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

Issue 15 - Evidence, June 8, 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 11:00 a.m. to give consideration to the bill.

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

[English]

The Chairman: Honourable senators, I call the meeting to order. We are here to continue our hearings on Bill C-22.

This morning, I am pleased to welcome the Information Commissioner of Canada, the Honourable John Reid.

Hon. John Reid, P.C., Information Commissioner of Canada: Mr. Chairman, I want to say at the beginning that I appreciate the opportunity to come before you to talk about this bill. This is also not the first time that a commissioner has come before this Senate committee to ask that legislation be changed. My predecessor, John Grace, came here a number of years ago to ask for amendments to a labour bill that also had the effect of removing information available to Canadians from a piece of legislation.

Senator Angus: Mr. Chairman, I have a point of order. We have had no documentation on this presentation.

The Chairman: We received it last night.

Senator Angus: It was not circulated to the senators, and everything Mr. Reid is about to say seems to have been available on the Internet this morning, while we did not have it yet. Do you think that is a good thing?

The Chairman: No.

Senator Angus: I think you should register your disapproval and ensure it does not happen again.

The Chairman: You have done so.

Mr. Reid: On that point, Mr. Chairman, I gave similar testimony earlier this week to the Justice Committee of the other place. Any information that came out of that testimony is, of course, in the public domain.

The point I want to make, however, is that Bill C-22, which seeks to create a new government institution, is a direct attack on the access to information legislation and the principles behind it.

Clause 85 of Bill C-22 provides that all required reports of financial transactions in respect of which there are reasonable grounds to suspect that the transaction is related to the commission of a money laundering offence, all voluntary reports about suspicions of money laundering, and any information prepared by the centre from information received concerning suspicious transactions or transactions involving sums of money of a value equal to or greater than a specified amount to be set by regulation, will be exempt from the Access to Information Act.

The Department of Finance was kind enough to invite us over for a brief discussion of these matters. We asked them what, if any, of these aspects of the activities of the new agency would not be protected under the existing provisions of the Access to Information Act and whether they could give us examples. They could not give us any examples and they could not be specific.

I have been unable to find any justification for this provision. If this provision goes through the House of Commons and the Senate and becomes law, how can we justify having CSIS, the RCMP, the Department of National Defence, or a number of other departments that hold information that, in many ways, is far more important, far more confidential, and far more dangerous to the health of the country than this, included in the act and this minor piece of information outside? If this is allowed to take place, it will create a "black hole" in the governmental system. Black holes, as you know, have a tendency to draw in a whole range of other information.

This is not an unusual attack on the Access to Information Act. In doing some research for this meeting, we discovered that the number of exemptions to the act has been growing very rapidly. When the act was passed, there were 33 statutes listed in Schedule II, which is where exemption from the operations of the act are found. Three years later, there were 38. In 2000, some 50 statutes are listed in Schedule II. Therefore, this is a continuing process by government and the bureaucracy to ensure that more and more information is kept away from Parliament and the citizens of Canada. This means a lessening of accountability. It means that, in effect, we must put more trust in the bureaucracy and the government to ensure that proper scrutiny of these activities takes place.

When the act was reviewed by the parliamentary committee in 1986, it recommended that, as a result of three years experience, Schedule II be done away with because it was not possible to justify intellectually the exemptions already in place under the Access to Information Act.

Senator Kelleher: Mr. Reid, did you have discussions with the Department of Finance regarding your concerns prior to the bill being tabled and passed by the House of Commons?

Mr. Reid: Yes.

Senator Kelleher: Did you have any success as a result of voicing your concerns to Finance?

Mr. Reid: I will ask Mr. Leadbeater, who organized the discussions, to reply to that.

Mr. Alan Leadbeater, Deputy Information Commissioner: Senator, it is fair to say that the department gave us a very fair hearing. We had a full opportunity to discuss our concerns with the experts in the department.

As to whether we had success in changing their minds, the answer is no. We agreed to disagree. We were of the view that all of the sensitive information that deserves protection could be protected under existing provisions of the legislation. The department felt they needed an "abundance of caution" approach. Although they could not come up with specific examples, they believed that this information was so sensitive that they would like the assurance of a "blanket of secrecy." That is where we agreed to disagree.

Senator Kelleher: Specifically dealing with clause 85, to which you have just objected, did they give any specific raison d'être for wanting this exemption?

Mr. Leadbeater: As you know, senator, the act requires all individuals to report suspicious transactions. That is fairly sensitive information. The centre is independent of the law enforcement agencies and it will examine it carefully and decide what to pass on. In that circumstance, they felt that for the public to have confidence in their integrity and independence, they wanted to be able to assure them there was absolutely no chance this information would ever get into the public domain.

I think that was the rationale for taking the "abundance of caution" approach.

Senator Kelleher: Did you have specific discussions with them about the lack of a definition of "suspicious transaction"?

Mr. Leadbeater: No. We felt that however "suspicious" was defined -- and that certainly becomes a privacy issue with regard to how intrusive this legislation should be -- the existing provisions in the Access to Information Act protected what was sensitive but also permitted the public to have access to accountability information. This organization will, after all, have a fairly intrusive role in Canadian society and Canadians will want access, for example, to any internal audits that may be done on its administration and effectiveness. This provision could prevent them from having access to that type of information.

Senator Kelleher: Did you raise any concerns with them over the fact that the citizen would never know he was being investigated, and if it was decided that there was nothing wrong with the transaction, he would not even then be notified that there had been an investigation and that he had been cleared?

Mr. Leadbeater: We did express concern about that in the sense that if the institution were to be covered by the existing provisions, section 19, which protects the privacy of individuals, would be available to them. However, there is a public interest override to that section. In certain cases, the public interest in disclosure might outweigh the privacy rights of individuals. That weighing, which we think should go on, and Parliament says should go on, under the Access to Information Act, would no longer be possible because of the changes to Schedule II.

Mr. Reid: As you see, senator, it becomes a black hole into which a great deal of normal information about a department can fall and be protected.

Senator Kroft: Good morning, Mr. Reid. My question goes to the root of the bill. I think we would all agree that it would be preferable if we did not need such legislation. However, the governments of the world, in the face of modern realities, have concluded that we need to protect ourselves in this area. The question then becomes, what is the least socially damaging thing we can do while still achieving the purpose? That is the way I approach it.

Is there a distinction between information that the analysis centre would have, which is collected by agencies of the state, be it police, CSIS, or others, and information that a broad range of Canadian citizens and institutions have the obligation to provide to try to capture illicit funds?

Does the fact that that information comes from ordinary citizens, rather than as a result of professional state agency work, change the nature or quality of the material? It seems to me you have some obligation to the people on whom the duty to provide the information is being imposed. It is of a fundamentally different quality when it comes from you, me, or someone else who has to make this report. Does the source of the information change anything about the situation?

Mr. Reid: No. If you look at the activities of the RCMP, CSIS, as well as other regulatory agencies that have powers similar to this projected agency, you will find that information that needs to be protected is well protected under the Access to Information Act. There are exceptions that provide for the protection of that information.

I should say that about one-third of our work -- perhaps more -- goes into the enforcement of various provisions of the Privacy Act to ensure that information that ought not to come out does not become public. If you were to take a look at the kinds of information that will be gathered by this new agency, and examine the exemptions as listed in the Access to Information Act, you would be hard pressed to find any piece of information considered secret that would come out. That is because the provisions of the act would protect it for the necessary period of time.

We have no problems at all working with CSIS. We have no problems at all working with the RCMP, who after all, in their day-to-day activities have information that is much broader, much deeper, and much more significant in a whole range of other areas than what this agency will be collecting and collating.

Mr. Leadbeater: The question you asked, senator, has another aspect to it that is worth mentioning. By placing this provision in Schedule II, Canadians will get the idea that they can come anonymously to this centre and say whatever they want and give whatever information. However, Canadians should remember that once the centre analyzes this information, if they feel there is a reasonable basis for the involvement of law enforcement, it will be passed on. There are no guarantees of anonymity once things gets into the criminal investigation and subsequent prosecution system.

I do not think it is fair to Canadians to give the impression at the very outset that this is an anonymous "snitch line," if you will, that they can phone in tips and never be involved subsequently. They may become involved, and they may as well know that right at the outset.

Senator Furey: Are you saying then that you would want access to the information for which they used the euphemism "for investigation analysis" at the analysis stage?

Mr. Leadbeater: We are saying that there would be an adequate exemption for the information at the analysis stage, subject to a public interest override, if the protection were to be for personal information under section 19 of the act. The information that is not related to the actual suspicion of money laundering, such as the administrative and personnel information of the institution, would also be accessible, subject to the ordinary exemptions to which all government institutions are subject.

Senator Oliver: Mr. Reid, because something is inconvenient, that should not be a justification for the denial of a fundamental right, such as the right of access to information or privacy. The document that we saw on the Internet contains remarks that you made earlier. I will quote two paragraphs and ask you to comment on them and explain them to this committee. It states the following:

We already know the Chrétien government does everything possible to block improvements to Canada's freedom of information laws. Now it wants to exclude even more government-held material from public scrutiny. The federal Information Commissioner, rightly, wants it to stop.

Farther down in the story it states that 17 years ago, some 33 agencies and departments were exempted. Now with Bill C-22 there will be 51. The article goes on to state:

Even worse, it seems the main reason for wanting the centre excluded is not to protect confidential financial records -- sufficient safeguards already exist in the access act and its corollary, the Privacy Act -- but because it would be "inconvenient" for the centre to have to respond to requests for documentation.

What do you say to that?

Mr. Reid: I say that the government has attempted to take other legislation out of the ambit of the Access to Information Act a number of times. An example I gave in my presentation was the labour legislation. My predecessor, John Grace, came to the Senate to seek to have that removed.

I also gave the example of the way in which the number of exemptions in Schedule II of the act has increased steadily at a very rapid rate. There has been an increase of almost 100 per cent in the 17 years since the act came into effect. The parliamentary committee that reviewed this said section 24 is not necessary because the exclusions in the act protect all of this information. Not only is there the abundance-of-caution argument, which Mr. Leadbeater mentioned, there is also the desire to hamstring the act in a variety of ways by removing a significant amount of information from the purview of the Information Commissioner. This is a continuing, and normal, I suppose, bureaucratic battle. I feel that it should stop. I feel that section 24 should be removed from the act and that clause 85 should be removed from this bill.

The Department of Finance has advanced no substantive argument as to why it is required. It can be "macho" reasons in saying, "I'm out and you're in." It can be an abundance-of-caution reason. It can be because I do not want to have to go through the agony that the access legislation provides for. There is no substantive reason, which is to say that there is no information that this agency will receive that is not already protected where necessary.

Senator Oliver: Your main submission, which is succinct, brief and clear, is that you would like to have clause 85 removed from Bill C-22. Do you have a proposed draft amendment or wording? Second, have you and your staff looked at any other ways in which the problem could be solved other than by complete removal?

Mr. Reid: In the first case, I have not been convinced that there is a problem. The Department of Finance has been unable to advance any substantive argument that this information and this agency will have a status higher than that of other secret and police agencies like the RCMP and CSIS. They have been unable to do that. Therefore, a simple amendment such as, "I move that clause 85 of the bill be deleted," would be satisfactory; and to report back to the other place that this clause has been deleted and to ask for their concurrence. That was the process used the last time an information commissioner came before a Senate committee.

[Translation]

Senator Poulin: Since the implementation of the Access to Information Act, there have been major changes in the communication field in Canada. What we consider as being private is far from being really private. This is what we see more and more of in every area. Have the new communication technologies influenced your legislation?

[English]

Mr. Reid: The new forms of communication, such as the World Wide Web, e-mail, and other forms of electronic communication are covered under our act -- not as clearly as we would like them to be, but they are covered. We take into account e-mails, for example. We take into account electronic documents created by government. Voice messages are also covered under the act, but no one has yet found a way of recording them. Decisions are often communicated using voice mail and no record of them is kept. We find a considerable amount of useful information on the Web, and that departments are increasingly using it as a means of information publication.

We have a problem with that because our act clearly refers to publications being in the Gazette or in the library depository system. However, publication on the Web is a greater source of information than the other more traditional means in many cases.

We are very conscious of the problems with electronic documentation. You know that I have complained vociferously about the collapse of the government's filing system, and we still do not have an electronic filing system in place. It is no wonder that records within the Government of Canada tend to be in a chaotic state. It makes it difficult for people to get the information that they want. It makes it difficult for departments to find that information.

[Translation]

Senator Poulin: Considering that explosion of communication technologies, is it not a real challenge for our government to balance ensuring access to information and accountability on the one hand, and the management and follow-up of information on the other hand?

Do you not think that in the spirit of Bill C-22, as Senator Kroft so well said, this balance is particularly important during the transition period? Sometimes it may be better to be overly cautious than to have a system overly accessible and open.

[English]

Mr. Reid: I agree that the question of balance is very important. However, Parliament has decided that the balance shall be met through the Privacy Act and the Access to Information Act. To further ensure that that balance is available to members of Parliament, there are two commissioners with separate mandates. In my case, I spend about 30 per cent to 35 per cent of my time enforcing the Privacy Act. Thus there is considerable balance.

Second, in terms of the activities of CSIS, the RCMP, and other enforcement and regulatory agencies, that balance has been demonstrated beyond a doubt after 17 years of experience with these two acts. I do not believe that there has ever been a case on either the privacy side or the access to information side, where the rights and needs of Canadians to have that balance has been found to be invalid. It is a wonderful record that I think goes back to the designers of the original legislation.

[Translation]

Senator Poulin: What is the main source of requests made under the Access to Information Act, to public agencies that comes under that legislation? Are those requests coming from the general public, Members of Parliament or journalists? What is the proportion of each source?

[English]

Mr. Reid: The greatest source of requests is from the business community. They make up about 40 per cent of the volume. Increasingly, however, we see requests from members of Parliament and senators climbing very rapidly. I have been told there is a study going on into where members of Parliament get their information. After the first six interviews with back-bench Liberal MPs from the House of Commons, the people conducting the study were amazed to find that they all said that the Access to Information Act was their number one method of obtaining information about government activities. Therefore, the Access to Information Act has now superseded the techniques for which I had some responsibility when I was in the House of Commons. They are seldom used now because the Access to Information Act gives citizens rights against the government. The government has an obligation to provide that information within 30 days. If they are dissatisfied with the information they have requested, and they are dissatisfied with the exclusions that the department has made, they can appeal to the Information Commissioner, who will conduct a thorough investigation. The Information Commissioner has very adequate powers to do that. It is a very good balance, in my judgment.

Senator Angus: We were told by the officials who came to brief us about the reasons for this bill, et cetera, that the principal underlying one was the need to combat organized crime. We were told it was to do our bit as a member of a group of 28 nations working together to deal with so-called "money laundering," which I refer to as sort of a folkloric term that television has created. These television definitions far exceed the definition set out in the bill.

At any rate, do you agree that the main and only purpose of this bill is to help combat organized crime on an international scale?

Mr. Reid: Yes.

Senator Angus: I was told before this briefing that there were other reasons, such as the fact that they are after tax dodgers, tax evaders, and not necessarily organized crime.

Senator Oliver: As well as the underground economy.

Mr. Reid: I am not capable of making that kind of judgment. We focused on how the act impacts on the Access to Information Act. That is my mandate. I dare not go beyond it.

Senator Angus: From what I can see, sir, you do your job very assiduously. I am happy as a citizen that you are doing it with the zeal and competence that you and your colleagues bring to it. Let us say it is a given that the principal and underlying reason for this somewhat Draconian bill is to help Canada do its bit in combating organized crime on a large scale. Do you know of other legislation or other databases that result from legislation designed to combat crime on this scale where that information would be available to the public?

Mr. Leadbeater: All the policing agencies of the federal government -- the security service, the RCMP, the policing agencies associated with the Correctional Service of Canada, the Immigration service, the Customs agencies and so forth -- all play a very vital role in the security of the nation. They all came before Parliament at the time the Access to Information Act was being proposed to say, "Don't, whatever you do, make us subject to this act because it will be the end of law enforcement." Parliament said, "No, sorry. We think we have given sufficient exemptions." They were all made subject to the act. Three years later, Parliament reviewed the act and not one law enforcement agency came before it to say that it had been crippled.

I think the experience in the law enforcement and related fields has been clear -- and this is not strictly law enforcement, it is a related field -- that this legislation does not interfere with them accomplishing their programs. At the same time, it gives the public a window into what they do.

Senator Angus: It is but an opaque window.

Mr. Reid: Yes, because the information that is important to the ongoing business of a regulatory department, the police, or CSIS is protected under the act. That is why we find it very difficult to understand why this agency is superior to all of the other agencies of government that handle confidential and important information such that it should have a special exemption.

Senator Angus: That was going to be my next question. It seems to flow from your written material and from your statement that you believe that the powers that be could carry out their intentions under this bill without clause 85.

Mr. Reid: Yes. As I say, they have been unable to advance a substantive argument as to why clause 85 is vital to the functioning of this agency.

Senator Angus: Is there any other element in this bill that offends you in terms of your mandate?

Mr. Reid: No, this is the only clause. I look upon this as part of a continuing attack.

Senator Angus: That is what worries me. I would rather hear you say that this specific bill is highly offensive. As my colleague, Senator Oliver, indicated, it appears that the present government is running roughshod over these main precepts of the privacy laws of the country. I think, therefore, that my staff and I will look more deeply into that.

However, I refer specifically to this bill, which is receiving a fair amount of international attention. We are told that it is urgent, that Canada is the last of 28 countries to do it, and that we had better hurry up and get this on the books. Now we find that that it is not quite accurate, that Canada already has quite good teeth in its criminals laws, et cetera. If we enact this bill, not only will we be one of 28 countries that have done something, but we will probably have gone beyond what those other countries have done. We are waiting for a chart from officials that will set out a comparison of all these elements, to see whether our government is asking us to go way beyond what the other 27 countries have done.

Mr. Reid: I can assure you that I believe that all the other information that is collected under other acts of Parliament is subject to the Access to Information Act.

Senator Angus: You have made that clear, and I was not fully aware of that. That includes the CSIS legislation and our main criminal statutes, but conditionally, of course.

Mr. Reid: Yes, because there are exemptions.

Senator Angus: Yes, and you folks bring the balance to it.

In preparing for today and examining Bill C-22, have you had occasion to look at laws of this nature in other countries to see whether they go beyond what you think is reasonable?

Mr. Reid: No, we have not.

Senator Angus: You cannot tell us that Canada will be more Draconian than other countries if we enact this bill?

Mr. Reid: We cannot make that judgment.

Senator Kroft: Perhaps Mr. Reid's answer obviates the need for my question. However, I am also interested in how we are doing compared with other countries.

Yesterday, we heard from a senior official from Belgium who had broad experience in the organization of this kind of legislation internationally. He also said that he was a professor of comparative law and would speak wearing that hat too.

When we asked him how this bill compared with laws internationally, he said that it was more "protective," I believe was the word he used, and that it went further than other legislation he had seen toward protecting the interests of citizens.

Senator Oliver: He did not say that. That is not accurate.

Senator Kroft: I think that if you check the transcript, you will find that he did.

Senator Oliver: He did not say that.

Senator Tkachuk: That is a nice spin.

The Chairman: I think he did say that, but I will have to check the transcript.

Senator Kroft: I invite you to look at the transcript and see what your reaction is to see what he said.

Senator Tkachuk: Belgium has always been a great example for us to follow and we should get right on it.

Since it was our government that passed both the Privacy Act and the Access to Information Act, we on our side feel a strong responsibility to protect that legislation. A number of issues were raised by the Privacy Commissioner yesterday that caused us great concern. Of course, you raise others today.

On page 3 of your brief you mention the black hole of secrecy that will be created if clause 85 is allowed to stand. You said that it could, for example, be a basis for refusal to disclose audits of the effectiveness of the centre's operation.

Could you expand on that? To what audits do you refer?

Mr. Reid: Generally speaking, one of the management tools we have seen develop over the last few years is an audit of programs to ensure that delivery is proper, that you have the right resources, and that the administration is up to scratch. These audits are, according Treasury Board, to be posted on a Web site, and the draft audits have been accessible for some time under Access to Information legislation. With the kind of exemption contained in this bill, it could be legitimately argued that those audits will no longer available, only a report on the administration of the program.

Senator Tkachuk: I believe this bill provides for one parliamentary review in five years, and then Parliament never reviews it again unless the government passes another bill or amends the act. Are you saying that audits will not necessarily be done, or that they will not be revealed?

Mr. Reid: I cannot say whether they would be done, but if they were, they would not have to be revealed according to this clause.

Senator Tkachuk: If someone asks for information about an issue in a department that is being dealt with in this centre, can that be used as an excuse not to give access to the information? They will be getting information from tens of thousands of people across Canada.

Mr. Reid: If the department controls the information, under this bill, it cannot come out. Also, if that information is in the hands of someone else because it is owned by this department, it will not come out. It would probably also be protected under the Access to Information Act, but in this case, because it is taken out of the act, it is an absolute prohibition.

Senator Poulin: Do you not believe, Mr. Reid, that there is a fundamental difference between this centre, CSIS, and the RCMP in terms of the fragility of information that could be accessed through the bill?

Mr. Reid: In a hierarchy, I would say that CSIS has by far the most sensitive and wide-ranging information, with the RCMP ranking second and this agency third. It does have significant privacy implications. However, the Privacy Act protects much of that information.

I do not see a particular conflict between the Access to Information Act and this agency, because we have had plenty of opportunity over the last 17 years to work out these differences, difficulties, and problems with the agencies that have sensitive and important information. This is the new boy on the block, and it would fit into the already existing practices.

Senator Angus: Did you say that CSIS was first on the spectrum of sensitivity?

Mr. Reid: Yes.

The Chairman: Thank you very much, gentlemen. We appreciate your being here.

I call the next group of witnesses from the Canadian Bar Association. I would like to welcome Ms Tamra L. Thomson and Mr. Greg DelBigio.

Ms Tamra L. Thomson, Director, Legislation and Law Reform, Canadian Bar Association: Mr. Chairman, the Canadian Bar Association is pleased to be able to present its commentary on Bill C-22 today. The Canadian Bar Association is a national association, representing over 36,000 lawyers in all aspects of practice in all areas of the country.

Amongst our primary objectives are improvement in the law, and improvement in the administration of justice. It is from that optic that we make our views known today.

You have received a copy of our submission, as well as a covering letter that addresses some amendments that were made in the other place after we had made our submissions to that committee.

I will ask Mr. DelBigio to address the substance of our concerns with this bill. Mr. DelBigio is a member of the criminal justice section and past Chair of the Vancouver group in that section of the CBA.

Mr. Greg DelBigio, Canadian Bar Association: The Canadian Bar Association expresses two general concerns in its final submission on this bill.

We are concerned about the way in which this bill might interfere with legitimate business activity. I will not dwell upon that today, as it is set out in our submission.

More important, the CBA is concerned about the way in which this bill will interfere with the lawyer-client relationship, in particular, with respect to privilege and confidentiality, which are both essential to that relationship.

As some of you may know, privilege and confidentiality are related but distinct concepts. Both protect information that lawyers receive from clients.

Confidentiality is of course an ethical duty. It is a duty that prohibits lawyers from disclosing information received in their professional capacity to others.

Privilege is a narrower concept. Privilege belongs to the client. Once again, however, the lawyer is prohibited from disclosing that kind of information.

It is the position of the Canadian Bar Association that this bill undermines and erodes the lawyer-client relationship, which is different from any other existing professional relationship. That difference is recognized in law. It is a difference that must be maintained, and that is threatened by this bill.

It is the position of the CBA that there is little doubt that the objectives of this bill are the deterrence of crime and the enforcement of criminal law, and perhaps in particular, the deterrence of organized crime as it relates to money laundering. When considering the bill, it is important to bear in mind existing law, in particular, Part XII.2 of the Criminal Code. That is the existing money laundering legislation, which provides a very comprehensive scheme, including offence-, search-, and forfeiture-related provisions. There are also special provisions within the Criminal Code dealing with organized crime -- for example, the wire tap and penalty provisions.

I say this to illustrate that the topics that are covered by the bill already exist within the Criminal Code in many respects. Is Bill C-20 as it pertains specifically to lawyers necessary? Is there a current void within the Criminal Code that needs to be filled? It is the position of the Canadian Bar Association that the answer to those questions is a simply stated no.

The existing laws deal effectively with money laundering and organized crime. Even if it is necessary for the bill to become law, it is not necessary for lawyers to be included as they now are.

The bill will require that lawyers fundamentally alter their relationship with their clients. In some instances, it will require that information be passed from the lawyer to the agency, and that that passage of information be kept secret from the client.

Uncertainty about the meaning of the term "suspicious" might lead to over-reporting. In other words, in the face of that uncertainty, it might well be that lawyers will err on the side of reporting rather than not reporting. More information may be collected than is absolutely necessary.

I am fully aware of the privilege protection contained in the bill, but again, it is different from confidentiality. That does not protect confidentiality in any way.

We have very specific concerns about the compliance measures and the ability to enter to law offices to search for and collect information. There is a similar provision in section 488.1 of the Criminal Code, which deals with the search of law offices. That has come under constitutional attack in Alberta, British Columbia, and Ontario. In all but one case, section 488.1 has been found to be unconstitutional.

That is because it does not adequately protect the privilege, which belongs to the client. In many respects, the provisions within the bill match, or mirror, section 488.1. The Canadian Bar Association is concerned that, for reasons very similar those already found by the courts, privilege is not protected. Privilege can be lost through inaction on the part of a lawyer and that then destroys the client's interest.

Senator Kelleher: I am not sure that I have everything completely straight and I want to confirm a few things with you. As I understand it, after the initial information has been given to the centre and they decide that further research is required, the centre can, under clause 62 of this bill, go to the lawyer's office and demand to see records and information that are stored on computers, et cetera. Then, as I understand it, under clause 64(2), the lawyer has the right to claim solicitor-client privilege with respect to those documents. That does not help much because it gives that lawyer the right to have the documents sealed. Then, under clause 64(4), the lawyer has the right, within 14 days I believe, to go to court at his client's expense to try to prove solicitor-client privilege. In other words, I sense that the onus has been shifted. If I want to claim solicitor-client privilege, then I have to go to court and bear the expense of proving it. Is that correct?

Mr. DelBigio: That is correct, and that is the precise concern -- inaction on the part of the lawyer will result in the loss of privilege. Once again, the privilege belongs to the client, not the lawyer. Inaction, either by failing to claim privilege at the outset, or through failure to act within the 14 days, will result in the loss of privilege. That is precisely why the courts found section 488 of the Criminal Code, in relation to the search of law offices, to be a failure.

Senator Kelleher: What have common law jurisdictions similar to Canada's, such as Britain and the United States, done about this problem? Have their lawyers, under similar legislation -- and we are the last to enact such legislation -- had the same problem of losing solicitor-client privilege?

Mr. DelBigio: I am afraid I cannot give you a comprehensive answer to that question, senator. I can only give you a partial one. First, it is important to keep in mind the demands of Canada's Constitution. That distinguishes Canada from Britain and from the United States. My understanding, and I stand to be corrected, is that in the United States, different states have different protections against the search of law offices.

Senator Kelleher: I think it is fair to say, from what I understand, that the government is somewhat anxious to have this legislation passed before we adjourn for the summer, if at all possible. The senate regularly encounters that at this time of year.

Would it be possible for the Canadian Bar Association to do a little research on this and get back to us around the first of next week? Let us know how Britain and the United States have handled this question. Obviously, their legislation has been in effect for a number of years. Why should we "reinvent the wheel," so to speak? This must have been a problem for them, and somehow they have dealt with it. They are quite law-abiding countries and it might be helpful to see what they have done.

Mr. DelBigio: We will attempt to put together some information for you, although a comprehensive legal brief of comparative law might not be possible within a week.

Senator Kroft: This is a direct follow-up to Senator Kelleher's question on the issue of where the burden of responsibility to establish the privilege lies. Can you tell us how the current proposal compares with what exists now under our Income Tax Act?

Mr. DelBigio: I am afraid that I cannot give you an immediate answer on that.

Senator Kroft: I should tell you that my understanding is that the proposal is the same as what is currently the practice under the Income Tax Act. I would like to know if I am correct.

Senator Kelleher: From my knowledge, you are probably correct. However, I think the difference, if I may suggest, is that under the Income Tax Act, a person supplies the information himself when filing his tax return. Therefore, he must bear some responsibility for his own acts. In this particular case, we have third parties.

Senator Kroft: I am talking about the narrow issue of privilege.

Senator Kelleher: I think you are correct, Senator Kroft.

Mr. DelBigio: It is important to recognize that there is a distinction drawn within the Income Tax Act between audits and special investigations. Special investigations are more akin to a criminal prosecution. The objectives of the bill are very much criminal rather than regulatory. The special investigation is to deter and detect criminal activity, in particular, organized crime. In considering the safeguards that are necessary, it is important to have regard for that background and those objectives.

Senator Furey: My question concerns the mass of information that will be gathered on private citizens who will ultimately be found innocent of any criminal behaviour. The way that the bill is set up now, there is no mechanism for notifying any of those people that they were ever under investigation. Has the Canadian Bar Association taken a position on this?

Mr. DelBigio: We have not addressed that specifically. There is a concern about the collection of information and about its subsequent use. There is a concern about information that is collected in private, although the Canadian Bar Association has not specifically addressed that in the submission.

Senator Furey: Do you feel that ordinary Canadian citizens who have done no wrong, and have been investigated, have a right to know that?

Mr. DelBigio: We are sensitive to the needs of the police to sometimes conduct investigations without the target of the investigation being aware of it. However, the greater concern of the Canadian Bar Association is, again, the risk of reporting much too much information to the agency because lawyers are protecting themselves in the face of uncertainty. The lawyer could potentially wash his or her hands by saying, "I have done my job, now let the agency treat the information as they see fit."

Senator Furey: At what point do you think that the poor citizens who do not know that they are under investigation should be informed in order that they can seek legal counsel?

No matter what this called, whatever euphemisms are used, a criminal investigation is being conducted.

Mr. DelBigio: Yes, as it now exists, and certainly with the section on exception of obstructing a criminal investigation. Currently, if a lawyer becomes aware that a client is the target of a criminal investigation, there is nothing that would prohibit that information regarding obstruction of justice laws from being disclosed.

Senator Furey: We are hearing a lot on that topic these days. T

Senator Oliver: Is it the position of the Canadian Bar Association that some provisions of this bill are ultra vires? To refresh your memory, you state in your brief:

Bill C-22 imposes significantly intrusive regulation upon businesses, financial institutions and professionals, including the legal profession, to the extent that we believe it may be ultra vires of Parliament.

Is that your position today?

Mr. DelBigio: Yes, it is.

Senator Oliver: What, if anything, are you recommending be done about the ultra vires nature of this bill?

Mr. DelBigio: It is our position that a bill like this inextricably combines business interests with criminal investigations. That separation needs to be made. The bill cannot purport to both regulate business and business interests and conduct criminal investigations at the same time.

Senator Oliver: You referred to clause 11 of the bill. I have asked a number of witnesses about the language of that clause regarding solicitor-client privilege. It states:

Nothing in this Part requires a legal counsel to disclose any communication that is subject to solicitor-client privilege.

The word "communication" is key. To me that word does not mean activity; it does not mean transaction, such as in subclause 9(1), nor does it mean confidentiality, as you have stated.

What could we do to strengthen clause 11 to afford the protections that the Canadian Bar Association feels need to be extended? I am thinking about what language we could use to strengthen clause 11 of this bill to overcome the weaknesses of the word "communication".

Mr. DelBigio: We would prefer not to have such a limited remedy. Our first position is that lawyers should be exempt from the bill. Second, if that is not done, privileged information should extend beyond mere communication and should include transactions. Third, recognition should be given to the importance of the ethical duty of confidentiality. Fourth, intrusion into law offices should take place only with a warrant, and only in a way that properly protects privilege and confidentiality. That might be done through mandatory provisions that give notice to third parties, the clients.

Part XII.2 of the Criminal Code provides for third-party notice. That concept is not foreign to existing criminal law.

Senator Oliver: Do you have wording or draft amendments to give effect to the suggestions that you have just made to assist us in our deliberations?

Mr. DelBigio: We do not have them now, but we would be happy to provide them.

Senator Oliver: My final question relates to what some people have referred to as the low thresholds for disclosure, the $10,000 figure. You are a criminal lawyer. There is certainly much confidentiality involved in routine commercial transactions conducted by corporate lawyers, for example, in a new public issue. Many things have to be kept confidential for a time before they become public.

Are you concerned about the low threshold in this bill? Do you think that that will inhibit activities that come to lawyers' offices on a routine and regular basis?

Mr. DelBigio: We are very much concerned with the low threshold. The threshold could best be determined through consultation with people who are engaged in commercial transactions. Ten thousand dollars would seem to capture far too many transactions.

Senator Angus: On the issue of constitutionality, Mr. DelBigio, you indicated that section 488.1 of the Criminal Code is essentially identical to the provisions in this draft legislation?

Mr. DelBigio: It is not identical, but it is very similar.

Senator Angus: I believe you quoted some jurisprudence to the effect that section 488.1 has already been held by certain courts in Canada to be ultra vires, as breaching the fundamental rights of solicitor-client privilege and the ethical standards of confidentiality. Is that correct?

Mr. DelBigio: That is correct.

Senator Angus: In your knowledge as a practitioner, have there been any further attempts by enforcement agencies to rely on section 488.1 since those decisions were rendered by the courts?

Mr. DelBigio: I cannot answer that question with certainty, senator. To my knowledge, limited as it might be, no law office searches have been conducted since it was struck down.

Senator Angus: Since some courts have effectively struck it down, it is a very fine precedent upon which to rely. Despite your excellent testimony, if the government decides to go forward with this bill as drafted, in your view, one could raise the court decision as a defence. A lawyer who was searched, or was asked to comply with the provisions of this proposed legislation, could say, "Sorry, it is unconstitutional and to heck with you," right? Is that your position?

Mr. DelBigio: Yes, that is our position. This would fail for the same reasons that section 488.1 of the Criminal Code failed. It is my understanding that in the Alberta case, which is called Lavallee, leave is being sought to go to the Supreme Court of Canada. Leave applications have been filed.

Senator Angus: When you supply us with this other information for which we asked, in particular the proposed amendments that you feel would do the trick, can you give us these citations? The citation on the case where they are seeking leave to go to the Supreme Court would be helpful.

I understand that whereas there may be other elements of the bill that would be of interest, and maybe not pleasing elements, to the Canadian Bar Association, you are here today only on the point of privilege?

Mr. DelBigio: Our main concern is that of privilege.

Senator Oliver: Does that include confidentiality?

Mr. DelBigio: That is correct.

Senator Angus: Do they go together?

Mr. DelBigio: We have broader concerns. We are very much concerned with the easy flow of information to the agency and then to law enforcement. Although there is a provision that states that the agency operates at arm's-length from law enforcement agencies, in fact the wording permits a very large and easy flow of information. As it applies to lawyers, it means that it is potentially very quickly out of the law office into the agency, and into the hands of the RCMP or other appropriate law enforcement.

Senator Angus: Perhaps the information would reach law enforcement agencies in Switzerland, or somewhere else?

Mr. DelBigio: Yes, that is exactly it.

Senator Angus: In any event, I think that you have made your point well, and certainly the Canadian Bar Association does an excellent job of monitoring the bill and bringing these potentially unconstitutional provisions to the attention of Parliament before they become law. I think that is great, and I am sure we will take what you have said into account.

May I ask you another question? I detected a sensitivity in your evidence to the need of the "state" to have certain special powers to combat the evils of organized crime, both domestically and internationally. From that, I gathered that perhaps the general spirit of the bill is not anathema to the CBA. Is that right?

Mr. DelBigio: There is no doubt that money laundering and organized crime exist. There is also no doubt that law enforcement would be more effective with a police officer on every corner, with powers that would permit every police officer to search every person's automobile without warrant or reasonable grounds. That is going to make for more effective law enforcement. Additionally, compelling law offices to disclose information will make for potentially more effective law enforcement.

The first question is, is it necessary? The second question is, is it constitutionally acceptable? The Canadian Bar Association says that the intent and objectives of the bill will not be undermined if lawyers are exempt, and in any event, it is not permissible to include lawyers.

Senator Angus: You have presaged the second question. The first question was, is it legal and is it constitutional? You say no. I was going to ask you if it is it necessary to have this illegal provision to make the bill effective. You said no to that as well.

Mr. DelBigio: Yes.

Senator Angus: That seems to cover the waterfront. Thank you very much.

Mr. DelBigio: In the litigation that has occurred, the law societies of Alberta, British Columbia, and Ontario in a Court of Appeal case that will be proceeding, have intervened and have agreed that section 488.1 is unconstitutional.

Ms Thomson: Just to note, please, that the citations for all of the cases that we have mentioned in our oral presentation today are found in our submission. For the Lavallee decision, in particular, the citation is at page 5 of the English brief and page 6 of the French brief.

Senator Tkachuk: When the department officials came before us, they left the impression that we were far behind the rest of the world in attending to the problems of money laundering, but in reality we have had laws to that effect for quite some time, actually even before Belgium had them. I was shocked. They said yesterday that laws against money laundering were passed in 1990, and before that there were none, but in reality we have had quite effective laws, as you stated.

To help me understand the philosophy behind this bill, I will be more specific. Presently, if a lawyer has a client who is participating in an illegal act, he has the responsibility to report that, does he not?

Mr. DelBigio: There is certainly a responsibility to not participate in that act. I would say there is disagreement as to when it becomes mandatory to report an illegal act. Some say that the mandatory reporting of an illegal act occurs when there is an imminent threat of bodily harm. Smith v. Jones in the Supreme Court of Canada discussed these issues. It might not be necessary to report the theft of a chocolate bar, but it would certainly be necessary to report a contemplated murder.

Senator Tkachuk: If a financial institution believes that someone is acting illegally, do they not presently have an obligation to report it? In other words, I believe the law now provides that if someone brings in over $10,000 in cash, financial institutions must report that for government records, but I am not sure to whom it should be reported.

Mr. DelBigio: Yes. There is a record-keeping scheme now in place. Indeed, I understand financial institutions are vigilant in knowing their customers and not participating in financial transactions that they regard as not in keeping with the standards of their institution.

The Chairman: Could you clarify that, please? Is that not a voluntary reporting system?

Mr. DelBigio: Is it voluntary?

The Chairman: Yes.

Mr. DelBigio: There is a scheme in place such that transactions in excess of $10,000 must be reported. That is my understanding.

The Chairman: I do not think so, but please proceed.

Senator Tkachuk: If a bank, financial institution, law office, or accounting office is caught participating in money laundering, they are also liable to prosecution under the present legislation?

Mr. DelBigio: Absolutely. The current definition of money laundering in the Criminal Code is very broad and will capture all kinds of transactions in which lawyers, accountants and banks might engage. There is already a scheme under which certain persons engaged in certain financial transactions can be prosecuted.

Senator Tkachuk: Therefore, this bill is not so much to make laws for the prosecution of criminals who are taking part in money laundering, because we already have laws that encompass everyone -- if you get involved in such an activity, you run the risk of being arrested and charged. Actually, the bill is for the purpose of allowing them to know all of your business so that they can make a decision, rather than you making the decision. Is that not really what they seem to be doing in this bill?

Mr. DelBigio: It is a much easier means of collecting a great deal of data upon which a prosecution might follow.

The Chairman: Our last witnesses today are from the Canadian Institute of Chartered Accountants. Welcome, gentlemen.

Mr. Ian Murray, Chairman, Advisory Group on Anti-Money Laundering Legislation, Canadian Institute of Chartered Accountants: Mr. Chairman, on behalf of the Canadian Institute of Chartered Accountants, we would like to thank you for allowing us to be here today to provide comments on the government's bill to combat money laundering.

I am a partner in the firm of KPMG and I chair the advisory group established by the CICA to examine this bill. With me today is Simon Chester, who is legal counsel to the CICA.

The CICA submitted a brief to the Department of Finance in February that commented on the government's consultation paper that preceded Bill C-22. As the basis for that submission, the CICA drew on the work of an advisory group that reviewed the consultation paper along with the draft legislation and regulations. Our brief broadly supported the bill, but we believed, and still believe, that it would benefit from some changes.

Our submission dealt with five areas that we want to focus on today -- narrowing the scope of the bill; defining "suspicious transaction"; avoiding the duplication of reporting requirements; restricting powers of access to records; and broadening available defences and safeguards.

I will speak first to the scope of bill. I would like to repeat at the outset that the CICA supports the government's bill and its focus on financial intermediaries. We recognize the importance of having an effective international regime to outlaw money laundering. We believe that financial intermediaries who have direct involvement in financial transactions should take primary responsibility for reporting suspicious transactions.

We accept that when a chartered accountant acts as a financial intermediary, he or she should have the same reporting responsibilities as other financial intermediaries. We understand that the bill is only intended to apply to professionals such as CAs when they are directly involved in a financial transaction -- for example, CAs who handle cash for clients or are in a general management position in a company.

That focus is appropriate. Such CAs should know where they stand. However, focus also means clarity, and clarity implies limits.

We understand that the reporting requirements of the bill are not intended to apply to those who are not directly involved in financial transactions within their companies -- for example, internal auditors, strategic planners, tax accountants, and assistant managers. The reporting requirements are not intended to apply to CAs acting in an advisory capacity -- essentially those who act in a third party role providing services to clients -- such as auditors, forensic accountants, management consultants, business evaluators, and tax advisers.

Notwithstanding this intention, we are concerned that the wording of the bill and the government's agreed-upon regulations could be interpreted to suggest that the profession as a whole could be subject to these provisions. Paragraph 5(i) provides for Part 1 of the bill to apply to persons engaged in a business profession or activity described in the regulations.

An existing regulation, which we understand will be retained, indicates that the act applies to "every person who is engaged in a business, profession or activity in the course of which cash is received for payment or transfer to a third party." We are concerned that this wording is too broad. It is not clear that the bill would apply just to those individuals who are directly involved in such transactions. It could be interpreted to apply also to all individuals who belong to a business or profession in which some individuals may engage in such transactions.

Our concern is exacerbated by wording contained in clause 7 of the bill that requires the reporting by persons or entities of suspicious transactions that occur in the course of their activities. We believe that this wording is so open-ended that it does not limit the reporting requirement to professional accountants who are directly involved in financial transactions.

The net would extend far beyond that.

We are concerned that the broad wording of the existing regulation, taken together with clause 7, could be interpreted as applying the reporting requirements much more broadly to the accounting profession as a whole.

Let me give a simple example. A forensic accountant is asked to assist a client in investigating their involvement in potentially suspicious circumstances. Any forensic accountant would be placed in a position of conflict between assisting the client and reporting to the centre, and may have to decline the engagement. The client would be deprived of needed assistance. There are many other situations where, in the absence of clarification, CAs could be drawn into the web of reporting requirements.

We think that the needed clarification should fall within the bill itself. However, we recognize the realities of the legislative timetable. If amendments are not possible, clarification should be made by regulation.

In that regard, we note that the bill includes a provision under paragraph 5(j) allowing for regulations to be made that limit the application of Part 1 to defined activities of businesses and professions. We think that a regulation under that clause should contain the following wording:

Part 1 of the Act applies to every professional accountant, who, in the course of engaging in a business or profession, receives cash for payment or transfer to a third party.

We believe that the focus, the intended subjects of the bill, should be determined by activity, not status, and not by the nature or title of our profession, but by the activities in which we are involved.

This change would make it clear that the bill will apply only to those directly involved in financial transactions. In this regard, we note the assurance provided by senior officials of the Department of Finance during the Finance Committee hearings on Bill C-22. Officials clarified that it is the government's intention to ensure that the bill only applies to professionals acting as financial intermediaries.

Officials also confirmed during those hearings that, "The regulations will indicate very clearly that the reporting obligations will not apply to the auditing function of the accounting profession."

We understand that officials are working on amendments in response to commitments made during the hearings, and that further consultation with stakeholders is planned. However, we do not know whether clarifications to the bill will be made.

We have not seen the amendments to date. We strongly reiterate the need to make changes that clarify how our profession will fit within the requirements of this bill.

The definition of "suspicious transaction" is my next topic. Of significant concern is that neither the bill nor the regulations contains a definition. The success of the mandatory reporting regime will depend on the extent to which clear and unambiguous criteria can be developed.

In the absence of this criteria, there will be overreaching and inconsistent reporting, because all professionals will have to make an important judgment call on what they believe to be suspicious. Although the reporting centre will develop guidelines to help identify appropriate characteristics and circumstances, they will not have the force of law. We think clarity belongs in the law, not in guidelines.

We recommend that the regulations contain a prescribed definition of suspicious transaction, one that sets out clear criteria. As a clear, unambiguous definition of a suspicious transaction is a tall order, it should be supported by examples and case studies to illustrate when reporting something required and when it is not.

The Chairman: Excuse me, have you taken a crack at the definition?

Mr. Murray: We have not attempted to do that. However, we have indicated our willingness to work with members of the department to assist in that process.

The Chairman: I think all of us probably have some trouble with actually zeroing in on a clear definition. I have tried to do it, but it is a little bit like beauty -- it is in the eye of the beholder, which is, I guess, what "suspicious" means. Please let us know if you come up with some bright ideas.

Mr. Murray: We will certainly be pleased to do that.

The Chairman: Thank you.

Mr. Murray: Should interim guidelines be put in place for any reason, they should ultimately be included in the regulations so that they are subject to public scrutiny and input and have the force of law.

Furthermore, we recommend that the effective date for commencement of reporting of suspicious transactions be deferred until criteria have been established and examples developed.

The third issue is duplication of reporting requirements. We are also concerned that the bill is unclear about professionals such as CAs who may be working for entities specifically covered under clause 5, and who are directly involved in financial transactions. On the one hand, such CAs have a reporting role as an employee working in an entity covered by the proposed legislation. On the other hand, they have a responsibility as professional accountants to report suspicious transactions.

This is confusing, and would appear to be a duplication of the reporting requirement that applies only to individuals who happen to be both employees of such entities and professional accountants.

Should such an individual report to their supervisor, they are protected by subclause 75(2) from punishment as an employee. However, they could still be open to punishment for failing to report to the centre as a professional accountant. We believe that the protections afforded the employee should clearly apply to protect the CA -- the same person -- in such situations.

The fourth issue is restricting the powers of access. The compliance measures in clauses 62 to 65 allow an authorized official from the reporting centre to examine the records and inquire into the business and affairs of any person or entity referred to in clause 5 for the purpose of ensuring compliance. We are concerned that even if Part 1 is amended to restrict its scope to financial intermediaries, these provisions appear to be very broad powers allowing access to all records -- not just those relating to financial intermediation activities -- without a warrant.

We therefore recommend that the bill be clarified to restrict the powers of access to only those records that relate to financial intermediation activities. We also think that such access should be allowed only under authorization of a warrant.

Our last point is on defences and safeguards. We would like to make some comments about the defences and protections available under Part 5 of the bill.

Other jurisdictions include a defence for "reasonable excuse," for example, where the fear of physical violence or other menaces make it unreasonable for someone to report or to refuse to act for a client. There may be circumstances where third parties may be able to deduce the source that gave rise to an investigation. While there may be certain defences under common law similar to reasonable excuse, this defence is not available under the bill.

We are also concerned that the bill does not provide protection or remedies to those who lose their jobs as a result of making a report in good faith. Furthermore, the bill is not clear as to how to deal with situations where the bill conflicts with other legislation requiring confidentiality, such as the Quebec Charter of Rights and Freedoms.

We recommend that a reasonable excuse defence be included in the bill, along with additional protections for those who report.

Last, we recommend that the bill be amended to deal with situations where the bill conflicts with other statutes requiring confidentiality.

In closing, let me stress again that we support the intent of this bill when applied to those who are directly involved in financial intermediary transactions. However, we believe that the wording of the bill lacks clarity in prescribing who within the CA profession must report. We believe this is a significant problem, and strongly encourage you to clarify the activities to which the bill would apply for the CA profession.

We also strongly urge to you include a clear, unambiguous definition of suspicious transaction in the bill so that those with the obligation to report apply consistent criteria.

We would be pleased to answer any questions.

Senator Fitzpatrick: I want to follow up on the chairman's remarks regarding the definition of suspicious transaction. The CICA indicated that they would be happy to advise or consult with the department. If I may, Mr. Chairman, it might be helpful if you could provide a list of guidelines. Presumably, with your experience, you would have some idea of cases or situations that would be of a suspicious nature.

I believe, Mr. Chairman, that prior to the drafting of the regulations, it would be helpful to have a submission, should they be prepared to do that.

Mr. Murray: We are pleased to try to do that. I think the department has clearly gathered some examples of what other jurisdictions are doing and so have developed some best practices, which is not easy to do. Nevertheless, they have started that process. The best process, I suggest, would be to collaborate with them in that regard so as not to duplicate efforts.

Senator Fitzpatrick: Well, we are a bit like you, I guess. We have not seen any of that so far. We either get a list from you or a list from the department. In that way, we know what we are looking at.

Mr. Murray: If we could get something from the department to start the ball rolling, we would be happy to look at that and provide guidance on it.

Senator Angus: The words, "We are sensitive to the legislative timetable" seem to me to have no place in your submission. I would rather that you tell us what, in your opinion, is the best thing to do to fix this bill. In other words, are you saying, "Could you do some regulations, " for the lack of anything better?

At the beginning of these hearings, our chairman was heard to say that there are too many regulations and it is very difficult to supervise them. These regulations arrive and then they are a fait accompli. There is almost a lack of accountability in the process. I wonder how much of a compromise that is. Do you feel strongly enough about the excellent points that you have made that you would like to see this bill amended in substance?

Mr. Murray: I think that we would like to see -- and I will let Mr. Chester comment as well -- the narrowness of the scope addressed. We understand that it is being addressed, although we have not seen the wording. The definition of "suspicious transaction" is the other major issue, and we would have a concern if the proposed legislation and regulations went forward without attempting to provide some clarity on that issue. That could result in widespread confusion. If the bill is to be successful, it must come up with some clarity on the definition of suspicious transaction. We acknowledge that it is very difficult, but we think there should be some guidance on this issue in the proposed legislation or regulations.

Mr. Simon Chester, Legal Counsel, Canadian Institute of Chartered Accountants: Could we have participated willingly and openly with the department in discussing these matters over some months? It was a couple of months ago that we were testifying before the House of Commons Finance Committee, and there seemed to be agreement from the officials who were testifying at that time that it was not their intention that the bill be applied so broadly and that there would be amendments. When we stated that we were sensitive to the realities of the legislative timetable, we were simply reflecting statements made by ministerial officials and others that Canada has an obligation, under the international regime, to come forward. Essentially, we would redefine the policy, and if that was not possible within the bill itself, then it would necessarily be done in the regulations. We would have been comforted if we had seen some wording at this point.

Obviously, we have the commitments made in testimony before the House Finance Committee and we are comfortable in relying on those. At the end of the day, could this bill be improved? Yes, we believe it could. Could it be clearer? Yes. If we are given a choice between clarification, and regulations with no clarification at all, we will go for that, but our preference would clearly be for the bill itself to be clarified.

Senator Angus: Mr. Murray, we understand you to be with KPMG, which is a large, international accounting firm. My question is in the context of Mr. Chester's interpretation of what the officials said, that Canada has a commitment to 27 other countries, with which it is working cooperatively to fight organized crime, to do something along the lines of this bill. As a professional CA at KPMG, have you checked back through your network to see which other countries in fact have brought in such provisions that would so impact on your profession?

Mr. Murray: Yes, we helped on that. For example, the U.K. does have similar legislation, although it is our understanding that it is not quite as broad as what is proposed here. That legislation has been in place for a couple of years now. One of the challenges in the U.K. is the definition of suspicious transaction. It is an evolving situation and they are trying to come up with a better definition as they go along, based on experience. That is one example of a jurisdiction with similar legislation in place.

Senator Angus: However, it is not as far-reaching.

Mr. Murray: I do not think that it is. I am not sure that I can quote specifically, but it is more restricted to certain illegal activities such as drug trafficking, et cetera. It is not quite as broad, but it does have a similar reporting requirement.

Senator Angus: What about in the U.S.?

Mr. Murray: My understanding is that they do not have similar legislation in place at this time.

Mr. Chester: They have other comprehensive legislation dealing with money laundering that gives their federal authorities some of the tools that this agency would have under this bill. However, there is nothing exactly comparable.

Senator Angus: We have all been coming at it from different angles to try to find out just how far behind Canada really is -- how late we are coming to the party -- in a cooperative effort to combat this kind of organized crime, particularly drug dealing. You are here today as representatives of the CICA, so I would like you to take my question in the context of how the bill impacts your profession. Based on your own knowledge and research, to what extent does this seem to represent the most onerous provisions that you have seen, or does it?

Mr. Chester: We have not done an exhaustive comparative review. I can say that the circumstances under which chartered accountants act as financial intermediaries is relatively small. There will be situations, for example, when an accountant is acting as a trustee in bankruptcy or in a management capacity within a corporation, when they would be actively involved in financial transactions -- I am not qualifying them as suspicious or otherwise. The vast majority of the activities of the CA profession, whether that be auditing, providing tax or strategic advice, forensic accounting, or consulting, are nowhere near suspicious circumstances involving reportable transactions. We felt that it was important to clarify that this bill properly impacts upon the CA profession when people are acting as financial intermediaries.

Senator Angus: Those are financial intermediaries who actually handle the money?

Mr. Chester: If those people are playing an active role, absolutely they should be reporting.

Senator Angus: Could you give me examples of some circumstances where they would be handling the cash?

Mr. Murray: Yes. Our insolvency practitioners, for example, would be handling trust funds. They would be authorizing the release of funds, receiving and disbursing funds. That is one example within the profession.

Senator Angus: I believe I saw you at the back of the room when the people from the Canadian Bar Association were here. They were commenting earlier. One of the concerns that they expressed was about a sizeable law firm. You folks are now getting into this multi-disciplinary world, I am told. I read that in The Globe and Mail.

Mr. Chester: I am a partner in the firm of McMillan Binch. I am in that situation.

Senator Angus: You know what I am talking about then.

Mr. Chester: Yes.

Senator Angus: Let us take the example of Ernst & Young, which is a major member of the CICA. They have some 2,900 lawyers worldwide at the present time. I think some of the things that our friends from the Canadian Bar Association said would apply to an accounting firm involved in multi-disciplinary activities.

You could be wearing the two hats. Do you folks feel the same way as the lawyers? If the authorities knocked on the door and demanded all the documents, would you feel constrained at that point to say that it is unconstitutional and buzz off?

Mr. Chester: Let me make two comments. If a lawyer is practising within the framework of a multi-disciplinary partnership, that lawyer will be subject to the professional and legal obligations attached to that profession. There will be other people working within the organization who have other professional and legal obligations. I think it is clear that the Canadian Bar Association represents those lawyers and would have some of the same concerns.

From an accounting perspective, it is clear that the accounting rules, generally accepted accounting principles, our code of professional conduct, and the laws involving accountants would apply to those accountants within the firms.

Senator Angus: It becomes known as "the firm." All of these firms have administrative staff, a switchboard operator, and a reception area. Those people are not equipped to know which section should be involved. If one were faced with the men in the black hats with the bag, coming for the papers, it would be hard to direct them.

Mr. Chester: One of the points that we made in our belief was that when the men or women in the black hats arrive, they should be looking through the records related to those particular suspicious transactions. They do not have carte blanche to look through the entire records of a particular KPMG office, or even broader than that.

Senator Tkachuk: Are you saying that they will have that power under this bill?

Mr. Chester: They could have that power. The bill does not define what the records are. Clause 60 talks about records. It does not talk about appropriate or relevant records. It simply talks about records of the firm. We think that sort of clarity would be important to bring to the bill, so that if the people in black hats arrive, they do not have a warrant to conduct a fishing expedition.

Indeed, one of the problems we have is that they do have a warrant. They should be looking specifically for the information that is relevant to their particular inquiry and respecting the professional confidentiality that attaches to all other records within the organization or entity.

Senator Angus: The lawyers said, "Here is our shopping list. The bill is unconstitutional, so take out these provisions, and furthermore, just to have clarity, exempt lawyers from its application." I heard you say at some point that the accountants are properly included. You are not seeking the same exemption as the lawyers. That is why I have this impression that with both accountants and lawyers in the same firm, it could be confusing when deciding who must report.

You can see my point. It serves to highlight the very difficult elements and almost frightening aspects of this bill. It points to the complex position that professionals -- lawyers, accountants, or other professionals -- could be in.

Mr. Murray: There is a difference between the lawyers and us in the sense that their rules of professional conduct do emphasize confidentiality of information with their clients. However, in the event that there is a legal requirement to do something, then that requirement prevails.

We have that embodied in our rules of professional conduct already. We do not have any choice. The lawyers do have a different issue, of course.

Senator Poulin: I believe I heard you say that you are definitely supporting this bill because it is important that Canada not only be perceived as not facilitating money laundering, but also have the tools to prevent any such activities.

I am coming at it from the point of view of a non-lawyer and a non-accountant. I am coming at it from the viewpoint of a former deputy minister who had the responsibility at one time to implement a new agency. I am looking at this bill as enabling a new agency.

I find that I am looking for, and seeing, opportunities for review, and also for ensuring that the proper regulations are developed as the new agency is set up.

Legislative drafters in this country have a tradition of using language that is more open than closed. Therefore, time is taken after the agency is set up to define different terms, powers and responsibilities through regulation.

Mr. Chester, you said changes could be made either through amendments or through regulation, and you made suggestions. Am I correct in saying that your concerns could be met through appropriate regulation?

Mr. Chester: We have said that we regard the regulations as very important because they provide the context within which the agency will work. They also provide guidance to all professionals, and all those who are subject to the bill, to give them a sense of what falls within the rules and what does not.

We think that it is important that that guidance should be embodied not merely in regulations, but in handbooks and examples. All those things should be presented in an unambiguous way.

One problem that I have with the open texture of this bill is that I am not sure how I am supposed to interpret it. As prudent professionals, we would give it the benefit of the doubt. However, I refer you to clause 7, which states: "reasonable grounds to suspect that the transaction is related to the commission of a money laundering offence." Those are almost words that would be addressed to a peace officer, not to a working accountant or a working lawyer, or any other sort of working professional who is going to have to make very tough judgment calls, if that is all they have to go by.

We believe that those professionals will do their jobs better, and that the regime will be better, if we are all working from a common understanding of what is inside and what is outside the bill.

The CICA would be happy to work with the department at any time in the development of such an exercise, because we believe that it does require that sort of collaboration between the policymakers and the people who are facing the problems on a day-to-day basis.

Senator Poulin: In other words, you are recommending that once the agency is set up, enabled by this bill, the agency and the department make sure that they include your association, as well as the bar association, in ensuring that the regulations cover all of these concerns.

Mr. Chester: Any other relevant bodies should be included also.

Senator Tkachuk: Not being a lawyer, an accountant, or a bureaucrat, but a parliamentarian, my job is to protect people from the intrusions of government and to ensure that their civil liberties are not trampled on. I need clarification with respect to the scope on page 3. The second paragraph states:

An existing regulation -- which we understand will be retained in the new legislation -- indicates the Act applies to...every person who is engaged in a business, profession or activity in the course of which cash is received for payment or transfer to a third party.

To what act does that regulation apply now?

Mr. Murray: I believe that is the existing legislation relating to money laundering.

Senator Tkachuk: What is this regulation referring to exactly, a reporting mechanism?

Mr. Murray: There is a reporting mechanism and voluntary reporting of suspicious transactions under the existing legislation. I assume it relates to both of those.

Senator Tkachuk: Presently, the suspicious part applies to every person who is engaged in business. It is voluntary now, but this bill would make it mandatory to recognize and report the suspicious transaction -- in other words, you would be legislating a person who knows of a suspicious transaction?

Mr. Murray: Yes, you are mandating the reporting of a suspicious transaction.

Senator Tkachuk: Whereas before it was voluntary.

Mr. Murray: Right.

Mr. Chester: I am reading from Finance Canada's, "Proceeds of Crime Money Laundering Regulations" consultation paper. On page 3, it indicates that that wording was taken from the existing PCMLA and PCML regulations, so it is the current act and the regulations.

Senator Tkachuk: Obviously then, you have been involved in this previously. Is that right?

Mr. Chester: Yes.

Senator Tkachuk: Does "third party" refer to a company? Is a company a third party?

Mr. Chester: I think that a third party is any entity outside the express relationship between the professional and the client.

Senator Tkachuk: It says, "engaged in a business, profession or activity." If a person gets cash and deposits it in a company, is that considered a third party transaction? For example, if I receive cash and I deposit it in a company, is that company a third party?

Mr. Murray: No. However, if a person is an employee of the company and deposits it in the account of the company, that would also not be a third party transaction.

Mr. Chester: If you give the money to your legal adviser or to your accountant for deposit with another entity, then that would be a third party transaction.

Senator Furey: I was not certain of your comments on defences and safeguards. Are you saying that clause 10 is not broad enough?

Mr. Murray: No.

Senator Furey: Is there something else you were getting at?

Mr. Murray: Simply that there is no defence for "reasonable excuse." If a person believes that they might be physically threatened, there is no protection in the bill for such circumstances.

Senator Furey: There is no out for not reporting. Is that what you mean?

Mr. Murray: Yes.

Mr. Chester: The United Kingdom has such a reasonable excuse defence in its legislation.

Senator Kroft: I was interested when Senator Angus was taking you through a reference to comparative legislation. I am not looking to you as experts in legislation, but I am curious about your response when it came to the U.S. Do I understand that there is no comparable American legislation? I may have misunderstood.

Mr. Murray: My understanding is that there is no comparable reporting mechanism in the U.S.

Mr. Chester: I think I said that there are, scattered throughout the United States, code specific obligations that relate to money laundering and reporting on money laundering, but there is nothing that looks like this Canadian bill. There are individual elements for banks that are parallel. Law enforcement authorities have individual tools, but there is nothing identical to this. Therefore, it would not be possible to do a clause-by-clause comparison between U.S. law and this bill, because the U.S. law comes from so many different places to the same destination.

Senator Kroft: This is perhaps an unfair question. Can you comment on whether or not the collective impact of those various pieces of legislation would have the same, greater, or less affect than the proposed bill?

Mr. Chester: I think we would be happy to take that under advisement and get back to you. One concern that I have is that I regard this as a work in progress -- legislation in embryo. There will clearly have to be further developments to see how the agency will work, what sort of guidelines are developed, and how the relationships between this entity and the existing law enforcement authorities will work. At the end of the day, I believe it would be possible to do such a comparison. However, at the present, there is an awful lot of open texture in this bill and many elements that require further development. We understand that the Finance Department is working on those and that there will be further announcements as the agency comes fully into being.

Senator Kroft: To your knowledge, is there an agency in the American system where this collection is carried out?

Mr. Chester: I have no such knowledge, but I will be happy to look into that.

Senator Kroft: We can look into that. I was wondering what information you have at hand as you approach this. If you are comparing it to something, I was wondering what that something is.

Mr. Murray: For example, there is no requirement for colleagues in my firm in the U.S. to report suspicious transactions. There is no such comparable reporting requirement for colleagues in my firm in the U.S. as what is being proposed here.

Senator Kroft: Do you have any comment, Mr. Chester, from the legal profession? Is there a comparable reporting obligation?

Mr. Chester: I do not believe so, but I would be happy to make inquiries. I have not, in my travels in the United States, heard about lawyers having to make reports to the FBI or to any other federal agency. In the United States, the attorney-client privilege is taken extremely seriously, as it should be.

Senator Tkachuk: Do we have any departmental officials here who may be able to help us on this question?

Senator Kroft: They would have to volunteer themselves if they had any such information.

Senator Tkachuk: They would not be hiding, would they?

Mr. Yvon Carriere, Senior Counsel, Transition Team, Financial Transactions and Reports Analysis Centre of Canada, Department of Finance: I am senior counsel with the transition team. I understand that there is an organization in the U.S. that is comparable in many ways to the new agency that will be set up here. I understand that there is a requirement to report a suspicious transaction in the U.S. This requirement applies to financial institutions, banks, trust companies, and such. This requirement does not yet apply to lawyers in the U.S.

Senator Tkachuk: Does it apply to accountants and accounting firms?

Mr Carriere: I believe it does apply to accounting firms, but I am not absolutely certain of that.

Senator Tkachuk: We were told at the beginning that we were so far behind the rest of the world that we must catch up. Some information has questioned that.

Senators, correct me if I am wrong, but were we not supposed to receive some kind of a chart from the department explaining the process in other countries? Were we not told that we are going to get that tomorrow? Good.

The Chairman: Thank you, gentlemen.

The committee adjourned.