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.
NDP
Liberal
Peter Fragiskatos Liberal London North Centre, ON
Thanks very much.
Mr. Alsace, please tell the committee when the sanctions regime against Russia was put into place.
Senior Director, Sanctions, Global AML Group, Canadian Imperial Bank of Commerce
It was in July 2014, I believe.
Liberal
Peter Fragiskatos Liberal London North Centre, ON
It was 2014. Okay.
You said there was a point when engagement was more positive with Global Affairs, and then things started to unravel a bit. When did that happen?
Senior Director, Sanctions, Global AML Group, Canadian Imperial Bank of Commerce
It's hard to say. I think it was just before Russia. I started my role in October 2013, and it was a time when we would still get responses. They weren't hosting conference calls at that time, and then it kind of degraded after that, probably around the time of Russia, approximately.
Liberal
Peter Fragiskatos Liberal London North Centre, ON
As I understand this, the previous administration was adamant that it was going to put in place a sanctions regime to deal with Russian actions, and it was going to be a robust sanctions regime. It knew full well that the burden of carrying out the sanctions regime would fall on Canadian businesses and Canadian banks, yet there was no real engagement.
Senior Director, Sanctions, Global AML Group, Canadian Imperial Bank of Commerce
I'm not sure if there was really that much thought given to it. If you look at the pattern and you watch what happened with Russia, Canada followed suit. We followed the Europeans and the Americans with our sanctions. Although we have a stand-alone sanctions regime that applies to Russia and the Ukraine, I'm not sure if that actually even came up—
Senior Director, Sanctions, Global AML Group, Canadian Imperial Bank of Commerce
In the sense that when you're talking about what we do with sanctions and you look at the support that we get from Global Affairs, I don't know if it was an issue with respect to any specific type of regime. I think it was more of a gradual deterioration that started since 2013 when they were a little more open.
If I had to pinpoint it to something, there was a change of staff, a senior member, that occurred around that time. With his absence, I think there wasn't anybody to come in who was willing to take the reins to actually host those conference calls anymore.
November 23rd, 2016 / 5:05 p.m.
Liberal
Peter Fragiskatos Liberal London North Centre, ON
Still, though, private enterprise matters a great deal in Canada. Our banks matter. Banking structure is essential to a market economy. If we're going to put in place mechanisms to enforce sanctions, a staff change shouldn't affect things drastically.
Senior Director, Sanctions, Global AML Group, Canadian Imperial Bank of Commerce
I can't speak to that. You'd have to ask Global Affairs Canada more specifically as to the rationale around that.
Liberal
Peter Fragiskatos Liberal London North Centre, ON
It's just puzzling, because the previous administration talked about being a government of private enterprise and then was trying to do something to deal with international problems at the same time. On the one hand, it was trumpeting its actions in the foreign realm, and then domestically it was asking the banks to do all the work and not providing the supports.
That said, I want to talk about the burdens that the banking sector faces, and businesses as well. Absent going through the UN, Canada has the ability, as you know, to impose sanctions unilaterally, either through the SEMA, through FACFOA, through the anti-terrorism laws in the Criminal Code, through the Immigration and Refugee Protection Act, or through several other acts. Sanctions, however, get layered. In fact, seven Canadian sanctions regimes at the moment require two or more of the acts I've just listed to be imposed.
The problem with this is that it creates a great deal of complication, because each act has a different penalty for non-compliance and a different definition on key issues, such as what constitutes property or what constitutes assets. This must be an absolute nightmare to deal with. Tell the committee how difficult it is to deal with, and whether you've been consulted at all on any of this.
Senior Director, Sanctions, Global AML Group, Canadian Imperial Bank of Commerce
In general, the Canadian banking industry is supportive of sanctions. We comply with the regulatory requirements and the law. We've made the point already, I believe, that it's complicated and it can be a burden at times. Yes, it's—
Liberal
Peter Fragiskatos Liberal London North Centre, ON
This seems more of a burden. I'm just thinking of it from your perspective and the perspective of anyone in the banking sector who's trying to figure this out on a daily basis. This is an absolute nightmare.
Senior Director, Sanctions, Global AML Group, Canadian Imperial Bank of Commerce
I'm not sure if it's a nightmare. Quite frankly, when we look at the sanctions regimes, although they come, say, from various different lists for us, we use service providers who consolidate. Having them on different lists is a bit of an additional burden because we still have to do list validation, which means going back to the original source to test—
Liberal
Peter Fragiskatos Liberal London North Centre, ON
I don't mean to cut you off, but my time is limited.
If I have to apply different definitions of what constitutes property, what constitutes assets, if there are seven sanctions regimes that require two or more acts to be imposed, maybe “nightmare” is overstating it, but I'm a politician and I tend to use hyperbole from time to time. What I'm trying to say is that it's extremely challenging, or I imagine it would be anyway.
Senior Director, Sanctions, Global AML Group, Canadian Imperial Bank of Commerce
I'll be frank with you. From a list-based perspective, if you're on a list, it doesn't matter where it derived from, it's not so much of an issue. You're either on the list or you're not on the list. In 99.99% of screening we do, there are no hits. If you don't have any hits and if you're not an SDN, we don't have to drill down on the definition of property or assets; we're not dealing with the party. It's a non-issue, for the most part. From a day-to-day perspective, although there is a lot of screening required and infrastructure required to do it, it doesn't usually create problems.
It's the other sanctions—we'll call them sectoral—that are country-based, such as Russia, when you have to look at arms or munitions. You have to start, then, looking at goods. That's when it gets much more complicated, because we have to get into interpretation issues.
We're doing both simultaneously, but the burdens that you are speaking of, from a day-to-day perspective, are not actually realized.
Liberal
Peter Fragiskatos Liberal London North Centre, ON
Okay, but you would like to see more engagement in general. That's something that we can look at as a committee. That's something that's glaring in your testimony.
Senior Director, Sanctions, Global AML Group, Canadian Imperial Bank of Commerce
Yes, we would encourage it. Collaborative efforts are great.
We appreciate that sanctions are a political tool, so you may not want to consult before you're going to impose sanctions on a new country. However, we would appreciate a general dialogue if you're going to create new types of sanctions, such as the sectoral sanctions, because then we could provide some advice around having to be careful about how you characterize certain transactions.
Liberal
Peter Fragiskatos Liberal London North Centre, ON
Since 2006, we've put in place mechanisms that tend towards unilateral sanctions, so I think you're talking about that factor complicating things, but there's still no engagement with the banking sector in any meaningful shape or form. There's a lack of dialogue. You were relying on one person in Global Affairs Canada to be your go-between, and when that person left, all of a sudden the banking sector lost its ability to have a voice. That's what I've taken here.
We can't have one person. We can't rely on one person's goodwill within a particular department. We need to take actions to address that, and I'm sorry you've dealt with these problems in the past, bearing the burden of putting in place and monitoring a sanctions regime while administrations would take the credit, or try to take the credit, for pushing forward a foreign policy to deal with authoritarian states.
Those are all my questions, sir.
Liberal
Liberal
Michael Levitt Liberal York Centre, ON
Can you take us through the life cycle of what compliance looks like for banks in really practical terms? Let's say the government publishes new regulations targeting certain individuals in a target state. You can use the Russian example if that's helpful. How do you learn about, interpret, and comply with this measure? What steps do you take to freeze assets you might hold and prevent transactions, and what does the timeline look like for this?
Senior Director, Sanctions, Global AML Group, Canadian Imperial Bank of Commerce
How much time do you have, sir?
Liberal
