Hello. My name is Vanessa Iafolla, and it's an honour to appear before the committee as part of the current review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. Thank you so much for the opportunity to contribute today. I'll be speaking from some of my research findings.
I'd like to draw the committee's attention to several issues that I think are particularly important in the fight against money laundering and the financing of terror. These include, firstly, the need for improved guidance and feedback to regulated entities by bodies of oversight such as OSFI and FINTRAC; secondly, the issue with respect to the use of discretion by individuals in reporting entities, and here I'm talking specifically about financial services; and, thirdly, the need for a business registry and improved transparency regarding ultimate corporate beneficial ownership.
My research within financial institutions has impressed upon me the desire of our schedule I banks not just to minimally comply with the legislation, but also to set industry-wide standards and be first in class. Our banks take compliance with the law seriously and, as I'm sure you know, have developed a significant apparatus with respect to the detection and reporting of money laundering and terrorist financing.
Still, many people with whom I've spoken have expressed a desire for their regulators to provide more structured guidance. These individuals have expressed that they feel that regulations are imposed with little guidance as to implementation. They describe this process as cryptic or interpretive, and while they appreciate the considerable flexibility, they feel that a better balance should be struck between providing sufficient direction and guidance, and the freedom to implement regulations in ways that work institutionally.
Another issue I've discovered is that this lack of guidance trickles down throughout the reporting process. At all levels that I've studied, bank employees have expressed a desire for feedback about the kinds of intelligence they are gathering. If you want intelligence to be truly intelligent, it's important for meaningful feedback to be provided to regulated entities. The banks don't get a good sense of the use or quality of the intelligence they generate, unless of course the report is rejected for incomplete information. In turn, employees down the reporting chain don't know if what they're sending up the line is useful or helpful.
I appreciate the difficulty inherent in providing such detailed information to the number of regulated entities in this country. However, people who are doing this work in earnest need to know if what they're doing is on the money, so to speak, or if they've missed the mark. I've heard FINTRAC's attitude described as, “Give us the info. We'll figure it out.” That isn't necessarily helpful to reporting entities who want to make sure that the resources they pour into this endeavour are bearing good fruit. Banks want to be more than a resource. They want to do real meaningful work on this issue, and feedback is crucial to that end.
Part of the issue on the lack of guidance ties into the second issue that I would like to discuss, the use of discretion. Reporting employees with whom I've spoken, and internal reports I've seen, highlight the significant latitude that reporters have. This is good, insofar as they're not tied to specific dollar amounts or thresholds for reporting, but there are issues related to the quality of intelligence generated, and frankly issues of privacy and fairness, when individuals are reported not for the suspiciousness of their financial transactions but for reasons that are fundamentally subjective.
Bank tellers have disclosed to me that they have reported suspicious transactions because the individual was wearing a hoodie or sunglasses; that the person was employed as an exotic dancer, which as we all know is legal, providing you have a licence to do so; that the person was too friendly or not friendly enough; worse, that the person was black or a Muslim. Those are not necessarily solid reasons to suspect someone of crimes, yet those concerns are significant enough for reporters to disclose them to me. I've worn a hoodie. I've worn sunglasses. I'm a very friendly person. I can assure you I've never financed terror, and I shouldn't be reported for presenting so in a financial institution.
Better guidance up the chain could translate into these kinds of reports being minimized, and thus in turn into better intelligence for FINTRAC. I think some of this is tied to the fact that, unlike other jurisdictions, Canada does not require the identification of a predicate offence on its suspicious transaction reports. The idea of suspiciousness is less tied to legal definitions, and instead can be more subjective. Perhaps tightening that up would be helpful for producing smarter intelligence.
Finally—and I won't belabour this point as Mora Johnson has spoken to it, and Dennis Howlett has mentioned it today—I think there's a real need for a public registry of beneficial ownership that could be accessed. It's problematic that law enforcement of any kind, and I mean not just criminal but also regulatory enforcement, cannot necessarily determine the connections between business entities, because of the way that our laws enable corporate secrecy. Dirty money isn't just the product of criminal acts; regulatory violations are also done in pursuit of financial gain. It's important for us to recognize that the value of a public registry of beneficial ownership extends beyond the police to other agents of social control.
Thank you so much for your time, and I look forward to your comments.