Justice Committee on Dec. 7th, 2009

[Commr Stephen White]

I don't think there's any definitive evidence of what that amount should be. I think it would be safe to say that there is a lot of fraudulent activity happening that collectively would be in excess of $1 million.

As Superintendent Foster just said on mass marketing fraud, for example, a lot of it is perpetrated right across the country. Individually, in a lot of small towns and communities across Canada, you may only have a handful of victims who are the subject of that particular criminal activity, but if you take that and multiply that by most small communities right across Canada, you could have an organization that's victimizing a large number of people and collectively would definitely be over $1 million.

I can't say the number of instances we've seen recently where the fraud has been over $1 million, but I would think there are quite a number of them, yes.

[Joe Comartin, NDP, Windsor—Tecumseh, ON]

You set out both in your statement and in a written form that the number of incidents you're investigating has gone up. Can you give us any sense of whether that's because of the increased number of personnel you have working in the field or whether it in fact indicates a rise in the occurrence?

[Commr Stephen White]

I would say a bit of both, but definitely a rise in the level of occurrences. Especially with the increase in technology, committing a lot of fraudulent activity today is so easy, and it's very lucrative. When we talk about the mass marketing frauds, for example, what before would take a large group to do a large telemarketing type of fraud, now one individual can do sitting in front of one computer and hitting hundreds of thousands of potential victims in a short period of time.

[Joe Comartin, NDP, Windsor—Tecumseh, ON]

Are there any recommendations from the RCMP in the preventative area? Is there technology we could be deploying to prevent that from happening? Are there regulations, say, under our consumer legislation that would help prevent them from ever happening?

This bill obviously deals primarily with--other than maybe the prohibition section--accepting that we failed, and then deals with penalties. Does the RCMP have any recommendations on prevention?

[Commr Stephen White]

In terms of tools for that, I think we have largely what we need. Where we're trying to put a lot of emphasis right now is in the area of education and prevention. I say enforcement is very costly; the better we can do at educating and awareness to prevent these crimes, the greater impact for Canadians.

I'll just mention one thing that we're trying to do right now. Because a lot of the victims who are targeted are right across the country and any one particular area may only have a small number of victims, locally it may not look like there's any major type of criminal activity taking place. However, when you take that right across the country, instead of a pocket of ten victims out in northern British Columbia, now you have several thousand victims across the country being perpetrated by one organization. One thing we're trying to put a lot of emphasis on is getting all that intelligence in as real time as possible, to bring it together so we're able to see very soon, at least in the early stages, that it isn't a small-scale fraud, it is a large-scale fraud with multiple victims across the country. The quicker we can see that, the quicker we can get out with public messaging to Canadians and try to prevent, educate, and make them aware of this activity happening so that when it does come to their community or they get calls, or messages over the Internet, they're aware. That is the key to prevention, and it's a challenge.

[The Chair, Conservative, Ed Fast]

Thank you.

We'll move on to Mr. Woodworth for seven minutes.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

Merci, monsieur le président.

Thank you to the witnesses for appearing here today. I want to repeat my own apologies for the fact that it has been a bit of a struggle to get you here. We do appreciate your patience.

I want to zero in on one particular part of your presentation, Superintendent White.

Often we hear the notion that crime rates are going down in Canada, and therefore, if crime rates are going down, what in the heck is the government doing by trying to tweak up our justice system?

The logic of that has always escaped me. If only a thousand people are being defrauded instead of two thousand, it seems to me that the government still ought to be improving our justice system.

Your evidence today is very important, and I'm going to repeat some of it. You say, in terms of financial crime trends, the RCMP is seeing an increase in the volume and complexity of mass marketing frauds and identity thefts. Payment card and counterfeit payment card frauds have also increased substantially. An increase in Ponzi schemes is also emerging. In recent years, the Canadian Anti-Fraud Call Centre has documented an increase in the overall number of reported incidents of mass marketing fraud in almost all provinces.

I'm glad we were able to hear that evidence. It serves to buttress our government's approach, in my opinion, in making some much-needed changes to the law on sentencing and fraud.

Apart from that, as you know, Superintendent White, our committee is currently undertaking a study on organized crime. If I'm not mistaken, you have appeared before us on that. Can you tell me how involved organized crime groups are in these kinds of frauds that I've just mentioned? In terms of mass marketing fraud, identity theft, and payment card and counterfeit payment card frauds, how much of that is coming out of organized crime groups?

[Commr Stephen White]

I can't say definitively. I guess what I would be able to say, though, with any degree of accuracy, in answer to whether organized crime is involved in some of these activities, is definitely. We haven't gone out to study exactly to what extent.

I guess it comes back to what I mentioned earlier. White-collar crime today can be conducted a lot more quickly and with a lot more ease than in the past, and it's very lucrative. In just by those two elements combined, I would think we're going to see a larger migration of organized crime groups towards that type of activity.

Have we seen some organized crime groups involved in this type of activity? Yes, we have.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

I suppose in my non-expert way of looking at it, it seemed to me that some of these schemes are so sophisticated that they, by definition or by nature, require a degree of organization. So it would not surprise me, at least, if you see more along that trend.

The other item of interest for me in this has to do with what you just said, that these crimes are very lucrative. Of course, when it comes to fraud, we know that it's all about making a quick buck and it seems sometimes as if people engaged in fraud treat sentencing, in some cases, as the cost of doing business.

These offences are non-violent. The people involved in them are naturally good at charming people. Consequently, when they come to court, it's not a surprise to see that they are able to put on a convincing show and justify conditional sentences, reduced sentences. So we're wrestling with the idea that a million-dollar fraud is a serious crime that will automatically put people away for two years regardless, in fact, of whether there are any other aggravating factors.

What we want to do is restore confidence in the justice system. We want people to know that there is no chance an offender will be sentenced to anything less than two years. We feel that it will go a long way toward restoring the public's confidence in our justice system.

I wonder if you might comment on that. Do you agree or disagree? Have you any thoughts about how the victims of crime are going to react to that minimum mandatory penalty?

[Commr Stephen White]

I would assume they would react positively. Minimum mandatory sentencing has the potential to be a good deterrent for those committing the crimes. But at the same time, victims would expect at least a minimum consistent consequence for anyone carrying out fraudulent activity of that magnitude. From my perspective, any fraudulent activity of $1 million or more is significant. I think victims would look very positively at that.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

It'll be interesting to see if some of the mass marketing crimes will attract the minimum mandatory, at least for those who are organizing the crimes. I think letting the public know that we're enacting a mandatory minimum penality will give people some extra confidence in what the law has to do.

My last question stems from your comment that eliminating profit eliminates the incentive to commit profit-driven crimes. You spoke about an integrated proceeds of crime program that would identify and forfeit illicit and unreported wealth accumulated through illicit activities. You mentioned that there has been more than $64 million in cash and property seized since 2003, and that another $142 million has been seized and is waiting for disposition.

You're familiar with the restitution provisions of the new act, which require a judge to consider making a restitution order and to give reasons if he decides against making one. Could you comment on how that will work with the integrated proceeds of crime program that you mentioned?

[The Chair, Conservative, Ed Fast]

Short answer.

[Commr Stephen White]

A short answer is that we'll be able to do a better job of identifying and forfeiting proceeds generated from the criminal activity. In the current regime, this is forfeited to the government. In respect of its restitution potential, I'm not sure how the mechanics would work. But from a proceeds-of-crime perspective, the more that can be identified, restrained, and eventually forfeited, the better. How this would be incorporated into a regime that would support victims is something that has to be looked at in more detail.

[The Chair, Conservative, Ed Fast]

Thank you.

Mr. Murphy.

[Brian Murphy, Liberal, Moncton—Riverview—Dieppe, NB]

Thank you, Mr. Chair.

Members of the panel, most of my questions will centre on the integrated market enforcement teams, or IMETs.

You covered a lot of territory in your submission, so I think we need to drill down on what IMETs have been doing since 2003. In particular, since we're discussing whether there has been a growth in commercial crime activity—and I think there has been—it might be useful to put more flesh on the IMET bones.

I understand they were established in 2003 in Toronto, Montreal, Vancouver, and Calgary. Is there a plan to expand to other locations? Are they cooperating well with the prosecution services, forensic accountants, and financial advisers? Are there any statistics on the number of crimes that have been detected and brought to conviction by IMETs? Does this bill do anything for IMETs? Are you sufficiently resourced to do what you do?

What were Nick Le Pan's recommendations? He tabled a report, I understand, in 2007. He talks about tools and resources. You say that you're trying to meet those needs. How's that going? I wonder if in his 2007 report any of the aspects of Bill C-52 were the tools asked for. I suspect that it had more to do with resources; with bringing down the barriers between the financial sector, commercial crimes units, and prosecution offices; and with encouraging more cooperation and an easier flow of electronic information.

We're very much in favour of IMETs. Could you give us a history of how this has gone since 2003 and tell us where you want to go in the future?

[Commr Stephen White]

Certainly. I look forward to that opportunity.

I'll give you just a 30-second history. They were created in 2003. As with any new unit being created, there were a lot of challenges. You have to do everything from going out to identify individual staff, to getting locations, to building up investigative teams, and to getting them working. Even though the concept was created in 2003, there was still a period of emergence, and that took a bit of time.

We're cognizant that there have been a number of criticisms of IMETs over the last number of years in terms of the timeliness with which their investigations were completed, but from my perspective, from the law enforcement perspective, those investigations have progressed very much in line with any other major type of investigation that's conducted by law enforcement.

So from about 2005-06, they were really up and running and into their investigative stage, and they started doing a lot of these investigations. As I said earlier, the vast majority of these investigations are multi-year investigations, two- or three-year investigations. In 2009 we started to see with a lot of these investigations that the investigation phase came to a conclusion and resulted in the laying of criminal charges.

Over the last few years, in the four locations across Canada, of the 18 major investigations that were on the go, nine of them have now been completed and have resulted in criminal charges and are currently before the courts. We hope to have a number of other investigations conclude in the near future, and then we have a number of other investigations that are continuing.

I think the results over the last little while show that IMETs are now working effectively, and we are getting the results in, as I said, a number of major investigations.

With regard to Nick Le Pan, I think there were just over 30 recommendations in total, so there were quite a number of them. A lot of them dealt with, as I mentioned earlier, the new resources for those key components, the sort of labour-intensive components of investigations to help us. What we didn't want to do, for example, was major case management, transcribing, getting all the disclosure material together in an investigation. We didn't want to have our front line police officer investigators in the office doing that type of work, so that's why the additional support staff was critical to doing that. We brought in more support staff, and that freed up some time for our investigators to do the main investigations.

It's a huge topic that would take quite a while to go into. I can do a lot more, but I'm cognizant of time.

[The Chair, Conservative, Ed Fast]

Thank you.

Monsieur Lemay, you have five minutes.

[Marc Lemay, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Mr. Chairman.

Thank you for this third visit. It was third time lucky, and very interesting by the way.

I am going to continue the same line of questioning as Mr. Murphy. I would like to know if the integrated market enforcement teams are solely intended to follow market developments, frauds that are perpetrated on the Vancouver, Toronto or Montreal markets. Is that in fact what you are saying, or is the mandate broader that that?

[Commr Stephen White]

The mandate is primarily any type of investigation related to capital market fraud, so it could be directly related to the stock exchanges located in those cities. A lot of that type of activity would occur primarily in those cities, and that's why those units were set up in those locations. Even if there is a market-related type of fraud in another part of Canada, we have what we call a quick-start capacity through which we will take a number of resources from our team here at our headquarters in Ottawa, probably take a number of investigators from existing units, and we will go and try to quick-start a related investigation.

That would, again, be in partnership as well with our commercial crime units, which are located in 26 different areas across Canada. Even though the IMETs are the primary lead in doing those types of investigations, our commercial crime units are also doing a number of capital market fraud-related investigations as well.

[Marc Lemay, Bloc, Abitibi—Témiscamingue, QC]

Thank you.

As far as money laundering is concerned, we have seen a lot of that currently with organized crime. In some cases they take control of businesses in order to launder sums of money, and very often these are legitimate businesses.

Is this program currently working well? Moreover, are you able to follow the money trail, not only in Quebec in particular, but also in Canada and outside of the country, that is to certain tax havens? Are you currently able to follow the money trail?

[Commr Stephen White]

The short answer is, yes, we can follow the money. Obviously the number of cases we can do are limited by the resources we have. However, you hit on a key component of money laundering, and that is establishing a legitimate business and integrating your illegal proceeds from criminal activity with the legitimate revenue of the company. It's a very mainstream way of laundering funds. Indeed, a lot of funds are laundered internationally before they're brought back into Canada.

Again, the success we could have chasing the money outside of Canada is dependent on the partnerships we have with those countries. Around the world we have fairly well-established partnerships for doing this type of work. When we have the opportunity to do so, I think we have been and can be very successful in following the money trail outside of Canada.

[Marc Lemay, Bloc, Abitibi—Témiscamingue, QC]

Thank you.

[The Chair, Conservative, Ed Fast]

Thank you.

We'll move on to Monsieur Petit.

[Daniel Petit, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Thank you, Mr. White.

I have a question for you. Earlier on, at the beginning of your presentation, you talked about minimum sentences. I would like to draw your attention to the fact that I come from Quebec, where the Lacroix case has acquired great importance.

Lacroix was a broker who had a company that was legally sold by the Caisse de dépôt et placement du Québec. He had all the Quebec licences but he nevertheless managed to defraud 9,200 people using a very particular system. As for Earl Jones, he had no licence but he dealt with the bank with which he held accounts in trust. It would appear that they worked on the trusts. The third case is that of Mr. Lafleur, which is related to the sponsorship scandal. He had assets that were traced to Belize, where he was living in a mansion. Then, we had the case of Mr. Coffin who was sentenced to less than two years in prison even though he had perpetrated frauds of over a million dollars. He paid the government back one million dollars, but he did not go to jail.

I would like to know what purpose minimum sentences serve? As you can see, in everything I have mentioned, there are legal issues and vast sums of money involved. Do you believe that a two-year minimum sentence will be significant? How will you follow the money trail? In the case of Mr. Lafleur, we know where the assets are but we are having difficulty getting to them. What would you do in such a case?

[Commr Stephen White]

First, as I said earlier, the two-year minimum mandatory sentence probably will be, in some cases, a very strong deterrent for some individuals. Others, who are definitely committed to doing large-scale fraud, may commit to that fraud anyway, regardless of whatever minimums are out there. I'm a firm believer that in a number of cases it has a strong potential to be a useful deterrent. As I mentioned earlier, in terms of chasing the money outside of Canada, it depends on partnerships and the cooperation of foreign countries, as well. It's out of our jurisdiction. We have no jurisdiction in those countries.

We have a number of mechanisms to assist in our investigations. For example, the Mutual Legal Assistance in Criminal Matters Act is a mechanism under which we do most of our bilateral-type investigative work with foreign countries. Again, it depends on the country. It depends on the type of case. No two investigations in a foreign jurisdiction are alike.

Again, without speaking of any specific investigations, I can say that I think we do a good job trying to locate money. It comes down to how we interact and engage that foreign jurisdiction to cooperate with us and work closely with us.