Finance Committee on Feb. 24th, 2022

[The Chair, Liberal, Peter Fonseca]

You have one minute, MP Lawrence.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Perfect.

I realize you'll have only 30 seconds for this, but perhaps you could talk about it later. As we prepare for the eventual inquiry and greater study of this, I'm wondering if you had any learnings from that week or five days about what it would take to implement crowdsourcing. Are there things you learned during that period that you could share with the committee?

[Barry MacKillop]

I do like to think that we learn all the time, but I'm not sure we've had enough time to really dig in deeply to see either the best way or the value of the reports that would come from crowdfunding platforms, for example. We anticipate that there would be, and we anticipate continuing discussions with them.

I certainly don't want to talk for my colleague Donna, but I anticipate that we will continue to explore with payment service providers and crowdfunders and others on the best way to ensure or enhance the coverage in Canada to enhance the efficiency and effectiveness of our anti-money laundering regime.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Lawrence.

We're now moving to the Liberals.

MP Dzerowicz, you have six minutes.

[Julie Dzerowicz, Liberal, Davenport, ON]

Duzhe dyakuyu. Thank you very much, Mr. Chair.

I want to start off with my own very short statement. As a Ukrainian Canadian as well as the vice-chair of the Canadian NATO Parliamentary Association, I also strongly condemn Russia's unprovoked attack on Ukraine, which has already claimed too many lives and continues to put countless civilian lives at risk.

I stand in complete and absolute solidarity with the people of Ukraine and its legitimate, democratically elected government and parliament. I'm glad...and unequivocally support our Prime Minister, our Deputy Prime Minister and in fact all leaders of our federal government who are condemning Russia's actions today. As well, I fully support our commitment to apply the strongest sanctions possible and to do all we can to continue to support Ukraine moving forward.

With that, Mr. Chair, I want to say a huge thanks to our two guests today.

Thank you so much for your work. Thank you for coming before us today.

The Deputy Prime Minister has announced that she intends to put forward legislation that will empower FINTRAC to have oversight over crowdfunding and cryptocurrency platforms without the need for the Emergencies Act. Would you support such a change?

[Donna Achimov]

Maybe I'll take that question.

That really is dependent on the Deputy Prime Minister and Minister of Finance. If that is to come to pass, we will obviously put in place the mechanisms of support.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you.

Continuing with Mr. Lawrence's last question and your comment right now, the Deputy Prime Minister has already made this public commitment to put forward legislation to make this permanent. Is there anything you recommend or you want to make sure this legislation contains?

I'm wondering if there's any recommendation you would make based on, as Mr. Lawrence put it, “learnings”—for instance, you want to make sure it covers online crowdfunding platforms, or cryptocurrencies, or it specifically does something. Is there anything you would recommend at this point?

[Donna Achimov]

I appreciate the question. These are certainly extensions of what we currently have in place, which are virtual currency dealers associated with money services businesses.

We would not only continue to leverage the brief experiences my colleague indicated but would also look to do some research internationally. We have our Five Eyes colleagues, who are equally seized with the movement of virtual currencies and these technologies and these platforms. We would provide any advice. I can't go into details on the provision, but certainly they would be informed by research and experience of not only this brief event but our colleagues internationally as well.

[Julie Dzerowicz, Liberal, Davenport, ON]

That was a very, very helpful answer. Thank you so much.

When the Emergencies Act was put in place and FINTRAC was given new powers to monitor the online crowdfunding platforms and other payment providers, did FINTRAC have—this might sound odd—the capacity to be able to do the work with regard to the online platforms and the cryptocurrencies?

[Donna Achimov]

Mr. Chair, that's a very good question.

FINTRAC is a small and mighty organization, and we have many reporting entities. As my colleague Barry indicated, we have 24,000 reporting entities. What we do is allocate resources to where they're needed most. In this case, we were agile and we were able to redistribute our resources to what the priority of the day was.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much, Mr. Chair. I appreciate that answer and I want to make sure that my intention was well taken and understood.

As we're moving forward, how do we ensure that there continues to be the necessary capacity and resources with any type of permanent legislation?

So that I can be clear, what FINTRAC was able to do with the Emergencies Act was, basically, that should there have been any information that was gathered, it would have been provided by FINTRAC directly to the RCMP and/or financial institutions. Can you confirm that? Is there anyone else that the information might have gone to?

[Barry MacKillop]

Thank you for that and for the opportunity to provide a bit of clarification.

We would not have reported anything. We do not give anything to financial institutions. We, in fact, receive the reports from them. We do not monitor, per se. We do not investigate.

Once the reports are received, if they meet our threshold, which is reasonable grounds to suspect they would be relevant to a money laundering or terrorist financing activity, we would disclose that to law enforcement. It could be to the CBSA, as well, or CSIS or CSE. We have a number of authorized and legislated disclosure recipients to whom we can disclose, and we would disclose the reports to whichever law enforcement jurisdiction or whichever appropriate designated recipient would benefit most from the actionable intelligence.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you.

I know that's a wrap, Mr. Chair.

[The Chair, Liberal, Peter Fonseca]

Yes, that is a wrap. Thank you, MP Dzerowicz.

We are moving to MP Ste-Marie for six minutes.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

Good afternoon, Ms. Achimov and Mr. MacKillop.

I would like to commend my fellow members on their statements. The one made by Ms. Dzerowicz was particularly touching and heartfelt.

Before discussing the Emergencies Act itself, I would like to properly understand what FINTRAC does when accounts are frozen.

I'm going to give you a hypothetical situation to make sure that I have understood correctly. Let's say that a financial institution observes a suspicious money transfer or suspicious activity in an account. Under the ordinary legislation, the institution can freeze the account and then report it to you. On your end, after analyzing the situation, you conduct a follow‑up. Is that correct?

[Barry MacKillop]

Thank you for the question.

That's not quite correct. We do not give any instructions to the financial institutions. We are not at all involved in the freezing of accounts or anything of that nature.

In a case like the one you are describing, normally, under the law, financial institutions can submit suspicious transaction reports to us if they suspect that the transactions in question are tied to money laundering or the financing of terrorist activities. Otherwise, we do not receive reports.

In this case, under the Emergencies Act, financial institutions were able to freeze accounts after receiving information from the RCMP to that effect. This was done without us having been made aware of the freezing of the accounts or informed of the accounts involved. We are not at all involved in this aspect of the emergency economic measures.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you very much for your response, Mr. MacKillop.

I just want to make sure that I have understood correctly.

In normal times, without the Emergencies Act, when a financial institution suspects that a criminal act has been committed under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, the institution reports it to you. What you just explained to us is that the activities in question in this case do not fall under this act. Since the financial institutions froze accounts under the Emergencies Act, they did not submit a report to you.

Is that correct?

[Barry MacKillop]

That is correct.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Okay, thanks.

In normal times, how many reports do you receive annually from financial institutions? I believe that you already said it, but could you remind me of the number?

[Barry MacKillop]

Every year, we receive some 30 million reports from all entities. Financial institutions send 80% to 90% of these reports.

Concerning suspicious transaction reporting, I believe that we received about 460,000 reports of this nature from all entities last year.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Okay. My takeaway from that is that FINTRAC isn't hurting for work. I congratulate and thank you for the work that you do.

To your knowledge, have some financial institutions been able to freeze accounts under the ordinary legislation, particularly the money laundering act, and report them to you?

I don't know whether my question was clear.

[Barry MacKillop]

Thank you for the question.

I'm not an expert in the legislation governing banks, but I believe that financial institutions have the power to decide on the risk level they are willing to expose themselves to when working with their clients. Therefore, if a client exceeds that risk level, it's up to the financial institution to decide whether or not to freeze the account or no longer do business with the client.

Can that be noted in a suspicious transaction report that would be sent to us? Yes, it's possible, because there is a section in the report that notes the actions undertaken by the financial institution or any other reporting entity. Therefore, a note could indicate that the account was frozen, or even that the institution disengaged owing to the financial risks the individual represents, which means that the institution decided to no longer do business with them.

That's information that becomes relevant for police because, if they wish to obtain an order for production, it's important to know whether the account still exists and is still active. That is part of the information that we provide to law enforcement agencies, if we have it.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Okay, thank you.

As part of the implementation of the Emergencies Act, FINTRAC hasn't been asked directly about account freezing.

Have you received any requests, guidance or direction from the government regarding the implementation of the Emergencies Act in some way?

[Barry MacKillop]

Thank you for the question.

Yes, of course, but only with respect to compliance and the businesses that would be required to register with us. In the other cases, the issue concerned the enforcement of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

I can see that my time is up.

Thank you.