Finance Committee on Feb. 24th, 2022

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste‑Marie.

We are moving now to the NDP.

MP Blaikie, you have six minutes.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much.

Had the registration process continued with crowdfunding platforms and other entities that aren't covered under your normal mandate, could you share with the committee what kinds of information you would have been able to receive as a result of completing that registration process, the reporting that would follow on that, and how you believe that information would have contributed to the purpose of the emergency order or how that information would work within the context of your existing mandate?

[Barry MacKillop]

I'll start, but I'll defer to Donna if she wants to jump in with additional information.

Had it continued, the crowdfunding and payment service providers would have registered as reporting entities to FINTRAC. They therefore would have been subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. They would have submitted reports as per that act.

That would have included threshold reports, as I went through earlier—into or out of Canada over $10,000, for example—and large cash transactions of $10,000 or more within 24 hours. They would have been able to submit suspicious transactions to us in the event they had reasonable grounds to suspect that the transactions they were looking at would be relevant to money laundering or terrorist activity financing.

That is still the limitation. The mandate was not broadened to receive reports on anything. It was broadened to allow additional entities to report transactions related to money laundering or terrorist activity financing.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you.

Please go ahead, Ms. Achimov.

[Donna Achimov]

I would just add that for these new funding arms of the payment service providers as well as the crowdfunding platforms, we also had under this order a requirement for the money services businesses who were already registered with us. But if they themselves had any changes associated with their dealings, according to the act, they were required to provide us the additional information.

In other words, those who were registered still had an obligation to signal if there were any changes in their business dealings and if they had any of those clientele who were involved or covered under the order.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Okay.

I'm tempted to say, because I think it sounds reasonable, that in the end FINTRAC was not really part of the actions under the emergency orders. That may have come into play had the registration process had enough time to take place, and you may have received information, in that case, that was pertinent to the actions being taken under the authority of the emergency orders, but in fact, given the brief amount of time that those orders were in effect, FINTRAC didn't really get involved.

Is that fair to say? Or would you recharacterize that statement in some significant way?

[Donna Achimov]

I would say that we jumped into action as quickly as we could. As my colleague indicated, we're one of 13 organizations that had a role in this. Our role was to very quickly react, to stand up our website, to make sure that we were available. We fielded numerous queries from those organizations who weren't quite sure if they were covered. The early days in terms of being able to respond to queries and to provide clarification—that was our role. That was the early start. Each organization in turn had their respective responsibilities.

I think that's the fairest assessment in terms of the brief period of time and the fact that we did jump in rather quickly and respond to the queries.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Indeed. Thank you for your work. I certainly didn't mean to imply that there was no work being done by FINTRAC. I was simply trying to characterize its ultimate role in the operations that took place.

I'm curious to know whether you have an opinion on this. If the registration process had occurred and you'd received that information, or if legislative changes are made such that crowdsourcing platforms and payment processors are registered with FINTRAC on an ongoing basis, do you believe that there is a fair bit of information...or what kinds of information do you think would help you execute your normal mandate? Or do you think it's not really required and there would not be useful information? I'm curious to hear your point of view on that.

[Donna Achimov]

The reality is that as we look at onboarding any new reporting entities, it is a matter of learning and understanding where the risks are and how we assess those risks and the type of reporting we receive.

In any instance, in ordinary times we strive to do analysis as best we can based on the quality of the information we receive. In ordinary times, the role that my organization plays is extensive outreach and education. We reach out to the various associations and partners to try to determine leading practices and how we can continue to provide guidance and help them interpret the guidance so that we can get the quality of the reports that are needed in terms of having the necessary action taken.

My colleague mentioned earlier that we are a learning organization. We strive and we work very closely with Canadian businesses and business associations to continue to educate, refine, and adjust accordingly. It is an ecosystem of us adapting to the risk, learning, and then training in sequence.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Blaikie.

That finishes our first round.

We are into our second round, members, which will be led by the Conservatives.

MP McLean, you have five minutes.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you, Mr. Chair.

Before I start my questions, let me echo my colleagues around the committee here in condemning what's happening in Ukraine today by the Russian aggressors. This is a time when democracies around the world are sliding, and we need to make sure that we stand fast with our democratic friends in the Ukraine and ensure we stop this as much as we can.

Moving to questions now, Mr. MacKillop and Ms. Achimov, thank you very much for the work you do and for being here at our committee today to give us more information.

I am going to get a little granular here with you, because you did speak, Mr. MacKillop, about how, in the week that the Emergencies Act was in force, a number of crowdsourcing organizations reached out to register with FINTRAC. My understanding of all crowdsourcing sites is that they are regulated at the provincial securities level. The decision was made not to have them report to FINTRAC because it really was a duplication of the reports that go to FINTRAC: because the money flowing into them is already regulated by at least one financial provider on the in and the out. Is that correct?

[Barry MacKillop]

Thank you for the question. I wasn't sure if Donna was going to jump in there on the regulatory side.

I believe you're correct. There is some regulation of crowdfunding, but I'm not sure and I'm not an expert on who regulates the crowdfunding platforms.

However, Mr. Chair, it is correct that there is always a touchpoint with a financial institution that is regulated by FINTRAC and that does provide reports to FINTRAC on money going through their own bank account or money being disbursed from their bank account to the person or entity who set up a page—for example, a GoFundMe page. GoFundMe would have disbursed the money, and it would have been through a bank or a financial institution.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you.

Then in the week when you actually were getting some requests from these crowdsourcing sites to get set up through a FINTRAC reporting mechanism, they were just going through the reporting mechanism and saying, “Something's emerging here and we're going to have to not only abide by the current regulations that are already enforced upon us by provincial securities regulators, but now we're going to have this extra regime”—like we say, belt and suspenders—“in order to get through the FINTRAC mechanisms.”

Would that be an overlap and, again, what you'd call a duplication of efforts?

[Donna Achimov]

Maybe I'll jump in here, Mr. Chair.

I don't know if it would necessarily be a duplication of efforts; certainly, the security sector and the Ontario Securities Commission, we work very closely with. Our mandate is slightly different because we are responsible on the anti-money laundering and anti-terrorist financing piece of it.

In our early days, as I mentioned, we fielded numerous queries from both crowdfunding platforms as well as payment service providers trying to understand if they are actually required and what their requirements are. We tried to make it easy to self-assess, as well as to provide guidance from that perspective.

[Greg McLean, Conservative, Calgary Centre, AB]

Okay. Thank you very much.

I'm going to go back to some remarks Mr. MacKillop made here about the intent of what the government wanted to do in the Emergencies Act by shutting off funding to these organizations that were undertaking illegal activity at the time in Canada, and how that had its intended effect by cutting off funds to those organizations. The intended effect, of course, was already being done prior to the Emergencies Act through the GoFundMe cancellation, so was the Emergencies Act required in that respect in order to stop the GoFundMe type of disbursements?

[Barry MacKillop]

Mr. Chair, I don't think it's for me to determine or to say or to opine on the need for any legislation. However, GoFundMe did, on their own, stop the page and decided to reimburse the donors and to not allow the funding to continue through their platform.

However, my understanding was that donors then moved to a different platform—GiveSendGo, which was less perhaps co-operative in terms of saying whether or not they were going to stop the funding happening on their page. Moreover, Mr. Chair, there are a number, I would say thousands, of crowdfunding platforms around the world that are accessible. I think that in terms of the Emergencies Act and ensuring that any money that was raised through a crowdfunding platform that went through a financial institution to be disbursed to support the illegal blockades was, in fact, appropriately stopped—

[Greg McLean, Conservative, Calgary Centre, AB]

Okay. I'd like to ask one final question here.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP McLean. We've gone well over five minutes, but thank you. You can ask it in the next round, I guess.

We are moving to the Liberals and MP MacDonald for five minutes.

[Heath MacDonald, Liberal, Malpeque, PE]

Thank you, Chair. I just want to say that our thoughts and prayers are with the Ukrainian people and also with our allies and the soldiers on the ground. Hopefully this gets resolved relatively quickly and we can all move on and learn from it.

I'll get on to questions. I want to go back to cryptocurrency. I fully understand how foreign funding could destabilize both our economy and our democracy, but I want to understand better the difference between regulated funding at the present time and cryptocurrency and how you're analyzing that.

[Donna Achimov]

In 2020 and 2021 we added virtual currencies to what we already report on—which include cryptocurrencies—thereby allowing us to see the flow of funding. Now we can look at the whole continuum of both regular currency and virtual currencies to see how money travels not just domestically but internationally. The addition of cryptocurrencies was very helpful.

[Heath MacDonald, Liberal, Malpeque, PE]

Crypto has been around for a couple of years now. I know you guys report on regulated funding, of course, and money movement but I'm just wondering if you have any stats or analytics relevant to crypto raising red flags to financial institutions?

[Barry MacKillop]

Mr. Chair, we have seen suspicious transactions from financial institutions that reference crypto and crypto-wallets or people using their fiat or normal money to purchase crypto.

We've also received some excellent, I would say, suspicious transaction reports from the cryptocurrency dealers themselves, as they have the ability through their own compliance program to look out for AML—anti-money laundering, anti-terrorist financing—to identify particular wallets that are problematic and flows of cryptocurrency through different wallets that are problematic. Given that you can do this with relatively small amounts of crypto, we've seen it and have found it to be particularly useful in our Project Shadow, which is our public-private partnership to combat child sexual exploitation material on the Internet, those who are accessing that and who use crypto hoping that they will be anonymous by so doing. We have received some excellent STRs that have debunked the idea of anonymity in that area.

[Heath MacDonald, Liberal, Malpeque, PE]

That's good to hear.

Since the occupation began and then the narrative on freezing bank accounts and we went through that whole process and then the Emergencies Act, at what point did you start seeing the act as having a deterrent effect on the crowdfunding “society”, if that's what you want to call it? Was there a deterrent? Was there a point in time when the crowdfunding started to decline?

[Barry MacKillop]

From our perspective, with regard to seeing any reports related to money laundering or terrorist financing, I don't think there was a point where there was a precipitous decline or precipitous increase in reporting. What I would say is that, as all of you have seen, I think the efforts came together at the same time and we saw the money being stopped and we saw the law enforcement activities, which were extremely well done in Ottawa, taking place almost simultaneously. I think it really was a combination of all of the actions that brought this to a peaceful end.