Finance Committee on Feb. 8th, 2024

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

Thank you, Mr. Chair.

Mr. Brazeau, on Tuesday, there was a rather explosive report published by Sam Cooper at The Bureau. Because you're nodding your head, I think you're probably aware of this report.

The report outlines very serious allegations of mortgage fraud at HSBC, which led to a commensurate campaign of money laundering. Essentially, the allegations are that mortgage applicants would apply for mortgages and submit fraudulent income verification letters to get large mortgages to close on homes using the proceeds of crime and laundered cash. These are very serious allegations.

I'm wondering whether you could tell me if, before the Minister of Finance approved the merger in December between HSBC and the Royal Bank of Canada, she was aware of these allegations.

[Julien Brazeau]

To be honest, I'll have to take that back. We're certainly aware of the report that came out this week. I think it is an area of serious concern. Whether it formed part of the analysis the minister relied on, we can come back to you on that.

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

Are you saying you don't know whether she knew, or that you can't say at this point?

[Julien Brazeau]

I'll have to find out from OSFI, because the information would have been disclosed to OSFI in the context of—

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

You don't know.

[Julien Brazeau]

I don't know.

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

Okay.

What's odd about it is that last July, FINTRAC published a report raising these very concerns. Perhaps you are aware of the report. It was about the banking industry and money laundering in 2023.

Are you aware of the report where FINTRAC basically talked about the issue of fraudulent mortgage transactions as it relates to money laundering?

[Julien Brazeau]

We're aware of the report, absolutely, and of the claims of fraud. Where there's evidence, we certainly encourage—

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

That report predated the minister's approval. Having that information from FINTRAC, wouldn't the natural question have been whether or not this was going on within HSBC? Was that question not asked before the minister approved the merger?

[Julien Brazeau]

In terms of discussions that FINTRAC might have been having with HSBC, we're not aware of those. In the context of approving the transaction, the minister did impose criteria on RBC in regard to enhanced due diligence and ensuring that they do a full accounting of their AML and ATF practices, with a view toward ensuring that the practices are in accordance with what is expected under the PCMLTFA. That was a precondition that was agreed to by RBC.

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

Was there a departmental briefing note prepared for the minister prior to her approving the merger?

[Julien Brazeau]

There was advice provided to the minister, yes.

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

Could that briefing note be tabled with the committee?

[Julien Brazeau]

I'll have to take that back. We can get back to you on that.

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

You'll let us know whether or not it can be tabled.

[Julien Brazeau]

Yes. It's advice provided to the minister, as in any other transaction that happens in the financial sector.

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

Do you know whether in that briefing note there was any mention of widespread mortgage fraud as it pertains to money laundering?

[Julien Brazeau]

I can't confirm what was in that briefing note.

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

You can't confirm or you don't know.

[Julien Brazeau]

I can't confirm what was in the briefing note. I don't have direct knowledge of it, but we can get back to you.

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

You may have indirect knowledge of it, though.

[Voices]

Oh, oh!

[Julien Brazeau]

I don't have knowledge around the discussion around mortgage fraud in the context of the RBC and HSBC—

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

Okay. I'm not getting definitive answers of no here, which I find quite interesting.

Just out of curiosity, assuming that at some point this all comes to light and fines are levied, who would be responsible to pay the fines if the merger and acquisition goes through? Would it be the Royal Bank of Canada?

[Julien Brazeau]

To the extent that the society is dissolved, I'm not sure. We'd have to take a look at what the implications are and who would be the parties found responsible for doing it. If it's fraud and it's individual parties who perpetrated that fraud, then those individuals could still be found liable.