Finance Committee on Feb. 8th, 2024

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

I just want to return to Mr. Cooper's report for a second.

Under the proceeds of crime legislation, banks, as reporting entities, are required to report suspicious transactions. The whistle-blower in Mr. Cooper's report went to great lengths to let more senior people at HSBC know of his concerns regarding fraudulent mortgage transactions.

Do you know if, as a reporting entity, HSBC reported those suspicious transactions?

[Julien Brazeau]

I don't. That would be a question that FINTRAC could answer more specifically.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Would you mind following up with them about that, checking with your colleagues and providing that information to the committee?

[Julien Brazeau]

Sure.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Those are all my questions, actually.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Morantz.

Now we'll go to MP Dzerowicz.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much, Mr. Chair.

I am going back to you, Ms. Hunt, and the last question I left you with, which was a bit unfair, to be honest. I gave you all of two seconds to respond to a very huge question, which was speaking to some of the ongoing enforcement issues of the AML regime.

I'm sure you can go through a lot. I know you split this into different buckets, which I fully understand. If there is something you want to highlight in each of those areas that you think we need to be aware of or need to be focused on, that would be helpful.

I'll also give you a part two. What I am hearing is that there is quite a bit of responsibility and some unique powers at the provincial level. I wonder whether there are some issues there as well when we're trying to look at enforcement issues.

I am wondering if you could take a couple of minutes to address that.

[Erin Hunt]

That's an excellent question. Yes, I started on that before, but it is a complicated question.

I think one of the fundamental challenges with financial crimes is that they are extremely complicated issues. They require a dedicated set of experts who have really detailed knowledge in very challenging areas of financial cryptocurrency, financial markets and how the transactions work. That expertise is really important to develop across the country.

In Canada, one of our strengths is our federation. It also means that there are a lot of players involved in this space at the federal, provincial and municipal levels. Ensuring that our system is effective in this space is a continual challenge, one where the committee's work on recommendations and how we can improve effective enforcement is certainly of benefit.

One of the areas we highlighted in Julien's opening remarks was the use of financial intelligence. This is obviously a really important way to detect...and where to begin investigations. In that area, we can continue to look at ways we may be able to improve that. Charlene has spoken to how we're looking to expand the disclosure recipients as a means to leverage that: Is there more we can do?

On the prosecution side, I think this is an area in Canada where we recognize the importance of the independence of the prosecution services. One process the RCMP has is IMLITs, or integrated money laundering investigative teams. They often include prosecutorial expertise to ensure they are effective and efficient.

The other area was taking or restraining the product of proceeds of crime. In this area, at the federal level it's criminal forfeiture, but at the provincial level there's also an opportunity to explore whether civilian forfeiture is something we may be able to pursue to look at the effectiveness of Canada's regime.

[Julie Dzerowicz, Liberal, Davenport, ON]

I appreciate that. That's very helpful.

Again, I'm asking these questions with the objective of trying to get to how we can do this better. How complementary are the federal and provincial regimes, from your perspective? Is there something you can recommend that would make it more complementary and more effective?

[Julien Brazeau]

Based on the Constitution, there is a division of powers. The regimes are complementary in some regards, but at the same time, provinces have oversight of some aspects of the regime that the federal government does not.

I think I've spoken to work at the working level, from our perspective, with federal and provincial territorial partners. I think a dedicated forum for those discussions and the ability to have conversations, whether they be among ministers of justice or public safety, on a more regular basis around how these issues are evolving and how they're considering these issues would certainly be beneficial.

Again, I think that's an interesting area for the committee to look at. We'd certainly welcome the recommendations.

[Julie Dzerowicz, Liberal, Davenport, ON]

I think those are all my questions right now.

Thank you so much.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Dzerowicz.

It's over to you, MP Chambers.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much, Mr. Chair.

You started off by saying how many agencies are involved that touch money laundering, or a portion of it. I'm wondering who in the federal government goes to bed at night and wakes up every morning and the only thing they think about is money laundering. Who is the owner?

[Julien Brazeau]

Finance has the overall lead for the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. That being said, we don't have a line of sight on the criminals and what they're doing. That would be police services and our intelligence partners. They live more of the criminality aspect. We live the policy side.

[Adam Chambers, Conservative, Simcoe North, ON]

Just for my own clarification, you're the assistant deputy minister of financial sector policy. In addition to money laundering activities, it's very wide. You're doing open banking. You're doing the widely held rule. You're doing OSFI. Is that right?

[Julien Brazeau]

Yes.

[Adam Chambers, Conservative, Simcoe North, ON]

Okay.

Who goes around to the other departments, knocks on the door and says, “Hey, there's an issue with money laundering”? Who does that? Would you say that Finance has the lead?

[Julien Brazeau]

Yes, Finance does have the lead, and we have an internal governance structure, which is probably bureaucratic in nature. At the DG, ADM and DM levels, there are regular touchpoints specifically on AML.

[Adam Chambers, Conservative, Simcoe North, ON]

That's perfect.

You know what a net worth assessment by the CRA is. The number of net worth assessments completed by the CRA has dropped over 54% within the last five or six years. They used to do about 13,000 to 14,000 net worth assessments a year, but now, in 2023, up until December they were at only 400 and something.

Have we spoken to our friends at the CRA to ask what's happening there?

[Julien Brazeau]

I can't speak to the issue of net worth assessments specifically, but the CRA is part of the group of entities and agencies that discuss certain issues around money laundering.

[Adam Chambers, Conservative, Simcoe North, ON]

They also receive actionable intelligence from FINTRAC, I believe. The number of net worth assessments that have been completed based on actionable intelligence has also dropped proportionally the same.

I suspect that the number of actionable intelligence reports sent to the CRA hasn't dropped, but I would be very interested to know how many actionable intelligence reports had been sent to CRA over the same time period. Currently, we have a number for net worth assessments that have been completed, and it shows a significant drop. I would be very interested to know if you could help us on that. Is it that the actionable intelligence has dropped or are they reshuffling resources within the CRA? I have a suspicion about what the answer is, but if we have data to support that, I think it would be very helpful.

[Julien Brazeau]

We can certainly take back the question on the number of disclosures.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much.

In terms of catching and convicting, in the United States it's illegal to lie to the police. They have a RICO statute and laws. For wire fraud, it's 20 years in jail. You can also be charged with perjury for making a mistake in statutory declarations. As long as the piece of paper says, “You'll be charged with perjury if you lie on this paper”, it's 15 years in jail.

Canada has no similar serious criminal penalties. Do you think that's an area where we should be pushing?

[Julien Brazeau]

I think that's certainly an area where we'd appreciate the committee's input.

[Some hon. members]

Oh, oh!