Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce

Issue 15 - Evidence, June 7, 2000

The Standing Senate Committee on Banking, Trade and Commerce, to which was referred Bill C-22, to facilitate combatting the laundering of proceeds of crime, to establish the Financial Transactions and Reports Analysis Centre of Canada and to amend and repeal certain acts in consequence, met this day at 3:45 p.m. to give consideration to the bill.

Senator E. Leo Kolber (Chairman) in the Chair.

[English]

The Chairman: Ladies and gentlemen, we are here to continue hearings on Bill C-22. We are privileged today to have as our first witness Mr. Jean Spreutels, who is the president of the Belgian Money Laundering Centre.

Please bear in mind that one of the objectives of this bill -- I say only one of the objectives -- is to harmonize with the rest of the world, which apparently we have not yet done.

Welcome to Canada, sir. I understand that you have some remarks to make and that you will make them in French. Please proceed.

[Translation]

Mr. Jean Spreutels, Chair of the Belgium Centre on Money Laundering: It is a great honour for me to appear before your committee. I prepared the written text of my brief, but since I was unable to prepare an English version, because of a lack of time, the Canadian Department of Finance has very kindly proposed to provide the English version.

I am Deputy Attorney General of the Supreme Court of Belgium, but it is mostly in my position as Chair of the Financial Information Group that I appear before you today. This Group is the equivalent of the Centre for Analysis which the bill you are studying would like to create.

I was the president of the FATF (Financial Action Task Force) in 1997-98. Currently I chair an ad hoc group of the FATF dealing with countries and territories which are non co-operative and our responsibility is to put together a list of these non-co-operative countries in our continuing struggle against money laundering. This list must be created within the next two weeks.

I would like to deal with several points. First of all, I would like to speak of the scope of the phenomenon of money laundering and the need to combat it. Then, I will tell you about how the anti-money-laundering system in Belgium succeeded and the international context in which this system fits. I will perhaps spend more time, within the international context, on the importance of creating the obligation to declare suspect transactions and that such declarations should be made to a central independent unit. And I would also perhaps add a few words regarding the organizations and professions who have preventive mechanisms in place. And lastly, I would like to give you a brief description of the Belgian system which meets these two essential conditions, namely a system where a statement is compulsory where there is suspicion and the creation of an independent central authority or central service.

As to the size of the phenomenon and the need to combat it, all I can do is quote Mr. Michel Camdessus, then Director General of the IMF. In February 1998, he stated:

Money laundering has a negative impact on how markets work and therefore is a detriment to economic growth.

While of course keeping in mind:

... the social and political consequences of organized crime and of money laundering which result, the suffering of the victims and the general weakening of the social fabric and the collective ethic. It is therefore important to combat money laundering, by attacking criminal activities where they are the most vulnerable, in other words where these illegally obtained funds come into the financial circuit.

This illegally acquired money represents a vast amount which is difficult to evaluate with any precision, but which various experts set at between 500 and 1000 billion dollars U.S. per year. There has also been made mention of 2.5 per cent of the global gross domestic product.

The main sources for this money come from organized crime in all its forms, and not only drug trafficking, but also, since of course crime has diversified over time, from economic and financial crimes which have a tie to more traditional forms of organized crime. It is therefore an enormous mass which may well destabilize the world economy, have a negative effect on the redistribution of the money supply, infiltrate legitimate economic structures, and even -- because these sums are also source of corruption -- put certain political systems at risk.

Therefore, the dangers of this phenomenon of course attracted the attention of the international community, who intervened by adopting legislation which on the one hand, deals with the repressive aspect of incrimination, of the criminal offence of money laundering, of seizures, confiscations and, on the other hand, develops what we call a preventative aspect, because the repressive side does encounter certain limits given the sophisticated nature of the money-laundering operations and their naturally clandestine aspects. Therefore, the preventative system quickly appeared to be the best way to preserve financial structures and to put an end to the exponential multiplication of money-laundering operations by early detection, at the outset, of these operations where they are principally using the financial sector and currently also other professions. We are seeing a movement of the money-laundering activities from the financial system towards non-financial professions.

My second point deals with the very real results of a system which has put in place the compulsory declaration of suspicion of money laundering, and created a central administrative unit which has an independent status and full autonomy, which would receive and then analyze the suspicious operations.

This is the Belgian system. Of course, one has to realize that we are dealing with a system in a small country whose means are limited. The system was implemented in 1993. It has been around for about seven years. Over this time, we have received 38,000 statements of suspicions from financial organizations and other people specified under the Act. These are not automatic declarations, but only statements of suspicion. A preliminary analysis must be carried out by authorities within the financial institutions or other professions concerned.

These 38,000 statements allowed us to open within our office, a little over 7,000 separate files. After analysis and discovery of serious indications of money laundering, the Group transferred 2,200 of these files to the prosecuting attorney, namely 31 per cent of all the files created. In terms of statements of suspicion, that represents some 62 per cent of all the statements. This demonstrates that there is good co-operation from the financial sector first, and now with the other professions concerned, and that these professionals and organizations are quite intelligent since 62 per cent of the statements which were sent to us were then tied to serious crimes as set forth in our legislation. The amounts involved in these cases which were then forwarded to legal authorities totalled 214 billion BF, which is a little over $7 billion Canadian.

The underlying forms of criminal activity in these files which were then conveyed to the authorities include 60 per cent of drug trafficking, which would appear to confirm the estimates made by other countries. It is not only a matter of drug trafficking; there are also other forms of organized crime, such as a variety of illicit traffic of goods or merchandise.

Of course, the legal system must then absorb this new caseload. I have the numbers for June 30 of last year. The courts and the tribunals, based on the files which were sent over by the Group to the prosecutor, brought down guilty verdicts in 184 cases. Therefore prison sentences were handed down, fines were handed down, and an amount equivalent to over 8 billion BF, approximately $240 million Canadian has been confiscated.

I can safely say that without this compulsory declaration mechanism to a central and independent authority, the vast majority of these crimes would have gone unpunished. Police statistics show that 90 per cent of money-laundering files in Belgium, which are dealt with by police services, come from statements of suspicion which financial institutions and other people concerned by the legislation forward to us.

This system has not led to any useless supplementary costs or any disproportionate costs for financial organizations. On the contrary, it has allowed them to reenforce their internal audit system and thus to improve the detection and prevention of fraud, both internally as well as externally, of which they may be victims. No sector is currently complaining about any costs which would have stemmed from the implementation of the money-laundering system in Belgium, to the contrary.

From an international perspective, I must indicate that the first initiatives were carried out back in the 1980s when, for the first time, we requested active cooperation amongst financial organizations with authorities in charge of enforcing the law. The first text along these lines stem from the Committee in Basle, the committee dealing with the rules and practices of banking operations of which Canada is a member. And on this occasion, I would like to mention Canada's very active role in various international organizations which have led to a more systematic policing of the fight against money laundering. The main organization in the fight against money laundering, namely the FATF, as you know, stems from the G-7 which put together 40 recommendations. On the international scene I could also mention a European directive of 1991 which basically repeated for a European Union context the 40 recommendations of the FATF.

The FATF is actually comprised of 26 States and independent territories and two international organizations. Three new members will belong to it as of the end of the month: Argentina, Brazil and Mexico. Of course, all these countries have to subscribe to the principles of the FATF, but they are not the only ones. I can mention, without giving a complete list, the member States of the Commonwealth. I believe that there are 52 of them, even if there is an overlap at times. There are 10 States within the Extraterritorial Banking Authority Group, 11 member States of the Black Sea Economic Cooperative, 11 members of the Caribbean Financial Action Group, 22 members of the Council of Europe Select Committee on the Evaluation of Anti-Money-Laundering Measures, and 17 countries of the Asia-Pacific Group dealing with money laundering. The list is incomplete because we would also have to mention the initiatives adopted by the CICAD, the Inter-American Drug Abuse Control Commission, stemming from recommendations of the FATF, within the OAS which has 33 members.

Therefore it goes much further than simply the United Nations -- it has a truly global scope -- and we are preparing a convention against organized international crime which will contain a certain number of measures in the fight against money laundering which will be drawn directly from FATF recommendations and which include the obligation to identify clients and economic areas, the registration of financial operations, the creation of a central service for the collection, analysis and information dissemination, the compulsory declaration of suspect declarations to this service as well as co-operation and exchange of information between the various services working in this area in all member States of the UN. This convention is being negotiated in Vienna for the time being, and it seems to be moving along well and will soon apply throughout the world.

This all goes to show that there is currently a large number of countries who have subscribed to the rules considered to be a minimum when trying to fight money laundering. The FATF took the initiative with regard to the cooperative States, and that is the ad hoc group that I chair for the time being. Amongst the criteria that have been established whereby we considered a State as non-cooperative, and again it is not an exhaustive list, you have to take into account how all the systems work. Amongst these criteria, there is the lack of the compulsory nature of declaring suspect transactions and the lack of centralization of these statements within a central body. These criteria also apply if one wants to become a new member of the FATF and for the time being, three countries are being evaluated.

I would like to underline the crucial importance of a declaration of suspicion. It is at the very heart of the international instrument that I have just mentioned, not only for the FATF. I could also have added the United Nations Commission on Narcotic Drugs and Interpol, as those organizations also insist on that criteria. The FATF has evolved since 1996, because what was once an option has now become compulsory.

It is also the case in a new model of legislation on money laundering and the proceeds of crime established in 1998 by the United Nations Program to eradicate the international drug trade. Obviously, the system does bend the principles of discretion or of professional secrecy of financial organizations, or even where it exists, banking secrecy.

I think -- and I am not the only person who says so since I have given you a list of all the States and international organizations who have also made statements along the same lines -- that it is one of the principal models, if not one of the only ones currently available, which can expeditiously counteract these increasingly complex operations. You have to have as much of an overall view as possible of the phenomenon. The fact that this mechanism has now become compulsory is without a doubt the best way to ensure that there is equity among the clients of the organizations, who can no longer make arbitrary decisions as to whether such and such a file should be sent on.

Any suspicious operation must be reported, an obligation whose effectiveness is guaranteed through a sanction mechanism which, according to the country, can be either criminal or administrative. Finally, this mechanism for the mandatory reporting of suspicious operations requires the creation of a body to process the information. In order to be effective as well as legitimate, and by that I mean in order to offer the greatest protection for the privacy of the various organizations' clients as well as fundamental freedoms, this agency must be independent in its management and especially in the decision-making process.

These are the conditions that are required so that trust may be established among the organizations, the people operating under the law, and the body that collects and analyzes the declarations of suspicion which act as a filter, so that only the serious cases of money laundering arising out of serious criminal activities will be reported to police and the justice system.

I might add that the Canadian bill seems to offer the greatest protection in terms of freedoms and privacy, and is also quite strong in the autonomy and independence to be granted to the centre that will be created. The one example I will quote is the fact that it prohibits the search of the analysis centre and will allow police access to the information held by the centre, with a warrant, only under the conditions set out in the Act. The same applies to the guarantees of solicitor-client privilege for legal advisors and lawyers. This is also becoming more and more common among the related international instruments which affect not only financial institutions but also the non-financial professions, particularly the legal and accounting professions.

The FATF made a statement to this effect in 1996. The European guideline is being renegotiated at present. Its jurisdiction will be deliberately extended to professions such as securities brokers, real estate professionals, casinos, as well as those in the accounting and legal professions, including lawyers. Of course, we must not single out the lawyers, but they must be included when they act on behalf of clients in financial dealings. We have no intention of affecting the fundamental role of the lawyer in exercising the right to a defence. I am now ready for your questions.

[English]

Senator Kroft: We appreciate your coming so far to help us with this bill.

I have two or three unrelated questions. When you spoke of the amounts of money involved globally in these transactions that lead to the need for this response, I think you used figures of $500 billion to $1,000 billion U.S. per year. Forgetting whether or not we are internationally using the zeros in the same way, it is a lot of money.

You talk about the ability of that amount of money to destabilize economies or governments. It is a very frightening prospect. Would you have any comment on how coordinated or organized that money is? It is one thing if all that money is under the direction of one person, one board of directors or one family, but is there not some overstatement of the threat? Is it not a statistic that is drawn from such a vast, diverse number of transactions that the threat sounds worse than it is? In other words, how organized are the bad guys? I will leave it at that and go to another question when I have a response.

[Translation]

Mr. Spreutels: I fear that the criminal groups are well organized and perhaps the increase that we are detecting is only the tip of the iceberg. The figures that I gave you come from the International Monetary Fund, but they have been corroborated through other studies. For drug trafficking alone, the annual amount that is laundered is estimated at between 300 and 500 billion American dollars. According to a recent United Nations report on the offshore accounts, of the $5,000 billion deposited in tax havens, it is estimated that 500 to 800 billion dollars come from organized crime. This is from a recent 1999 United Nations report. That is what they call the black hole of the world economy.

[English]

Senator Kroft: Thank you. The other question I have is rooted in my overwhelming concern, a concern that I think most of us share, granted there is a problem, regarding the appropriateness of the response in terms of the question of civil rights and privacy, the collective issues of individual rights. You have pointed out that this seems to be a protected statute.

Take Belgium as an example for a sort of comparative law question. We have our Charter of Rights and Freedoms, which protects these rights. To the best of your knowledge -- and this is perhaps an unfair question -- would you say that the legal environment in which you work is more sensitive or less sensitive to these issues? I am trying to judge whether, if your experience is good and non-problematic, it is because your threshold of concern in Belgium may not be as high as ours is in this country on matters of individual rights. I appreciate that it is an awkward question and I hope you have been able to discern what I am getting at.

[Translation]

Mr. Spreutels: Yes, and I might also tell you that I am also, incidentally, a professor in comparative criminal law at the Université de Bruxelles. In that capacity I compare the various legal systems, whether they be common law or continental. I think I can say that if the legal mechanism is different, the practical result is quite similar. What I mean is that in Belgium, fundamental rights, including the respect for privacy, are part of our Constitution.

Moreover, we are signatories to the European Convention on Human Rights, the Convention of the Council of Europe, which, in clause 8, also provides for the protection of privacy. This protection is guaranteed through the remedies that can apply, not only with respect to domestic law, but also international law, involving courts and tribunals, in particular the Cour de cassation of which I am a member.

And that is not all, because we also have laws that are much more specific, for example, those that protect personal information. We also have wiretap legislation, but with respect to personal data, or data bases, we have a law which created a privacy commission which, I believe, is very close to your Privacy Commissioner here, and which also exercises control. It is a control which is indirect.

I believe the same thing applies here also. If the citizen does not have direct access to our data, he is entitled to file a complaint with the Privacy Commissioner who can determine whether or not our system complies with the protective legislation.

I will admit that the system we now have is born of compromise, but also of balance. Moreover, in Belgium, we have managed to strike such a balance by setting only two conditions for imposing the active co-operation of individuals or private undertakings such as banks and other professionals, which, consequently, affects the privacy of their clients.

First of all, we can only fight against serious criminal activities, and not simple tax fraud. The second guarantee is that we created the group for processing financial information, with its independent status. It acts as a filter that only releases those cases where a clear link with serious forms of crime covered by the law have been established. This information is sent only to the prosecuting authorities -- not administrative or taxation services. I think that is the only condition that will give us a well-balanced system.

[English]

Senator Kelleher: Thank you for coming this long distance. I am somewhat interested in money, other than money laundering. Could you tell us if you have any idea what it cost to set up this commission and what are the annual operating expenses of this commission?

[Translation]

Mr. Spreutels: Yes, it varies according to the country. However, in Belgium, the total administrative cost for the unit is 60 million BF. That is not very much.

[English]

Senator Kelleher: What type of transactions must be reported by the various financial institutions and financial intermediaries?

[Translation]

Mr. Spreutels: On the one hand, in cases where financial organizations or brokers are certain that the transactions involve money laundering, but that is very rare, and second, transactions that are suspected of involving money laundering.

The operation must be suspicious. It results from an analysis made by the designated money-laundering specialist in each financial organization. The analysis is based on whether or not the operation appears normal, as well as on the organization's client profile or on certain characteristics of the operation. We have managed to determine a profile of operations related to drug trafficking with the Netherlands or with Russian organized crime, for example, which is active to a certain extent in Belgium. We therefore have criteria allowing us to determine whether or not an operation is suspicious.

For the casinos, we have a system for automatic reporting. A list of indicators has been established -- which can evolve and be revised -- through which the casinos must report all operations that meet these criteria. Other organizations and individuals are themselves responsible for reporting.

[English]

Senator Kelleher: Does your legislation set out criteria and examples of what would constitute a transaction that should be reported?

[Translation]

Mr. Spreutels: For casinos, yes. For other financial institutions and financial intermediaries, no. Of course, we work closely with the professional associations involved and representatives of the various sectors to develop guidelines, lists of suspicious transactions and classification systems that vary from one sector to another, and are constantly changing, in keeping with the ever increasing knowledge that we are acquiring of the phenomenon.

We therefore take into account the classification work done by the FATF and by other international organizations. We have our own files, we conduct discussions with representatives from the sectors involved, and they are the ones who are responsible for communicating to their members the criteria that may be used to determine whether or not a transaction is suspicious.

[English]

Senator Kelleher: If I were a lawyer practising in Belgium and entered the role of a financial intermediary and felt it was necessary under your legislation for me to make a report, is my client informed, or do I have the right to inform my client, or does he remain uninformed about my making a report?

[Translation]

Mr. Spreutels: It is a very widely accepted rule, in all the international instruments developed to combat money laundering, including the FATF recommendations, that intermediaries may never inform their clients that they have reported a suspicious transaction. This is a rule that is found universally in all systems that suppress money laundering, and I think that it is an easy one to understand.

Currently, in Belgium, the system does not yet cover lawyers. We are waiting until completion of the amendments to the European directive that applies expressly to lawyers when they are acting as financial intermediaries. When this is the case, lawyers who discover a laundering transaction and are not retained to defend their client in court, will, like other financial intermediaries, have an obligation to report the transaction to the analysis centre and will not be able to inform the client that it has been reported.

[English]

Senator Kelleher: I have one further question. Under our proposed legislation here in Canada, once a report is made, let us say by a lawyer fulfilling the function of a financial intermediary, and the government agency or the commission or whatever you want to call it determines that they need more information and they want to pursue it, they would have the power here to enter, inspect and make copies of the records of the financial intermediaries without a warrant. Of course, that is causing a great deal of concern for lawyers because they feel it infringes upon the solicitor-client relationship. Have you any comments with respect to that? Are you going to produce similar legislation in Belgium?

[Translation]

Mr. Spreutels: In the current Belgian system, people who enjoy a legally approved professional privilege must report transactions to the centres spontaneously. This includes, for example, the public notaries mentioned in the Act or the "réviseurs d'entreprise," that is, the statutory auditors or external accountants, as well as other people to whom professional privilege applies. However, they have no obligation to answer complementary questions that are asked by the centre.

Those who are entitled to exercise professional privilege may remain silent when asked to testify in court if they believe that the information is legitimately covered by professional privilege. Therefore, they make a judgment. However, the law says that they are not infringing on professional privilege by conveying this information, by reporting to the analysis centre. Consequently, reporting is mandatory, but responding to a question put by the analysis centre is optional and left to their judgment. On the condition, of course, that professional privilege is not abused.

[English]

Senator Kelleher: Would that apply to records of the lawyers as well as talking to them? Would they have access to the lawyers' papers and records?

[Translation]

Mr. Spreutels: They have access only to the documents related to the transaction which they themselves spontaneously reported as suspicious.

[English]

The Chairman: I think there is a little confusion with regard to what the centre would have the right to do. We will try to get that clarified later. It does not appear that it would have the right to go in without a warrant. It would have the right to determine whether the institution was in compliance. I cannot explain the difference, but that is a question we should ask of someone else later on.

Senator Kelleher: It is my understanding that this would apply to a lawyer in the role of a financial intermediary.

The Chairman: I do not want to debate it now. We will get someone to elucidate that matter later.

Senator Furey: I also wish to thank you for being with us today. I want to return to the line of questioning begun by Senator Kelleher. Could you explain further the setup of the agency? Is it a stand-alone agency? Is it affiliated with existing enforcement organizations? How many people and of what type are employed there?

[Translation]

Mr. Spreutels: It is an independent administrative body that is under the external control of the Ministers of Justice and Finance, so that there is dual oversight. It is an external control in the sense that the ministers or departments cannot interfere with the agency's decision-making process. The agency's executive, which makes its decisions as a group, is made up of six people. Three members come from the judiciary -- these are public prosecutors who are seconded to the agency -- and the other three are financial specialists who usually come from organizations that oversee the financial sector, for example, the commission that oversees the banks or the agency that monitors the insurance sector. We have a staff of 20 officers, including nine analysts. We have three permanent liaison officers who are seconded from the major police forces, who are subject to professional privilege, and we have agency members and staff who work as contacts with police forces.

[English]

Senator Furey: My next question pertains to what you do with the information you receive. For example, when a bank reports suspicious activity to your agency, what do you do with that report? I am wondering whether it is analyzed internally or whether you use external people to assist in analyzing the information you receive.

[Translation]

Mr. Spreutels: No, it is all analyzed internally by our staff and by ourselves. We have powers that are not the investigative powers of a police force, but powers that allow us to obtain information. We have the authority to ask any financial organization composed of people mentioned in the law for any additional information in their possession. As far as professional privilege is concerned, there is the exception that I mentioned earlier.

We can also request any information we think would be useful from the Belgian police forces, from any government administration, including the Finance Department, and, therefore, tax authorities. However, we cannot provide any information to either police forces or tax authorities. We can also have access to certain information that is provided for the agencies that oversee the financial sector.

Finally, we have developed bilateral co-operation mechanisms with similar foreign agencies, including a whole series of guarantees. To date, I have signed 25 co-operation agreements with similar foreign bodies. From all of this financial, administrative and police information that we process ourselves, without conducting field investigations or questioning the people involved, we determine whether or not a connection exists between the financial transactions and the serious crimes covered by the legislation. If we have serious reasons to believe so, we must then transmit the file to the authorities responsible for prosecution.

[English]

Senator Furey: You initially do an internal investigation or analysis, but you have the legislative authority to go beyond that and speak to outside agencies.

I am not sure whether you said there were 38,000 declarations of suspicious transactions since 1993 or in 1993. In any event, I am more interested in the breakdown.I believe you said that 31 per cent of those files went nowhere and 62 per cent of those declarations determined criminal activity. Did I hear that correctly?

[Translation]

Mr. Spreutels: Yes, there have been 37,000 reports since the agency was created, in just under seven years. We do not have an automatic reporting system. These were there for all the transactions that were deemed to be suspicious by the financial organizations themselves. So 62 per cent of the reported transactions were handed over to the prosecuting authorities, and the others were filed away at the agency. This means that we closed our files. Of course, we can always reopen them if ever we receive additional elements. Among our sources, we now have a huge internal database that allows us to cross-check information within the agency, without having to use databases from other institutions.

[English]

Senator Furey: If you make within the agency a determination that 31 per cent of these files are going to be closed, are the clients notified they have been investigated?

[Translation]

Mr. Spreutels: No, but we do advise the financial organizations. We notify the people who reported the transaction that we have closed the file, but that this may only be temporary and they should therefore remain vigilant in case they ever discover more suspicious transactions connected to the same client. We do not clear the names of these clients ourselves, but we nevertheless provide some feedback to the people who reported them to us.

[English]

Senator Furey: Surely, you would find information that would indicate that at least some of them, let us say a very small number, were innocent transactions and had innocent explanations so that they would in fact be closed.

When you send it back to the reporting institution, it would be highly unlikely, I would suggest, that the reporting institution would notify the client. Therefore, an innocent client who has been investigated has no way of knowing that they have been investigated. Is that what you are saying?

[Translation]

Mr. Spreutels: I do not see what such a client would gain by knowing, because nothing has happened and everything stays within the agency, which is an intermediary. That is precisely one of the safeguards given to clients of financial institutions, thanks to the creation of a sealed-off agency that acts as a filter, because if the transaction was reported immediately to a conventional agency, similar to a police force, an innocent client would have a police file and traces would always remain. Whereas now, the information remains solely within this agency and does not go farther.

[English]

Senator Oliver: Are you familiar with Canada's Charter of Rights and Freedoms? If you are, are you aware that lawyers in Canada have a responsibility when a client comes in to see them, say on a commercial transaction or a securities transaction, to keep much of that information confidential so securities information does not leak out and offend securities rules, like the stock exchange?

Are you aware that, in addition to the obligation for confidential information, lawyers also have obligations regarding privileged communications? When a client tells the lawyer or the financial advisor certain information, he or she has a right to know that that information will remain confidential and privileged. Are you aware of that rule applying to the professions in Canada?

[Translation]

Mr. Spreutels: This rule is exactly the same in Belgium.

[English]

Senator Oliver: You have referred to the Canadian statute. Clause 11 of Bill C-22 says that nothing in Part 1 requires a legal counsel to disclose any communication -- the word is "communication" -- that is subject to solicitor-client privilege. Communication does not include an activity; it does not include a transaction, as in "every prescribed financial transaction" from clause 9; nor does it refer to confidentiality. That being the case, my question to you as an expert and as a lawyer is this: Do you think that the language in clause 11, dealing only with communication, is broad enough to protect accountants, lawyers and other financial intermediaries who are dealing with something like a securities transaction?

[Translation]

Mr. Spreutels: You are referring to clause 11, which says that "Nothing in this Part requires a legal counsel to disclose any communication that is subject to solicitor-client privilege"?

[English]

Senator Oliver: Yes. I am talking specifically about the word "communication."

[Translation]

Mr. Spreutels: I see that this word is not contained in the French version of the text.

[English]

The Chairman: Could someone tell us what the French version says? Senator Oliver, do you have that there?

Senator Oliver: Yes, I have. The French translation is on the right and it talks about a secret professional, a judicial counsellor.

My submission to you is that the language in the English version is not substantial or broad enough to protect lawyers, accountants and other financial intermediaries from the burden of confidentiality and privilege they have by virtue of their professions.

[Translation]

Mr. Spreutels: I greatly fear that I am not competent to undertake such a detailed analysis of the proposed system, which is very complex, very balanced also, and which contains a whole series of safeguards. However, when I first read the clause in French, I had the impression that this notion of solicitor-client privilege seemed sufficiently clear.

[English]

Senator Oliver: It does not refer at all to confidentiality.

To go to a separate area, a different kind of question, in the Canadian statute the threshold for accountability is $10,000. What are your comments as to the appropriateness of that threshold, whether it is high enough, too high, or too low?

[Translation]

Mr. Spreutels: I believe that this is the threshold over which a client must be reported, in the case of an occasional client. This figure is perfectly in keeping with the provisions of the laws of the European Union member states.

[English]

Senator Oliver: How much is it there?

[Translation]

Mr. Spreutels: It is 10,000 euros.

[English]

Senator Oliver: When you made your opening remarks, and before Senator Kelleher asked you questions, you said that lawyers should not be covered comprehensively. Then when Senator Kelleher started asking you questions about the client-solicitor privilege, you did indicate that when they function as financial intermediaries, lawyers should be covered comprehensively. I find that a contradiction. Perhaps you can assist me by explaining what you meant.

[Translation]

Mr. Spreutels: The profession of a lawyer and the social role of the lawyer are very complex things. I think that everyone realizes that it will not always be a simple matter to distinguish between the lawyer who is acting as a financial intermediary and the lawyer acting as counsel in defending the client before the law.

In this regard, a key role must be played by the disciplinary authorities for lawyers, and therefore the lawyers' associations that should participate in them. This will be the case in Belgium, where they will cooperate very closely in formulating this legislation and, above all, in applying it, so as to ensure that such a provision does not lead to breaches. The solicitor-client relationship is one of the pillars of our democratic system; on the other hand, however, a democratic society cannot permit a profession that acts as a financial intermediary to be the missing link in a system to protect against laundering the proceeds of crime. It is not easy. We have to achieve a balance and I believe that the good will of all the parties will be essential.

[English]

Senator Kroft: My supplementary is directly on this point. I would ask your opinion in summing up Senator Oliver's and Senator Kelleher's inquiries. Since your centre was established, have you generally satisfied the public and the profession that a line has been drawn successfully between lawyers as financial intermediaries and lawyers as counsel, lawyers as lawyers? Is that a contentious matter? Would you say it is an ongoing problem? How would you characterize your success in this area?

[Translation]

Mr. Spreutels: I believe that this balance has been achieved with respect to the professions that are currently covered by the law, the professions which exercise professional privilege like public notaries or some accounting professions, which in the beginning had also set out some obligations in principle with regard to their inclusion in the system. In fact, it was thanks to the cooperation of the professional associations and the close contacts that we maintained with them that we achieved a balance. Now I no longer hear any complaints about the system. As for lawyers, I cannot tell you anything because they are not yet part of the system in Belgium.

[English]

Senator Wiebe: This question could be a supplementary to the questions of Senator Kroft and Senator Oliver. It could be based in part on my understanding of the translation. In your opening remarks, you mentioned that Bill C-22 is the most highly protective of privacy and civil rights. Did you mean that in comparison to legislation that you are aware of in other countries?

[Translation]

Mr. Spreutels: Yes, absolutely. I was very impressed in particular by the provision that states that no search warrant may be issued for the centre, thereby providing special protection for the confidentiality of the very sensitive data that the centre must maintain. Moreover, as part of an upcoming review of the Belgian law, as a result of the amendment of the directive, I will be urging my government to introduce a provision of this type into our system, so as to strengthen the protection and the privacy of the information available to the centre. Actually, it was after a comparative study of the other laws.

[English]

Senator Wiebe: From your experience, do you feel that the bill's highly protective nature regarding privacy and civil rights will hinder or complement the effectiveness of the legislation?

[Translation]

Mr. Spreutels: No, I think that this would rather contribute to its effectiveness inasmuch as, thanks to this enhanced protection, there will be a relationship of trust between the financial institutions, the other people covered by the legislation and the analysis centre. In my view, it is a way of ensuring its effectiveness.

[English]

Senator Tkachuk: You mentioned earlier the budget of 60 million Belgian francs to operate the centre. You also talked about the number of employees who were seconded. When an employee is seconded from the police or from other departments is their salary paid by the department from which they were seconded or is it included in the 60 million Belgian francs?

[Translation]

Mr. Spreutels: Yes, I believe that each national system has its own institutional arrangements. It is hard to transpose one system to another with regard to such practical considerations. Since we are highly autonomous, we recruit our staff members ourselves and we pay them ourselves, out of our budget. However, the salaries of the agency's board members, including myself, a member of the judiciary, are paid by the government and do not come out of the agency's budget. Similarly, the police officers who are seconded to the agency remain on the payroll of their original police force.

[English]

Senator Tkachuk: So the police officers and the people who work directly for the board are paid from outside of that budget. What is that expense? If all were paid out of the same budget, would the budget need to be twice as big or three times as big or 50 per cent bigger?

[Translation]

Mr. Spreutels: No, it is quite insignificant because, apart from the three prosecutors who are seconded to the agency and work full time -- although I personally do not work full time, although my colleagues do -- the other staff members are part-time employees and only attend meetings. There is one meeting per week, during which we make decisions as to closing files, transmitting files or collecting additional information. It would be unreasonable to charge the total salaries of these people to the agency's budget because they also have other duties. As for the three police officers, I believe that it is very insignificant in relation to the total budget.

[English]

Senator Tkachuk: You have been in operation for seven years. You said that 38,000 of those pieces of paper have rolled into your office. What percentage would have been referred to the police? What percentage of that amount would have been prosecuted successfully?

[Translation]

Mr. Spreutels: The 38,000 reports of transactions were grouped together in 7,000 files because many reports may deal with the same person, the same company, the same case. We therefore processed 7,000 files. Of this number, 1,800 were referred for possible prosecution. I do not yet have the most recent figures for the past year, which will not be available until the end of the month, but the judicial outcome was 180 convictions. However, there are still at least 100 cases that were sent to court but have not yet been tried.

Occasionally legal proceedings are dropped. But, in the majority of cases, the investigations are still under way because they are generally of a complex nature. As you are well aware, these are never very simple cases, justice is slow and investigations are slow too. There are often international connections in these investigations, which also slows them down. For the time being, I am pressing the government to take more effective legal action on the files transmitted by the agency. This is also part of the new security plan that the government adopted only last week.

[English]

Senator Tkachuk: I believe that that would amount to about 26 successful prosecutions per year, on average, from your department alone. That does not take into account people that police outside of your agency may have caught using the banking system to launder money. How many would have been caught without your agency?I am wondering whether the agency is necessary. The agency is catching only 26 per year and only looking at 1,800 files. Surely many of those files would have exceeded 10,000 euros, which means that they would have been sent to the police in any event and the police would have investigated them without your agency. I am wondering how many could have been handled otherwise.

[Translation]

Mr. Spreutels: No. I would like to remind you that we do not have an automatic reporting system for suspicious transactions. A transaction does not have to be reported to the agency just because it exceeds 10,000 euros. The 10,000-euro threshold applies only to identifying clients. What we receive are only the transactions that financial organizations, after conducting their own analysis, consider as suspicious, regardless of the amount. There are a number of systems existing in the world. We have one which is not an automatic reporting system.

The figures that I cited refer only to files that were opened by the agency in response to a report of a suspicious transaction. Of course, the police opens other money-laundering files, because the police may have knowledge of offences from other sources. The police unit that specializes in fighting money laundering indicated in its last annual report that 90 per cent of the investigations carried out by the specialized police unit were initiated by files transmitted by the agency.

Let me also add that the advantage of a central agency is that it is able to specialize in one particularly difficult area and thus acquire expertise that a regular police force would not necessarily be able to acquire. When we send a matter to prosecution, all of the financial information in the file has already been analyzed. That greatly facilitates the work of the police.

[English]

Senator Tkachuk: How many successful prosecutions for money laundering did you have per year before your agency was set up?

[Translation]

Mr. Spreutels: Money laundering became a criminal offence in Belgium in 1990. The preventive system of reporting suspicious transactions was put in place in 1993. I think it would be fair to say that over this period, no one was found guilty of money laundering in Belgium.

[English]

The Chairman: Thank you, Mr. Spreutels, it was very kind of you to be with us.

Our next witnesses are from the Certified General Accountants Association of Canada.

Mr. Everett Colby, Colby & Associates and North American Forensic Accountants, Certified General Accountants Association of Canada: I am a certified fraud examiner as well as a certified general accountant. I own both Colby & Associates and North American Forensic Accountants. With me today is Dawn McGeachy, GCA, who is the manager of the public sector with CGA-Canada. I should like to thank you for having us appear before the committee today.

The Certified General Accountants Association of Canada is a prominent, respected, self-regulating professional body responsible for the education, certification and professional development of over 60,000 certified general accountants and CGA students in every constituency in our country. Many of our members provide accounting, taxation and related services to individuals and businesses of all sizes, especially small and medium-sized businesses. Others occupy financial, administrative and policy positions in governments, financial institutions and not-for-profit organizations.

CGA-Canada is charged with ensuring that our members adhere to the highest standards of professional conduct. As you know, we also regularly appear before parliamentary committees to address public policy issues of concern to our membership and to provide our expertise to policy-makers such as yourselves whenever appropriate.

We are pleased to advise that, in principle, CGA-Canada supports the initiatives contained within the proceeds of crime bill, Bill C-22. We recognize that money laundering and the cross-border movement of proceeds of crime are becoming increasingly difficult to deter and detect and that traditional means of investigating those activities are proving less effective. The proposals in the bill will provide Canada's law enforcement agencies with the tools they need and access to valuable data that they may not otherwise be able to obtain. However, our association has four specific concerns with this bill.

First, we suggest that some of the ambiguous wording contained in Part 1 of the bill could lead to broad interpretation beyond what is intended. For example, clause 5 of the bill states that the legislation will apply to 12 different kinds of organizations as well as their employees. It also provides that it will apply to persons engaged in a business or profession described in the regulations. While we understand that this is meant to include accountants, it does not specifically state so, as the regulations are also ambiguous and do not specify what professions are included.

Further, clause 7 addresses the requirement to report suspicious transactions. We would like to suggest, as we have in other committees, that the clause be revised to more properly reflect the true intent: namely, its application to a professional who is involved in the business of transacting monies or acting as a financial intermediary.

Our analysis of the backgrounder to the legislation and of the consultation paper has identified the potential misunderstanding that entities and individuals acting as financial intermediaries, such as lawyers and accountants, will be required to report any financial transactions that they have reasonable grounds to suspect are related to a money laundering offence merely by becoming associated with the information and not necessarily being involved in the transaction. The consultation paper says that clause 7 requires every person or entity subject to Part 1 to report to the centre every financial transaction where there are reasonable grounds to suspect that the transaction is related to money laundering. We understand the intent. That has been brought to our intention before. However, this wording is broad enough that it could apply to those situations where we are merely associated with the information and not necessarily involved in the transaction.

The Chairman: Please explain to us what "associated with the information" means.

Mr. Colby: For example, if I prepare financial statements for a company, I am associated with that information even though I may not have acted as a financial intermediary in any way with that company on a financial transaction. Accountants in general are typically viewed as being associated with the information if they audit it or prepare tax returns.

A more precise presentation would ensure that the wording limits the reporting requirement to professional accountants like CGAs who are directly involved in the actual transaction, which is what we understand the intent of that section to be.

Second, we are concerned with the receipt and management of information being provided to the centre. The bill does not provide for the establishment of regulations regarding criteria for determining what are reasonable grounds to suspect money laundering. Rather, the consultative paper states that the centre will develop guidelines to assist reporting entities to identify characteristics and circumstances that might lead to a determination of reasonable suspicion. The paper further states that the information to be contained in these reports and the means by which the reports are to be transmitted to the centre will also be prescribed by regulation.

As this leaves much to the unknown, we are left with the impression that something will now be designed and then imposed, and we will just have to trust that the reporting system will be an efficient and cost-effective process. The bill implies that it is the responsibility of the professional to determine whether a particular transaction is suspicious. Accountants will be called upon to exercise considerable judgment in recognizing whether a transaction is in fact a money laundering transaction as contemplated by the bill.

We recommend that the legislation include actual regulations rather than simply provide guidelines regarding specific criteria for determining those characteristics and circumstances that might lead a professional to conclude that there is a reasonable suspicion. In circumstances where we are leaving it up to the judgment of hundreds of thousands of individuals, how can the provisions for failing to report be enforced against someone who has exercised their judgment if their judgment differs from that of the centre?

Part 5 of the bill addresses defences and protections available under the legislation.

The Chairman: As a forensic accountant, what would your criteria be for a suspicious transaction?

Mr. Colby: Due to my expertise and work experience, I have worked on cases involving money laundering. I also have a banking and investigation background in the United States. Therefore, I am quite familiar with those situations. The average accountant who typically prepares financial statements, tax returns and the like will not have the specific training and background to enable them to recognize suspicious activities such as repeated transactions or multiple people presenting cheques payable to one company that is unknown to them. Those of us who are familiar with what constitutes suspicious activity would not have a problem with that.

Our organization alone has a membership of 60,000. There are, in addition, the Institute of Chartered Accountants and the Certified Management Accountants Association. All those professionals will not have the same level of expertise. Therefore, there will be several hundred thousand people exercising different judgments than would you or I. This bill leaves matters to their judgment. It seems to me that it would be difficult to enforce the provisions against failing to report if it is left up to their judgment and the judgment of the centre is different from theirs. It becomes a difference of opinion. If the criteria were specifically regulated, that would provide to the professionals untrained in that area a measuring stick by which to judge whether those transactions constitute suspicious activity.

Senator Kolber: Are you willing to suggest some measuring stick?

Mr. Colby: I would suggest that the Certified General Accountants Association of Canada is more than happy to assist the Department of Finance, the Department of Justice and whoever else may be involved in establishing those regulations. We would absolutely want to be part of that as we are one of the main professions affected by this legislation.

I will continue in regards to the defences and protections available under the legislation. While we recognize that clause 10 provides a general immunity provision, we are apprehensive that this may prove ineffective within the context of a civil or professional disciplinary proceeding. The Certified General Accountants Association has already had to propose amendments to our own code of ethics and rules of professional conduct to allow us to comply with this act.

There are various elements of the required reporting. We believe there needs to be a "safe harbour" provision for those professionals who, in good faith, do submit a report, as required by the act, regarding a conclusion of a suspicious activity that later proves to be unfounded. Although we are obligated not to report to the client that we have reported, and the centre theoretically would never say to them that a report has been made, we have all seen many examples of information leaking from various agencies and departments. The likelihood of something getting out at some point is highly probable. In other words, we would like assurances that this legislation will include protection, legal and otherwise, for employees in this situation: A report is made in good faith but later turns out to be unfounded. For whatever reason, the client finds out about it and tries to bring action against us as professionals under our own codes of ethics and rules of professional conduct.

Further, it is our belief that the bill should address incidents where an employee makes a report to the centre and subsequently loses employment as a result. As well, it should address the possibility of legitimate circumstances under which no report should be made. That should be covered by the proviso of a "reasonable excuse" defence.

Third, we would like to see the role of the centre more clearly defined. Comprehensive information must be provided to the Canadian public regarding the accountability of the centre. Although clause 55 addresses prohibited disclosures by the centre, we do not believe the centre should be immune from prosecution in the event that information it provides to law enforcement agencies or others proves to be in error or slanderous. There is literally no accountability.

While we agree that the centre should be authorized to provide information to law enforcement agencies, we are alarmed that they are also permitted to disclose this information to the Canada Customs and Revenue Agency, CSIS and the Department of Citizenship and Immigration.

Although this is not specifically worded in the backgrounder papers, the same people who will staff the centre and be taught to recognize and analyze the criminal offence of money laundering will now also be expected to look for tax evasion. Those are two widely divergent criteria to judge.

The Chairman: Why should we ignore tax evasion? I do not want to get into it now but I am having trouble with your point of view. That is all.

Mr. Colby: Subclause 55(3) states that the centre must first determine whether it has reasonable grounds to suspect that the information would be relevant to investigating or prosecuting a money-laundering offence before disclosure can be made to those other authorities. However, the bill does not state what constitutes reasonable grounds to suspect that the information would be relevant.

What springs to mind in all of this is data mining. The safeguards proposed for the release of information appear at this point to be weak. There are no provisions for third-party reviews of decisions prior to the release of information. Again, we are in a position of trusting that, once the regulations are developed, they will be palatable to the public.

The most distressing aspect of the proposed legislation to our association is contained in clauses 62 to 65, which provide the power for representatives of the centre to enter a professional's office and copy documents from the office without the need for due process. We find this to be highly intrusive. It also raises the question of whether the legislation is contrary to the provisions of section 8 of the Charter of Rights and Freedoms, which provides that everyone has the right to be secure against unreasonable search and seizure.

While the creation of the centre seems to have gone to certain lengths to maintain the perception of protection of individual privacy, a warrantless search of a professional's office seems to violate the same principle of privacy. There is an expectation by the public that an accountant enjoys privilege much as there exists in a lawyer-client relationship. While such is not the case, it is reasonable to expect that a client's files should not be freely available, thus making receipt of a warrant prior to entry a mandatory part of the process a natural conclusion.

We also wish to recommend that the legislation be clarified to restrict the powers of access to only those records that relate to financial intermediation activities.

To come back to an earlier point, clause 11 relates only to legal counsel, meaning a barrister and solicitor or lawyer. It does not extend to accountants or other professionals who may have a pseudo-client relationship that is intended to be kept confidential.

In addition, in clause 64(2), under the enforcement and compliance procedures, when staff go in supposedly to search for these documents and to copy them, if they are in the possession of legal counsel, then that privilege may be claimed. I am an accountant, not legal counsel, but in my activities as a forensic accountant or perhaps on certain tax consulting engagements, I may be in the possession of privileged documents. I may be performing the engagement on behalf of legal counsel. These clauses do not extend to me or to those privileged documents in that capacity. We would like to see that wording modified in the sense that any documents to which solicitor-client privilege may be maintained, not just those in the possession of the legal counsel, should be afforded the same rights under the legislation.

Mr. Chairman, for further details on our association's viewpoint, please refer to our written submissions.

Senator Furey: My question is brief. I do not understand why you feel you need a "safe harbour" when the only requirement for you to have immunity, in clause 10, is that you act in good faith. Then it gives you immunity from all criminal or civil proceedings. What more do you want?

Mr. Colby: The codes of ethics and rules of professional conduct that various professions fall under would not be covered under the civil or criminal proceedings. They would be administrative tribunals governed by the associations themselves since we are self-regulating bodies.

Senator Furey: Are you saying that there are clauses in this bill that would require you to violate your various codes of ethics?

Mr. Colby: Potentially, yes. We have already seen some modification. We adjusted our code just to allow us to comply with the reporting on the suspicious activity section. We still have not been able to resolve, for example, the reporting of a monetary transaction in excess of $10,000. Our code says we are not allowed to disclose that. This act requires me to disclose it. I am in a quandary. Do I do what the act says --

The Chairman: This is the law.

Senator Furey: It is not a quandary. The legislation takes priority over your code.

Mr. Colby: We would like to know that when we act in good faith --

The Chairman: You cannot supersede the government.

Mr. Colby: That is not our intent, but we would like to know that we have protection for ourselves in our professional capacities, because a client can bring action against us under our own regulations.

Senator Tkachuk: The government is supposed to protect the people. That is the job of the government.

The Chairman: If they are doing something illegal, you do not protect crooks.

Senator Tkachuk: You do not know. That is his point.

Mr. Colby: My understanding is that the government in general has tried to stay away from dictating policy to the various professions and has allowed them to become self-regulating. Most of our associations, whether the bar association or the accountants' association, have adopted fairly similar codes. They express the underlying principles and values that we all hold. However, we are having to modify and change our codes to be in compliance with the law. We will have to do whatever it takes to allow us to comply.

Senator Furey: That is what happens, it is not? When new legislation is passed, if a professional body finds that it is operating with a code of conduct that is not in compliance with that legislation, then it is the code of conduct that will have to change.

Mr. Colby: Yes.

Senator Furey: There is no need to change the immunity section in this act. It gives incredible immunity, and the only requirement for anyone asking for it is that they act in good faith.

Mr. Colby: Okay.

Senator Tkachuk: On page 7 of your brief, you talk about a safe harbour and the difficulty of amateurs, really, submitting information to the centre. Would you be of the view that because they are amateurs, to err on the side of safety, they would be making a whole bunch reports that were not necessary? In other words, if I do not know for sure, I will err on the side of safety and send it in, because I do not want to get into trouble.

Mr. Colby: That is a possibility. There are many different people whose judgment will be put to the test in that regard.

Senator Tkachuk: As an association, would you not ask your people to do that?

Mr. Colby: We would undertake as an association to try to inform them of what the actual criteria might be, but we do not necessarily think that it should be our job to do it if that might conflict with the intent of the legislation. Other than in guidelines that are proposed, why not set down in regulations what those criteria are? Then you would have the measuring stick by which anyone in the various professions could judge.

Senator Tkachuk: You mentioned that the distressing aspect of the proposed legislation is the power that allows representatives of the centre to enter a professional's office and copy documents without the need of due process or warrant. Why would they be doing that?

Mr. Colby: It comes under the section for compliance with the act. I guess the theoretical approach here is that in order to ensure that there is compliance with the act, they will have the ability to enter my office and copy, and presently it says there is no limit on what they can look at. They can just review and copy documents at my expense to ensure that I am in compliance with Part 1 of the act.

Senator Tkachuk: Do you think that perhaps the person from the centre would in reality be doing an investigation?

Mr. Colby: That would be the logical conclusion.

Senator Tkachuk: That would be the only reason they would come down.

Mr. Colby: I would hope so, other than a fishing expedition.

Senator Tkachuk: That is interesting. I will have to check back as to what they said they would do, exactly. Somehow I thought they would not be doing investigations at the centre but simply reviewing the information they had.

Right now, the way the act reads, if they walk into your office and ask for a document, is it a document that you would have filed or that someone else would have filed? In other words, would it be something about someone that had been filed by a third party? Could it be?

Mr. Colby: Subclause 62(1) states:

An authorized person may, from time to time, examine the records and inquire into the business and affairs of any person or entity referred to in section 5 for the purpose of ensuring compliance with Part 1...

I am not a lawyer, so this may be a matter of interpretation, but this tells me that, at any given time, without prior knowledge of them coming, and for whatever reason it may be, they can come and knock on my door, examine all of my files, without limit, and ask me questions about my own business and affairs to see if I am in compliance with this act. I find that intrusive.

Senator Tkachuk: I do too.

Senator Fitzpatrick: I want to go back to your comment on client confidentiality. You said that legal counsel is protected but that you would not be if you were performing on behalf of legal counsel. I thought the arrangement would be that you would be engaged by legal counsel to do whatever work it is. Under that situation, the protection that is extended to legal counsel would follow you as engaged by legal counsel. You are protected because it is an engagement that legal counsel has arranged. Are you trying to tell me that, if you are engaged by legal counsel and the legal counsel is protected, you think that you are exposed as an accountant?

Mr. Colby: Subclause 64(2) is the compliance and search and seizure section. It says:

If an authorized person acting under section 62 or 63 is about to examine or copy a document in the possession of a legal counsel who claims that a named client or former client of the legal counsel has a solicitor-client privilege in respect of the document, the authorized person shall not examine or make copies of the document.

Again, I am not a lawyer, but I relate this back to the exclusion in clause 11, which says that, if it is a document over which a lawyer claims privilege, it is not to be examined. This says "in his possession." Not being a lawyer, I am concerned. If I have a lawyer's document but it is not in his possession, can I claim that? The way the bill is presently worded, I do not think so, but, again, I could be wrong in my interpretation.

Senator Fitzpatrick: You are saying that the client-lawyer privilege arrangement would be subverted.

Mr. Colby: I think it is highly probable that it would, and perhaps there should be a change to the wording to allow for any document that may have solicitor-client privilege attached to it to be covered by that exclusionary provision, regardless of whose possession the document is in.

Senator Kroft: I presume that in the course of your work you are familiar with the similar provisions that would apply under the Income Tax Act?

Mr. Colby: I am aware that under the Income Tax Act, section 231, they have the power to come in and examine my books and records, but when it involves client books and records, if they were my working papers, those are not covered by that supposed search and seizure section. They would have to get a search warrant to take my records. Case law, as far as I understand it, shows that the papers that an accountant prepares are his property and not the client's property. To come to my office to search my files, they need a search warrant. If I have the actual client's books, they have access under the act to examine those books and records.

Senator Kroft: Going back to the general provisions, are you saying that there is no symmetry between the provisions of the Income Tax Act on the rights of the agency to obtain evidence and the provisions of this bill?

Mr. Colby: I understand what you are trying to say.

Senator Kroft: I am wondering what the differences are between what you are saying and what is proposed here.

Mr. Colby: The Income Tax Act applies directly to the individual who is required to report, regardless of what third parties may have assisted that person to report. This act applies to third parties rather than to the specific individual who is conducting the suspicious activity or the financial transaction.

Under the Income Tax Act, the books and records of the taxpayer can be examined, but there is no right to examine my books and records simply because I was associated with or assisted the taxpayer.

Senator Kroft: There is a different purpose. We should not expect it to be exactly the same because the purpose of the legislation is different.

Mr. Colby: Let us say that the bill provided for examining the records of Joe's Money Order Shop, because reports were received about Joe. The centre wants to inspect Joe's books and records. I understand that is different than inspecting Joe's files found in the office of Joe's lawyer or accountant or whatever other professional.

The provisions in this bill that allow for that access are so broad, as written, that the staff are not limited only to looking at the files or documents relating to the subject of the report. They can look at anything they want. There is no limit.

Senator Kroft: That seems to be the idea.

The Chairman: What about subclause 64(2)? You wanted to be included. Legal counsel can have a solicitor-client privilege in respect of a document. The authorized person from the agency shall not examine or make copies of the document.

Mr. Colby: I understand the reason for the clause. I should like it to be modified.

The Chairman: You want accountants included in that general description?

Mr. Colby: I should like to see any professionals or others covered regarding any document that can have solicitor-client privilege attached. That document could be held by a doctor, a lawyer, an accountant or a government official.

Senator Furey: Presumably, if you were engaged by a solicitor to review such a document, that document is deemed to be in the possession of the solicitor and solicitor-client privilege would apply, would it not?

Mr. Colby: I do not know the legal interpretation of that, nor the intent behind the wording in this clause. What does it mean, to be in the possession of legal counsel?

In a fraud examination, for example, I may be retained by counsel to actually conduct the investigation. I am conducting an engagement. I am retained by that counsel and all my work is subject to their solicitor-client privilege. I may be accumulating documents and evidence that the lawyer does not even have a copy of yet because I have not yet submitted my report. We would need a legal interpretation of whether those documents are deemed to be in the lawyer's possession.

Senator Furey: I think it is clear.

Senator Fitzpatrick: You are concerned because you do not want the chain of solicitor-client privilege broken when it comes to you or any other professional?

Mr. Colby: That is correct.

Senator Fitzpatrick: My colleague says he thinks it is clear that it would not be, but, Mr. Chairman, that is something we should examine.

The Chairman: Thank you, witnesses.

The next group of witnesses will be from the Royal Canadian Mounted Police. Please proceed.

Mr. Tim Killam, Assistant Commissioner, Technical Operations Directorate, Royal Canadian Mounted Police: Honourable senators, we welcome this opportunity to raise awareness of the need to identify strong and effective measures to combat criminal organizations predisposed to the laundering of criminal assets. We also welcome the opportunity to appear before the committee today in support of Bill C-22 as it pertains to money laundering and to discuss the effects of money laundering on the legitimate economy and what we see as a way ahead in an attempt to stem the tide against organized crime money laundering.

I have made available a short document prepared April 3 entitled "Royal Canadian Mounted Police -- Proceeds of Crime Enforcement in Canada." This document outlines the evolution of our proceeds of crime program, the legislative changes and the structure of the program for reference purposes only. I will summarize that reference material so you can better understand the context.

Money laundering is defined as a process by which one conceals the existence of an illegal source or an illegal application of income and then disguises or converts that income to make it appear legitimate. In other words, money laundering is a conversion of illegal proceeds from a cash-based system into the business-based system.

The objectives of criminal organizations are to place illegally obtained proceeds beyond the reach of law enforcement by moving the bulk cash through the financial system, thereby cycling it into the economy. The attempt is to make it as difficult as possible to identify and trace. Once the funds are moved through the money-laundering stages, the income appears legitimate, which makes it more difficult to detect and prosecute. The profits can then be used to provide working capital for future activities. It allows these organizations to expand and open new markets, thereby becoming more powerful. Criminal organizations derive earnings not only from illegal activities but also from investments in legitimate enterprises. Proceeds allow them to penetrate into legal economic areas.

The RCMP Proceeds of Crime Program is directed at restraining and forfeiting illicit and/or unreported wealth accumulated through criminal activities. Presently, 22 Proceeds of Crime units are scattered throughout Canada and they vigorously pursue criminal organizations both nationally and internationally by attacking their illegally obtained assets.

The objectives of the Proceeds of Crime Program may be described as follows: identifying, assessing, restraining and forfeiting illicit and unreported wealth accumulated through criminal activities; prosecuting offenders; restraining and seizing assets pending judicial forfeiture; and identifying to the courts assets that could not be seized to justify judicial penalties. The program's primary focus is to remove the incentive for committing crime.

Our objectives are met by performing the following tasks: We conduct investigations relative to the laundering of proceeds derived from designated substance offences, designated customs and excise offences and enterprise crime offences. As well, we respond to requests for investigative assistance from foreign and domestic police agencies, and we foster international cooperation in the area of money laundering investigations.

The second focus of the Proceeds of Crime Program is prevention. Our field units carry out community policing and crime prevention initiatives by making presentations to the financial and business communities, government departments and agencies and the general public; by distributing pamphlets and related material; by promoting strategies developed locally or by the Proceeds of Crime Branch; and by liaising with other police departments and agencies to identify criminal trends and activities relating to the Proceeds of Crime Program.

The third focus is on training. Investigators coming into the Proceeds of Crime Program receive appropriate training, and we actively provide international training as well.

The fourth focus of the Proceeds of Crime Program is policy development and implementation. We identify areas of legislative weakness and seek statute amendments through the Department of Justice. We develop and publish RCMP policy, and we do program evaluation of each unit.

As the former officer in charge of the Proceeds of Crime Program for Canada, I diligently worked with my colleagues in attempting to ensure that Canada was protected by a broad range of measures aimed at strengthening organized crime enforcement by preventing the laundering of profits of illegal activity. Early on, it became clear to me that Canada's financial systems were being exploited by criminal organizations to conceal, legitimize and transport their illicit profits, thereby financing their future activities. It was felt that Canada required a systematic, coordinated and cooperative approach to ensure that our financial systems were sound as well as free of criminal taint.

Money laundering is the economic engine that runs all criminal organizations around the world. Preventing dirty money from entering Canada's financial system would mean not allowing those predisposed to this activity from ultimately strengthening criminal organization. The Canadian government has taken the fight against organized crime very seriously; by extension, the RCMP, as the federal police force, is on the front line of this fight.

We heard from Mr. Spreutels that estimates of the amount of illicit drug money laundered annually worldwide range between $300 billion and $500 billion U.S. The UN estimates that in excess of U.S. $1 trillion in illegal profits is generated by organized crime annually. The inclusion of laundered illicit funds from economic and other non-drug crime could potentially double those figures. The magnitude is staggering. The flight of capital and the chaos spilling over the borders of the former Soviet Union and into jurisdictions in Europe, the U.S. and elsewhere are examples of just how complicated these matters can be. A portion of these funds ends up in Canada, which is seen internationally as a haven. The RCMP is unable to quantify the exact amount of money laundering in Canada annually but has empirical data to show that it is in fact happening at an alarming rate.

Money launderers are attracted to Canada and consider it a haven for a number of reasons. First, Canada has a stable economy with a relatively strong currency and a banking system whose efficiency, stability and security is second to none. Second, there is a long, undefended border between Canada and the United States with a huge volume of commercial and financial trade occurring. Third, Canada is located next to one of the world's largest illicit drug markets, the United States. Last, and likely most important, is the lack of controls in Canada over cross-border movements of currency and the lack of a mandatory unusual transaction reporting system.

What this means for Canada essentially is that there exists an ever more challenging regulatory and law enforcement environment, particularly in a time of reduced barriers to trade and finance. It is the opinion of the RCMP that, in order to effectively combat organized crime, Canada must institute a legally defensible mandatory unusual reporting system to assist in the investigation of the laundering of proceeds of crime.

As far back as 1993, during the Commission on Crime Prevention and Criminal Justice held in Vienna, the Secretary General of the United Nations put forward an unsettling portrait of the control organized crime has on a worldwide scale. He said:

As revenues generated by organized crime increase, the necessity to control banks becomes a priority for criminals...businesses controlled by organized crime generate a seventy (70) percent profit margin on their investments. This is achieved at the detriment of law abiding competitors who must worry about profit margins, overhead, repayment of bank loans. All in all the infiltration by organized crime tends to introduce distortions in the interplay of market forces. In the long run it is the taxpayer and consumer who are affected. The profits of organized crime are so huge that no economy is immune to the impact of this underground economy...we must improve investigative techniques and limit secrecy to appropriate dimensions.

The situation described by the U.N. Secretary General seven years ago is identical to the situation being observed in Canada today.

All financial institutions such as banks, trust companies, "near banks, insurance companies and intermediaries, such as solicitors and accountants, as well as casinos, who deal with client funds on a daily basis, have a front line role to play in reporting unusual and suspicious transactions. Under voluntary disclosure, as we have today in Canada, there is no systematic and reliable way of detecting money laundering activity. A permissive system grants wide discretion to individual financial institutions to determine their commitment to the battle against money laundering and ultimately organized crime. The anecdotal evidence that the RCMP has seen underscores the varying commitments in Canada.

At this time, there is no overall coordination or control of reports, which is fragmented at best, and thus there is no way of ensuring that the available information is being used to its full potential via a central agency as proposed under Bill C-22.

It is accepted that it is a struggle to reach an appropriate balance between privacy and enforcement considerations, and it seems clear that the balance can never be struck once and for all time. Rather, the balance requires constant examination as ways of doing business, record keeping and retrieval systems and methods of fraudulent transfers all evolve.

From the enforcement viewpoint, the benefits of the creation of a financial transaction and report analysis centre of Canada as envisioned in Bill C-22 are many. The centre, according to us, would, among other things, provide a deterrent by making it more difficult to use traditional financial institutions to hide the profits from illegal activities, therefore reducing Canada's reputation as a haven for money laundering. The centre would fulfil our international obligations. It would provide a mechanism for enlisting the support and cooperation of banks and other financial institutions in identifying possible currency violations. The centre would identify investigatory targets for possible laundering of proceeds of crime, and the centre would provide corroborating evidence against individuals identified through other sources such as informants and other agency referrals.

At the end of the day, senators, countries are only as strong as their weakest link. Of the 26 member countries of the Financial Action Task Force, only Canada, Singapore and Germany have not yet implemented mandatory systems of reporting suspicious or unusual transactions. In addition, Canada does not meet the standard required for the Egmont Group, a collection of financial intelligence units of which there are 53 member countries around the world, who set the standards and share financial intelligence data in order to combat money laundering.

The bottom line is that money laundering ultimately entails the use of the lawful commercial system for unlawful means. The addition of a mandatory suspicious transaction and cross-border reporting regime will serve notice to Canada's criminal organizations, and indeed the world's criminals, that Canada has an effective transaction reporting system and that their money is not welcome here.

The problems caused by organized crime are not the sole responsibility of the police. Bill C-22 allows for a partnership with police, government and the private sector, and it will discourage the continued use of Canadian financial institutions for depositing large amounts of illicit cash and concealing it in accounts around the world. In reality, money laundering is a national and international cross-border phenomenon. In order for law enforcement to reach over the fence and join hands, it seems logical that we should be obligated to cooperate amongst our national institutions and across international borders with at least the same effectiveness as those who launder the proceeds of crime.

Whether it is a known motorcycle gang that specializes in violence or intimidation or the Mafia who use corruption, we are faced with organizations that are structured to maximize their profit at the expense of the state and its citizens. I humbly submit, honourable senators, that it is therefore the state's responsibility to contribute and place an additional tool into the law enforcement toolbox to assist in impacting on the perverse reflection of society predisposed to laundering the proceeds of crime. Individually, these problems are formidable. Collectively, they may seem overwhelming. A mandatory reporting regime should not be viewed as a panacea. Rather, it is an integral part of a broad range of measures aimed at strengthening organized crime enforcement.

Senator Tkachuk: We are all in favour of your efforts. In a democratic society it is a difficult thing, as you said earlier, to balance the need to capture this illegal cash with the need to protect the rights of innocent citizens who may be caught in the crossfire of an investigation. While this may not be as violent as being caught in the crossfire of bullets, which often happens in a shootout between bad guys and the police, we have here the possibility of people being caught in the crossfire by this huge organization being set up throughout the country using lawyers and accountants -- all major professionals, it would seem, who handle a dollar -- as part of this solution.

We have estimates for the amount of money laundered annually worldwide, but what do you estimate as being laundered annually here in Canada?

Mr. Killam: Because of the nature of this kind of activity, we cannot estimate it. As a matter of fact, the Financial Action Task Force has been trying for the last number of years to figure out what it is internationally. Those figures are just guestimates at best. They are extrapolations of the kinds of crimes that go on and the kinds of money involved. Because money laundering is trying to make the money legitimate, it is very difficult to quantify.

The best way to understand it is that there are many organizations -- and we see them in the paper -- prosecuted for regular traditional offences and they do not have to go through processes to get their money. They use criminal activity to get their money. They are huge organizations and have lots of profits. We can see that. That is the empirical evidence. Through the cases we now investigate, we know that there is a lot of money in those organizations, but all we can see is one part of the picture. We see one piece of the puzzle. Right now, when we start an investigation, we see one piece of the puzzle. If you have ever done a puzzle, you can understand what I am saying. We see one little piece. Perhaps we get that piece from a bank on a voluntary basis right now.

The Chairman: Senator Tkachuk, the Library of Parliament has an answer for you. It says the federal government estimates that between $5 billion and $17 billion in criminal proceeds are laundered in this country each year.

Senator Tkachuk: Between $5 billion and $17 billion?

Mr. Killam: It is so wide that it is very difficult, but it is a huge figure.

Senator Tkachuk: You successfully prosecute money laundering activities now under the present legislation?

Mr. Killam: Yes.

Senator Tkachuk: How many successful prosecutions would we have reported in a year in Canada?

Mr. Killam: I do not know.

Senator Tkachuk: Maybe you could use one province, such as Ontario or Quebec.

Mr. Killam: I cannot tell you exactly what the figures are.

Senator Tkachuk: Hundreds?

Mr. L. R. J. (Lou) Goulet, Staff Sergeant, Proceeds of Crime Branch, Federal Services Directorate, Royal Canadian Mounted Police: In terms of the number of people actually charged or convicted, I do not have that figure here with me. The best I can give you is in terms of recoveries, revenue, fines and referrals over the past four years, by one method of measuring. I will round out the figures from 1996 to 1999. The recovery rate was $142 million, of which the revenue amounted to $50 million that accrued in actual forfeitures. Referrals to other agencies, we identified $90 million. In terms of fines, it came out to about $7 million. Those are the actual dollar figures.

Senator Tkachuk: To be sure I understand the first number, the $50 million is the amount of illegal cash you actually captured; is that correct?

Mr. Goulet: That is correct; the $150 million is the amount that was restrained.

Senator Tkachuk: Is that per year?

Mr. Goulet: No, that is for the last three years, 1996 to 1999, based on our limited resources of the 22 units, which is approximately 287 regular members of the RCMP who are predisposed to investigations in this area. Our integrated units are made up of a team concept that includes forensic accountants, lawyers from the Department of Justice, and police. Those are the end results of our unit to this point in time.

Senator Tkachuk: I assume there will be a lot more investigations going on once this agency gets up and running.

Mr. Goulet: We are expecting quality leads, of course. The information that will be received will be acted upon as best we can. We may already have investigations ongoing where the information will complement, or it may be something brand spanking new that we were not familiar with regarding that particular individual and the details provided with that disclosure.

Yes, we expect an increased workload. By way of example, over the same time frame, in the Netherlands there were approximately 16,000 disclosures and there appeared to be a trend where approximately 20 per cent to 24 per cent of those filtered down to their police agencies after being raised from the unusual to the suspicious level in the methodologies that they use there.

Regardless of the total number of suspicious transactions that the agency receives eventually, we could expect 20 per cent of the volume. That is law enforcement, not just the RCMP.

Senator Tkachuk: Will you have money in your budget to increase the number of people you will need from 297?

Mr. Killam: There will not be any more money for the investigation itself. There is a provision for some money to augment the investigation once we receive a report from the agency. The report or information will come to us at way below any kind of level of legal threshold where we can go back. It will just be tombstone data. That is what will come to the police from the agency. It could say my colleague here and his name and the fact that he did some kind of activity at certain banks. There is much more that was done at the agency, but we will not get that. It comes to us at a certain legal threshold, then we have to conduct a preliminary investigation to allow us to get the production order from the agency in order to get the rest of the file. There is much work we have to do after we get a report. Some money will come to help us with the investigation at each unit so that we are able to do that part of the investigation, which is new. We did not get these leads from there before.

The Chairman: To follow up on that, are you telling me that when the agency does its analysis, whatever else it does, they will not give that to you?

Mr. Killam: They will not give us the analysis.

The Chairman: Does that not seem to be a very cost-inefficient way of carrying on? We are going to have two government agencies doing the same thing twice.

Mr. Killam: It is coming that way for the privacy considerations and the Charter considerations. You have heard Mr. Spreutels' comment that this legislation is very protective, and it is for exactly those reasons.

The Royal Canadian Mounted Police was involved in the discussions with regard to the buildup of this piece of legislation. I was at the table for most of those discussions in my prior job.

For those reasons, we feel it is a legally defensible system that protects the privacy of people. It requires a lot of us, yes, but that is the society we live in.

Senator Fitzpatrick: Commissioner, I know this is a difficult question to answer, too, but do you have any idea what business activities or companies this laundering process takes advantage of? For example, how much goes into publicly traded companies through the stock exchange? In turn, where does that lead with respect to regulatory requirements and policing stock exchange activities?

Mr. Killam: This goes back to the answer I began earlier. By the very nature of this activity, you do not know it. By the very fact that we do not have this centre in operation, we will never know it. The centre will be able to get some kind of information from the leads that may come in later on.

At the end of the day, the centre may be doing those kinds of investigations. There is no requirement right now. We have heard our colleagues from the CGAA. There are concerns about being part of the solution. It is not a police problem. It is society's problem. I happen to be paid full time to do this, but we all should be looking out for this.

This bill would provide a standard expectation that people put that information into the centre. That information will come in. In the report to Parliament that is required, you will see more information, probably in a closed setting.

Senator Fitzpatrick: My next question is unrelated. What is your opinion with respect to phasing out $1,000 bills? Will that have a real impact on money laundering activity?

Mr. Killam: That would have an impact. Very few countries have denominations of that size. I am in favour of stopping that production. Such bills can be concealed more easily and be carried internationally. The largest denomination in the United States is $100. Even though our dollar is worth less, we still experience many smuggling cases where $1,000 bills are used.

Senator Fitzpatrick: These $1,000 bills can be smuggled out of the country. Then they come back into publicly traded companies through the stock exchange and can penetrate industry in that way?

Mr. Killam: Absolutely.

Senator Kroft: I will ask a general question that, I warn you in advance, calls for an opinion. We all understand that, to achieve a sound piece of legislation, a balancing act is required between solving the problem and protecting citizens' rights. Let me put this on a scale of "toughness." I am asking your opinion as amongst yourselves and I would be surprised if you do not have a sense of this from your own conversations. As an overall observation, would you say that the drafters of this legislation, in terms of toughness, have it too tough, too easy or just about right?

Mr. Killam: I was involved in the drafting and I happen to be a legally trained police officer. I can understand the legal issues and I think this is a good balance.

In Canada we do have requirements that are tough. We do have stringent privacy requirements. We have a charter to protect citizens, rightfully so. I think this bill works. It makes our work harder but that is the price of living in Canada and I am proud to be here. I do not mind being required to be involved in these activities. Sure, it will be tough and it would be easier if no agency were involved, but this is the way things should be.

Senator Kelleher: I see this as essentially criminal legislation. The object of the bill is to deal with criminal matters and the proceeds of crime. Therefore, I am a little surprised that the reporting mechanism is through the Minister of Finance. I am somewhat prejudiced, of course. I would have thought a better reporting mechanism would have been through the Solicitor General. What is your feeling on the reporting mechanism?

Mr. Killam: This was the subject of many discussions. It boiled down to the fact that the centre should not be in the police, even though its administration would be much easier.

Senator Kelleher: I am not asking that.

Mr. Killam: I know, but by the same reason, the RCMP reports to the Solicitor General and has a close relationship with that ministry. In our view, the same charter concerns that arise with the police would arise with the Solicitor General. Quite frankly, it is an amendment to the old Proceeds of Crime (money laundering) Act, which was the responsibility of the Department of Finance. This is just an extension of or an amendment to that act. It stays with the same department. We did have that discussion.

Senator Tkachuk: I have a question on a clause that has bothered us a lot and it deals with your relationship with the actual agency. If a file comes in and an investigation is begun, would you be involved from the beginning? Not at all? The centre will speak to no police officer until the file is actually referred to the police?

Mr. Killam: The act prohibits the agency from such disclosure to anyone. That is because of the charter protection. Eventually, if a case comes to the threshold where it should be reported, we will deal with that, but it will have been sifted and filtered by then.

To better understand it, we have put these charts on the wall to show what this agency will do for us.

Mr. Goulet: Under the existing act, provisions are made to allow access to government databases. Depending on how that works out, we could have access to the actual CPIC system, the Canadian Police Information Centre system.

Senator Tkachuk: Does that show criminal records?

Mr. Goulet: That is right. We would not be involved in the actual investigation.

We have a chart that shows a "wagon circle." This concept was borrowed from my friends at the Financial Crimes Center in the United States. A sanitized case is shown with colour coding. Yellow is used for actual transactions. Pink denotes business names. Brown denotes account numbers.

The data would be considered and a link analysis would be done. Based on the disclosure, we would investigate and build up our evidence, hoping for sufficient grounds to obtain a court order, a production order, and then we would attend to the agency. In our view of the world, the agency can produce this kind of report at the end of the day.

As you can see, if you look at the number of transactions, it is an onerous task. We have been asked in the past whether there is an ability to handle this volume of information. Our answer to that is yes. There is artificial intelligence, which is what produced these particular charts for the sake of demonstration.

Mr. Killam: That is what we expect to come out of this agency. In other words, now we make it a piece of information that goes all across the country. It comes in on a voluntary basis, with no real standard, just what may come through our relationships with the financial industry. As some of the earlier witnesses said, there are varying degrees of commitment to that and varying degrees of understanding and ethics and so on.

There is a picture out there, and we just get that one little piece of the puzzle. That is what I was trying to talk about before. This agency should be able to pull those pieces of the puzzle together to get a better picture. You might not get the whole puzzle, but when that piece comes to us, it may be a good part, and we may be able to do something with it. The best way I can visualize it is that they are bringing a lot of the pieces of the puzzle together at that agency.

Senator Tkachuk: It would not normally be the practice of the police, of course, to release names of people who are simply being investigated but who have not been accused of anything.

Mr. Killam: No.

Senator Tkachuk: Yet it happens.

Mr. Killam: It has happened in the past. It is not normal practice.

Senator Tkachuk: It does happen quite a bit, actually.

Mr. Killam: We attempt not to. It is certainly not our policy to do that.

Senator Tkachuk: I understand that, but it does happen.

Mr. Killam: Absolutely.

Senator Tkachuk: It happens on a fairly regular basis that people are being investigated and somehow it gets in the paper. Some reporter finds out. Why do you think that will not happen at the agency? Are they better people?

Mr. Killam: I just do not believe the same kinds of investigation will take place. My understanding of the way the agency will work is that it will be in an office; it will be done in more of a closed way, with privacy protections.

Senator Tkachuk: We live in Ottawa, where reporters and bureaucrats hang around together at cocktail parties, go out for dinner, talk. Let us say a nice, juicy name comes across the desk; the reporter might be interested in that, right? Some teller at a bank sends to the agency a piece of information with a name attached and it happens to be the name of a prominent person -- someone people are interested in reading about -- and even though that person has not been doing anything, it is possible that it would just happen to leak to a reporter. That could happen, and it will happen.

Mr. Killam: Absolutely, it is possible.

The Chairman: It is a pleasure to welcome, from the Office of the Privacy Commissioner of Canada, Mr. Bruce Phillips, the Privacy Commissioner. Mr. Phillips informs me that he does have an opening statement, and then senators may ask questions.

Mr. Bruce Phillips, Privacy Commissioner, Office of the Privacy Commissioner of Canada: Senators, attending with me today are Julien Delisle, who is the executive director in my office, and two of our legal staff, Stuart Bloomfield and Martine Nantel.

The first thing I want to say is that this is quite a piece of legislation. It does seem to me to be breaking new ground in the sense of the amount of personal information that the state is prepared to demand of its citizens.

The Chairman: When you say it is "quite a piece of legislation," do you mean it quite good or quite bad?

Mr. Phillips: That is a judgment for you to make, although I do have some observations about specific problems with it.

The Chairman: I am just kidding.

Mr. Phillips: You might catch me a little bit later on.

It has the potential and the likelihood of placing a very substantial proportion of the population under what amounts to a more or less constant form of surveillance. Given the possibilities, and owing to the very broad information-gathering authorities of having essentially detailed life profiles constructed of a great many Canadian citizens, I think it is worthwhile to bring to this committee's attention the very obvious concern that Canadians at large have with this kind of activity, especially given our recent experience with a comprehensive database at the Department of Human Resources, which, so far, has generated no fewer than 50,000 demands by Canadians for access to those records. It is a matter of some public concern, as well as having importance as a piece of legislation.

It is for this committee to decide whether the problem defined by the sponsors of this bill is sufficiently severe to warrant the kind of information gathering that is made possible by the bill. I appreciate that money laundering is an important issue, but I must be concerned about the impact on the privacy of Canadians.

We have here a proposal to collect information on uncountable numbers of Canadians, largely without their consent when you get beyond the prescribed reporting requirements, largely without their knowledge and, so far as we are concerned after examining the bill in its present state, with no real right of access to those records. Essentially, therefore, it vitiates the rights that are contained in the existing Privacy Act.

I will sum up our first objections regarding what we consider to be vagueness, ambiguity and lack of precision. Banks, trust companies, insurance companies, credit unions, investment counsellors, other organizations providing financial services and even casinos are being required to report "every financial transaction" where there are, according to the bill, "reasonable grounds to suspect that the transaction is related to the commission of a money laundering offence." What are these reasonable grounds? We do not know. They are not part of the proposed legislation. The bill requires businesses and individuals to make subjective and possibly speculative assessments of the character and activities of their clients without providing the statutory or regulatory guidance about what constitutes reasonable grounds.

In fact, you could argue that this legislation encourages excessive reporting of personal information. Given that organizations and individuals required to report suspicious transactions can be fined as much as $500,000 and imprisoned for up to six months, it seems to me that reporting organizations will be very likely to err on the side of submitting too much rather than too little. Further, the lack of clear definitions of "reasonable grounds" and "suspicious transactions" invites excessive reporting and increases the likelihood that innocent citizens will have their privacy invaded. The point must to be made again and again that the vast majority of persons who will be captured in this immense collection of information will be innocent people.

The observations of Mr. Seeto of the Department of Finance were very interesting. In trying to weigh the value of the information from an investigative or evidentiary point of view with the amount being collected, he tells us that, in Belgium, which apparently is one of the few places where there are any comprehensive statistics, 24,000 suspicious transactions were reported in the six-year period from 1993 to 1999. Of those 24,000 reports, 1,400 went to judicial authorities and 117 convictions were registered. I think the argument that must be posed and that the Senate must consider is whether the cure here is not a little worse than the disease.

Where the objective criteria do exist that trigger mandatory reporting, such as two or more transactions on the same day totalling $10,000 or more in cash, although I am no expert, I would respectfully suggest that this will result in the collection of information about a very large number of people. There are discussions about the thresholds here, and although that gets a bit beyond my brief, it does seem to me they are very low.

The organizations required to collect and report this information will send it to the Financial Transactions and Reports Analysis Centre without the client's knowledge or consent on the basis of these yet undefined suspicions. In some cases, this information will never be used for criminal purposes. It is our belief that without convincing evidence that notification of purpose -- that is, telling the client why the information is being collected -- would seriously undermine the criminal investigation process, people's rights to be informed should not be abrogated in this way.

Paragraph 54(b) of the bill provides that the centre may collect personal information "relevant to money laundering activities." Again, as in the case of "reasonable grounds," the legislation does not attempt to define "relevant." Given that they have access to almost any database in the possession of the federal government, no matter where it is located, and access to databases of provincial governments and other sources as well, it would seem that the centre could amass information relating to such things as employment history, income, professional relationships and travel patterns, all of which could be considered relevant, in addition to the information provided by financial institutions and other organizations covered by the legislation.

This seems to me to be giving a licence to the centre to collect information for the compilation of comprehensive profiles of individual life and behaviour. Because of the lack of definitions and guidance in the legislation, we do not know whether the centre will collect this information. We think we need to specify the type of information that can be collected, as well as the possible sources of information, with a good deal more precision. We object to the breadth of the information the centre is mandated to collect and use. We believe that the types of information considered relevant to the proper assessment of whether a given transaction is suspicious, as well as the sources of those data elements, should be specified, preferably in the statute.

One of the fundamental principles underlying both the Privacy Act and the new Personal Information Protection and Electronic Documents Act is that organizations should collect only as much information as they need. The legislation needs limits placed around it.

The establishment of the centre as an agency at arm's length from the police, subject to the Privacy Act, or so we are told, is, I suppose, preferable to having the reporting organizations disclosing information directly to the police. However, the protection afforded by the Privacy Act, in my opinion, is largely illusory. The public's ability to lodge complaints and the commissioner's power to investigate complaints will be meaningless given the secrecy surrounding the collection of information by the centre. As a result of this secrecy, members of the public will not know what information is being collected about them, short of what is prescribed in the bill or that they may be being investigated. Citizens will not be able to use the Privacy Act or the Personal Information Protection and Electronic Documents Act to determine if information has been collected about them. Although in one part of the bill the centre is said to be expressly subject to the federal Privacy Act, we have been informed by officials connected with this operation that the centre will routinely deny access requests pursuant to section 16 or paragraph 22(1)(b) of the Privacy Act.

Bill C-22 also amends the Personal Information Protection and Electronic Documents Act to include reporting organizations as organizations that can disclose information to the centre without consent and authorizes the centre to inform an organization that it cannot disclose the fact that it has sent information to the centre.

Without evidence of harm, access to personal information should not be denied to an individual as a matter of routine or a matter of course. At a minimum, individuals should have access to the information collected by the centre as a matter of statutory right if they have not been subject to a criminal investigation as a result of that collection.

Clause 55 of this bill authorizes the centre to disclose designated information to law enforcement organizations, the Canada Customs and Revenue Agency and other bodies without warrant. However, subclause 55(7) of the same bill gives the minister the authority to add to this any other similar information that may be prescribed. That poses the risk that the centre could simply become a conduit through which other information could be channelled to law enforcement bodies, circumventing the controls normally applied to the collection of evidence in criminal investigations.

In summary, therefore, our problems boil down to four. There is the lack of statutory or regulatory guidance about what constitutes reasonable grounds and suspicious transactions. These terms should be defined in the legislation or regulations, not in guidelines developed on an ad hoc basis between the centre and interested parties. If these terms are defined in regulations, the committee should have an opportunity to review them.

There is the scope and the quantity of the information the centre is authorized to collect and the potentially very large number of citizens that will be under surveillance. Terms such as "relevant information" and "law enforcement" must be defined in the legislation or in regulations, and the number of individuals about whom information is collected should be kept to a bare minimum.

Above all, citizens should be able to use their access rights under the Privacy Act or under the Personal Information Protection and Electronic Documents Act, unless it can be clearly demonstrated that informing them that information may be sent to the centre or that giving them a right of access would jeopardize the intent of the legislation.

Finally, we are concerned about the possibility that the information provided to law enforcement bodies will be expanded. That must be kept to a minimum.

In a Supreme Court majority decision respecting privacy and law enforcement, Mr. Justice La Forest stated:

The restraints imposed on government to pry into the lives of the citizen go to the essence of a democratic state....where privacy is outweighed by other societal claims, there must be clear rules setting forth the conditions in which it can be violated. This is especially true of law enforcement, which involves the freedom of the subject.

I am asking you today to take this under advisement to ensure that Bill C-22 does contain clear rules. If you feel that this legislation is needed, then I urge you to ensure that it contains definitions and rules that will minimize the intrusiveness of the legislation.

I should like to add one footnote to that. One of the basic principles under the Privacy Act is that we have, as individual Canadians, the right of access to information the government holds about us. The Office of the Privacy Commissioner of Canada is established to investigate complaints in cases of denial of access. The normal process for us is to look at the documents concerned, make a judgment and offer recommendation to the relevant department. If the recommendation is not accepted, if it happens to be a failure of disclosure, we do have the right to go to court on behalf of the complainant. As we see this bill, we do not have that right. We can look at the information, but the bill, as nearly as we have observed, stipulates that there will be no disclosure by a court of any document contained in the centre unless it meets certain conditions that are contained in the bill. They certainly do not include a recommendation from the Privacy Act. We get a sense from this bill that the judge would be required to say, "I am sorry, because this bill overrides the Privacy Act I cannot entertain an application to the court for disclosure of the document."

The Chairman: This committee obviously has a dilemma, because we are informed that there is a great deal of criminal activity going on and something should be done about that. On the other hand, do you give law officers licence to do whatever they want? I do not pretend to know the answer. I do know, however, that the trend seems to be changing a little. Do you remember the famous Miranda rules, where even if a guy had a smoking gun you would not touch him until you had read him his rights? Apparently that procedure is now under fire and it looks like it will be changed. You pose a difficult dilemma, I think.

Senator Kelleher: Prior to your presentation to us, would the Department of Finance and the drafters of this bill have been aware of the views that you just recited to us?

Mr. Phillips: Indeed they are, yes. We have conveyed these views to the department.

Senator Kelleher: Obviously it has not had too much effect upon them.

Mr. Phillips: I would not say it has had no effect, but it has had very little. Originally, this bill would have denied the Privacy Commissioner the right even to see any of these documents. They have amended it to that extent. However, the ability of the commissioner to function as an ombudsperson and to make recommendations to the centre is really vitiated by our inability to bring any relief to a complainant we feel has a just complaint.

Senator Kelleher: Were you made an interested party to the drafting process? Were you asked for your views on this legislation?

Mr. Phillips: Yes, senator. A consultation document issued early on in this process was sent to us, among many interested parties, and we conveyed our views back to the department in response to that consultation document. We have had meetings with the Department of Finance. We have put our views on record.

Senator Kelleher: Have you offered any specific drafting to alleviate some of your concerns?

Mr. Phillips: No, not specific. I do not feel it is the proper business of my office to be writing regulations or writing statute law. We are not qualified to do that. However, we think we know what it should not be doing.

Senator Kelleher: If this committee wanted further and more detailed assistance from you with respect to possible amendments, would you be able to provide that for us?

Mr. Phillips: We would certainly try to help, yes. You are far better equipped in that respect. You have legislative counsel and experts of that nature available to you. We would certainly be happy to look at any amendment proposed and give you our opinion of its effect on the totality of the legislation.

Senator Furey: Most of my concerns were addressed in your presentation, but I want to recap two of those. Commissioner, you indicated that in the first instance you would prefer to see clients notified that they were being investigated at the investigative stage, unless there was compelling evidence to show that it would interfere with the investigation. Is that correct?

Mr. Phillips: That is correct.

Senator Furey: The second part of my question is that once an investigation has been conducted and a client is deemed to be innocent, that party should be notified. Is that correct?

Mr. Phillips: I did not specifically say that, but it is not a bad idea. What I am arguing for here is a bit more transparency in this process. If it is deemed necessary for them to collect all this information, you know as well as I do that the vast majority of transactions will be found completely innocent and lawful. One analogy is the police R.I.D.E. program. It operates on a statistical assumption that, if you stop 100 cars on Christmas Eve, a certain percentage of those people will be found to be violating the law. This, equally, is law enforcement by statistics. You assume that in 1 million transactions a certain percentage will raise suspicion.

I think we all have views about that approach, because it involves fishing expeditions and collecting information about many people without probable cause. Those concepts are not consistent with our general view of the proper role of law enforcement in a society such as this.

You are being asked, in the first place, to set aside the normal considerations here because of what the law enforcement authorities say is such an urgent problem and of such enormity that normal rights must be set aside. My argument is that, if that is so -- and it is for other people to make that argument and to convince this body that it is so -- I do not think they need to go as far as they are going here with respect to the great majority of the people whose information will be collected here, in terms of violating their existing rights under the federal Privacy Act and under the Personal Information Protection and Electronic Documents Act applicable to the private sector.

If you, senator, make a couple of $5,000 deposits in the bank that get reported to the centre, it is difficult for me to see any reason why the information should remain in a file for five years -- or longer, if you do it again a year later, because they essentially are in a position of maintaining a rolling, perpetual file about you, with no reason whatsoever to keep it based on the information at hand. I do not think that is right. Furthermore, there is no reason why you should not know it is there. Second, if they are keeping information for the statutory five-year term, there is no reason, if it has not generated a suspicion -- and on what terms a suspicion is generated I do not know -- why you should not have access to that information, unless it can be demonstrated by the holders of the information that to disclose it to you, the individual concerned, would somehow or other impair a criminal investigation.

That is the principle now embodied in the Privacy Act. In most cases, investigative bodies working under the Privacy Act must demonstrate an injury if they deny access to the information. That this group should be exempted from that or that they should routinely deny any access requests to this, as they have told us they intend to do, strikes me as an arbitrary and unjustified position. They may say, as Mr. Seeto of the Finance Department has said, that the Privacy Act covers this. However, if you look carefully at this bill, you see that the coverage is a bit of a chimera because they have written in clauses that essentially make the ability of the Privacy Commissioner to act on behalf of any complaint meaningless.

Senator Furey: I agree with an earlier comment you made that reporting agencies no doubt will err on the side of protecting their own interests. As a result, I can see a whole host of transactions being reported that end up being purely innocent transactions. If the individuals or clients who are reported are not told about this, they have no opportunity to go back the next time to ensure that the transaction is more transparent so that it does not get caught in this web. One of my concerns is that the failure to notify people will mean that they do not have the opportunity to ensure that they do not continuously get snagged up or caught up in it.

Mr. Phillips: Senator, I could not put it better myself.

Senator Oliver: Mr. Phillips, every time you appear before one of our committees you leave us with a big challenge and you have done it again today, with comments on clause 55 of this bill and section 16 and subsection 22(1). Clause 55 is the one that authorizes the centre to disclose designated information about a Canadian citizen to law enforcement organizations and the Canada Customs and Revenue Agency.

From reading the bill, I have the impression that this bill gives a lot more powers than are necessary to do the job of combatting money laundering in Canada. Some of the powers given are intrusive. I think you would agree with that.

Because section 55 gives this extraordinary power to give information to other agencies, such as the Canada Customs and Revenue Agency, I also have the impression that this is a backdoor way for the federal government to say, under the guise of controlling money laundering, "Let's go a couple of steps farther and try to find out if we cannot combat the whole underground economy." If they find someone has given $5,000 cash to someone and then another $5,000 cash, they have the power under clause 55 to give that information to the Canada Customs and Revenue Agency. In my opinion, that could be used for purposes of trying to combat the underground economy. I should like to hear your comments on that.

Mr. Phillips: We did look at that section. The purpose for the reverse direction of the information flow, if you want to put it that way, did seem a little obscure to us. I do not think we ever did question any of the officials about that particular section. In the end, we came to somewhat the same view, that this certainly would permit the use of information given by a financial institution, for example, to the centre for purposes of money laundering investigations also to be transmitted to the revenue authorities for the disclosure of unreported income. Whether that is right or wrong is something you might want to consider, but it did seem to me to be getting a bit beyond the stated purposes of this bill, which they repeatedly say in various places is only for the purpose of money laundering investigation.

There is a broader issue there, senator, which is the question of whether, when people have at hand what they think may be evidence of criminal activity, they should disclose it to another authority. What does merely reporting a sum prove to the financial centre about a person's relationship with the Canada Customs and Revenue Agency? It is well worth looking at, absolutely.

Senator Oliver: You also make the amazing revelation that your department has gone to the Department of Finance and said, "Tell us about the Privacy Act and its position vis-à-vis this act," and you have said that you have been reliably informed that the centre will routinely deny access requests by you. In other words, in Canada, we have a right of privacy. One of the powers you have now to enforce that right of privacy is to go to agencies and seek to get information. Now you have been told, before this act gets Royal Assent, "There is no point in your coming because we are routinely going to turn you down."

Mr. Phillips: Yes.

Senator Oliver: Do you think that language such as "such consent shall not be arbitrarily or unreasonably withheld" might strengthen your position under the Privacy Act?

Mr. Phillips: I suggested some language in my brief opening remarks, to the effect that, where the information collected about financial transactions has not precipitated and is unlikely to lead to a criminal investigation, the person concerned with that information should have a right of access to it. The only conceivable explanation for refusing such a request for access would be if that access were injurious to a lawful investigation of money laundering.

Senator Oliver: What reasons did they give for telling you that they were routinely going to refuse to give you this information?

Mr. Phillips: I will refer you to Mr. Delisle, who attended the meeting at which those statements were made.

Mr. Julien Delisle, Executive Director, Office of the Privacy Commissioner of Canada: I should like to clarify a point, senator. Section 16 and paragraph 22(1)(b) are Privacy Act sections that deal with an individual's right of access. What the Department of Finance is saying is that individual Canadians making an access request under the Privacy Act may be routinely denied under section 16 and paragraph 22(1)(b) of the Privacy Act. That has nothing to do with the authority of the commissioner to investigate complaints on their behalf. He will be permitted to do that.

Mr. Phillips: The point I am making is that even though we can go and investigate the complaint and come to a conclusion about the merits of the complaint, pro or con, if we should in the case of a denial of access decide that the complaint is justified, we cannot force the centre to grant access. As you know, as ombudsmen we do not issue orders, we issue recommendations to the departments holding the information. If they do not accept our recommendation, we then have the option of applying to the Federal Court for a hearing of the complaint and our recommendation.

The way this bill is structured, I can make a recommendation, and they can look at it. However, since they have decided in advance, as evidenced by their statements to us, to deny access, what is the point of the investigation? They have already told us in advance, "We do not care what you recommend."

Senator Oliver: You can still go to the Federal Court.

Mr. Phillips: No, we cannot. Clause 60 is worthy of your attention. We can go to the Federal Court, but this bill says that this information can be disclosed only under the circumstances that are set forth in clause 60. That does not include the Privacy Act, which is overridden specifically by clause 60. That clause states that, despite any other act of Parliament, the information may be disclosed only under these very narrowly defined circumstances.

In other words, we are shut out of the court process unless a Federal Court judge is prepared to say that, in his view, this is a denial of natural justice or that it offends administrative law in some other way. On the face of it, though, as we see it, the commissioner is effectively blocked from ever providing relief, even when he may feel that the complainant has a fully justified complaint.

Senator Oliver: Has your department looked at the charter and at this particular statute to see whether provisions of the charter have likewise been infringed?

Mr. Phillips: I do not think we have come to any conclusion about the charter argument. It has been raised elsewhere. The Canadian Bar Association made some comments that struck us as reasonable observations.

Mr. Stuart Bloomfield, Policy Branch, Office of the Privacy Commissioner: The Canadian Bar Association is concerned about section 8 of the Charter but also about the vagueness of several provisions within the bill, such as the uncertainty surrounding what may constitute a "suspicious transaction."

One rationale for establishing the reporting centre at arm's length from the law enforcement body is to insulate the authority from a Charter challenge. This is because the centre is not an investigative body, even though it ostensibly performs an investigative kind of function.

Yes, we did consider the charter issues. There may still be some outstanding concerns in that regard that need to be resolved.

Mr. Phillips: Senators, you have just heard a very good lawyer being very careful. I will tell you what the commissioner thinks.

True, the centre is not an investigative body as defined in the regulations, but, when it talks like a duck -- et cetera. The sole purpose of the centre is to facilitate law enforcement investigations into money laundering. You have just heard a good deal of evidence from police witnesses about how useful and essential this centre will be. Law enforcement is its raison d'être. It is difficult for me to accept the notion that it is not involved in investigations.

Senator Kroft: I do not think Canadians like this legislation in the sense that we do not like the kind of society that calls up this kind of legislation. It is part of a bigger feeling. I did not like putting in my first burglar alarm system because it said something about the community where I lived.

Our job is to find the best way of doing things, often amongst alternatives. Today, in the absence of this legislation, where are we? Investigations are certainly going on now for money laundering. In your official office, do you have any access to police investigation reports? If this bill is not passed, obviously police activity will fill the gap. Is that system not even more protected, even more impenetrable, by any kind of process?

Mr. Phillips: The Office of the Privacy Commissioner does have access to police investigation records if a complaint on an investigation is filed with our office. We also have authority under section 27 of our act to audit the manner in which government agencies and departments are managing the personal information that they collect.

Yes, we do have an insight. If you are asking my view on how they do their work, I hesitate to go very far along that track. We are not there to tell people how to do their jobs, only to look at the way they manage personal information.

Senator Kroft: I am just trying to confine the question to accessibility. For example, do people who were investigated ever know that they were investigated? My colleague raised that question.

Mr. Phillips: Sometimes yes and sometimes no. For example, the Privacy Act does provide a process by which a government department can refuse to confirm or deny the existence of personal information if it qualifies for exemption under some of the exempting clauses of the bill. For example, the Canadian Security Intelligence Service routinely refuses to confirm or deny the existence of personal information when people write in to ask for any personal file that involves them. CSIS's justification for doing that has been tested in the courts and upheld. CSIS argues that, if they confirm or deny the existence of personal information, it could be a very valuable tool for terrorists, for example. A terrorist would want to know if Canada was not watching. It is the so-called mosaic effect.

Senator Kroft: Judging from the reactions you have heard, do you think that this proposal is roughly equivalent to the way CSIS operates?

Mr. Phillips: There was an attitudinal view demonstrated to us by their statements about refusing to grant access to any information.

We are dealing with a somewhat different issue here. This is not capturing information on people who are suspected of anything. It is capturing the information on thousands of people on the statistical assumptions that people have made. If you collect enough information, you will find a crook. If you go through enough houses in the city of Ottawa without warrant and without telling people, doing it while they are away on vacation, you eventually will find some stolen property.

Those are the analogies. CSIS is an entirely different matter. It is conceded, and the statistics so far prove, that the vast majority of this information will concern the innocent, entirely lawful business of Canadians. Some limited proportion will be helpful to law enforcement authorities.

The normal reasons police collect information, which lead to probable cause to feel that someone is committing an offence, are set aside here. This is essentially based upon the proposition that, if you get enough information about enough people, somewhere in that enormous body of information you will find reasons to suspect a criminal act. That sets aside the normal rights of people dealing with probable cause as a principle of law.

The Chairman: You are defining "probable cause" in your way. Their "probable cause" may be different. A bank customer who makes deposits at a bank three times a week may be totally innocent, but that may be probable cause for a police officer.

Mr. Phillips: Granted.

The Chairman: It is hard for us to discern what is suspicious and what is not. I do not think you can define it. I am not arguing with you, but I am saying that I do not know how to deal with it.

Mr. Phillips: I would be the last person to argue that this is an easy question. This is one of the many cases where we must strike some kind of a reasonable balance in the face of a national problem.

It is my contention that the centre will collect all this information but that most of the information will clearly not involve criminal activity. I see no compelling argument why those innocent people whose information is in that database should not have access to it, or, for that matter, that they should not be notified that the information has been collected and that no fault has been found with it. Why can they not put that in the bill and make that a statutory requirement?

It is very disturbing, senator, to have officials of a department in this country telling us, before the thing is even law, "Well, they can ask for it if they want to, and even though the Privacy Act says that an injury has to be demonstrated, we are going to deny access automatically and routinely."

The Chairman: It sounds stupid.

Mr. Phillips: It is offensive to me. At any rate, it constitutes a very strong argument for putting right in the legislation that, if no criminal investigation has resulted from the accumulation of this information, people should have access to it, at least.

The Chairman: Which means they have to be informed.

Senator Furey: Did you not also say, Commissioner, that you did not have standing before the court to take it that further step?

Mr. Phillips: We do in normal cases, yes.

Senator Furey: Not here?

Mr. Phillips: Clause 60 of this bill seems to override the normal process of our right to apply to the court.

Mr. Delisle: I wish to apologize, senator. I misled you and, I think, the commissioner. He was, in fact, referring to section 37 of the Privacy Act, which deals with audit, not section 27.

The Chairman: The commissioner's omission.

Senator Tkachuk: This bill troubles me greatly because of its enlisting of the Canadian citizenry to send paper to the government on their friends and neighbours and the people they do business with, which is much like stopping crime in a neighbourhood by putting cameras in everyone's house. The term "suspicious transaction" bothers me because, just a while ago, a black man in New York who was thought to be suspicious had 42 bullets put in him by well-trained people. Of course, he was an innocent bystander. Here, we are going to have amateurs doing this, bank tellers, who do not know the law itself.

I asked the bureaucrats when they were here why people could not get information on their own file, and they did not really have any answer except "No." In all this discussion, did they give you the reason they would not release a file on a person who just happened to have his paper cross the desk of the commission? Were you told why they want to keep it?

Mr. Delisle: Sorry, I missed the last part of your question.

Senator Tkachuk: Why do they want to keep the file? A person's file comes in, they investigate, there is nothing there. Why do they want to keep the file for five years and why would they not allow a person access to his file if he wanted it?

Mr. Delisle: They want to have the information for a set period of time in order to decide if there is some kind of pattern or if there is any information that should be passed on to the police for criminal investigation purposes. I think there is also a requirement in the bill that the information be purged after five years, if nothing has happened.

From our perspective, in order to bring more transparency to the process it is important to develop the statutory right of access so that individuals could see what is in their files, if that information is not subject to a criminal investigation. If it is subject to a criminal investigation, then one could understand why they should not get access to it. It seems to us to be the quid pro quo for denying a person his fundamental right of privacy.

The Chairman: Thank you very much, gentlemen. I do not know that we got any further, but we know more.

The committee adjourned.