Finance Committee on March 27th, 2018

[Denis Meunier]

I'd have to say that the best people to comment on that would certainly be active members of law enforcement.

In my own experience, I've had opportunities in the past to speak with crown prosecutors in a few provinces, and at the federal level—and they're swamped. To be fair, I believe FINTRAC probably has produced close to 2,000 disclosures, money laundering and terrorist financing, for the police. It's like drinking from a fire hose, if you're in the police investigation business. That's an issue. There are not 2,000 money laundering investigations ongoing in Canada every day.

There are choices being made by investigators and prosecutors, and the information that I had at the time when I was there was that prosecutors, because of the complexity of tying money laundering to the predicate offence, would be trading it off. They'd say to plead guilty to something and they'd drop it, and they would get an agreement with the defence.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

If the predicate offence isn't even investigated, often.... Yes, there has to be a predicate—

[The Chair, Liberal, Wayne Easter]

We're over your time. We'll probably come back to this.

I want to say to witnesses, if you have a supplementary point you want to raise when a question is directed at somebody else, don't be afraid to raise your hand. We'll try to let you in.

Mr. Julian.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thank you very much to all the witnesses. It's very interesting and compelling testimony.

Ms. McNeil, you talked about closing loopholes. Most Canadians would be very surprised to learn that owner-sale real estate isn't subject to the same system of checks and balances as when a realtor is involved. Do you have any idea of the percentage of sales across the country that are owner sales? We certainly see them advertised more on television, but to what extent are we actually excluding from the real estate system of controls portions of real estate sales in this country?

[Dina McNeil]

Unfortunately, we don't have data on the sales that exclude realtors. We know how many transactions our members complete, but unfortunately from either mere posters or for-sale-by-owners, FSBOs, we don't have any data on that. We know in certain provinces it's definitely higher than others, but we don't have numbers.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Would you even hazard a guess? Is it 5% of the market or 20% of the market?

[Dina McNeil]

In Quebec it's more like 20% of the market. We know that in that province it is higher. Other provinces, I would guess are at less than 20%, but I can't say for sure.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

It's certainly significant. What you're saying is, if there is a system of checks and balances for those transactions involving a realtor, it needs to be extended to that sector.

[Dina McNeil]

To the company that allows that to happen, not to the individual.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thank you.

I still have many questions, so I'm going to move on to Mr. Meunier.

You made some very interesting recommendations, particularly the last two: that the government amend the Criminal Code to make additional resources available to better support adequate law enforcement; and that the government publish annual reports providing an overview of all activities.

Your organization is doing very meaningful work, and you have a great deal of experience. To what extent are we ignoring what we should be doing to create a sound regime?

[Denis Meunier]

Thank you for your question.

On the second recommendation you mentioned, I would say that annual reports would be very welcome. Oftentimes, committees—and I've attended many committee meetings—don't have immediate access to information on the entire compliance continuum. The justice department is asked a question, for example, but doesn't have the answer. That's why we think all Canadians should be better informed about what is happening throughout the entire process, right from the outset. In other words, it should start with the reports banks and other financial institutions send to FINTRAC. Then, it would be possible to see the outcome of the long chain of events leading to the prosecutor's involvement. Having that information would be beneficial.

Not only would this enhance accountability to parliamentary committees, but it would also give Canadians an opportunity to see where the government is investing in resources and what the outcome of that investment is. It would be even more useful if the data were broken down by province.

I'm not sure whether that answers your question.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Yes.

Some 250 million, or a quarter of a billion, transactions are reported. A few are referred to the Canada Revenue Agency, but we have no idea what goes on between FINTRAC and the CRA. You've worked in both places.

Do the two organizations communicate?

[Denis Meunier]

I can't speak to how things work today, but I assume they're going well and that the communication mechanism is even stronger than it used to be.

I have to say that, as soon as the legislation changed, in July 2010, and tax evasion became a predicate offence for money laundering purposes, the number of reports and communications received by the agency went way up. As far as I know, the two organizations work together very closely.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Okay.

My last question is for Mr. Clark and Mr. Kemper.

You're strong advocates of and have good knowledge of cryptocurrency. Both of you mentioned detection of criminal activities, but I didn't sense any specific recommendations. Obviously, if we're moving more to blockchain, to cryptocurrency, we need recommendations as to how to identify criminal activity.

What recommendations can you make to us?

[Jeremy Clark]

I'll go first.

As I mentioned, you can think of the on ramps or off ramps: exchanging Canadian dollars for Bitcoin and vice versa. That's where you could look at how you want financial reporting to be handled by these organizations.

In terms of specific criminal activity, it just falls under the RCMP's jurisdiction. It could be different levels of police, but for federal crimes.... And they're doing a great job. They treat it like any Internet crime. That's not necessarily going to dig into the specifics of Bitcoin or the fact that a currency is being used.

[The Chair, Liberal, Wayne Easter]

Mr. Kemper.

[Kyle Kemper]

I would say, work with the exchanges. We have this pulled-out-of-thin-air $10,000 number where every time a transaction is over $10,000, an STR is submitted. That's leading to so much data going into FINTRAC that it's being completely swamped with it.

The exchanges are the ones that are actually handling it. I've worked with the exchanges, and I've worked with many people in the industry. We know. We're the front-line warriors. Work with us towards building a better communications system and better data towards actually making qualified STRs, as opposed to just blanketing anything over this number.

You can tie that back to digital identities and verified claims around things, as well, that will lead to.... I don't really know. The gentleman earlier was talking about them just being faxed off to the room.

The cryptocurrencies and digital currencies are not included in the 20 boxes at the bottom of the STR form. If they were included, if they were partitioned, and if you actually used blockchain behind them, you could have excellent actionable data. However, currently the forms are literally going in the mail and into a room. Who knows if action is being taken on them. It's a daunting task, and there is no way you could ever possibly have the resources to do that. However, if you make it a little bit more, and perhaps reward or incentivize action and good results and put in positive feedback loops, we will get to the bottom of identifying the criminal activities that are hurting society.

[The Chair, Liberal, Wayne Easter]

Thank you.

We're out of time on that round.

Mr. Sorbara.

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

Thank you, Mr. Chair.

Welcome, everyone. It's very insightful testimony. I'm not really sure if I understand blockchain, Bitcoin, or cryptocurrency yet.

I'll just start with Mr. Meunier.

You seem to have some past experience with FINTRAC, I believe, and you also mentioned the CRA, if I am correct. Now you're over at Transparency International Canada, which is wonderful, and I'm sure they're leveraging your experience.

If you had to provide a quote or two about where Canada is in this in terms of transparency, anti-money-laundering effectiveness worldwide, say against our G7 or G20 partners, where would we rank today, in your view?

[Denis Meunier]

In a few words, we're behind the eight ball. We're going to continue to be behind the eight ball because the world trend is to go to publicly accessible beneficial ownership registries.

As I mentioned in my opening remarks, in a couple of months we expect that the European Union is going to make publicly accessible beneficial ownership available within the whole EU. We should remember that it is a new trade partner, and people who want to invest here will also want to know who they're dealing with. They might think of putting a little more pressure because the international standard, in my view, will change in a couple of years.

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

In your view, because you've worked for federal agencies—FINTRAC and the CRA—are there any jurisdictional issues to being able to set up an accessible beneficial registry in Canada because we don't have a national securities regulator yet? Is there anything preventing that from being done here in Canada?

Mr. Russell may wish to chime in on this as well.

[Denis Meunier]

You're addressing your question to?

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

First to Denis and then Ian.

[Denis Meunier]

The Minister of Finance is working very closely with the provinces on this, according to his announcement back in December. We're very happy to hear that.

There are obviously some challenges, I'm sure. The interprovincial trade agreement of 1994 was made as a result of a commitment of all provinces and the federal government to harmonize that. It's been a long time coming. There will be some definitional and systems and jurisdictional issues, but for the betterment of and the protection of our public interest, I encourage the governments to make it accessible publicly.

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

Ian.