Industry Committee on June 12th, 2023

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

I was listening on the French channel and I could hear the interpretation into English.

[The Chair, Liberal, Joël Lightbound]

Mr. Beaudoin, could you please repeat your answer?

[Supt Denis Beaudoin]

I consulted my colleagues at ISDE, and as I understand it, they will be responsible for implementing this law. However, this is federal legislation. Therefore, the RCMP would also have jurisdiction. It could be called upon to use the evidence obtained in a broad investigation into money laundering, fraud, drug trafficking, and so on.

In fact, if we find evidence that allows us to lay a charge on a company, we could certainly do so.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Généreux.

Ms. Lapointe, you have the floor.

[Viviane LaPointe, Liberal, Sudbury, ON]

Thank you, Mr. Chair.

I have a question for all the witnesses.

What do you believe are the consequences of not passing this legislation and making these changes?

[Annette Ryan]

I'll go first.

This is a big help. The absence of this bill, this measure, means that it's just that much easier for professional money launderers or criminals to establish corporations that can hide the ultimate beneficial ownerships, the intents of these businesses and the actions of these entities.

It makes it harder for FINTRAC and the RCMP—if I could speak for Denis—to establish those linkages between entities, and the finding of the networks is really core to how we push back even more broadly in terms of the threats that face the country, either through money laundering or the underlying crimes we're talking about, as well as terrorist financing.

Absent this bill and these measures, money laundering and serious crime is just that much easier and pervasive. I think the civic society colleagues have spoken very well to the international position that puts Canada in, in terms of an easier jurisdiction for bad folks to do business in.

[Justin Brown]

I would mostly echo. It's one of our largest legislative gaps in terms of anti-money laundering. If this legislation doesn't go forward, we wouldn't be plugging that gap federally. It would most likely impede our progress to implementing a pan-Canadian solution, and we would continue to be offside our international standards, our international obligations. Canada's corporate and financial sector would continue to experience the reputational damages accordingly.

[Supt Denis Beaudoin]

I would certainly echo the comments from Annette and Justin. When we look internationally at our policing partners, there are several tools they have that we sometimes don't, and that's certainly one of them. As I said in my opening remarks, we certainly welcome this. Not doing it would, again, keep us back from the rest of the world and from moving forward.

[Sasha Caldera]

I share the perspectives of my fellow colleagues from the RCMP, Finance Canada and FINTRAC.

Just to ground this in what the impact would be at the community level, you would see increased risk to public safety if this legislation does not pass. You would see continued foreign influence and foreign interference if this legislation does not pass. You would also see a continuation of business fraud and consumer fraud.

This is a really important bill to pass. It will strengthen the integrity of Canada's economy and hopefully shut these actors out.

[James Cohen]

To build on the agreement that this bill needs to be passed and to put into perspective, again, the consequences of its not being passed, it's been well documented that Canada is a laggard in this area by the Financial Action Task Force, by Transparency International—ourselves at the global level—based on G20 beneficial ownership high-level principles, and by the bad guys themselves.

As I said in my opening testimony, there are websites by enablers overseas who are blatantly marketing Canada as a jurisdiction to bring dirty money to. Just as we're talking about any province being a holdout province and thus being the place for crooks to stash their cash within Canada, if we're the holdout amongst FATF community western nations, it will progressively come here.

As we look at the impacts of the Cullen commission in British Columbia, it started a lot with money laundering in casinos. Everyone said, “As there's going to be pressure, that money will go somewhere else.” Lo and behold, last year we saw the Ontario auditor general's report say that casinos are increasingly becoming a money-laundering issue in Ontario.

As Europe regains its ground on money laundering, on beneficial ownership registries post the court decision, as the U.S. implements it and as all of the FATF members and the over 100 other countries around the world continue to work on this, if we don't move forward, Canada is the last stop for the crooks to stash their cash.

[Viviane LaPointe, Liberal, Sudbury, ON]

My next question is for Ms. Ryan.

Having legislation is the starting point, but we need to ensure that the intent of the bill is covered in the application of it.

In your opinion, what is required to ensure that financial institutions report the information to the registry when they suspect illegal activities? What barriers do you think need to be removed to make that process easier for those financial institutions?

[Annette Ryan]

Thanks for the question.

I think it can't be stated enough just how much work our private sector currently does to keep essentially bad money out of the system. They already follow a range of requirements to check their clients and to make sure that corporate entities can be traced to their beneficial owners. It really needs to be said just how much we appreciate the efforts of banks, realtors, accountants, etc.

While some of the details of the discrepancy reporting will remain to be seen, the core idea is that as they do business with entities and are able to look at their financial records and understand them as clients, if that doesn't line up with what's in the corporate registries that are publicly available, then essentially it's a common-sense step to allow them to be able to report back to Corporations Canada and make sure that the overall system sees the same picture.

We will, as a regulator, be thinking about how that works in practice. That's a step to come once the law is passed.

[The Chair, Liberal, Joël Lightbound]

Thank you, Ms. Lapointe.

Mr. Lemire, the floor is yours.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Mr. Chair.

As you know, representatives of the Canadian Federation of Independent Business were scheduled to attend today, but the Federation cancelled its appearance on Friday, according to a letter received by Committee members today. The Federation has nonetheless shared some of its concerns with us, and I have turned them into questions.

Mr. Brown, how might public disclosure affect the competitiveness of small businesses in relation to their competitors? Will the registry be public, which might not necessarily be the case for registries in other countries? Could this harm the competitiveness of our small and medium-sized businesses?

[Justin Brown]

That question is better directed to officials at Innovation, Science and Economic Development Canada. I can tell you, however, that more and more countries are considering a public registry model, even if it goes further than the international standard.

As previously stated, the bill provides a balance between the publication of information and the protection of information that will be disclosed to government authorities, including exemptions. To the best of my knowledge, the bill seeks to strike the right balance between the publication of information and the protection of sensitive information.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Mr. Caldera, is it international practice to make this information public? The United States doesn’t seem to have made that decision. Why hasn’t it? Do they want to dissuade fraudsters from using their scheme in Canada and thus move the problem elsewhere? Does this concern you?

[Sasha Caldera]

Thank you so much for your question.

I just want to comment that small and medium-sized enterprises can use a publicly accessible beneficial ownership registry to carry out supplier due diligence. If one business is about to transact with another business, they can use the registry to understand who might be the beneficial owners of that contractor, for instance, as part of their due diligence perspective.

In the United States, they took a very different approach for a variety of reasons. When we spoke with our colleagues in the United States, who have driven a public beneficial ownership registry campaign on behalf of civil society, they commented that campaign financing, for instance, was the biggest barrier preventing the United States from making their own beneficial ownership registry publicly accessible.

Did I answer that question clearly?

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Yes, that does answer my question overall.

Thank you very much.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Lemire.

Mr. Masse, you have the floor.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

With regard, Mr. Beaudoin, to the fines and penalties, I think right now the $200,000 is a joke. I'm going to look for an amendment on that. It reminds me that in this country we used to be able to write off environmental fines and penalties and other tax deductions for, basically, criminal activity. It was used basically as part of operations. One could get up to 40% to 50% —in fact, one drug company had a $40-million fine for illegal marketing but got $11 million of that back at tax time.

I guess with this legislation, it will be up to a million dollars, so it will allow for those cases. If it's a small business or a small organization and it's an honest mistake, it could be looked at and they could set that lower. To you, is even a million too little?

In terms of what we're dealing with here, with it being up to a million, there's no guarantee that you're going to get that. Obviously there is going to be some review on that. What are your thoughts on that?

I think that $200,000 is the cost of doing business really.

[Supt Denis Beaudoin]

It's always difficult, when new laws pass, to understand how we can investigate it, how the Public Prosecution Service of Canada will interpret the law and how we can use it. Sometimes a law is passed and we're excited about it, but then in real life it's hard to gather the evidence as written in the law. That's the first thing.

The second thing, to answer your question, is that some criminals will always commit crimes. You could put whatever limit you wanted to on that penalty. I think that at some point, if somebody decides to do money laundering, they are still going to lie to the registry. They are still going to do it. I think the enforcement is going to be important there.

The penalty goes to a certain degree, but, again, making sure that people are held to account will go just as far.

[Brian Masse, NDP, Windsor West, ON]

I think that's critical, because another minister was here and he was saying he wanted to rely on the courts also for some of the fines. As a former city councillor, I always found it very irritating that some crimes weren't sent to the courts because it would have cost way too much money and time and taken officers off streets to go to court appearances instead of doing public safety out there. What I'm worrying about here is that, if our fines and penalties aren't strong enough, then it's going to cost us more through that type of a model. If we at least recover the base amount for actually taking somebody to court, then we're not putting the burden back on the public for somebody doing the wrong thing.

[Supt Denis Beaudoin]

At the federal level, we will provide officers for courts when necessary.

I think the PPSC establishes public interest when deciding to go forward with charges or not, and this is when it takes into account how long a trial may take, how much of the court's time it may take and how much it may cost. These things are taken into consideration when they make a decision.

[Brian Masse, NDP, Windsor West, ON]

Go ahead, Ms. Ryan, and then that's my final time.

Thank you, Mr. Chair.

[Annette Ryan]

I just wanted to say that finding out a specific entity has such an egregious misrepresentation of its beneficial ownerships is informative as well. To the extent that we are informed about who the beneficial owners are, that allows us to do our work and essentially shed light on whether that effort was part of a professional money-laundering effort.

I think it is important to keep in mind that this is within the context of several laws, and the specific penalties around the reporting have backstops.