Finance Committee on May 9th, 2017

[Lisa Pezzack]

Yes.

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

Thank you, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

Thank you, Ms. O'Connell.

Monsieur Dusseault.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you once again for your presentation.

I'm mainly interested in the issue of ultimate recipients or, as you put it, “beneficial owners”. It mainly concerns the Canada Revenue Agency, which has an agreement with the Financial Transactions and Reports Analysis Centre of Canada, or FINTRAC, to provide information. I noticed the following problem. The agency collects a great deal of information from FINTRAC, particularly on transactions of $10,000 or more. The agency recently informed us that it did not follow up after receiving FINTRAC documents to determine whether the information received had been effective.

In the case that concerns us today, we realize that if, for example, you have information about the ultimate beneficiary or beneficial owner of an entity, of a corporation, you can't disclose it to the Canada Revenue Agency. That's the current problem, is it not?

[Lisa Pezzack]

In the current situation, if FINTRAC people have information, they can't disclose it to FINTRAC, the RCMP or anyone else who collects information.

What do we call disclosure?

[Maxime Beaupré, Chief, Financial Systems Division, Financial Sector Policy Branch, Department of Finance]

It's the disclosure of information obtained from those subject to interrogation.

[Lisa Pezzack]

They can't communicate information that they already have in their database.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

The amendment will allow FINTRAC to say that it has detected large suspicious transactions and even that, according to that information, the ultimate beneficiary is one in that country. Is that it?

[Lisa Pezzack]

Yes.

[The Chair, Liberal, Wayne Easter]

Thank you, both.

Mr. Ouellette.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

Thank you very much, Mr. Chair.

I want to delve a little bit more into the Department of National Defence and Canadian Forces. Under subclause 430(1), subsection 55.1 of the act, it states:

(e) the Department of National Defence and the Canadian Forces, if the Centre also has reasonable grounds to suspect that the information is relevant to such a threat as it relates to that Department or the Canadian Forces.

Who's actually going to determine if that's relevant? There's always this idea of mission creep. I'd be interested to know, at some point from the Department of National Defence or the Canadian Forces, who in that department is qualified in financial matters? How would they determine that it's a relevant threat to them, and what would they do with that information in the long term?

I'm a bit concerned that there's perhaps a bit of mission creep in that, because even in the RCMP, for instance, it sometimes has difficulties understanding all these things and working with all the other agencies.

[Lisa Pezzack]

It would be up to FINTRAC. It would have the information on hand, and it would then do its two tests: is there a threat, and do we believe from what we know that this would pose a threat to the security of Canada, and therefore that we should disclose the information? It's not going to be up to anybody at the Department of National Defence to be making any financial analysis.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

They could conceivably say to FINTRAC, “We would like this information, could you share it with us?”

[Lisa Pezzack]

No.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

Because I don't see anything preventing that. I see this as allowing that, but I don't see anything laying out the framework or criteria to ensure that information is protected.

[Maxime Beaupré]

There are many provisions in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act that protect information that's in the custody of FINTRAC. One of those provisions that reinforces the separation between FINTRAC as an arm's-length agency and law enforcement as disclosure recipients, for example, is the fact that FINTRAC controls the information. We have legislated thresholds in the act that allow FINTRAC to disclose. As Lisa was indicating, FINTRAC is the one that applies those legislative tests to determine whether information under its custody can be disclosed to a recipient. It is not up to the recipients to make that test.

Furthermore, under the act, it is not possible to request information from FINTRAC, but it is possible for disclosure recipients to submit voluntary information records. This is how FINTRAC can help investigations when law enforcement agencies are, for example, interested in a case, and they have grounds to suspect that the target is involved in money laundering or terrorist financing. They can submit records to FINTRAC, but then FINTRAC makes its own analysis, and if it meets threshold that are legislated, there will be a disclosure.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

We'll look at it from the opposite side, then.

If you're in National Defence and you have to wait for some other agency to tell you there might be a threat to your national security, and you can't ask for that information because you don't really know anything about that, and FINTRAC's not really aware if it perhaps might be a national security threat, how do you then ensure there's a coordination between these two entities? Have we set up a way for National Defence to interact in some way with FINTRAC?

[Maxime Beaupré]

There are mechanisms in place, from an administrative point of view, to govern the exchange of information, but, as I say, it's mostly one way.

If FINTRAC wanted to meet its threshold, it's going to be able to disclose to the recipients. At the same time, FINTRAC maintains ongoing discussions in a calibrated manner with disclosure recipients to better understand the environment they're operating in and understand the priorities. Therefore, when it comes across information that is relevant to them as part of its analytical work, it is able to make that judgment call.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

I'm just going to another thing in the act here. I'm sorry to waste everyone's time. I hope I'm not boring anyone.

I've noticed there are quite a number of mentions of the “issue”, or the sale of “money orders”, or “redeem them from the public”. This is to ensure, for instance, that monies aren't transferred illegally or to finance terrorist operations.

Let's say we have the Canadian Forces in operations in some country, perhaps Africa, and someone has an unregulated corporation under a provincial jurisdiction and they're doing money transfers. How does FINTRAC ensure that National Defence is aware that monies might be flowing into the zone of operations where they're operating, so they're aware that maybe arms are being purchased that could be used against Canadians?

[Lisa Pezzack]

Well—

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

I know it's outside of the finance thing, but the reason I'm asking is that because we're about to pass this legislation, I'd like to see how these moving parts are going to work together.

[Lisa Pezzack]

As a general rule, any financial transaction, any electronic fund transfer out of the country, that is over $10,000 would have to be reported to FINTRAC.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

We always do $9,000.

[Lisa Pezzack]

You could do that.

Now if you have a series of transactions, any sort of money remittance, business doesn't have to wait until the $10,000 threshold is met. They could say, wow, there are a lot of transactions going to that little town and I know that's a bit of a war zone, so that doesn't look right. They can then say, to me, that is a suspicious transaction and I need to report that. Just because we have the $10,000 threshold doesn't mean that they're not reporting you.

They would put that information together, send it to FINTRAC, and say, “There are some of these little things going to this little town and you might want to look into that.” FINTRAC has that ability, and it also has the ability to disclose information to its national security partners as well.

If it felt that there were an issue—it knew the Canadian Armed Forces were there and that the money was going into this region and that it would look suspicious—in the eyes of the money transmittal business, or whoever would be sending the money, they would be then in a position to share that information, if it met the two tests.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

Now I'd like to take one final—