Evidence of meeting #86 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was health.
A video is available from Parliament.
Director, Financial Systems Division, Financial Sector Policy Branch, Department of Finance
On the day-to-day supervision of financial institutions, the questions are really better targeted to the superintendent, but of course he has ongoing.... As I think he has said publicly, he is monitoring the situation very closely.
Liberal
The Chair Liberal Wayne Easter
We're not really on that question anyway in Bill C-44, so I could have ruled it out of order.
Mr. Dusseault.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
Thank you, Mr. Chair.
I would also like to thank the witnesses for being here today.
I'm going to focus a little more on clauses 109 and 110 of the bill, which amend section 11 of the Canada Deposit Insurance Corporation Act.
Someone said that the board will need to develop and maintain resolution plans for systematically important banks. Clause 109(2.01) states that resolution plans must be approved by the minister. In fact, that part states:
“specifying that a by-law made under paragraph (2)(e) is not effective unless it has been approved in writing by the Minister.”
Could you explain why you decided to add that provisions, which requires ministerial approval for resolution plans?
Director, Financial Systems Division, Financial Sector Policy Branch, Department of Finance
I guess, first and foremost, the Minister of Finance is responsible for financial sector stability, so his overall responsibility for that would include making sure that, should one of the domestic systemically important banks, or D-SIBs, as we say, gets in trouble, they have a plan to fix themselves.
Do you want to talk about the process?
Justin Brown Chief, Financial Sector Policy Branch, Department of Finance
I would also say that the provision is consistent with other practices for creating CDIC regulations.
The process begins with the CDIC board, usually with the exception of regulations or internal procedures. Generally speaking, when the practices apply to Canadian industry, financial institutions or a governance issue, the standard is to get the approval of the Minister of Finance. It's about imposing demands, a burden, on the Canadian industry. It is therefore appropriate to refer the matter to the minister.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
Could it slow down the process? I assume that it is sometimes necessary to react quickly in these situations. If a systemically important bank facing significant financial problems is also involved, shouldn't the processes also be swift and efficient so that the plan can be put in place quickly and implemented by the bank?
Chief, Financial Sector Policy Branch, Department of Finance
It is a question of approving the requirements, plus the process of presenting the plans. This is done in advance. It's not a question of implementing the plans themselves. I don't think there would be a significant delay in a situation or a financial crisis. We are planning rather than making decisions on the spot.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
If I understand the process well, if a systemically important bank is in a situation defined by the superintendent of financial institutions, that's when the board of directors will request resolution plans. Is that it?
Director, Financial Systems Division, Financial Sector Policy Branch, Department of Finance
No, the board has already, in fact, started working with the institutions on an informal basis without the legislative push to get them there. They are already, in fact, working on developing plans to put in place, to make sure they would be in a position to resolve themselves should it ever be necessary to do so.
Conservative
Ron Liepert Conservative Calgary Signal Hill, AB
I have a brief question, and I don't know if you're in a position to answer it, but I see that the Bank Act is mentioned in here. Can you give us any status update on your review of the Bank Act that's under way?
If that's not in order, Mr. Chair, I leave it up to you.
Director, Financial Systems Division, Financial Sector Policy Branch, Department of Finance
The Bank Act review is ongoing. We've had a first round of consultations, and we've got some input. They're in the process of considering that input and developing the next steps at this point.
Director, Financial Systems Division, Financial Sector Policy Branch, Department of Finance
The budget last year amended the deadline date for the Bank Act renewal to be March 2019, so clearly there's a deadline.
Liberal
The Chair Liberal Wayne Easter
Thank you very much. I thank members for their questions.
I'm wondering, Ms. Pezzack, if it's okay with the committee, if we jump to division 19. Ms. Pezzack is on division 19 as well, the proceeds of crime. If we can jump there, she doesn't have to stay and wander all afternoon.
Maxime Beaupré is here as well. Maxime is the chief, financial systems division, financial sector policy branch, and we are dealing with part 4, division 19, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
The floor is yours, whoever is starting.
Director, Financial Systems Division, Financial Sector Policy Branch, Department of Finance
First of all, thank you very much, Mr. Chair, and members of the committee for adjusting your schedule.
The Proceeds of Crime (Money Laundering) and Terrorist Financing Act would be amended by division 19 to do the following:
...expand the list of disclosure recipients to include the Department of National Defence and the Canadian Armed Forces, and to include beneficial ownership information as “designated information” that can be disclosed by the Financial Transactions and Reports Analysis Centre of Canada.
Furthermore, it makes several technical amendments to ensure that the legislation functions as intended and to clarify certain provisions, including the definition of “client” and the application of the trust of the act to all trust companies.
The Government of Canada is committed to combatting money laundering and terrorist financing, and while we maintain a robust and comprehensive anti-money laundering, anti-terrorist financing framework, it must evolve to ensure the integrity of the financial system and the security of Canada and Canadians.
Including the Department of National Defence and the Canadian Armed Forces on the list of disclosure recipients would allow FINTRAC to relay information as it relates to the threats to the security of Canada. We would define threats to the security of Canada as defined in the CSIS Act, so it's quite a clear definition there.
It would allow for FINTRAC to disclose information that it has on beneficial ownership. Sometimes reporting entities provide this information to FINTRAC. They are not currently allowed to provide that information to competent authorities, and this would allow them to do it.
There are a variety of technical changes that would strengthen the framework, support compliance, and improve the ability of reporting entities to operationalize the act and ensure that it functions as intended. Some would relate to clarifying and streamlining regulatory authority, clarifying that all trusts are covered.
It would ensure that MSBs that are subject to the United Nations and Special Economic Measures Act sanctions cannot re-register as an MSB with FINTRAC.
There are some technical changes to correct English and French and to clarify some of the concordance.
Thank you.
Liberal
Liberal
Jennifer O'Connell Liberal Pickering—Uxbridge, ON
Thank you, Mr. Chair.
Thank you for being here.
I'm curious, and perhaps this is really technical on the process of how it would actually work. How would FINTRAC determine any irregular occurrence, and then how often are they sharing that information? Or is the case that as soon as something irregular pops up it is shared immediately? What is that communication between FINTRAC and National Defence or the Canadian Armed Forces?
Director, Financial Systems Division, Financial Sector Policy Branch, Department of Finance
Usually when they come to the conclusion that there is an issue related to the security of Canada, it would be as a result of doing some analysis. It would probably not necessarily be from a single source of information coming to them, but maybe from their ability to put together various sources of information and say there would be an issue here. Then they would have to look at whether or not it meets two tests.
In the first instance, they have to say that there are reasonable grounds to suspect the information would be relevant to threats of Canada as defined under the CSIS Act.
Secondly, they would also have to have reasonable grounds to suspect that the information would relate to threats to the Department of National Defence or the Canadian Armed Forces.
Liberal
Jennifer O'Connell Liberal Pickering—Uxbridge, ON
Thank you.
Following up on that, how would FINTRAC determine an unregulated trust if it were set up in a province or territory? Or do you have agreements with provinces and territories to also report anything irregular, or what might be a concern?
Director, Financial Systems Division, Financial Sector Policy Branch, Department of Finance
Most trusts right now are registering as reporting entities. The legislation stipulates that regulated trusts must register. This would allow for trusts that are not currently regulated, most of which I think we've identified, to be able to be told, no, you're included now. It's not just regulated trusts; it's all trusts.
Liberal
Jennifer O'Connell Liberal Pickering—Uxbridge, ON
Is that how you would capture it, by essentially establishing that all of these trusts would now have to go through that federal process?