Evidence of meeting #140 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was fintrac.
A video is available from Parliament.
6:20 p.m.
Liberal
The Chair Liberal Wayne Easter
We'll go to Mr. Albas and then come back to one more on this side.
Mr. Albas.
6:20 p.m.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
I think we've heard from a number of different industries that are subject to FINTRAC that there are administrative compliance costs in terms of time, data collection, etc. When I approached FINTRAC directly about this, they said they do not track the administrative compliance cost, because they know that what they do is important and that they are more focused on the efficacy of their efforts—not necessarily the efficiency. I'm a big believer in the point that you cannot manage something if you cannot measure it.
Would you be in favour of there being an inventory, industry by industry, about roughly how much time it takes to do it? To me, then you would have an impetus to try to reduce the compliance costs, which I think would ultimately benefit everyone. If there's greater compliance and efficiency, the chances are that the system will improve.
I'll just put it out to any of the groups here, maybe starting with Mr. Russell.
6:20 p.m.
President and Chief Executive Officer, Investment Industry Association of Canada
I can appreciate that FINTRAC doesn't make that a priority, but on the other hand, if there is a suggestion, idea, or concept that, if it were put into place, could reduce the costs for the people who are complying, FINTRAC should not stand in the way of that. More importantly, it should be pushing and encouraging that.
The central registry on beneficial ownership would be one example. The other big example from my industry is moving forward with some kind of mutual recognition scheme for foreign institutions that are transacting in Canada. If they're in an acceptable jurisdiction, you shouldn't have to go through their identity.
These initiatives make a lot of sense, and it's just inertia on the part of government, it seems to me, not to move forward with them. It would relieve the burden, certainly for my industry, if we had their proactive support.
6:20 p.m.
Executive Director, Blockchain Association of Canada
I would suggest that they're not going to want to have measurements and statistics about their efficiency because they're not doing a good job. They're inundated with information. We need to consciously and critically think about the goals of these organizations, and start thinking about the fact that we have electricity and don't need to be thinking about candles anymore. We need to think about how we redesign these entire systems to be very efficient, seamless, and not even require centralized authorities to oversee them all. That is the potential that blockchain brings to us.
It worked for FINTRAC, but it also works for real estate, identity, taxation, and monetary policy. However, we are now in a time of change and need to address at a very high level how we're going to move forward as a country and a civilization. Are we going to try to take this new technology and hem it into the previous paradigm, or are we going to embrace it and ascend into the new age? To that end, there's a need for a national blockchain strategy or a task force with decision-making power, with the ability to make mistakes, work with international partners, and to try things, to implement pilots.
One of the things we've done at the Blockchain Association is to work with superclusters. We put in a bid for superclusters, but we're a horizontal industry that's spread out everywhere, representing global interests. There is tons of support; everybody is supported. We put out letters of support to all of the supercluster finalists and to those that were selected. We're looking forward to working with each of them, to bringing together all the stakeholders, and identifying and understanding the challenges industries face at a multi-stakeholder level.
As a government, you can't tell the industry how to do things, and industry can't tell the government how to do things. Collectively, you must agree and then work together toward implementing these new solutions, and not be afraid of making mistakes, in the understanding that we don't know everything. Then we move forward.
6:25 p.m.
Senior Advisor on Beneficial Ownership, Transparency International Canada
At Transparency International Canada, certainly our goal is ensuring greater transparency. If it comes with efficiency, savings, and compliance, we're all for it. Certainly, a beneficial ownership registry that's publicly accessible would help all of the reporting entities—all of them. It would reduce their costs. If there are other measures that can be implemented that would facilitate compliance, all the better, because they might encourage more compliance and transparency, as well as better detection and conviction.
6:25 p.m.
Assistant Professor, Concordia Institute for Information Systems Engineering, Concordia University, As an Individual
That question is not really within my expertise, so I'll defer to my colleagues.
6:25 p.m.
Director, Government Relations, Canadian Real Estate Association
We don't have data from all our members on this, but we know that complying with FINTRAC costs between $10,000 and $100,000 for different reporting entities. For small businesses, a one- or two-person operation, it could cost them up to $10,000. That doesn't include all the time they spend filling out the forms.
Definitely, if we can work with FINTRAC to be a little more efficient and bring down the costs, then compliance will go up. We would be pleased to work with FINTRAC.
6:25 p.m.
Liberal
The Chair Liberal Wayne Easter
I'll be coming to Ms. O'Connell.
Mr. Clark, that question wasn't within your expertise, but can blockchain be used as a tool to deal with some of the problems we talked about here with money laundering and the proceeds of crime as they relate to FINTRAC? If so, how?
6:25 p.m.
Assistant Professor, Concordia Institute for Information Systems Engineering, Concordia University, As an Individual
Sure. You can think of a blockchain as providing database-like structures. The only difference is that you don't have to decide who holds that database, so you sidestep the governance issue of who's going to hold that data.
It also has very strong technical properties in terms of what data can be written. The data that's written will be validated according to sets of rules you can write, and you can write these in software or code. To the extent that you could think of a computer being able to record or act on this information, then a blockchain could be dropped in to provide that same functionality. It could be done in a way that you don't have to pick one person to be in charge of running that database.
It is a relevant technology. There are a lot of open questions and research questions before you can just drop one in.
6:25 p.m.
Liberal
The Chair Liberal Wayne Easter
Okay, thank you. It's nothing but been complicated.
Ms. O'Connell, you have the floor.
6:25 p.m.
Liberal
Jennifer O'Connell Liberal Pickering—Uxbridge, ON
I want to ask a question of the real estate association.
I've heard you on the compliance issues and the paper work. Your comments about nitpickiness with things that really don't contribute to what we're all trying to deal with here were well said.
The compliance will have to be there. There's obviously a huge risk of money laundering in the real estate market. If compliance were streamlined—I think that is probably a safe way to put it—how can we ensure that real estate agents are actually doing this work? I knew my real estate agent when I bought my house. He knew who I was and didn't really have to do much background checking. Of course, I still signed all the papers and went through all of that.
I'm from the GTA and we had the attorney general from B.C. here, and homes are selling within hours, in certain cases. How are we ensuring that the agents themselves are actually getting to know their clients? How can we feel secure in their doing that if the compromise is to somehow streamline the process as well? Have you given any thought to that?
6:25 p.m.
Legal Counsel, Canadian Real Estate Association
First, I would mention that the regulations already include some measures to encourage compliance, such as fines or AMPs. Also, recently specific obligations were introduced to basically require brokers and agents to document every step of the way. They're called “reasonable measure” records.
There are, then, some things in place. I think, however, that you can streamline some areas in cases in which the obligations imposed don't really make sense. For example, we have a policy interpretation from FINTRAC that says you have an obligation to know who your client is, and if you do repeat business with them you have an obligation to make sure that, say, their occupation hasn't changed.
However, what if you're doing two transactions concurrently? Basically, what FINTRAC has told us is that if you ask someone what their job is—let's suppose they say they're a plumber—and you're doing another transaction, you have to ask them again: “Remember that a minute ago I asked whether you were a plumber? We want to know whether you are still a plumber.” This makes no sense.
If we had a policy interpretation that recognized the way real estate actually is being conducted, which is that people often buy and sell homes at the same time or in a very short period and there is no need necessarily to ask the exact same question, such as, “Did your date of birth change?” or “Did your occupation change?”, it would be a way for FINTRAC to have more credibility. Then we could tell that what they're really saying is that they want to make sure you know whom you're dealing with.
We don't have an issue with that. We know we have a role, but it has to make sense.
6:30 p.m.
Liberal
The Chair Liberal Wayne Easter
I see no other burning questions. Are we okay?
Thank you very much to the witnesses. I will say that I do know that the Department of Finance is looking for feedback on that discussion paper. In case you think of something in the meantime, and if you are presenting papers to the Department of Finance, it might be helpful to send us a copy as well so that we're not working at cross-purposes. Just forward it to the clerk and we'll get it.
We've covered quite a number of bases here this afternoon. Thank you, each and every one, for your presentations.
The meeting is adjourned.