Finance Committee on May 30th, 2018

[The Acting Chair, Conservative, Dan Albas]

It's up to the committee members. Is there unanimous consent to move forward?

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

Is it no motions when we come back?

[The Acting Chair, Conservative, Dan Albas]

It's just so we can hear from our witnesses.

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

Some members may have time commitments after 5:30 as it is. I'm not sure if they want to go longer.

[The Acting Chair, Conservative, Dan Albas]

I have been told by the clerk we can't prevent motions. We're at a crossroads. We either extend the meeting or we thank the members.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

May I ask a question?

I don't know what's on the agenda for committee business. I'm assuming some of it's the travel. Is there an opportunity to put that off until another time? I don't know what's on the agenda, so I'm not sure how urgent it is.

[The Acting Chair, Conservative, Dan Albas]

I'm told that the business cannot be put off. Again, the clock is ticking.

Mr. Fergus.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

I'm a bit of a sucker for.... I know that there's nothing in the rules to prevent us from introducing a motion, but I actually do believe in the good word of the folks around the table. I would ask that we all agree not to have any business so that we can have the opportunity to question these two witnesses who have spent a bit of time and effort coming to appear before us. I would love to pick their brains.

[The Acting Chair, Conservative, Dan Albas]

Okay, we had better come up with something quick.

Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

I would agree and you have my word.

[The Acting Chair, Conservative, Dan Albas]

Mr. Sorbara.

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

I think we should come back and complete our committee business and then during whatever time we have remaining until 5:30 we can ask questions.

[The Acting Chair, Conservative, Dan Albas]

We don't have the option. We would have to have unanimous consent to come back and question for a round. Do we have unanimous consent?

[Some hon. members]

Agreed.

[The Chair, Liberal, Wayne Easter]

Gentlemen, please, if you wouldn't mind, we're going to do the people's business and then we'll come back to ask you some specific questions. Then we will continue with committee business right after.

[The Acting Chair, Conservative, Dan Albas]

The committee is suspended.

[The Acting Chair, Conservative, Dan Albas]

We are going to continue with moving on to witnesses and asking questions.

To give as many members a chance to ask questions, are we okay with going with five minutes?

[Some hon. members]

Agreed.

[The Acting Chair, Conservative, Dan Albas]

MP O'Connell please, the floor is yours.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Thank you. Thank you both for being here, with all the changes.

Mr. German, you talked about how in 2012 things really changed and the RCMP are now getting back into it, so to speak. I'm trying to write that down. You gave a couple of examples of the money laundering divisions or departments that were cut. Could you elaborate on that a bit more?

Obviously, as this committee moves forward, we need some recommendations to make to government. In rebuilding these divisions, are there things that we need to do to get back the level of enforcement?

[Peter German]

Thank you. That's a great question.

I don't speak for the RCMP, but what happened in or about 2012 or 2013 is that, with the rise of terrorist incidents in Canada and an awareness that we could be subject to terrorism at home, the RCMP moved a lot of resources in that direction. It also restructured its organized crime resources. It collapsed units that had existed for a long time, such as the commercial crime section and proceeds of crime. These units had been around commercial crime since the seventies—a lot of expertise and so forth. They essentially created organized crime teams, and they would attach a couple of specialists to each team, like a specialist in money laundering and fraud.

The problem with that is that you don't have that nucleus of people who can drive a file, so they end up being add-ons to, let's say, a drug investigation. Over time you lose that expertise. My understanding is that now, about five years down the road, white collar crime is starting to rise in terms of profile in the country, or at least in certain parts of the country. Again, I don't speak for the RCMP. Just by reading news reports, it's obvious that they are trying to recreate their expertise in that area. That is so critical, in terms of the work of dealing with proceeds of crime legislation.

I would just add—and this was a concern of mine right from the beginning in 1993, when you had the first proceeds of crime legislation—that it's the Department of Finance that is responsible for this legislation. There's nothing wrong with the Department of Finance. It's just that the Department of Finance does not deal with enforcement. That's the solicitor general. You have two ministries. It's great for finance to be dealing with the framework, but they have to be talking, and you have to make sure the solicitor general is engaged in the game as well. Both departments have to be talking for you to have a holistic approach to this problem.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

I'll just quickly speak to—forgive me, I don't know who said it—the point, in the description of how the money essentially gets cleaned, around that happening in instances of the wilfully blind. I want to speak a little bit about the issues of beneficial ownership and those loopholes. I think we've seen a lot of testimony of that issue. Do either of you have an opinion in terms of dealing with beneficial ownership, but also with the legal community's—I don't want to call it a loophole—court ruling, or exception to dealing with some of the issues around lawyers and the legal community in Canada, whereas other jurisdictions don't seem to have that problem.

[Milos Barutciski]

On the legal thing, I think it's mostly much ado about very little.

Lawyers generally.... Remember the original regulation that was struck down. It was about lawyers moving money, where lawyers are actually intermediaries, taking funds in trust, and moving it out. Lawyers that take crooked funds in trust and move them around are really at the margins already. They've broken 101 other rules before they did that. To get into a massive fight over that and devote the resources of a lot of well-meaning, well-intentioned advocates for AML regulation to it is actually letting the elephant just march through the door, barrel around, stomp on the flowers, and go back out while we're focusing on a technical issue. It's a pointy-headed technical issue.

I'm not saying that it's not a real issue. I'm not saying that there aren't lawyers who do bad things. All I'm saying is that it's like a drop in the bucket. Remember what it is: it's just lawyers actually handling money. Most of us don't handle the money. The money rarely.... In certain instances, it does, but it's not how most laundered money goes through. What we're doing is allowing a whole bunch of other stuff to go through, and not even unacknowledged but unenforced.

When Peter says there's no enforcement, we have this massive infrastructure that is extremely expensive to maintain and to keep working on and, yes, maintaining.... When I say “extremely”, we're talking about billions a year with the reporting entities, but we spend a fraction of that. I said this once to.... I won't mention his name, but he was one of the superintendents of the commercial crime unit a number of years ago. I said, “If you had a choice between having the AML legislation and the information that FINTRAC has and that occasionally you can have access to under certain circumstances, etc., which costs x billion dollars, or just getting another $500 million so that you can hire forensic accountants, investigators, and a bunch of people, what would you take?” Hands down, it was, “I'll take the money.”

So I ask you guys.... That's why I said to do some studying. Get the data. How many forfeitures have there been? How much money was seized? How many prosecutions have there been for money laundering, etc.? Because right now we have a highly expensive regime that in my view hasn't actually accomplished very much. Why?

[The Acting Chair, Conservative, Dan Albas]

I imagine other members are going to want to go through that, but I have to end it there.

[Peter German]

Can I respond to that, if you don't mind? I have a different opinion on that, quite frankly.

If I may, Chair, very briefly...?