Finance Committee on April 18th, 2018

[Vanessa Iafolla]

Currently, as I mentioned, if individuals are engaging in financial activity that is particularly egregious, they are generally terminated as clients. Financial institutions are still able to kind of use whatever intelligence they've garnered internally.

I think that given the dearth of prosecutions that we see in Canada and the limited activity that we've seen in this area—

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

That might not be a fix.

[Vanessa Iafolla]

Exactly.

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

I appreciate that.

To both gentleman from Imperial Tobacco, you say that contraband tobacco and money laundering kind of go hand in hand. Obviously the RCMP plays a role. We've also heard before about the excise stamp as being the way for someone to identify a product.

Do you feel that the current system of the excise stamp through this CRA is curbing this, or are there challenges such that this committee, for example, may be suitable to review that system?

[Eric Gagnon]

There are important issues with the stamp right now.

I have right here an illegal pack with a legal stamp on it. What's happening right now is that some of legal stamps are making their way into the hands of illegal traffickers, so consumers who are buying these products see a federal stamp on them and believe the products are legal.

That is the challenge when I talk about Bill S-5. The health minister has been going around Canada and telling everybody that plain packaging will not be an issue because we have a federal stamp that's going to differentiate between legal and illegal products. The issue we have today is that some of these illegal products already have a legal stamp. The challenge will be very significant moving forward. We already have a contraband problem right now. The issue is that we might be stuck with a counterfeit issue also.

That's one of the issues we have.

[The Chair, Liberal, Wayne Easter]

Okay.

Thank you.

Mr. Sorbara.

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

Thank you, Mr. Chair. Thank you to the witnesses for their patience this afternoon.

I would like to start with Canadians for Tax Fairness.

Mr. Howlett. I've read a lot of what you've written and commented on.

You made comments with regard to beneficial ownership. A beneficial ownership corporate registry is the big step we need to take to improve disclosure in this country, is it not?

[Dennis Howlett]

Yes, I would agree.

The agreement between the federal government and other jurisdictions that was announced in December talks about a phase two where they will discuss the possibility of setting up registries or requiring corporate registries to collect an official ownership. It is not clear when they're going to get to really seriously talking about that.

This initial step that they've agreed to, which would be implemented by mid-2019, is really, in my opinion, not very much of a step forward at all. They really need to get right to what they call “phase 2” to talk seriously about collecting beneficial ownership information at the registry level across the country.

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

Since the December agreement between the finance minister and provincial ministers, which banned such things as bearer shares—if I remember the terminology correctly—I believe there is momentum toward increased transparency within Canada.

Also, on fighting tax evasion, for example, our government has put over a billion dollars of additional resources into CRA in our first two budgets to improve tax collection and bring down what I would call “tax avoidance measures” that are deemed to be illegal.

I think you also mentioned in your opening remarks the Transparency International report, which you said is coming out tomorrow.

[Dennis Howlett]

Yes.

The Transparency International report, called “G20 Leaders or Laggards?”, tries to compare how the different G20 members are doing. Canada, unfortunately is identified as part of the laggards.

It's true that this government has clearly indicated in the last two federal budgets that it wants to make progress on beneficial ownership transparency. It's also true that Canada has a complicated system where you can register a company in any province or territory. However, the federal government needs to take leadership to ensure that all jurisdictions comply with the international commitments they have made.

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

Thank you for your comments today.

This is to the Canadian Gaming Association. We had the attorney general from British Columbia appear at this committee and provide some very substantive discussion and fodder for thought for us. He and others have commented, for example, that in B.C. some of the casinos potentially could have been used to whitewash or to snow, whichever term you want to use, or launder the proceeds of crime from illegal to legal activities.

Would you rebut his comments? Would you say that the minister and others are wrong in the concerns that have been shared?

[Paul Burns]

No, I wouldn't call the minister's comments wrong. I think we need to be clear on what is occurring in British Columbia. There is a layering effect going on. If there's an issue in B.C. casinos, it may be with proceeds of crime being used. As to the actual laundering of money to make it clean, there's no evidence that it has occurred.

The proceeds of crime issue is very different and very hard for a casino to detect without taking additional measures. One of those measures was taken in British Columbia, but when an individual with a money services business lends money or puts money in somebody else's hands and that person comes in—it could be a customer known to the casino, and casino patrons do use cash—and it's a known patron, those are the issues they have to deal with to determine the source of cash.

Now, the Government of British Columbia has taken one extra step in saying that sources for people need to be determined when deciding to step in. That was one final, additional measure that was added, but during this process, walking in with large amounts of cash, playing a little bit, and walking out with a cheque didn't occur. People using the proceeds of crime and playing in casinos would be a more accurate determination, I think, of what has gone on.

[The Chair, Liberal, Wayne Easter]

Thank you. We will have to end it there.

We have time for one question each from Mr. Albas and Mr. McLeod.

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

I'm sorry, I have to go there concerning British Columbia.

The minister tells us that there are suitcases of $20 bills coming in and that he takes drastic, invasive action to stop that activity, yet your comments today have been that you're a well-regulated industry. Do you feel that your own internal controls are fine and that it's just the Government of B.C. that up to that point was the issue?

We're getting mixed messages here, sir, and I don't think this committee or Canadians are done any service to hear anything other than point blank what is occurring.

[Paul Burns]

The issue concerning what comes in is that people bring cash into the casinos; our patrons do. Some are very reputable people who like to play with cash and prefer doing so. What has gone on in many cases in British Columbia is that the issues have been reported and discussed publicly. Yes, people have shown up with large amounts of cash. In some cases, they were accepted; in other cases, they have probably been refused.

What has gone on, though, is that the ability to determine the person in front of you at a given time and to say that this is a known customer with whom we have a relationship and know who they are and to talk about the sources of funds—maybe they have been playing with cash, and this time it's a lot more cash.... Those are determinations that are made at the property level. Those are the controls that we as an industry, in determining proceeds of crime coming in front of us, find very difficult.

This is a challenge that we have. It's a challenge we continue to work on to try to improve the process. But in terms of the definition of it, laundering money—walking in with a bag of cash and walking out with a cheque—hasn't occurred. What has occurred is that money that has been brought in has in many cases been used, been played; the money has been lost on occasion. Walking out with cheques is not an issue that has been discussed or has been found at this point in time.

Acceptance of that money is a challenge that we have as an industry. People—our patrons—like to use cash, whether it's for cultural or historical reasons. There are lots of reasons people bring cash into a casino. Our determination and the difficulty we have—

That's where the additional measures in British Columbia, for example come in. They started interviewing customers to find out more of their sources. They asked them; they banned them.

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

Should those measures be rolled out right across Canada? It sounds to me as though, if it's allowed, it puts your members in a position in which they want to serve their customers but also want to serve larger interests.

[Paul Burns]

They do.

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

Are there any other provinces that had B.C.- like situations before these changes were made?

[Paul Burns]

No, there have been no other jurisdictions that have had the same kind of report.

The industry uses a risk-based approach and identifies risks in their business. By and large, the industry in Canada is a local's gaming business, meaning that the patrons come from the surrounding area. In very few instances, they're coming from abroad. The Lower Mainland was one of those.

What the industry does on an ongoing basis is to identify those risks in order to mitigate them. Some companies have different policies from others, and their tolerance for taking notes of cash is a lot lower. Those are the things that we continually work on as an industry, to ensure that we identifying risk and put mitigating procedures in place, because patrons still like the cash. Over half of the transactions the industry reports on are disbursements. We pay out people in cash because that's what they want.

There are lots of issues that we're working with on a regular basis.

[The Chair, Liberal, Wayne Easter]

You can have a quick last question, Michael. The bells are ringing, and I think people are okay if we want—

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you, Mr. Chair, and I'll be quick.

I want to ask Imperial Tobacco Canada about their comment on being able to differentiate legal from illegal product. I've worked with organizations that have campaigned for a long time to get plain packaging in place. I'm from the north, and we have a serious problem with a high number of people who smoke. Lung cancer's an issue. Many people applaud this move to go to plain packaging because the status quo is not working.

I had suspected that plain packaging was going to come with its share of problems, but what do you recommend we do to keep the product out of the hands of children? How do we make it so it's not attractive, but at the same time, we can tell that this is a legal product?

[Eric Gagnon]

There are a couple of things.

First of all, I want to remind the committee that tobacco products are hidden from public view. There's already a 75% health warning on the pack. I don't think that plain packaging will reduce smoking, but that's another debate.

The health minister has been saying that marijuana products will be in plain packaging. However, Bill C-45 allows for branding of the products. What we're saying is that if there is plain packaging for marijuana, the same plain packaging should apply to tobacco products. There should at least be a logo of the brand that enables us to differentiate legal from illegal packs.

[The Chair, Liberal, Wayne Easter]

With that, thank you to the witnesses for the discussion and the submissions you've made today.

We have votes in about 25 minutes.

This meeting is adjourned.