Industry Committee on Oct. 3rd, 2022

[The Chair, Liberal, Joël Lightbound]

I call this meeting to order.

Welcome to meeting number 36 of the House of Commons Standing Committee on Industry and Technology.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on Monday, September 26, the committee is meeting to study fraudulent calls in Canada.

Today’s meeting is taking place in a hybrid format, pursuant to the House Order of Thursday, June 23, 2022. I am sorry to join you virtually today. I always prefer to be here in person, but that is not possible today.

However, we are fortunate to have several witnesses joining us in person in the first hour today, including representatives from the Royal Canadian Mounted Police: Superintendent Denis Beaudoin, director, Financial Crime; Sergeant Guy Paul Larocque, acting officer in charge, Canadian Anti-Fraud Centre; and Mr. Chris Lynam, director general, National Cybercrime Coordination.

In the second hour, we have Mr. Randall Baran-Chong, co-founder of Canadian SIM-swap Victims United; Mr. Kevin Cosgrove, digital safety educator and civilian advisor; and finally, Mr. John Mecher, retired RCMP fraud investigator. They will be testifying in their individual capacities.

Without further ado, I will turn the floor over to representatives of the Royal Canadian Mounted Police for five minutes.

[Chris Lynam, Director General, National Cybercrime Coordination, Royal Canadian Mounted Police]

Good morning.

Mr. Chair and members of the committee, it is my honour to join you today to discuss the prevalence of fraudulent calls and other scams in Canada, and the efforts undertaken by the RCMP since we last spoke to you on this topic in May 2020.

I'm Director General Chris Lynam. I'm responsible for the national cybercrime coordination unit—the NC3—and the Canadian anti-fraud centre (CAFC) at the RCMP. Joining me today are Sergeant Guy-Paul Larocque, acting officer in charge of the CAFC, and Superintendent Denis Beaudoin, director of financial crimes within federal policing criminal operations.

Before discussing fraudulent calls and other scams impacting Canadians, I would like to briefly outline the mandate of the CAFC and the NC3. First, the CAFC includes a long-standing partnership among the RCMP, Ontario Provincial Police and Competition Bureau Canada. The CAFC works closely with Canadian and international law enforcement partners to combat mass-marketing fraud and other types of fraud, including fraudulent calls.

In 2021, the CAFC aligned its operations with the NC3, another national police service at the RCMP focused on combatting cybercrime. Whereas the CAFC focuses on fraud and online scams, the NC3 focuses more on combatting technology-as-target cybercrime, such as ransomware, data breaches and other cyber-intrusions. The CAFC and the NC3 work closely, given the strong links between fraud and cybercrime, to provide highly coordinated services to the Canadian and international law enforcement communities.

Since our last committee appearance in 2020, the CAFC and the NC3 have seen a significant increase in fraudulent activity in Canada. In 2021, the CAFC received reports of $379 million in fraud losses from victims—a historic year in reported fraud losses and a 130% increase compared to the previous year. At the same time, the CAFC estimates that only 5% to 10% of victims actually report fraud to law enforcement.

Of the reported fraud losses among victims in 2021, more than 70% were cyber-enabled, meaning that the fraudulent activity was committed via the Internet or related digital platforms, such as email or social media. These trends and the convergence of cyber-enabled fraud with other cybercrime activity underscore the importance of collaboration between the CAFC and the NC3, and the need for Canadian law enforcement to continually adapt and keep pace.

Despite the rise in online scams, Canadians continue to be targeted by fraudulent calls at the same time.

In 2021, the CAFC received over 32,000 reports where the victim was contacted by phone by the fraudster. Fraudulent phone calls can include attempts from criminals claiming to be law enforcement, the Canada Revenue Agency, banks and other financial institutions, among other types of fraud.

Make no mistake. It is incredibly challenging to investigate and apprehend fraudsters and cybercriminals. Oftentimes, we are dealing with thousands of victims, multiple policing jurisdictions, and cybercrime infrastructure and digital evidence in foreign countries.

However, these challenges also acted as a catalyst for Canadian law enforcement. We adapted, accelerated our efforts to collaborate with like-minded partners, and took on more of a holistic approach to combatting fraud and cybercrime.

Various RCMP programs continue to play key roles in several international operations against cybercrime and fraud. However, we also recognize that fraud, in all its forms, is a pervasive and enduring challenge, and we cannot simply arrest our way out of this problem. Our response to fraud requires broader efforts.

For example, in some cases, and where possible, we work closely with domestic and international partners to assist with the recovery of victim funds attributable to fraud. In 2021 the CAFC assisted in 36 instances of freezing or recovering funds, totalling approximately $3.4 million.

Another key aspect to combatting fraud and cybercrime is prevention, outreach and awareness-building. It is a happy coincidence that I am here and able to speak to you in October, cybersecurity awareness month. A key theme to our prevention activities this month includes awareness and prevention material about phishing techniques used by fraudsters. Our prevention efforts are ongoing throughout the year, with another notable month in March focused on fraud prevention. Last year for fraud prevention month we focused on outreach and awareness against impersonation scams.

In conclusion, our efforts over the past few years have been significant—insufficient but significant—and we remain committed to finding new ways to protect Canadians and reduce victimization associated with fraud and cybercrime.

I would like to thank the committee for the opportunity to speak with you today. We welcome any questions.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Lynam.

I'll now turn it over to MP Michael Kram for six minutes.

[Michael Kram, Conservative, Regina—Wascana, SK]

Thank you very much, Mr. Chair.

Thank you to the witnesses for being here today. I guess I should start by saying thank you for all the work the RCMP does. I think politicians and the public at large often take for granted the difficulty of the job that law enforcement has. I certainly want to express my thanks for all the work you do.

Telemarketing fraud is a difficult issue. I'm wondering if you could walk us through this. When you are investigating an incident of telemarketing fraud, how do you go about doing that when the perpetrators are located in Canada versus in foreign countries?

[Superintendent Denis Beaudoin, Director, Financial Crime, Royal Canadian Mounted Police]

It may not differ that greatly from other types of investigations. If the suspects are in Canada, we're going to utilize the vast tools at our disposal, including production orders, search warrants and other tools. When people are located outside Canada, then we need partnerships and we need to request assistance from foreign governments. Oftentimes, that creates delay. That's the main difference.

There are other differences, but I think that would be the main difference. If you are seeking evidence located outside of Canada, then you're going to need assistance from a foreign jurisdiction.

[Michael Kram, Conservative, Regina—Wascana, SK]

Can you elaborate on how your co-operation with foreign jurisdictions has been going? Has it generally functioned well? Does it generally run into roadblocks?

[Supt Denis Beaudoin]

Well, I'm sure you would understand that it's very dependent on which country you need assistance from. We have a very strong relationship with countries that are close allies, whereas with other countries it's more difficult. Of course, any type of assistance for evidence goes through the Department of Justice and then through the justice department of the foreign jurisdiction.

There is a process in place, but sometimes we're not able to get the evidence we seek due to a lack of collaboration or willingness from the other country to collaborate. When we talk about complexity, that's definitely one that is at the forefront.

[Michael Kram, Conservative, Regina—Wascana, SK]

When the committee studied this issue two years ago, one of the recommendations in the report was that co-operation in terms of telemarketing fraud be part of future free trade agreements. When we had the CRTC here last week, the witnesses indicated that maybe frameworks or agreements outside of free trade agreements with foreign countries would be more productive.

I'm wondering if the witnesses could share their thoughts on what future frameworks or agreements could be entered into between Canada and foreign countries to reduce this problem.

[Chris Lynam]

I'll answer that, although not necessarily about new frameworks. I can talk about some of the measures that exist now.

As Superintendent Beaudoin mentioned, there's both the domestic piece and then the international co-operation piece. That's a big piece of what the mandate of the CAFC and NC3 is about. It's about working with law enforcement partners domestically and then linking those efforts, where possible, to international efforts. That could be bilaterally with other countries and also multilaterally.

A good example in the cybercrime space is that we work quite a bit with the European Cybercrime Centre. They have a specific group, the joint cybercrime action task force, of 18 member states of Europol plus some third parties—Canada, the U.S. and Australia. Out of the Europol headquarters, they are in contact daily, trying to work these international investigations together.

That is a great example of how collaboration at the multilateral level can lead to further investigations and, if not to arresting or prosecuting cybercriminals and fraudsters, to going after their infrastructure. There have been quite a few successes on that front.

[Michael Kram, Conservative, Regina—Wascana, SK]

If Canada were to pursue future agreements with countries that we don't have agreements with yet, could you recommend some countries that should be at the top of our list?

[Chris Lynam]

I'm not sure I would recommend countries. I think we would continue to try to deepen the relationships we have with some of the key ones that are working together, as I mentioned, a lot of the European countries and our Five Eyes allies, the U.S., U.K., New Zealand and Australia. Those are the ones we are really working closely with on a lot of these international files.

[Michael Kram, Conservative, Regina—Wascana, SK]

What percentage of the problem would you say is contained 100% within Canada, and what percentage of the incidents are based in foreign countries?

[Sgt Guy Paul Larocque, Acting Officer in Charge, Canadian Anti-Fraud Centre, Royal Canadian Mounted Police]

This one is difficult to draw a specific number to because, for the vast majority of scam operations, they will try to work over many different jurisdictions. The way criminals operate in that sphere is that they will operate from point A, likely targeting a victim in point B, and then move the money to point C. We often see that when we look at data from the anti-fraud centre.

To say specifically what it is operating from the country.... We're aware there are scam operations originating from the country, but there are also many scam operations targeting Canadians that come from outside, from all over the world. It can be difficult to give a specific number, but what I can tell you is that Canadians are really being targeted by scam operations. The losses we see with reports at the anti-fraud centre speak to that.

[Michael Kram, Conservative, Regina—Wascana, SK]

When it comes to—

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Kram. That is all the time you have; I'm sorry. Thank you very much.

We will now turn it over to MP Dong for six minutes.

[Han Dong, Liberal, Don Valley North, ON]

Thank you very much, Chair.

I also want to thank all the witnesses for coming today. Good morning.

The last report was two years ago, and technology has evolved quite a bit on the criminal or fraudster side. Could you describe to the committee what you have done to keep up with those technology advancements?

[Chris Lynam]

Part of the challenge, as you mentioned, is that you're dealing with very highly adaptive people, and they are criminals. They can very easily pivot to adopt the newest technique or figure out what technique works. For example, they will watch what's happening in terms of an incident or a government-type rebate, and they will very quickly be able to figure out how to go and put that scam pitch out to Canadians.

They are adapting technology to enable that as well. As we talked about, we now think that over 70% of the activity is cyber-enabled at the same time. We're working with law enforcement across the country to help them either build or acquire software or share best practices in techniques. There are some things out there now that, if we keep training on them in terms of techniques and what have you, are going to make us better prepared.

It's a bit like they move the yardsticks and then we have to keep moving the yardsticks down the field as well.

[Han Dong, Liberal, Don Valley North, ON]

Yes. It feels like you're forever trying to catch up to their technology and their methods.

Do you have any stats on how many arrests you have made in the last two years in Canada?

[Chris Lynam]

We don't collect that in terms of the units represented here. I know that Statistics Canada releases regular crime stats on the prevalence of fraud and cybercrime. In some cases, that trend is increasing in the cyber-enabled. That has increased year to year.

One of the additional aspects is that we don't just focus on the arrests, charges or convictions. We try to take a holistic approach to reducing victimization. In some cases, that could be recovery efforts to help people freeze or recover their money, as I mentioned.

Other efforts are to work with different service providers, so if we come across infrastructure, web domains or websites that we think are being used by fraudsters, we reach out to those service providers to say that we think fraudsters are using this. They can then take action to take those offline and what have you.

We also focus a lot, as I mentioned, on the prevention side. We really focus on a holistic approach to tackling and reducing that level of victimization.

[Han Dong, Liberal, Don Valley North, ON]

If you could provide the committee the actual numbers of arrests, and how many convictions have resulted from these arrests, that would be very telling. That would be very helpful. If you can figure that out later on and submit it to the committee, I would really appreciate that.

In terms of method, it sounds to me that you are more focused on the prevention and loss recovery, as opposed to investigating and catching the criminals. If the criminals are out there, they're going to find different ways to victimize more people. That, perhaps, is part of the reason the public always feels like we're trying to catch up to these technologies and criminal methods.

To change the channel, last week we heard from the CRTC that telecom industries, or companies, feed data—bulk data—to the CRTC. You report to the CRTC. Do you feel there is a challenge on information sharing between the CRTC and RCMP, or to a unit? At the same time, regarding the telecom and financial industries, are you able to get data from them or flags from them when suspicious activity is going on?

[Chris Lynam]

Sure. Actually, I might address one of your questions. I wouldn't want to leave the committee with the impression that police aren't heavily focused on investigating fraudsters and cybercriminals. The mandate of the CAFC and the NC3 is very much about enabling law enforcement agencies in Canada to do those investigations, and the federal policing part of the RCMP as well. There are many investigations under way. I wanted to point out that we don't just do that; we have other activities.

In terms of information sharing with the CRTC and other entities, we operate under what our authorities are in terms of sharing. There is some information we can share with the CRTC and vice versa. Almost any agency would say it can improve information sharing across the board and that would make things better, but there are many opportunities where we share now.

When it comes to private sector entities, like telecommunications companies and financial institutions, we have to be governed by how police operate. If we need information from the police, we often have to get a production order or other type of measure.

There are many opportunities or times when a bank will come to us as a victim and say, “We think we've been victimized,” or, “Some of our clients have been victimized.” There is regular communication, and we have talked about some of the outreach we do when we come across stuff that we think is impacting their clients.

Generally, yes, there is always scope for improved information sharing.

[Han Dong, Liberal, Don Valley North, ON]

Is there anything you need from legislators like us?

[The Chair, Liberal, Joël Lightbound]

I'm sorry, Mr. Dong, but we have to move to our next round of questions. Your time is up.

We will now move to MP Masse, because Mr. Lemire had to step out for a few minutes.

Mr. Masse, the floor is yours.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair, and thank you to the witnesses. I know Mr. Lemire will be back soon. I always enjoy his interventions as well.

I'm glad you finished with the last question. Why is this here at the industry committee? This is the frustrating part for me, having been here for a number of years. This is a regulated industry where we allow criminal activity to basically course its way through. That's the telco sector. None of this would take place, impacting our citizens, without the fact that we have spectrum auctions, we allow access to our infrastructure, and we regulate through the CRTC. All those different aspects provide a vehicle for this activity to take place. I really appreciate the efforts that have taken place, not only here at committee but also over the last number of years to make a difference.

What I'm worried about, and what I'm interested to hear further on in the conversation, is that this is very similar to white-collar crime. It seems to escape the grasp of Parliament Hill here in many respects. We go after the workers and we go after the street criminals, but I'm wondering whether or not there are sufficient laws in place.

I'll give a quick example. We saw Rogers recently drop the 911 access from citizens. We saw from the telco industry, from testimony here, that the telcos were not even working together properly to help each other out to protect 911. I'm wondering whether we should be taking the gloves off with our telcos in some respects to get more power or more improvements in order for the RCMP and other law enforcement to get better co-operation.

I'd like your comments on that, please.

[Chris Lynam]

Obviously more of a regulatory-type argument or position is needed whereby CRTC and the Government of Canada have more of the mandate in terms of how regulated the telcos are or whether additional regulations are needed. I could say that from the RCMP and law enforcement perspectives, we have good relationships with telcos. We try to work with them as much as possible within our current authorities. I really can't comment on whether the government should regulate this sector further. We focus on enforcing the Criminal Code provisions.