Evidence of meeting #163 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 video is available from Parliament.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
Another topic came up more than once in our discussions with the witnesses. It seems that the matter of real estate values in at-risk areas is not mentioned in the discussion paper you published in February 2018. Witnesses told us that Canada is perhaps an at-risk area, but that it had not been mentioned by the Department of Finance or in the testimony.
Perhaps you would like to adjust your position and specify that money laundering may pose some danger for real estate values.
Liberal
Bill Morneau Liberal Toronto Centre, ON
Your report is very important for us. It will allow us to understand the challenges we are facing and the way things are done in other countries, as well as the risks for the future. In our opinion, it is important for us to consider it.
Liberal
The Chair Liberal Wayne Easter
Thank you very much to both of you. We did hear a lot on securities when we were on our travels, so I expect there likely will be something on that.
Go ahead, Mr. Sorbara.
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
Thank you, Mr. Chair.
Welcome this afternoon, Minister.
We've probably heard from over a hundred witnesses here on this study that we've been doing, and a number of agencies have come in. I have to say that on our travels to New York and Toronto, and for those who travelled to London, the feedback was definitely.... Listening to and hearing from the agencies outside of our wonderful country and the granularity that they provided was a really positive thing for us. The information, the granularity, that was provided was very welcome, whether it was FinCEN, the Department of Justice, the Treasury, or the New York State Office of the Attorney General, and I think it will make our report even better. I sometimes wish we received that sort of granularity from our own agencies, but nonetheless we have heard from a lot of people.
The one question I have has to do with the article that came out in The Hill Times: “Feds float idea of beneficial ownership registry as House Finance Committee reviews anti-money laundering law”. Part of that article stated that Canada was viewed as “behind on corporate transparency”.
Through your leadership in sitting down with the provinces in December 2017, we came to an agreement to strengthen beneficial ownership transparency. Minister, my question is this: how are we doing in Canada, and what measures are we undertaking to take the veil off the view that Canada is behind on corporate transparency?
Liberal
Bill Morneau Liberal Toronto Centre, ON
I think we should start by acknowledging that our structure for corporate registrations in Canada presents particular challenges. The fact that we have registration both provincially and federally and that we have those registrations across the country means that we have an important challenge that we need to overcome. It would certainly, all else being equal, be easier if we had one approach to registration, but that's not the reality that we face.
As we contend with people's assertions—and I didn't see the article that you were referring to—that we're not doing as much as we should, we need to recognize that there's more to be done here. We do need to get this information, and it's the only way for us to deal with some of these challenges. That is exactly why we've been focused on this from the beginning.
I will say that the provinces have not been reluctant. We have 10 provinces and three territories, and it's not always easy to get agreement on everything, but we've had agreement on this issue. Provinces differ in their ability to be speedy in doing their work, so it can't always happen quite as quickly as we might like. We're going to stay on top of it. Our view is that getting the information and making sure that the information is accessible to the appropriate authorities at the time they need it is critically important. We've made progress. We're not there yet, but we're going to keep on it.
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
The issue of beneficial ownership obviously came up a number of times within the study. It's also an issue in the United States. They're having to deal with it. They have the same issue that we have.
For example, someone can buy a condo in New York City for a hundred million dollars, but no one knows who the condo purchaser is or where the funds were received from. You can use the example here in Canada of peut-être someone buying a house in West Vancouver or in Toronto, paying several million dollars for it, putting it in a corporation or a trust, and you will never know who the purchaser is or where the funds were received from. I think the December agreement is a big first step in getting to some sort of registry. You can quibble on the details on whether it should be public-private and so forth.
With regard to the December agreement, in point 3 there was a date of July 1, 2019, by which these legislative amendments to a number of statutes on beneficial ownership transparency would come into force. Is there any sort of update on point 3 in the December agreement?
Associate Assistant Deputy Minister, Financial Sector Policy Branch, Department of Finance
The work with provincial and territorial partners is very much on track. We've worked through the technical details and done targeted consultations, and we'll bring it to ministers next week at your meeting.
Erin O'Toole Durham, CPC
Thank you, Mr. Chair.
Thank you, Minister. It's nice to see you at the committee.
My question is going to relate to the “No Money for Terror” conference. I guess you were there, alongside most of the other G7 and G20 finance ministers.
Were you a signatory to the joint declaration that came out of the conference?
Liberal
Bill Morneau Liberal Toronto Centre, ON
To my recollection, no signed document came out of that conference.
Durham, CPC
It was a joint statement. I might be overstating it.
The reason I ask is that the first element coming out of that conference was a priority, and I'll read it to you:
(1) Further reinforcing the domestic legal and operational frameworks to collect, analyse and share information by national authorities
This week Bill C-59 passed and actually took away that information-sharing ability for relevant national security information with changes to the Security of Canada Information Sharing Act, so we don't seem to be meeting the lofty goals of the conference in terms of terror financing.
Liberal
Bill Morneau Liberal Toronto Centre, ON
We will continue to work to ensure that we get the information required for the work we're trying to achieve. I can tell you that it will be a continuing focus of our government. We see that there are some very important steps that need to be taken right now.
Appropriately, we've been talking about beneficial ownership, which is an aspect that we think is critically important and, as was pointed out, is quite murky.
Durham, CPC
I'm not asking about that, Minister.
We're looking at a situation that we heard about in London. Banks and financial institutions share information among themselves and, through JMLIT, the Joint Money Laundering Intelligence Taskforce and other sources, share it with the public sector. In Canada we're actually taking away the ability for public authorities to share this same information when it comes to terror financing and money laundering. Why would we trust the financial institutions to share among themselves, and not trust departments of the federal government?
You're aware that the Canadian banks are asking for this information-sharing ability in Canada.
Durham, CPC
We've heard that our partners, the other countries that were at the French “No Money for Terror” conference, are enhancing their information sharing among government departments. Bill C-59, which passed this week, detracts from relevant information sharing. Why are we going in an opposite direction to our allies and partners in the G20?
Liberal
Bill Morneau Liberal Toronto Centre, ON
As I'm sure you can appreciate, all the countries that were in that meeting have different approaches to ensuring that we have appropriate data flow in our countries.
In our country, we think that FINTRAC is an important institution that allows for the passage of information from our financial institutions to the federal government. We will always seek to balance the important safeguards around Canadians' privacy with the importance of getting this information. That will be a continuing focus.
Durham, CPC
Let's leave aside FINTRAC, because one of the things security experts say is that siloing of information often leads to money laundering or terror financing. We see information sharing in the global community and, potentially from this hearing, financial information sharing between institutions, but we don't seem to trust the agencies of our own government.
Is there some reason you removed that ability in Bill C-59?
Liberal
Bill Morneau Liberal Toronto Centre, ON
As I've said, we believe the approach we've taken is one that allows us to get the information. It allows us to also ensure that we protect Canadians' privacy. It's always going to be a fine balance.
Durham, CPC
In your introduction you used very fiery language, and Greg quoted it. You said we should marshal every tool at our disposal.
You're actually taking away a tool that agencies within the federal government needed to use to stop terrorism financing. How is it marshalling tools if you are taking tools away?
Liberal
Bill Morneau Liberal Toronto Centre, ON
We'll be happy to get the committee's recommendations and ideas on how we can at the same time consider how we combat money laundering and terrorist financing while protecting Canadians' financial information.
The approach we're going to take, which I think all of us as parliamentarians appreciate, is to balance those two important issues.
Liberal
Jennifer O'Connell Liberal Pickering—Uxbridge, ON
Thank you, Mr. Chair.
Thank you, Minister, for being here.
Following up on Mr. O'Toole's point, we heard the opposite point being made by our own officials, that funding for this level of departmental investigation was cut under the previous government and is only now being restored with new funding. I find the sudden concern over siloing quite interesting, when the previous government specifically cut the department that led to these types of investigations. That's in testimony that I'm sure will be included in the report. I'm sure a recommendation will be coming that will talk about the reinvestment after the previous government's lack of commitment to dealing with money laundering and anti-terrorism financing.
I don't have specific questions on some of the things we've heard, because this committee still has work to do in formulating our recommendations, but one of the areas we heard about that was of some concern to me—and it was brought up by Mr. Fergus earlier—was information sharing among banks or the information of FINTRAC and the flow-through process. In the U.S., FinCEN seemed to have a very interesting program that any law enforcement agencies or prosecutors could access in certain states. One of the benefits was there seemed to be a real sense of value in that information.
My concern in some of the information sharing among banks is that banks aren't technically allowed to do that right now, but the enforcement side is a very small community and they're sharing that information informally among colleagues anyway. The worry that I have—and I think we have to have this conversation—is banks taking the approach of de-risking. They're so afraid of regulation or penalties that they would rather maybe de-risk or de-bank some clients among themselves.
In this country, do we need to have that conversation around people being entitled to a bank account. Banks, being so afraid of penalty, de-bank someone, and a Canadian who has done nothing wrong now has no access to a bank account. Quality reporting from banks is an area where we need to do some thinking. Yes, they should be afraid of penalties, but not so afraid they just get people out of the system who have never done anything wrong. Among themselves, through informal channels, they are deciding it's not worth the risk, and they de-bank some individuals.
I don't know if this is a discussion you've had, but it's an area where I think we need to do some serious thinking. Do you have any initial thoughts, or not? I can go to another area as well.
Liberal
Bill Morneau Liberal Toronto Centre, ON
I think you point out an issue that we'll be happy to hear about from the committee. Obviously if we are focusing on getting information and curbing bad behaviour, there are consequences. I think we need to carefully consider our objectives and the consequences.
Liberal
Jennifer O'Connell Liberal Pickering—Uxbridge, ON
Thank you.
In regard to Canada's international reputation, we did hear a different level of discourse from witnesses here, from our own agency officials, which is interesting. There's no question that our officials are doing a good job and our systems are working, but I think the issue of money laundering and terrorism financing has certainly changed, which you pointed out, and there is a lot of work to be done. I worry that Canada's reputation as a good place to launder money might be growing. We're seeing correlations—and this is what we heard from testimony—that the human traffickers and then the drug runners come where the money launderers are. The money launderers don't care who they're laundering for, and that seems to be the client base.
From this committee's perspective on the changes and the investments to move our system to where a lot of other countries are, is that commitment in your department as well as Public Safety? That's what we certainly saw in the U.S. and the U.K. It's a joint program between their equivalents of the Department of Finance and Public Safety. Have you given any thought to maybe bringing them into the fold, not just on a committee discussion basis, but as overseers of the policy formation process for any reviews moving forward?
Liberal
Bill Morneau Liberal Toronto Centre, ON
We do think that working together with different areas of government is critically important in this area. We already have the Department of Public Safety engaged in our efforts on how we can make sure that we're getting the appropriate information.
We're not moving forward just in the area that you're talking about here. We're also recognizing that some of the other key areas of risk—cybersecurity being a very obvious one that relates to this issue because of how information can flow—are critically important, and that's demonstrated through the kind of funding we put towards that this year, funding that was very well received by the banking community. It's something that we've been looking at together with the banking community over the last number of years.