Evidence of meeting #160 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was money.
A recording is available from Parliament.
5:35 p.m.
Conservative
The Acting Chair Conservative Dan Albas
Thank you for that. That's five minutes.
Before we go to MP Fergus, I have a quick question.
Whether it's private or public, what kind of information should be in that beneficial ownership registry?
5:35 p.m.
President, International Centre for Criminal Law Reform, University of British Columbia, As an Individual
I don't think there's an easy answer to that one.
What you want to look at is what the international standards are. Canada wants to be in compliance with the international standards, or ahead of them.
I think the important thing is transparency. That's what this is all about. It's about transparency of ownership, so you know who you are dealing with. It's not about revealing tax forms or what your tax situation is. It's about the ownership of companies. It's about who the actual owner of a company is so that you know who you're dealing with and they're not hiding behind the corporate veil.
5:35 p.m.
Partner, Bennett Jones LLP, As an Individual
Where I would come down is.... Peter just kind of elided from the real issue. You know who you're dealing with in transparency. I thought we were talking about money laundering and criminal activity.
Beneficial ownership is not about allowing me to know that I'm transacting with Mr. Masse through his personal holdco. The beneficial ownership argument is about making sure that whether it's corporates or drug dealers or kleptocrats, from whatever countries you chose to pick, they can't use the hiding of their identity to basically commit crimes, enable crimes, and keep the money.
That's what we thought we were about, not about knowing who I'm dealing with. I have a million and one ways.... I spend a lot of my time advising my clients on KYC and knowing who they're dealing with.
5:35 p.m.
Conservative
The Acting Chair Conservative Dan Albas
Thank you for that.
We'll go to MP Fergus, for five minutes.
May 30th, 2018 / 5:35 p.m.
Liberal
Greg Fergus Liberal Hull—Aylmer, QC
Thank you very much to our witnesses, Mr. German and Mr. Barutciski.
Mr. German, I would like to go back to the point that you raised in terms of the importance of the need to have enforcement as well as disruption capabilities. In a minute and a half, would you be able to elucidate and give the committee a better sense of that?
To be specific, what types of enforcement and disruption tools do you think would be useful, and what models can you draw upon from around the world?
5:35 p.m.
President, International Centre for Criminal Law Reform, University of British Columbia, As an Individual
The term “disruption” comes from the consultation paper, which I believe refers to the Department of Finance's three pillars. I don't think that's a good word to use. I think “disruption” is supposed to be an umbrella for a number of different topics. We're really talking about enforcement, so ideally, the third pillar is enforcement.
When you're talking about enforcement, that means you have to have units of trained specialists. They don't necessarily have to be police officers, but we're talking about law enforcement units. You certainly see this in the United States with the task force approach—task forces dealing with money laundering and so forth. We don't have that now. We did have it. I'm saying it has to be reconstituted.
5:40 p.m.
Liberal
Greg Fergus Liberal Hull—Aylmer, QC
Thank you very much—and you're on time.
Mr. Barutciski, I appreciate your comments. I would just like to continue the discussion on that type of beneficial ownership, be it private or public.
I know that you prefer a private or confidential system managed by the government, but can you tell us what the benefits of a public system are? In what context should a public system be used?
5:40 p.m.
Partner, Bennett Jones LLP, As an Individual
That's not really my major concern. I understand completely why a registry of beneficial ownerships would be wanted. It is completely logical. That should exist to facilitate the application of the law.
5:40 p.m.
Liberal
Greg Fergus Liberal Hull—Aylmer, QC
Do any countries have a state-managed system that is not accessible to the public?
5:40 p.m.
Partner, Bennett Jones LLP, As an Individual
I don't know yet, as this is completely new. All this movement related to beneficial ownerships is completely new.
Beneficial ownership has been an issue for maybe three or four years at most.
Everyone is currently experimenting with this. People who are active in the field—be they lawyers, journalists or other stakeholders—prefer a system that is open to the public for reasons of transparency. I completely understand this, but that is not really the goal here. The goal is to facilitate the application of the law and prevent any violations.
If someone knows that they will use a digital company to conceal illicit funds and that their interest in that company will be revealed through a system that enables the police or an investigator to find them eventually, that will deter them from using this option. That is sort of the reasoning behind it. In my opinion, making everyone's private affairs and ownership interests public is neither necessary for the application of the law nor effective for there to be transparency when it comes to
due diligence, to let you know who you're talking to, who you're dealing with.
There are other ways to do that.
5:40 p.m.
Liberal
Greg Fergus Liberal Hull—Aylmer, QC
This is for whoever would like to answer. We've talked about beneficial ownership. We've talked about measures of enforcement. You haven't mentioned some of the new technologies that have come into place, for example, blockchain technologies. What are some of your concerns on this? What should we be looking at to try to get ahead of this development?
5:40 p.m.
President, International Centre for Criminal Law Reform, University of British Columbia, As an Individual
Actually, I have a whole menu of things I could mention if we had time, but certainly with regard to blockchain, this seems to be a very positive development. There are all sorts of potential uses for blockchain. It could revolutionize, essentially, the back office. It's not so much the blockchain. The concern seems to lie with the cryptocurrency and the fact that it can be used as an alternate form of cash by organized crime. I think that's where the emphasis is.
Going back to your earlier question about models, I'll just give a shout-out to la belle province, because what Quebec did after the Charbonneau commission, creating a unit of some 300 auditors and enforcement specialists to deal with the construction industry, is really a best practice, and it would be really nice to see that replicated in other provinces and so forth.
5:40 p.m.
Partner, Bennett Jones LLP, As an Individual
First of all, I completely agree with what Peter just said. Quebec is at the forefront of that aspect of it—enforcing white collar crime and creating resources.
On the issues involving blockchain or..., the cryptocurrency is the most potentially dangerous from that perspective—I agree with Peter—but it's just one of several things we focus on and are studying and looking at. This is one we need to pay attention to.
I become very frustrated when we spend so much time talking about beneficial ownership or lawyers: “Why shouldn't lawyers be reporting?” I see where Peter is coming from. Lawyers do play a role. They don't, however, generally handle the money. To focus attention on those kinds of things, public versus private registry, while the big issues are unaddressed....
Let's talk about beneficial ownership. That's fine. How are you going to deal with trusts? In a common law regime, trusts are created almost by just a handshake. I may hold the legal title. I'll declare that. There is, however, a trust relationship established by a course of dealing, implied by law. Trust is a unique.... Corporate lawyers, tax lawyers, and estate lawyers use trusts to structure certain kinds of things in very creative ways. That's not going to be caught by the traditional beneficial ownership.
The U.K.'s beneficial ownership is moving in that direction, but much of the leading work on beneficial ownership and much of the stuff that goes on at the Financial Action Task Force is actually driven by civil law jurisdictions that have no concept of trust. There are many issues out there that you guys should be dealing with that are far bigger in terms of their dollar impact on crime and on the economy.
5:45 p.m.
Liberal
Greg Fergus Liberal Hull—Aylmer, QC
Mr. Chair, Mr. German made reference to there being a number of things he could speak to that he has written on. I wonder whether he could submit that.
5:45 p.m.
Liberal
The Chair Liberal Wayne Easter
I picked up on that.
I think you said, Mr. German, that there's a menu of items. I apologize for not being here and for the disruptions with votes in the House. If you have further information that you would want to send by note to the clerk, it will get to us and we'll examine it.
With that, I would like to thank you both for answering members' questions. This is an important issue.
I hear you, Milos, that there are other issues we need to be looking at as well.
Thank you very much, gentlemen, for your evidence today.
We will suspend now and go in camera to deal with committee business.
[Proceedings continue in camera]