Finance Committee on March 21st, 2018

[The Chair, Liberal, Wayne Easter]

Is that it?

[Michael McLeod, Liberal, Northwest Territories, NT]

I have one more question.

[The Chair, Liberal, Wayne Easter]

Go ahead, the floor is yours.

[Michael McLeod, Liberal, Northwest Territories, NT]

I'm just curious because $7,500 is a lot of money—to me, anyway. How common is it in your field, in your law society, to have people walk in with $7,500 worth of cash?

[Sheila MacPherson]

It's not common at all. I know that the no-cash rule in the north encountered some challenges in smaller places, because sometimes you go into the community and somebody wants to retain a lawyer to do something and they only have cash because they don't often have ready access to bank accounts or cheques and that sort of thing. That became an important limiting issue for us to try to deal with, to make sure that we were able to allow people in small communities, perhaps without access to checking accounts, to still have access to legal services. I can tell you that it happens very rarely. I can't think of a time in the last 20 years where I've come across that amount of cash in my own practice.

[Frederica Wilson]

Just quickly, it may interest you to know that we surveyed that in the work of our committee. We went to criminal lawyers, in particular, thinking that they might be more likely recipients of cash, and it's actually not common. I think what Ms. MacPherson said is absolutely correct. It is very much the exception these days.

[The Chair, Liberal, Wayne Easter]

Okay. Thank you, all.

We'll turn to Mr. Dusseault, and we will have time if somebody else wants to ask one more question, or for another round of five minutes. Let me know.

Mr. Dusseault.

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

Thank you, Mr. Chair.

My question is for the jewellers.

Like a number of us around this table, it really bothered me to learn that you can go and buy pieces in an auction house without anyone checking the identity of the owners of the items or their provenance. Perhaps we should examine those issues in more depth.

As I understand it, jewellers are required to declare transactions of more than $10,000. There are other areas involving luxury items, such as the art market, where pieces may be proceeds of crime. To your knowledge, are you the only dealers in the luxury goods market—I am not sure if I am using the right term here—to have obligations to FINTRAC?

[Phyllis Richard]

First, if I may just clarify this, auction houses may have their own requirements for identification, but there is no requirement for them to report it further to FINTRAC.

To your point about other luxury goods outside of a house, no, we are the only ones so far captured under the act. In the U.K., for example, instead of the requirement being for a particular industry, like jewellers, for example, they call them high-value dealers. It is illegal to accept over 10,000 pounds in cash unless you are a registered, high-value dealer. That applies to whether you're buying a diamond ring, a car, a boat, designer clothing, anything. If you are going to engage in that level of cash transaction, you must register as a high-value dealer. Otherwise it's illegal to accept the cash.

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

That is interesting.

I would now like to come back to the issue of companies and registries.

Even if there were a national public registry, how could we prevent people using dummy names?

One person can arrange with another person, perhaps a family member or someone with no family ties at all, to act as a nominee, meaning that they do certain things in someone else's name. Even if there were a registry, it would be impossible to find out whether the person is acting in someone else's name and whether the profits are going to that third person, who could be involved in acts of dubious legitimacy.

Is there a way of detecting the kind of strategy that involves an intermediary? You do not need a lawyer or a notary to make yourself into a legal entity. Anyone can do it at any time. How can we detect that kind of strategy?

[Mora Johnson]

That's an excellent question, and certainly in the world of corruption, because politically exposed people are so famous, it's almost universal to use an associate or an agent.

Banks commonly use commercial databases like World-Check. I don't know if you've heard of this. There are other ones as well. When a new client walks in the door, they run the name through this database. This database flags all kinds of fascinating information, including whether they're a relative or known to be an associate of a politically exposed person, whether they're on a sanctions list or they have criminal convictions—anything that's in the public domain. Thomson Reuters and different companies gather vast amounts of data, and it's quite expensive to have a subscription to that, but banks do this. They can certainly flag suspicious or red flags when an innocuous person walks into the bank. My hope would be that a registrar would do the same. You can't be sure, but it would create a red flag for enhanced due diligence, more inquiries and that sort of thing.

The other thing that's useful about a registry, especially if it has really good searchability, is that you can start to see certain patterns. For example, it's not uncommon for an agent working for a corrupt person to work for many corrupt people, and their name will start popping up more frequently, or you might have one address that has a surprising number of shell corporations associated with it. These patterns are almost impossible to detect, but if you get a large amount of data you can start to see suspicious areas.

I hope that's helpful.

[The Chair, Liberal, Wayne Easter]

Okay.

The bells are ringing.

I would like to ask two questions.

Mr. Land, in your statement you said that you strongly believed that a better understanding of the fabric of your industry by the Department of Finance and FINTRAC would lead to more realistic compliance requirements and in turn a much higher rate of compliance from your industry. What do you mean by that? What needs to be done there?

[Brian Land]

As you know from our remarks, the jewellery industry in Canada represents somewhere in the range of 1,000 to 1,200 doors. There are probably 5,000 jewellers in Canada. We speak for the jewellery industry, but all jewellers don't belong to our group, so one of our challenges is to get the word out to other jewellers to help them understand the requirements, because we're constantly getting feedback from some of our consultants and partners that compliance among non-members might be lacking.

[The Chair, Liberal, Wayne Easter]

Okay. Thank you.

We hope to avoid making recommendations that will cause any more constitutional wrangles. There's no question that beneficial ownership is one of the key areas we have to include in our recommendations. There have been some good suggestions here.

Is there anything else you want to add about closing these loopholes, and are there any other prime examples we should be looking at from other countries? We understand that the U.K. has a reasonably good system. Do you have anything to add in that area, Ms. Johnson?

[Mora Johnson]

My final comment is that many countries have explored different types of registries, including tiered access. There were lots of questions about who should have access to it. Of course, law enforcement, tax authorities, journalists, investigative NGOs, all kinds of people wanted access to it. Many countries ended up deciding it was cheapest and simplest to make the beneficial ownership registry public, even though they had started out thinking that they would not do that. Many jurisdictions have now gone public, including Germany, the Netherlands, and France. It'll be interesting to keep an eye on where that goes.

[The Chair, Liberal, Wayne Easter]

Ms. Wilson or Ms. MacPherson.

[Sheila MacPherson]

I would just say that I think that the devil will be in the detail in many respects. I think there appears to be quite a consensus perhaps emerging on the importance of addressing this issue within the legal profession, within the community, and among Canada's ministers of finance.

It will be important to have the legal profession at the table, because we do bring a unique perspective and we would like to be at the table. We haven't been at the table, for reasons relating to the litigation, but that litigation ended three years ago and we would welcome the opportunity to talk through some of the challenges of implementing the objectives of the legislation, because we all want the same thing in the final analysis.

Thank you so much for your time today.

As a last thought, I should indicate that this issue is one of the top three priorities of the federation, so it very much is something we have our eye on and we appreciate the opportunity to make these submissions here today.

[Frederica Wilson]

I only want to say with regard to the comment about our failure to have a centralized security regulator, I think Ms. Johnson is absolutely right that the approach on this issue doesn't require there to be a single regulator or a single registry, but more that there be integration so that the information is available across borders.

[The Chair, Liberal, Wayne Easter]

Okay.

With that, thank you all for your information.

Committee members, the bells they are a-ringing.

Thank you all.

The meeting is adjourned.