Evidence of meeting #44 for Industry and Technology in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was institutions.
A recording is available from Parliament.
Bloc
Gabriel Ste-Marie Bloc Joliette—Manawan, QC
Okay. Thank you very much.
Can you give us more details on how the scoring system works, including the assessment of fraudulent transactions, among other things? If it's too complex, you can send us a written response. However, I'd like you to give us a 30‑second overview.
Chief Delivery Officer, Payments Canada
My sound cut out for a little bit. Can you repeat the first part of the question?
Bloc
Gabriel Ste-Marie Bloc Joliette—Manawan, QC
Yes.
Can you give us more details on how the scoring system for assessing fraudulent transactions works?
Chief Delivery Officer, Payments Canada
We work with our members on the types of indicators they need from a score to come back into their system. They help define the requirements. We run those through algorithms that then provide, effectively, a caution to perhaps not proceed, a yellow to please investigate or a green zone for them to adjudicate. Those types of scores get ingested in our participants' prepayment initiation fraud checks.
Before they send a payment through the RTR, they have all of their internal systems. Let's say you're a bank or a fintech. They would run through that and make a decision, using algorithms, to proceed with the payment or not. It allows them to hold the payment and do further investigation or reject the payment because it's been identified as fraud.
Liberal
The Chair Liberal Ben Carr
Thank you, Mr. Ste-Marie.
Ms. Borrelli, the floor is yours for five minutes.
Conservative
Kathy Borrelli Conservative Windsor—Tecumseh—Lakeshore, ON
My question is for Mr. Pinto.
Many fraud victims, including seniors and small businesses, are manipulated into sending mass money transfers, but the payment systems treat the transaction as final.
What options exist to make high-risk payments more interruptible and recoverable, for example, temporary holds, recall mechanisms, delayed settlement for suspicious transfers and the like?
Chief Delivery Officer, Payments Canada
That's a great question, and it's commonly misunderstood what is recoverable versus irrevocable. Our rules basically have been written to allow for certain categories of high-risk payments or known fraud, etc., to actually be required to be returned. We set up rules that say here are the mechanisms by which the sending and receiving organization under certain mechanisms will agree to actually return funds.
The irrevocability has to do with when that doesn't kick in. If that rule wasn't an indicator of needing to return, then it's irrevocable, and even when money has to be returned, it's the second transaction that comes back. That's the way to think about that.
As far as putting holds on it are concerned, we go back to the discussion we just had around the fraud indicators and the score. Before an RTR transaction, an actual payment transaction is initiated in subsecond time, that fraud check, a check against the risk list and an ingestion of the score would go into the participants' algorithm, and they could decide to place a hold and investigate or decide what to do with it, case by case.
Conservative
Kathy Borrelli Conservative Windsor—Tecumseh—Lakeshore, ON
In your opinion, should the federal government set a clear policy expectation that payment modernization must include not only faster payments but faster fraud response?
Chief Delivery Officer, Payments Canada
That's a good question. Thank you for that.
To the extent that we've come to designing and launching RTR, that has been the expectation. Our membership, our future membership through new participants coming in with wider expansion, and our regulatory guidance have all required that we make this mandatory via our rules and via an initial market offer that launches simultaneously with the system.
Conservative
Kathy Borrelli Conservative Windsor—Tecumseh—Lakeshore, ON
Should there be a centralized hub where sectors like police can co-operate with access to the data necessary to prosecute fraudsters?
Chief Delivery Officer, Payments Canada
I think that's an astute question.
The centralized hub...let's separate that from the need to collaborate. On the need to collaborate...absolutely. For law enforcement and prosecution, in the channels as we talked about—social media might have data, telcos, banks, etc.—there has to be a mechanism to be able to collaborate and share data, where required, for financial crime fighting. With the national anti-fraud strategy and the financial crimes agency, we're expecting to get engaged in a lot of that type of discussion as part of those.
The notion of a centralized hub pooling data from all of those sources hasn't been a big part of the discussion. It's been more about the official mechanisms to share data in a collaborative way and build schemes to share data amongst all those involved in fraud prevention, detection and prosecution across a pretty wide network.
Conservative
Kathy Borrelli Conservative Windsor—Tecumseh—Lakeshore, ON
Mr. Paterson, many seniors are targeted through fake tech support scams or bank impersonation scams where the victim is convinced to install remote access software. Once that happens, the scammer may be able to guide or control the transaction.
What technical safeguards could help detect when a person is being coached or controlled remotely through a financial transaction?
Chief Executive Officer, Plurilock Security Inc.
Thank you for the question.
[Technical difficulty—Editor] is key. As well, in terms of specific technical controls that can be put in place, there's visibility, so understanding what you are installing and what it does, and, frankly, making use of existing technologies such as firewalls. These don't require additional cost [Technical difficulty—Editor].
Bloc
Gabriel Ste-Marie Bloc Joliette—Manawan, QC
Mr. Chair, on a point of order: the interpreters are indicating that they are unable to do their job.
Liberal
The Chair Liberal Ben Carr
Yes, I understand. Thank you.
Mr. Paterson, unfortunately, notwithstanding the fact that we heard bits and pieces of what you said, you're coming in continuously choppy. I'm going to move on. However, I will provide Ms. Borrelli an opportunity to ask that question again down the line if we see that the connection has improved. If not, we'll have her submit that question to you in writing, at which point you can submit your answer to the committee. We can hear you enough, but the challenge is for the interpreter. Unfortunately, I can't rely confidently on the status of the connection at the moment, so we'll try to come back to you, sir.
Ms. Borrelli, we were at the end of your time there, but—
Conservative
Liberal
The Chair Liberal Ben Carr
No, you didn't. You had five minutes, and we were over. I'll circle back to allow you to ask that question again—or another question, if you so choose—as a result of the technical difficulties.
Conservative
Liberal
The Chair Liberal Ben Carr
In a few minutes, if that connection stabilizes, I'm going to allow you the opportunity to take 45 seconds or a minute and ask that question again, or another question.
Conservative
Liberal
Liberal
Karim Bardeesy Liberal Taiaiako'n—Parkdale—High Park, ON
Thank you very much.
Ms. Corrigall-Brown, you mentioned the relationship between cryptocurrencies and the issue we're studying today. The Government of Canada has announced its intention to help create a stablecoin framework, and it's standing up a financial crimes agency.
Can you speak to that? Some written advice afterwards would also be great. What is the collective security regulators' view on melding these two pieces at the same time—the introduction of the stablecoin framework and the introduction of a financial crimes agency?
General Counsel, British Columbia Securities Commission
Thank you for that question.
Our enforcement directors and the CSA enforcement committee have met with representatives in relation to the financial crimes agency. They are also consulting with and providing their views to the federal government in the development of the stablecoin legislation. It is important. There will be the need to ensure that there is respect for the respective jurisdictions and that there's a really clear ability to share information and have co-operative and partnered oversight of entities, as stablecoin is used by different market participants for different purposes. These products and businesses move through jurisdictions, so we need to partner together.
At the highest level, we are partnering. We have offered our strong support for and our view that collaboration and information sharing are absolutely essential.