often they are second- and third-generation jewellers in that same community. They tend to know the vast majority of their customers.
The jewellery manufacturing industry in Canada thrived in the latter part of the 20th century, but, like so many other industries, the manufacturing sector declined with the advent of offshore and foreign manufacturers who were able to produce jewellery products much more cheaply. The world was opening up with the age of the Internet and the online revolution.
Well over 20 significant jewellery manufacturers closed their doors or went bankrupt between the latter part of the 20th century and today. Importers, wholesalers, and distributors have become more prominent than manufacturers as suppliers to retailers in Canada. Those Canadian manufacturers still producing have sought other markets to sell into such as the U.S., Britain, and Europe.
The retail side of the Canadian jewellery industry has also changed dramatically. Unlike other retail operations, such as clothing and hardware, which are dominated by chain stores, our industry consists of small, independent retailers. Three of the largest chains from the 1960s to the 1990s— Peoples Jewellers, Mappins Jewellers, and Birks—are now owned by foreign companies. In addition, many of the Canadian-owned jewellery chain stores have closed their doors. Retailers like Ben Moss Jewelers, Walters Jewelers, and Ostrander's Jewelers are no longer in business. Big-box stores such as Costco and Walmart also carry fine jewellery and new chain stores such as Michael Hill from New Zealand have arrived from foreign shores.
Statistics about the Canadian jewellery industry are not available, other than those supplied in the Ernst & Young report. However, it has been documented in the U.S. that approximately 60% of jewellery sales are done through multi-line merchants such as Costco and Walmart. In Canada these types of retailers generally are not part of the CJA. This would be also true of department stores like the Bay.
From an international perspective, it is noteworthy that precious metals, stones, and finished jewellery are not a common medium of exchange in Canada. While some items such as gold bars or ingots may be used as a store of value, this is generally not the case for finished jewellery. It is estimated that in the resale of a piece of finished jewellery in the Canadian market, the loss of value would be between 75 and 95 per cent of the retail price on average. This is to say that an item purchased for $100 Canadian would have a resale value of between $5 Canadian and $25 Canadian. That being said, products that lose less value when resold are the most vulnerable—the same items that are targets of thieves in a robbery—brand name watches and high-end larger diamonds.
The CJA is committed to attaining a higher level of AML/ATF compliance within our membership. We strongly believe that a better understanding of the fabric of our industry by the Department of Finance and FINTRAC will lead to more realistic compliance requirements and in turn a much higher rate of compliance.
I look forward to any questions after my colleague gives an overview of the DPMS sector and AML/ATF compliance. Thank you.