Finance Committee on Dec. 8th, 2021

[Beth Potter]

Access for sole proprietors has been a real challenge across many of the programs that have been available through COVID, so certainly we are constantly looking for an opportunity to correct our course on that one. If there were that opportunity in Bill C-2, we would of course support it.

Our whole priority, really, is to get back to work. We want these programs to be in place, but we would like to not have to use them if we didn't have to, so yes, we would—

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Potter.

Now we're moving to the Conservatives and Mr. McLean for five minutes.

[Greg McLean, Conservative, Calgary Centre, AB]

First, let me thank all the witnesses who are with us today to provide us with information on this issue.

The first question I have will follow on my colleague's questions to Mr. MacKillop here. The question is on the financial transaction report—and thank you for your annual report—wherein you indicate that the number of suspicious transaction reports in 2019-20 rose to 386,000 from 235,000 in the previous year. Can you give us a brief explanation of why that increase may have occurred, please?

[Barry MacKillop]

Sure. It's for a couple of reasons.

One is increased reporting by our reporting entities. I think we're seeing the benefits of our public-private partnerships. We're seeing the result of the knowledge of potential money laundering indicators and our sharing of those indicators with our reporting entities. We have lots of consultation with our reporting entities and we talk a lot with them about what is required in terms of good STRs.

From that perspective, I would say, we're seeing increased monitoring in terms of applying indicators, the advent of technology and the ability to use algorithms to identify transactions and to identify suspicious transactions within institutions. That has also led to—

[Greg McLean, Conservative, Calgary Centre, AB]

Okay. Thank you. The gist of what I'm hearing is that it's something extraneous to the programming that we're talking about here today.

[Barry MacKillop]

Correct.

[Greg McLean, Conservative, Calgary Centre, AB]

Good. Thank you.

You did speak earlier about how money was coming in and was going into accounts of existing family members. Can you elaborate on that, please? How did you determine that family members were benefiting from one claim? I'm presuming that would be in some kind of corporate account where income was being split among family members.

[Barry MacKillop]

Not necessarily; it could have been one person in the family who applied using their bank account, and other members of the family were using the same bank account in which the money was being deposited.

[Greg McLean, Conservative, Calgary Centre, AB]

So it isn't just a corporate one. Did you see any corporate transactions that were flagged as potentially crossing the line of many payments going into one account and being distributed to family members?

[Barry MacKillop]

There likely would have been instances we'd have seen under CEBA, for example. There may have been money going into a corporate account and then quickly sent out to a personal account.

[Greg McLean, Conservative, Calgary Centre, AB]

All right. Thank you.

I'll turn now to Ms. Potter of the Tourism Industry Association of Canada.

Thank you for being here today, and thank you for the contribution your industry makes to Canada. It is a net benefit. I really appreciate all that your members bring.

I'm curious about some details around the programming here. What percentage of tourism revenue occurs in the spring to summer to fall months—let's call it the middle six months of the year—in Canada?

[Beth Potter]

I can tell you that in what we call the “high season”, the summer months between May and October, one day's revenue can equal a week's revenue in February. I think that gives you a sense of how a lot of businesses really rely on that summer season. Of course, there are businesses that are solely winter season, but in a number of sectors—the business event sector, for example—they really rely on the shoulder seasons.

At this point, I will tell you that the split between those who need to have year-round revenues and those who don't is about 60:40.

[Greg McLean, Conservative, Calgary Centre, AB]

With regard to the tourism revenue that is allocated in what you call that summer season or the middle six months of the year, what percentage in Canada does that represent of the total GDP that comes into the tourism industry, please?

[Beth Potter]

Of the $105 billion in spending that we realize in a year, about 60% of that would be allocated to those six months.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you.

I have one final question on that. Do you see any problem with the reduction that's going to happen in the months that are leading right up to the high season?

[The Chair, Liberal, Peter Fonseca]

That may have to wait for another round, Mr. McLean.

We will now move over to the Liberals.

Madame Chatel, you have five minutes.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you, Mr. Chair.

My thanks to all the witnesses who are here to share their expertise with us.

My first question goes to Mr. MacKillop and deals with the very important work that FINTRAC is doing. We in Canada are also very proud that we have some of the highest standards for detecting financial crime.

Mr. MacKillop, you were talking about collaboration. It's very important for the government to put its faith in collaboration, particularly by creating a Canadian agency to fight financial crime.

We are passing bills and establishing standards to ensure that financial companies and banks can quickly detect financial crime or potentially fraudulent transactions. You were talking about red flags, and I found that very interesting. We actually have some of the highest standards. I also know that you took part in the consultations that led to the development of those standards, so my thanks to you for that.

I would like to know what mechanisms are put into motion to immediately advise authorities of potential problems that then need to be checked.

[Barry MacKillop]

Thank you for the question.

Yes, it really is based on collaboration and the relationship we have with the reporting entities, casinos, banks and so on. We work with them closely.

The measures we have put in place include what we call operational alerts. These are documents that describe a problem in exact detail. Our first operational alert was issued in 2016 as part of Project PROTECT, the target of which was financial transactions connected with human trafficking. We not only identified the problem as definitely existing in Canada, unfortunately, we also identified very precise indicators that the financial institutions could monitor. We established those indicators with financial institutions as well as with law enforcement organizations. For example, we had consultations with the RCMP to validate the indicators that we had identified to make sure that they would be useful in uncovering suspicious transactions.

When we issued operational alerts, those indicators were sent to all the entities that, under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, are required to declare certain operations to FINTRAC. They were then able to use those indicators to strengthen their capacity to uncover suspicious transactions and report them more quickly. In addition, it allowed them to provide higher-quality and more detailed information on each transaction. That helps us to collect all the information and to send cases of fraud to our law enforcement partners and cases of terrorist financing to the organizations responsible for national security.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you very much for your answer.

I would like one point clarified. You say that the number of disclosures and alerts is increasing, as is the quality of information. You also talked about the agility with new technology that organizations, partners and entities that identify suspicious transactions are demonstrating. This all contributes greatly to the effort and to the increase in the number of disclosures and frauds that are uncovered. Is that correct?

[Barry MacKillop]

Yes, that is correct. I would not say that organizations are able to change their entire systems overnight to add the indicators. But it is certainly the case that we work with them to determine indicators that truly zero in on the transactions. These are not necessarily additions. It is just a matter of finding the indicators and applying them. For example, if one transaction displays a number of indicators, that in itself may indicate that we are dealing with a case of money laundering.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. MacKillop and Madame Chatel.

Members, we're going to suspend now for our vote. We will be back to the witnesses for our last third round.

Thank you.

[The Chair, Liberal, Peter Fonseca]

I call the meeting back to order. This will be our third and final round.

Thank you very much to the witnesses for your patience.

We are going to start with the Conservatives for five minutes.

Go ahead, Mr. Chambers.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much, Mr. Chair.

Thank you again to our witnesses for sharing your stories today and for your patience.

Obviously, this is a very important piece of legislation. I was and am very touched by Ms. Sarangi's testimony about those individuals who are food insecure or housing insecure and those individuals who are in the greatest need. That's precisely why some of my colleagues have been questioning some of the issues around potential fraudulent activity with some of these benefits. They are related, because every dollar that we send to somebody who is undeserving, ineligible or a criminal is another dollar that does not go to someone in the greatest need, so these questions are very relevant.

I have two brief questions for our witnesses from FINTRAC.

First, have you been asked to expand upon or complete a more fulsome audit of the transactions after completing your initial sampling and review? Has the government asked you to do any further investigation on the benefits already provided?

[Barry MacKillop]

Other than the special bulletin that's available on our website, where we provide a broader knowledge of the trends and typologies and what we've seen—and that bulletin is available to the general public—we do not actually do audits of those types of transactions.

We provide intelligence, as a financial intelligence unit, to law enforcement when we reach our threshold. It's not part of our remit to do an audit of transactions. We see only a limited number of transactions in any event. We would not see all of the transactions that were related to the provision of CERB benefits.

[Adam Chambers, Conservative, Simcoe North, ON]

That's helpful. Thank you.

I must say that I know Canada is a world leader in investigations. FINTRAC actually has a very good reputation around the world for the work that it does. Where I think Canada does lag our peers would be on prosecutions and convictions.

Are you aware of any enforcement actions as a result of the transactions you've identified, or prosecutions for these transactions that have taken place?