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.
5:20 p.m.
Conservative
The Acting Chair Conservative Dan Albas
Yes, very briefly. If you can do it in a minute, I would appreciate it.
5:20 p.m.
President, International Centre for Criminal Law Reform, University of British Columbia, As an Individual
First, with regard to beneficial ownership, I would make it a rhetorical question. Why should people not want to disclose the true ownership of a corporation? Why hide that in terms of normal commercial dealing?
In terms of lawyers, I would just very quickly point out that the problem is not so much the regulation lawyers; it's the fact of the intelligence. They are gatekeepers in so many different types of businesses, and FINTRAC does not get their information. It's a component that's missing.
I get it with regard to solicitor-client privilege. I'm a lawyer. I understand that. Take B.C. for example, and the notaries who deal with most residential matters, with real estate. They in fact have to report to FINTRAC, so the intel is coming in from notaries, but it's not coming in from lawyers.
The Law Society of B.C. has very strong regulations. I'll agree on that, but lawyers are pivotal in terms of so much of our economy. So much goes through them that it's a bit of a missing link. I don't have an answer for it. I thought I'd just throw that in.
5:25 p.m.
Conservative
5:25 p.m.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
I'm going to pick up on some similar themes.
Mr. German, I was pleased to hear you say it, get it into the record, and validate what I've long heard on this topic: the absence of investigation. I wasn't aware of the absence, the specific gap, in RCMP policy that you spoke of. I'm going to ask you to address that a little further and address how the lack of resources impacts the ability to have a functioning anti-money laundering regime.
5:25 p.m.
President, International Centre for Criminal Law Reform, University of British Columbia, As an Individual
Thank you.
I'd like to quote something from the consultation paper itself, which actually is quite telling. The consultation paper on page 34 says that “Canada seldom requests or obtains international assistance in relation to Canadian investigations and prosecutions of money laundering and terrorist financing.”
Why?
Virtually all organized crime cases are across borders. Money laundering moves across borders. Why is Canada not making requests? Canada is not making requests because there are police officers investigating these things who make requests, right?
5:25 p.m.
President, International Centre for Criminal Law Reform, University of British Columbia, As an Individual
It's great to say that the framework is not good enough or that MLATs are difficult and so forth, but the Americans are using MLATs. The Brits are using MLATs. They're coming in here and we're responding to theirs. Again, I hope that's changing. The bottom line is that if we don't have specialists investigating it, people that are trained in this work, and you're organized crime, you're saying, “What are we worried about?”
May 30th, 2018 / 5:25 p.m.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
I wanted to get that strongly on the record. Thank you for that.
Mr. Barutciski, you said something that really caught my attention and resonated with my own experience in industry. You talked about checklist compliance. It immediately struck me that this is the approach that actually makes it easy for a criminal to game the system—by understanding how checklist compliance works—but creates difficulties and confusion, perhaps, for industry practitioners with regard to really understanding what their role is. If you're just ticking boxes, it really takes more of an intangible nose to sense a rotten transaction.
Real estate and mortgages are where my experience is. I was told, in my time, that perhaps as much as 60% of all of the proceeds of all of the crime in Canada is laundered through real estate transactions. I'll let you comment on any of that.
5:25 p.m.
Partner, Bennett Jones LLP, As an Individual
The issue of checklist compliance isn't limited to this area. We see it in all fields. You have to take it from the standpoint of why a company wants to comply.
We have the fundamental reason and the tone from the top: you don't want your people being crooked because that jeopardizes the business. But human nature being what it is, with people having personal incentives to juice the revenue for this quarter so that they can get the bonus for it or whatever, stuff happens, so the tone from the top is important.
The other thing that motivates companies is exposure to liability. When you have a complex regulatory scheme, like the one we have under the PCMLTFA...and I can point to other schemes that are similar. We've had the same thing happen with the securities law, by the way. The Securities Act, which was supposed to be blue sky legislation to allow investors to understand what there is, is now a quagmire of lack of transparency. But that's the whole point.
Companies invest enormously in mitigating liability. If you're an FI, a bank, a trust company, or an insurance company, and you can get amped because you didn't follow the right process, didn't report the right thing in a timely manner, this, that, and the other, you sit there and you establish systems that mitigate that risk. But that essentially means spending scarce compliance resources on the checklist to comply with the massive regime rather than preventing the harm that the regime is intended to mitigate. You're actually diverting resources away from true compliance.
Get me right. I am not against what FINTRAC does, and I am supportive of what the legislation does. FINTRAC does a certain job. The problem is the disconnect Peter was talking about between the regulatory regime and the enforcement—
5:30 p.m.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
That's great. Thank you.
I have just a moment left.
Where does real estate sit in this? Does anybody have any accurate or meaningful stats on how money is laundered in Canada?
5:30 p.m.
Partner, Bennett Jones LLP, As an Individual
You asked a question about beneficial ownership. I actually do believe that beneficial ownership should be reported.
Where I part company with some of the advocates is on public reporting. I just don't see it, and this isn't the place for me to get into a length discussion of why I think a public registry makes sense. In terms of a confidential registry that can be accessed by government and by law enforcement, I'm completely aligned with Peter. Why would you not want to report?
5:30 p.m.
President, International Centre for Criminal Law Reform, University of British Columbia, As an Individual
The problem with real estate is that it's not a level playing field right now. There are certain aspects of real estate that are regulated. There are other aspects that aren't regulated. That's covered in the consultation paper. You have to have a level playing field where either everybody is regulated or nobody is. Hopefully, everybody is regulated.
Then, of course, you also have to make sure that people are reporting—there have been all sorts of reports that this is not happening in the real estate industry—and that someone is, again, doing the enforcement side of things.
5:30 p.m.
Partner, Bennett Jones LLP, As an Individual
My answer to your question was that beneficial ownership was what will ultimately help clean up the problems in real estate.
5:30 p.m.
NDP
Brian Masse NDP Windsor West, ON
Thank you, Mr. Chair.
Thank you, gentlemen. It's been a circus here, and I appreciate your patience.
I've had a high degree of interest in this, having come through a bill I championed, which was recently defeated, on single-event sports wagering. The United States has moved ahead with this in a 6-2 decision and will now, basically, be a bastion for organized crime related to sports betting and also a flag-bearer for nefarious offshore operations that will receive Canadians participating in their operations.
One of the things that is clear about some of the work we did on Bill C-25, with regard to beneficial ownership, is that Canada is considered a laggard in terms of its international reputation for dealing with beneficial ownership. I do want to say, though, for the record, that in terms of public and private disclosure, it's interesting that you can, with that corporate number, ask for the public to subsidize you for everything from your entertainment business expenses to writeoffs, a series of different things, but you don't actually have to disclose ownership of it. You get all the benefits of the public subsidy, being tax deductions, but you don't have to actually disclose what it is that you are....
I would like your comments. What would be the criminal reasons for not wanting to actually provide that public identity?
5:30 p.m.
President, International Centre for Criminal Law Reform, University of British Columbia, As an Individual
I differ with Milos on this one. I see no reason why you wouldn't want a public registry. What is there to hide?
If you're getting into shareholdings, there may be a certain threshold level, but in terms of boards of directors and the actual beneficial owners of companies, why wouldn't that be public?
5:30 p.m.
NDP
Brian Masse NDP Windsor West, ON
I guess you could obviously be withholding criminal intent if you don't want to do it. I mean, it doesn't make those who are not doing it for that particular exclusive reason.... The reality at the end of the day is that there is something potentially to hide.
5:30 p.m.
President, International Centre for Criminal Law Reform, University of British Columbia, As an Individual
There's an international movement towards disclosing beneficial ownership. It's coming: United Kingdom, Germany. I's just a matter of time. Now, to what extent remains to be seen. We do have the federal-provincial divide, but of course we know that governments have been talking about this.
5:30 p.m.
NDP
Brian Masse NDP Windsor West, ON
You've agreed to a private...so maybe distinguish the difference, and then—
5:30 p.m.
Partner, Bennett Jones LLP, As an Individual
It's not private. I talk about beneficial ownership being disclosed a bit like you disclose information to CRA or any number of government regulators. It's confidential business information.
Let me give you a simple one. If I have a mining and oil and gas company, I'm spending hundreds of millions of dollars or billions of dollars to find where those resources are. If I'm going to signal to my competitors that I'm looking in...I don't know. I think you're an MP for Windsor, so maybe you don't want an open pit mining operation in Windsor.
5:30 p.m.
NDP
Brian Masse NDP Windsor West, ON
We already have salt mining. It's one of the largest mines in Canada.
5:30 p.m.
Partner, Bennett Jones LLP, As an Individual
If I'm going to signal to my competitors that there might be the technology and know-how that I've invested to find the resources, that I'm staking out property in a location because I've registered a claim, which is property under this corporate, etc., I'm hurting both myself and the economy. Reporting it to the government so it's available to law enforcement is an entirely different thing.
I'm just giving you that example. I could go on for hours; you don't want me to.
5:35 p.m.
NDP
Brian Masse NDP Windsor West, ON
I've been through this and you're welcome to go on for hours, but the committee won't allow you.
It is a fine example. That's one, and there are other ways for corporations that have that intent to quite easily find that information about their competitors. They do that on a regular basis.
My point is, if you're asking for public taxpayers to fund and write off everything from a golf game to research and development or something else, there's probably a dual responsibility, in the context of having disclosure, to prevent organized crime and other nefarious activities that the public subsidizes through paying for police forces and agencies.
5:35 p.m.
Partner, Bennett Jones LLP, As an Individual
Mr. Masse, all of us, everyone in this room, claim all kinds of exemptions in our income tax filings. It's up to the government, essentially CRA, to review our claims and decide whether those exemptions, those provisions, are legitimately done. This is no different.
5:35 p.m.
NDP
Brian Masse NDP Windsor West, ON
That's done through our regular tax filings. What you're asking for I guess is a blanket.... It's different from what the rest of the world is moving toward.
When you look at the European Union, at Australia, at other jurisdictions, they've been pulling the veil back on some of these things because the damage is far greater.