Evidence of meeting #35 for Foreign Affairs and International Development in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was banks.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Kimberly Prost  As an Individual
G. Stephen Alsace  Senior Director, Sanctions, Global AML Group, Canadian Imperial Bank of Commerce
Sandy Stephens  Assistant General Counsel, Canadian Bankers Association

5:20 p.m.

Conservative

Tom Kmiec Conservative Calgary Shepard, AB

You mentioned Australia as an example of a jurisdiction that does it the right way. Is there any other example of a sanctions regime, apart from Australia, that works well for you?

5:25 p.m.

Senior Director, Sanctions, Global AML Group, Canadian Imperial Bank of Commerce

G. Stephen Alsace

If you're re-engineering the administration of sanctions, I would encourage the committee and the government to look at a number of jurisdictions and pick and choose elements that are the best from each, but you have to think about what works for Canada.

I picked Australia because it's about the same size as Canada. I could just say OFAC, but we appreciate that the Government of Canada may not want to use that kind of a model.

From my understanding, Australia is one regime that hasn't had a lot of complaints from the banks. It is collaborative. It provides guidance. It seems to work.

I've seen elements of the U.K. model. It provides certain guidance. I wouldn't necessarily use that as the gold standard.

I've seen good elements of the OFAC model, such as the FAQ and just being able to publish questions and answers. That's a great start. That's all we were actually asking Global Affairs to do. We even asked it to make it generic. We'd even offer to help draft what we think the answer is, and then just make sure it confirms that it's the correct interpretation and posts it, but there has been a general reluctance to do that.

5:25 p.m.

Liberal

The Chair Liberal Bob Nault

Thank you, Mr. Kmiec.

We'll go to Mr. Miller, please.

5:25 p.m.

Liberal

Marc Miller Liberal Ville-Marie—Le Sud-Ouest—Île-des-Soeurs, QC

Thank you for coming in.

I have a quick question as to the logistics of tagging a bank account or freezing a bank account or a securities account. You're talking to a former mergers and acquisitions lawyer who knows how conservative you are and has spent many Friday afternoons wondering why funds weren't wired, so I get it, and I get that you're conservative.

I'm now wondering about the rights of your custodian of funds or securities. I'm wondering about the people who have entrusted their funds to you, and what they expect their institution to be doing, and how there can be overcompliance and you're faced with this perhaps bureaucratic or logistical nightmare.

What happens when a law enforcement official or a public administration official comes and says an account is suspicious and you should freeze it? I'm being silly, but do you ask where the warrant is or ask where the proof is? What does your legal team ask at the outset?

5:25 p.m.

Senior Director, Sanctions, Global AML Group, Canadian Imperial Bank of Commerce

G. Stephen Alsace

I'm no longer part of the legal team, but I think there are two different things you're talking about. One is our requirement and our obligation to comply with the law. You're all aware that sanctions are criminal statutes, so you do have to have a positive match. We have very specific requirements under the law to block and freeze and report.

We do everything in our power to make sure we identify the right entity or individual if we're ever going to do that. We make sure we have an exact match, and that's why I made the point earlier that it is very rare in Canada that it happens, from an account holder or even a securities transfer perspective.

What might be more common is that we see on the other side of a wire transaction that the recipient of funds may be a listed person. That's more common. It's either that, or the recipient looks likely to be listed—for example, there's an exact name match, but we don't have any other information.

Our process is to hold until we verify. Almost every international bank we deal with takes the same approach. You interrupt the transaction on the basis of information that leads you to believe that it is, in fact, a listed person because the name is either close enough or exact. Then you pursue additional avenues to clear that. It's based on information you can obtain on that transaction.

5:25 p.m.

Liberal

Marc Miller Liberal Ville-Marie—Le Sud-Ouest—Île-des-Soeurs, QC

Just as a conservative matter, you will preventively freeze until you have cleared any suspicion?

5:25 p.m.

Senior Director, Sanctions, Global AML Group, Canadian Imperial Bank of Commerce

G. Stephen Alsace

Yes, but I want to distinguish between a listed person and sanctions—

5:25 p.m.

Liberal

Marc Miller Liberal Ville-Marie—Le Sud-Ouest—Île-des-Soeurs, QC

Correct.

5:25 p.m.

Senior Director, Sanctions, Global AML Group, Canadian Imperial Bank of Commerce

G. Stephen Alsace

—from a suspicious AML activity. That's a very different threshold.

If the police are investigating in a potential crime, they will need a court order, typically, to interrupt a payment. It varies. If we suspect it may be money laundering, that's a whole other issue.

5:25 p.m.

Liberal

Marc Miller Liberal Ville-Marie—Le Sud-Ouest—Île-des-Soeurs, QC

There is a range of thought processes that you go through. I understand if we're talking about SEMA or FACFOA, your frustration is finding out in the first place, and then it's pretty easy to freeze, as opposed to more of a money-laundering situation.

5:25 p.m.

Senior Director, Sanctions, Global AML Group, Canadian Imperial Bank of Commerce

G. Stephen Alsace

The advantage of sanctions is it's a bit more black and white. If you're dealing with a listed person, the obligations under the law are very clear. You have to block. You freeze and then you report, so we do that.

5:25 p.m.

Liberal

The Chair Liberal Bob Nault

Thank you, Mr. Miller.

Madame Laverdière has the last question.

5:25 p.m.

NDP

Hélène Laverdière NDP Laurier—Sainte-Marie, QC

Thank you very much, Mr. Chair. I would like first to apologize that I was on my BlackBerry, but I have journalists running after me to come and deal with an issue, so I'm just trying to deal with the crisis in question.

I'll go back to French, if you permit.

5:30 p.m.

Senior Director, Sanctions, Global AML Group, Canadian Imperial Bank of Commerce

5:30 p.m.

NDP

Hélène Laverdière NDP Laurier—Sainte-Marie, QC

I was stunned by your remarks.

We see everything you do. You use service providers. You review all the lists to create sort of your own consolidated list. I imagine the Bank of Montreal, Scotiabank and all the major Canadian banks do the same thing. There is a kind of duplication of effort in what you are forced to do, and I'm not blaming the banks for that.

Before we set up a system that would be more useful for you, can you at least share some information or services?

Thank you.

5:30 p.m.

Senior Director, Sanctions, Global AML Group, Canadian Imperial Bank of Commerce

G. Stephen Alsace

It's a valid point and a good question. The larger financial banks in Canada use service providers, quite frankly, to help us with list generation. Some of us use the same service providers. There are a number of them out there that are best in class.

We don't really share information around clients, etc. We do collaborate on a regular basis to talk about practice and some of the issues that we encounter, but there is no central list. I'm not sure if you would ever have one. You could do that for Canada, and that would be great, but you still have other jurisdictions that you have to derive lists from, so unless the United Nations or someone comes up with a master list and a service that everybody could use, we're kind of left to our own devices. Quite frankly, we use a service provider.

5:30 p.m.

Assistant General Counsel, Canadian Bankers Association

Sandy Stephens

A consolidated list for smaller institutions would be very helpful, absolutely. Just from an efficiency perspective, why not do it once, as opposed to, as you said, hundreds of times?

5:30 p.m.

Liberal

The Chair Liberal Bob Nault

Colleagues, I think that wraps up a good hour of discussion with the Canadian Bankers Association, and in particular the Canadian Imperial Bank of Commerce. I want to thank both of you for making this presentation. I very much appreciate your style of presentation, because it does give us recommendations. It does give us an opportunity to think about those recommendations from your perspective. We very much appreciate that.

I know a lot of questions have been asked of you. If there is any other information you want to supply the committee, please feel free to do so. Again, we very much appreciate the time you've given us this afternoon, so thank you.

Colleagues, I'll adjourn this meeting to the call of the chair, and I think that will be for tomorrow. It will be tomorrow morning at 8:45. Thank you.

The meeting is adjourned.