Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 12 - Evidence - February 29, 2012
OTTAWA, Wednesday, February 29, 2012
The Standing Senate Committee on Banking, Trade and Commerce met this day at 4:22 a.m. for the review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (S.C. 2000, c. 17), pursuant to section 72 of the said Act.
Senator Irving Gerstein (Chair) in the chair
[English]
The Chair: Ladies and gentlemen, it is a pleasure to call this meeting of the Standing Senate Committee on Banking, Trade and Commerce to order. This afternoon, we continue the five-year parliamentary review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. This is our sixth meeting on the subject.
To date, the committee has heard from a number of so-called regime partners involved in the implementation and administration of this legislation, including the Department of Finance, Public Safety Canada, the RCMP, CSIS, CBSA, OSFI, the Information Commissioner, Public Prosecution Service of Canada and, of course, FINTRAC.
This afternoon, we will begin by hearing from the Canada Revenue Agency — it is not often that you like to hear from the Canada Revenue Agency, but under these circumstances we are all delighted — and then by hearing from the Foreign Affairs and International Trade Canada.
First, representing the Canada Revenue Agency, we are pleased to welcome Cathy Hawara, Director General, Charities Directorate, Legislative Policy and Regulatory Affairs Branch; Claude St-Pierre, Director General, Enforcement and Disclosures Directorate, Compliance Programs Branch; Alison Rutherford, Acting Director, Review and Analysis Division; and Stephanie Henderson, Manager, Special Enforcement Program, Enforcement and Disclosures Directorate, Compliance Programs Branch.
Ms. Hawara, I believe you have an opening statement.
Cathy Hawara, Director General, Charities Directorate, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency: Thank you, Mr. Chairperson, and good afternoon. Thank you for the invitation to appear before you today. Ms. Rutherford is Acting Manager of Operations in the Charities Directorate, Review and Analysis Division.
The Proceeds of Crime (Money Laundering) and Terrorist Financing Act is focused on deterring and detecting money laundering and terrorist financing, as well as facilitating the investigation and prosecution of these offences. It also establishes the Financial Transactions and Reports Analysis Centre of Canada.
We are here today because FINTRAC discloses information to two areas within the CRA under the PCMLTFA. Simply put, when FINTRAC has reasonable grounds to suspect that information would be relevant to money laundering or terrorist financing and also to tax or duty evasion, it discloses that information to the CRA's Enforcement and Disclosures Directorate. I will let Mr. St-Pierre and Ms. Henderson speak more about the role of the Enforcement and Disclosures Directorate.
When FINTRAC has reasonable grounds to suspect that information would be relevant to terrorist financing and also to charities, it discloses that information to the CRA's Charities Directorate. I would like now to provide an overview of the Charities Directorate's mandate and the impact of the PCMLTFA has on the directorate.
[Translation]
Under the Constitution, the provinces have jurisdiction over the establishment, maintenance and management of charities. The CRA's authority to regulate charities exists solely under the Income Tax Act, which confers significant tax advantages on registered charities. In addition, Canadian taxpayers who make a donation to a registered charity are offered partial tax relief for the amount of their donations, and registered charities may issue tax receipts to their donors. It is this privilege of being able to offer donors a tax credit that gives the CRA a role in overseeing the conduct of charities.
It is the Charities Directorate's responsibility to ensure that registered charities meet the legislative requirements for obtaining and maintaining charitable registration. This is done through a balanced program of education, service, and responsible enforcement. By doing so, we seek to maintain the confidence of Canadian taxpayers that the benefits of charitable registration are made available only to organizations that operate exclusively for charitable purposes and that charitable funds and services reach the intended, legitimate beneficiaries.
[English]
In the course of its work, the Charities Directorate has for many years turned an eye to determining whether the registration system was being abused by individuals or groups having links to terrorist organizations. However, this work was not supported by specific legislation or funding, and the tools to effectively carry out the work were not readily available.
Recognizing the CRA's role in the Government of Canada's anti-terrorism financing regime, three significant changes have been made over the years.
First, following the September 11 terrorist attacks, the Charities Registration (Security Information) Act or CRSIA was enacted as part of the Anti-terrorism Act. CRSIA makes possible the use of classified information in determining whether organizations can be registered as charities under the Income Tax Act or whether, previously having been registered, they can retain this status. It is a prudent reserve power, should it be necessary to rely on classified information to substantiate an organization's ties to terrorism.
[Translation]
Second, funding received starting in 2003 under the Public Security and Anti-Terrorism Initiative provided the CRA with the ability to staff a dedicated team within the Charities Directorate, the Review and Analysis Division, which is focused on protecting the integrity of the registration system for charities against the threat of terrorism. It also enabled the CRA to acquire the analytic tools needed for this specialized work.
[English]
Third, in 2006, amendments to the PCMLTFA, which is the subject of your current review, authorized FINTRAC to disclose information to the Review and Analysis Division on suspected cases of terrorist financing involving charities.
Complementary changes to the Income Tax Act permitted the Review and Analysis Division to share information with FINTRAC and other partners in cases of suspected terrorist financing.
These amendments did not result in any changes for or increased burden on registered charities. Registered charities have always been required to remain in compliance with the Income Tax Act and the common law requirements of registration, which include the obligation not to break the law, including the terrorism-related offences of the Anti- terrorism Act.
Today, while the Income Tax Act remains the primary vehicle for administrative decisions made by the Review and Analysis Division about charitable status, disclosures received from FINTRAC under the PCMLTFA contribute valuable intelligence, enriching the information required to make informed decisions.
Following my colleague's opening remarks, I would be pleased to answer any questions the committee may have.
[Translation]
Claude St-Pierre, Director General, Enforcement and Disclosures Directorate, Compliance Programs Branch, Canada Revenue Agency: Mr. Chair, with me today is Stephanie Henderson, manager of the Special Enforcement Program. As my colleague mentioned, if FINTRAC has reasonable grounds to suspect that information would be relevant to money laundering or terrorist financing and also to tax evasion, it discloses that information to the Canada Revenue Agency. If the disclosure relates to terrorist financing involving a charitable organization, then the file is sent to the Charities Directorate for appropriate actions. Otherwise the disclosures come to the Enforcement and Disclosures Directorate of the Compliance Programs Branch.
[English]
We receive $2.2 million annually as part of the regime and we are mandated to perform civil compliance actions based on information contained in the disclosures received from FINTRAC on taxpayers who are suspected of money laundering, terrorist financing and tax evasion. In the 2010-11 fiscal year, 115 audits were completed based on FINTRAC disclosures with approximately $27 million of federal tax reassessed.
Given the nature of the activity and the ease with which money can be moved in today's environment, these cases can be very complex. The information obtained from FINTRAC is combined with our existing data and appropriate actions are taken based on the overall risk assessment of the taxpayer. FINTRAC provides valuable information through its disclosures, which supplements existing intelligence held by the CRA. We participate in regime committees and provide regular feedback to FINTRAC on the quality of the information provided.
Through its compliance actions, the CRA in conjunction with other regime members plays an integral role in addressing those who seek to benefit from crime and illegal activities. The CRA continues to focus on intelligence-led strategic file selection to make the best use of its resources.
I would be pleased to answer questions from the committee.
The Chair: Were there any other presentations? Thank you very much for your opening statements.
Ms. Hawara, in your opening statement, you mentioned three developments to your internal regime that granted you increased tools and resources to combat terrorist financing. In the back of my mind is that you said these three things happened in the past. We are reviewing what has taken place, but we are also here to make recommendations to government as to what could be done that would be of great help to you. Do you have further recommendations that you would like to make to this committee that we should be considering?
Ms. Hawara: We have been closely involved in the evaluation of the regime that was undertaken over the last year or so, and we worked with Finance on the consultation paper that they have prepared. There are two proposals in the consultation paper that have an impact on the Charities Directorate that we are very supportive of. One has to do with disclosures directly from CBSA to the Charities Directorate on cross-border reports and the second has to do with FINTRAC and the threshold they need to meet in order to be able to share information with us. Looking at that threshold would be helpful to us as well. Certainly, we are very supportive of the proposals in the consultation paper that Finance prepared.
The Chair: Is there anything in addition that you want to add? It is in the consultation paper and you are comfortable with that.
Ms. Hawara: Yes it is; thank you.
Senator Ringuette: As the chair mentioned, we have been holding meetings on this review. To my knowledge, unless I missed something, this is the first time that there has been talk about tax evasion. Other witnesses talked about money laundering and terrorist financing. All of a sudden, your group is talking today about tax evasion. Can you give us examples of how tax evasion is related to terrorist financing and money laundering? Is the issue of tax evasion within the current act?
Mr. St-Pierre: Tax evasion is, as of July 2010, a predicate offence under the money laundering moniker, if you will; so it is part and parcel of this. For example, FINTRAC will provide information to the CRA when they have information related to money laundering, terrorist financing, and tax evasion.
The role we play on the enforcement side as one of the regime members in this particular construct is that we are funded to look after the civil compliance component of information that they received in addressing tax evasion. In this particular case, the funding for our part of the regime is from a civil perspective.
Obviously, that is not the only activity that the agency has or the only programs in addressing those who choose to be non-compliant; we have other activities as well. For example, last year, we received 147 disclosures from FINTRAC, which resulted in 115 audits, and, as a result, we reassessed $27 million in federal tax. It is part and parcel of those activities that are part of the legislation and part of the work FINTRAC does in providing information to the agency.
Senator Ringuette: You indicated that you received 147 disclosures and that of those, you conducted 115 audits. How many of those audits were charities? How many were individual people? How many were companies?
Mr. St-Pierre: Both Ms. Hawara and I are from the same agency, but we have different roles. If the information relates to individuals or companies as it relates to tax evasion, it will be referred to my area. If it is charities, it will be referred to the Charities Directorate. We treat those as two different channels as to how that information from FINTRAC gets to us. In our case, of the 115 audits the vast majority would have been individuals.
Senator Ringuette: The 115 audits have nothing to do with companies or charities.
Mr. St-Pierre: They would not have involved charities. If that had been the case, they would have been looked at separately through the Charities Directorate. There may have been some companies, though it would have been a much smaller amount.
Senator Ringuette: Of the 115 audits of individuals, not charities or companies, how many have you pursued through the Federal Tax Court?
Mr. St-Pierre: As I mentioned, our role in the regime and the funding that we received in this case, is to look after the civil component of anyone who is being non-compliant based on information from FINTRAC. Of the 115 audits that we have done, as opposed to the criminal activity, which I will speak to, we would have penalized approximately 50 per cent or applied a gross negligent penalty. In the case of $27 million in federal tax reassessed, we have applied approximately $15 million in gross negligence penalties. Our role in the regime is the civil component.
Senator Ringuette: Could you define "gross negligence? "
Mr. St-Pierre: Gross negligence occurs when there is demonstrated activity where they should have known better. We have varying degrees of penalties and gross negligence is, if you will, one level below where we would go to a criminal component. For example, they did not arrange their affairs, were careless enough, took steps to not pay tax either through improper bookkeeping, not bookkeeping, having been told to keep books and not keeping books — that would be the civil component.
In order to go to the criminal, two components have to be met: actus reus and mens rea. There has to be a provable act and a guilty mind. In that particular aspect, not necessarily part of this regime, we conduct criminal investigations. Any time I say "investigation " for the purpose of what we are talking about, it is from a criminal perspective. Some believe they are being investigated when they are being audited or reviewed, but those are separate actions. We also have investigators that, under the Criminal Code, will charge when we can establish that there is a guilty mind, and a provable act of tax evasion, but they are very different. One is on the civil side and one is on the criminal side. The role of the regime here is on the civil side.
Senator Ringuette: The audits that you did were only on the civil side of the issue. None of the information you have received from FINTRAC is in regard to criminal pursuit on your part?
Mr. St-Pierre: The funding of the $2.2 million is for the role that we played. We have different regime partners. There is the RCMP and other law enforcement where criminal charges and activities will be undertaken. Apart from this, we also have investigations that the CRA undertakes.
Senator Ringuette: No, I am talking solely in regard to the information you received from FINTRAC that, last year, led you to 115 audits. How many of these audits led to criminal charges?
Mr. St-Pierre: For the whole number in these 115 audits, they were all civil assessments.
Senator Ringuette: There were absolutely no criminal ones from last year, then. You indicated that the tax evasion information that you are getting from FINTRAC has only been in force since July 2010. Is that right?
Mr. St-Pierre: We may have received some prior, but in July of 2010, tax evasion became a predicate offence, and we have now changed our process as a result. For every criminal investigation that we undertake, we will make a voluntary information record available to FINTRAC. If they have information related to the investigation that we have, they can then provide that to us.
We did, I think, approximately seven last year. This change is fairly new. We undertake about 150 criminal investigations a year. In every single case, because of the change that was made, we are now going to FINTRAC with the voluntary information.
The Chair: Senator Ringuette, can I put you down for second round? We have a number of people on our list of speakers. I will now turn to Senator St. Germain.
Senator St. Germain: Thank you, panel, for being here, and for your excellent presentation.
Actually, Senator Ringuette pursued the line of questioning that I was going to. Is the audit process limited by the $2.2 million? How is $2.2 million determined to be the amount of allocation to pursue these particular audits? Is it adequate or are you restricted by the $2.2 million?
Mr. St-Pierre: I am not privy to the mechanism for the funding of all the regime partners. I am not sure of the decision-making process that determines who gets what. Unfortunately, I cannot answer that question.
I think it would be fair to say that any regime partner would say that with more money, they could all do more. We would be no different in that perspective. That being said, we do not limit, from an agency perspective, the work that we do in tackling tax evasion, tax avoidance and non-compliance as a result of the $2.2 million received through this regime. We have a significant amount of audit activity in our international and large business areas; we work significantly with our international partners. We undertake 150 criminal investigations per year, which is outside of this particular funding. The agency has a broad approach to dealing with non-compliance. This is our part and what I am reporting on is what we do in our role, which is the civil component of compliance as it comes to the regime.
Senator St. Germain: I think understand that, but you are generating a profit of $27 million. Are you allowed to access any of that funding in the event you need more money to pursue more of these audits?
Mr. St-Pierre: I believe all the funding goes to the Consolidated Revenue Fund. No, we do not get —
Senator St. Germain: There is no way of getting it back. That is fine for now.
Mr. St-Pierre: No.
The Chair: Senator Massicotte, please.
Senator Massicotte: I want to thank our witnesses for being here this afternoon.
In your presentation, you make it clear that tax evasion is one of the justified reasons for FINTRAC to share information with you. However, if you look at their presentation, that is not the case. In fact, they say the reason the act was created to begin with was money-laundering and terrorism. In fact, we specifically asked them, "If you were suspicious of tax evasion, can you share the information? " They said no; you say differently. Is there a reason for that?
Mr. St-Pierre: I am not sure of the particular passage that you are referring to. I know that would have been true when it was originally created and perhaps reviewed again in 2006. However, with the change in July of 2010, and, with tax evasion being identified as a predicate offence under money laundering, we can now provide FINTRAC with the voluntary information record when we identify tax evasion. That was a change, and, for us, an improvement to the legislation that allows us to get that information and to provide the information to FINTRAC.
Senator Massicotte: Your interpretation of "suspicion of tax evasion " is that FINTRAC now has permission to share the information with you?
Mr. St-Pierre: With that change, yes.
Senator Massicotte: When FINTRAC was created eight or nine years ago, there was a big debate about privacy and sharing information. This is a lot of personal information, basically money transfers and a lot of people do that.
The justification at that point in time was that terrorism is scary to us, and money laundering is a major threat to our society and to the integrity of our economic systems, so we all bought into this thing. Looking back, I guess that is the reason for this review. We spend maybe $75 or $100 million dollars doing this research when you take all the departments combined. When you look at the results, the most significant contribution of FINTRAC is toward fraud and investment fraud. About 34 per cent of cases are investment fraud. If you look at examples that they report on, the fraud that would have been detected is not money laundering; it would have been detected anyway. It is additional information to help our criminal justice system, basically.
You said that the second most significant one is drugs. That is not bad; that involves a bit of money laundering. You get 5 per cent, from my understanding, of the cases. If you look at your percentages, of that 5 per cent, it is a small per cent from those you actually collect money and it is proven that there is something wrong. Is it all worth it, this program, all this money and the infringement upon privacy of information, when the major outlet was not even discussed eight or nine years ago and terrorism is very minor? What are your comments on that?
Mr. St-Pierre: I think the current construct of the legislation is very restrictive, and appropriately so, in terms of ensuring privacy. There is absolutely no question about the very limited circumstances under which FINTRAC will share information with the regime partners, and vice versa. From a privacy perspective, I would not say that with the addition of tax evasion being identified as a predicate offence under money laundering that it has opened the floodgates to accessing information. We cannot, for example, access the FINTRAC database. There are tight restrictions on that. The information that is gathered by FINTRAC is very protected and very restricted.
When it comes to the changes that have been made, we found those to be beneficial for all the partners. For example, as I mentioned, with tax evasion becoming a predicate offence, financial institutions have to report to FINTRAC now when they suspect or see cases of potential tax evasion. FINTRAC then looks at that information, together with what they have, to determine whether or not a further referral will be made.
I see the original construct still being very much in place with regard to the securing of privacy. We at the agency take the protection of taxpayer information to be of paramount importance. We can only share information additionally in very restricted circumstances because of section 241 of our act. FINTRAC is no different than the CRA when looking at the protection of taxpayer information. It is of paramount importance. That being said, one of the recommendations from the review is certainly to continue with that. However, without infringing on any privacy rights, how can the regime partners ensure that they can share information to meet the overall objectives? That is one recommendation that has continued to be discussed.
Senator Massicotte: I can appreciate the deterrence and the privacy, but have a look at the numbers: Direct costs are $75 million, plus, plus, plus; and there were 700 files last year raised by FINTRAC and sent to different parties. It used to be as low as 200 to 300 files. Every potential file is $100,000 and there is only a 5 per cent probability of something happening from that file. Given all the money accumulated it is far less than the $75 million in direct costs. Economically, we are not recouping our costs, yet we have this whole threat to privacy. An argument could be made that maybe we are exaggerating. Maybe there is a big department for little benefit.
Mr. St-Pierre: I guess I have two points to that. If you look at the last five years for the workload that I have, we received over 800 disclosures for FINTRAC and conducted over 500 audits. We have reassessed federal tax in the neighbourhood of about $81 million. That is in terms of the work that we are funded for.
From an agency perspective, we also value the information, which is very important. Perhaps what does not get measured, for example, is when we proceed with a criminal prosecution. There have been instances where, as a result of the FINTRAC data, we were able to identify and secure funds in offshore banks that otherwise we would not have had, been aware of or perhaps had access to.
In terms of the overall measure, it is not only the money in the door but also money that may not have been reported anywhere that you protected. I think it is achieving its results when you look at the fact that we and other regime partners have taken that money away or secured the money away from those who wish to pursue criminal activity. There is the deterrent effect and the real effect in terms of identifying and taking the money away. It has to be very broad in terms of looking at the value for money on this one. We cannot discount the deterrent effect.
Additionally, in terms of the work we undertake with our international partners, this legislation is similar to what other countries have. It is part of our obligations and the commitments we make with the OECD and other international partners. It is very important legislation on a number of fronts.
Senator Massicotte: On the international scene, we hear of certain countries that are much more lax than we are. They say that they abide by the rule rules of disclosure, but there can be criminal activities on small islands where there are significant Canadian banks. Under the system, if they do a bank transfer, it is noted, but if they use a cheque from that bank and that cheque is deposited by some creditor in Canada, it is not noted. We know these operations are continuing. Is there something missing to give you more tools to get to those significant offshore accounts?
Mr. St-Pierre: That may be something that perhaps FINTRAC would be better placed to answer.
Senator Massicotte: They told us to ask you people when you came.
Mr. St-Pierre: Is that right? FINTRAC for us is one piece of information. We have a number of tools and a number of other mechanisms for receiving information. We have Mutual Legal Assistance Treaties, MLATs. When there is identified criminal activity going on, we can work with other countries in getting information and vice versa. We have 13 signed Tax Information Exchange Agreements, TIEAs, and another 13 are being developed where we will have exchanges of tax-related information with the particular country. We have 87 treaties with countries. We have the Joint International Tax Shelter Information Centres, where we work with our treaty partners to identify schemes and non- compliant areas.
From an agency perspective, FINTRAC data is a source of information, but we work with all of those other tools to be able to identify, detect and deter non-compliance on a domestic and international scale.
[Translation]
Senator Maltais: Thank you, Mr. Chair; my question goes to Mr. St-Pierre. On page 1 of your brief, when talking about charitable organizations involved in terrorist financing and tax evasion, you say that, if the disclosure relates to terrorist financing involving a charitable organization, then the file is sent to the Charities Directorate for appropriate actions. Do you collect it beforehand? Do you tax it? Can the Canada Revenue Agency seize a part of their income for unpaid taxes?
Mr. St-Pierre: When charitable organizations are involved, those are the files that Ms. Hawara deals with directly.
Ms. Hawara: Mr. Chair, charitable organizations actually do not pay income tax. They are tax-exempt. So for us, the question is rather to determine whether they can continue to be registered as charitable organizations, because, if they are supporting terrorist organizations or helping to finance terrorist activities, we will have serious concerns as a result. The question is not really one of taxes; the question is whether or not registration can be maintained. That is a rather different question. The Charities Directorate is not concerned with taxes being payable but rather with the registration system and whether, first of all, charitable organizations can be registered, and, once they are, whether they can maintain their registered status and the ability to issue tax receipts.
Senator Maltais: Do you have any control over the issuance of those receipts?
Ms. Hawara: The organizations are responsible. There are very strict regulations as to what must appear on a tax receipt, when it can be issued and also as to the requirements in terms of the books and the records that the charitable organizations must keep. They must produce a report each year showing the amounts for which receipts have been issued. If necessary, we can carry out audits as well.
Senator Maltais: In your audits, and when you pass on information when you notice that it is a group that warrants a closer look, have you been able to link those organizations with other organizations in other countries?
Ms. Hawara: With charitable organizations, no. What can be done in the international context is that there is some information about charitable organizations that can be disclosed, much more than is the case with other Canadian taxpayers. Part of the information we have on charitable organizations can be disclosed. So if we determine that the registration status must be revoked, the public information can be shared with our international partners, if appropriate and if we think that there is an international link.
Senator Maltais: A cause-and-effect link?
Ms. Hawara: Yes.
Senator Maltais: According to Statistics Canada, there was probably from $5 billion to $15 billion in money laundering between 2008-09 and 2011. That is a lot of money. Can the revenue agency go and get its share of that?
Think back in history: Al Capone had an empire. It was the tax people who caught him and completely cleaned him out. We are talking about a lot of money. It is almost the country's annual deficit, or half of it. How can the revenue department collect the portion it is owed, on behalf of our society and our government?
Ms. Hawara: I will let Mr. St-Pierre answer that.
Mr. St-Pierre: It goes back to what I mentioned earlier, working with our international partners under the legislation that currently exists, making sure that our approach, in terms of noncompliance, includes information, education and also that we take action and investigate criminal matters. That is what we do.
We approach people, depending on their attitude as to whether they want to comply or not. We have to make sure that everything we need is in place to help those who want to and those who do not want to. If you look at the efforts that are being made internationally, they are quite significant. By working with the OECD and our other partners, with treaties, it is all important for Canada and for all other countries. If you look at the efforts that were made last year, and also for 5 or 10 years, they are significant. More and more, those who choose to try to hide their money are going to find that, given all the efforts countries are making, their ability to do so is diminishing.
Senator Maltais: To wrap up, what tools do you use to go and get our fair share of the fortune that is out there? What other tools do you need apart from the ones you already have?
Senator Massicotte: You could work harder!
Mr. St-Pierre: That is a question —
Senator Maltais: Worth five dollars!
Mr. St-Pierre: I feel we have plenty of tools in our hands to do the tasks that we have been assigned. There are always discussions between the Canada Revenue Agency and our other partners. But I could not tell you exactly the details of those discussions. What we have asked of others, I am not aware of all those details. Unfortunately, I cannot give you all the details.
Senator Massicotte: When you look at the efforts that have been made, there are a lot of results. But I think that the average Canadian reading the newspapers sees a lot of results from the United States, where you hear a lot about them, and about how strenuous the efforts are. We do not hear a lot about similar results in Canada. Why should we feel comfortable with our efforts when it is always the United States taking the lead in this kind of action?
Mr. St-Pierre: But the laws in Canada and the United States are different. I am aware of the cases you are referring to, with the powers of the Senate and other organizations.
Senator Massicotte: Did you say the powers of the Senate?
Mr. St-Pierre: They are bigger than us. Their numbers are bigger too and that attracts more attention. Often, in specific cases, we cannot. . .with private citizens, for example, I cannot talk about specific cases.
Senator Massicotte: I understand.
Mr. St-Pierre: We can talk about criminals, but in Canada the rules are different than in United States. I cannot tell you exactly if there is something missing here, I could not tell you what prevents us from being more public; things are different.
Senator Massicotte: Visibility aside, are you getting decent, satisfactory results?
Mr. St-Pierre: I am not able to judge whether the agency's results are good or bad. I can say that, with our budgets, with our other requirements, we produce results that you or others may or may not consider satisfactory. But as to whether we are providing a good, effective program, whether we are working effectively and optimally with others, I believe so, but it would not be appropriate for me to express an opinion on whether or not it is enough.
[English]
Senator Harb: Thank you very much for your presentation.
Who from Revenue Canada sits on the management committee for the regime? Is it one of you or who?
Mr. St-Pierre: It is one of my directors.
Senator Harb: Is it permanent or rotational? Is that person always there?
Mr. St-Pierre: In my case, it has been the same individual since I have been on the job, but I am not sure what it was prior.
Ms. Hawara: For the Charities Directorate it is the director of the review and analysis division, so someone who reports to me.
Senator Harb: Has there been any discussion over the past two or three years about bringing other partners into the regime? Are there other partners? Should we consider making a recommendation that they be part of the regime? The banks, for example, are they important partners? Are there other agencies in the Government of Canada that should be part of that regime? Have you given any thought or have you had any discussion on that?
Mr. St-Pierre: I am not aware of any of that discussion. It could have been and perhaps FINTRAC or Finance has had it but I am not aware.
Senator Harb: The Privacy Commissioner made a number of recommendations and had a number of concerns with regard to FINTRAC, and the Government of Canada has a number of treaties with other countries such as the double taxations and you have some treaties too.
What mechanisms do you have in place in order to ensure when you are exchanging information that privacy of the individual is not being sacrificed in the process?
Mr. St-Pierre: They are all government treaties obviously, so they would go through the normal process for any treaty. We have tax information exchange agreements. We have the tax treaties. They would all go through the normal process in terms of looking at privacy concerns, but all that information remains protected between the treaty partners.
Senator Oliver: I apologize for being late and I hope my questions have not been asked already.
In your paper you talked about the regime members and the integral role that they play and you used some interesting language. You say that the CRA continues to focus on intelligence-led, and I would like to know the sources of your intelligence. Is it the RCMP, CSIS or OECD? What are the sources of your intelligence that form the basis of what you do?
Mr. St-Pierre: If we are talking about the regime, the $2.2 million and the civil assessments that we raise, we use the FINTRAC data provided to us and then we look at the information that is already contained in our own tax files and in our own research. We have sophisticated risk assessment systems and we will look at particular areas and particular individuals to see what the risk of non-compliance may be. It is a combination of information.
Senator Oliver: Is it largely internal?
Mr. St-Pierre: Largely internal, yes.
Senator Oliver: Are the sources of your intelligence not so much external from CSIS and other intelligence forces but more so your internal systems?
Mr. St-Pierre: Mostly internal systems, but again I am restricting that part of the answer to the role we play with this regime. We do undertake activities outside of the regime that are relevant. We do undertake criminal investigations. We can and do undertake joint investigations with the RCMP. We have a very good working relationship and communication with law enforcement. Again, we are absolutely restricted in terms of sharing taxpayer information with those bodies. That is completely prescribed as to the limited circumstances under which we can provide those.
However, through our own research we may look at particular industries. We may undertake sample audits or random audits to try to determine the non-compliance of a particular sector, of a particular grouping of taxpayers in order to determine what the risk levels are. We allocate our resources based on risk in order to ensure that we are most effective in addressing the highest risks and to ensure that we reduce the compliance burden on those who decide to comply.
We take a look at a myriad of information, including that which we are allowed to share or that we get from our other activities such as the Joint International Tax Shelter Information Centre. All of those things we build intelligence on, and that is what we use in order to decide which areas we will focus in on.
Senator Oliver: The second word you use in that same sentence is you select what you will do by what you call a "strategic file selection. "
What is a strategic file to you and what makes it strategic and how does it become strategic?
Mr. St-Pierre: Many examples, but I would give you an example of, when we are looking at the criminal component of the work that I do, it is important for us to focus in on, say, promoters of particular schemes. We were recently successful, as you might know, in someone who was looking at promoting, being a tax protestor and the natural person and all of those cases. It is important we look at those areas where there is the greatest risk, ensure that Canadians know where we are focusing our efforts and at the same time ensuring that we make Canadians aware of what we have done in that area so that those who wish to comply do not inadvertently become part of a scheme or become hoodwinked by those who promote incorrect things.
For us, if we identify a risk, we will make sure to identify and take the appropriate measures to address that non- compliance and make Canadians aware of that.
We can pick the file for that. If we find a particular sector is being non-compliant as an entire sector, we will ensure we have increased audit activity in that sector. We will allocate our resources to wherever we have the highest risk and undertake the work to protect the overall tax base.
Senator Oliver: It still does not explain what would make one of those things strategic by your definition.
Mr. St-Pierre: With the limited resources we have, we can choose or we have to choose those particular areas in order to look at from an audit perspective and our contribution to protecting the tax base, so it is strategic in the sense of saying we will go there because we have identified there is a risk. We need to ensure that we correct that non- compliance and send a message to that particular sector or that particular industry. That is a strategy to ensure that we increase the overall compliance of that sector or industry.
Senator Oliver: I understand.
The Chair: That concludes round one of our questions, and we have one question from round two. I will turn now to Senator Ringuette.
Senator Ringuette: Did you say one question?
The Chair: A question, but I trust you will keep it tight as I know you always do.
Senator Ringuette: You indicated, Mr. St-Pierre, that last year you conducted 150 criminal investigations. Do you conduct those criminal investigations yourself as a department?
Mr. St-Pierre: Yes.
Senator Ringuette: You do. Is the RCMP or municipal or provincial police involved at all in those investigations?
Mr. St-Pierre: They can be. We can undertake, and have undertaken in the past, joint investigations in particular cases. In other instances, law enforcement will help us, for example, when we would execute a search warrant. We do undertake searches.
We do charge under the Criminal Code, so I have approximately 400 investigators that undertake investigations, and charges are laid under the Criminal Code, and once we have established a file, we then refer that file to the public prosecution office who then decides which files will be prosecuted. Last year, as I think I mentioned, approximately 204 taxpayers were charged.
Senator Ringuette: Individuals, not charities and not companies?
Mr. St-Pierre: No.
Senator Ringuette: So far the information that you are receiving from FINTRAC has led to no criminal investigations, and you have audited only people — no charities, no companies.
You say that during the same year you led 150 criminal investigations and you have 400 criminal investigators and no charities are involved and no companies are involved.
Who investigates risky companies?
Mr. St-Pierre: I will correct in part or clarify part of what I said. The 115 were mostly individuals, though there were companies, but that was on the civil side.
Do you recall the exact number?
Stephanie Henderson, Manager, Special Enforcement Program, Enforcement and Disclosures Directorate, Compliance Programs Branch, Canada Revenue Agency: I do not recall the exact number. Generally speaking, when we are looking at the regime, because money laundering is involved, we try to bring the funds back to the individual. It may flow through companies, but we bring it all back to the individual.
Senator Ringuette: If it is money laundering, it is criminal. It is not civil.
Mr. St-Pierre: In our case, tax evasion is part of the money laundering; it is. When we look at tax avoidance or non- compliance, not all non-compliance is criminal.
Senator Ringuette: I can understand that.
You also indicated earlier that you provide information to FINTRAC. What kind of information are you providing to FINTRAC?
Mr. St-Pierre: We can make a voluntary information record. We can send that to FINTRAC. For example, now that tax evasion is a predicate offence, when we have reasonable grounds to suspect tax evasion, we would provide the information that we have on that suspicion to FINTRAC. They would take a look at that and determine from their perspective if they have other information that they can provide to us, and if it meets the criteria for their providing information to the CRA, they will provide that to us.
Senator Ringuette: Chair, if you do not mind, I have a few others.
The Chair: We have two additions and we are running very tight on time.
Senator Ringuette: Okay.
[Translation]
Senator Maltais: Mr. St-Pierre, did you get cooperation to get that sum of $27 million back or did CRA have to go to court to recover it?
Mr. St-Pierre: Our recovery system can deal with the courts at any level. I do not have the details of those specific cases.
Senator Maltais: In Quebec, the government has established the Charbonneau commission that will look into a number of problems in the construction industry, tax evasion among them.
I believe that everyone around the table is aware that the Canada Revenue Agency was a step ahead of the Charbonneau commission, identified a number of people who were evading taxes, and was able to recover millions of dollars as a result.
Are you going to be interested in the commission's work? After the commission tables its report, will you be able to use the information in it to recover money from tax evasion?
Mr. St-Pierre: I am not in a position to answer that question because it deals with a matter that is not in my expertise.
Senator Maltais: Fine, but, if information is shared between countries at times, it can be shared between provinces.
[English]
The Chair: Point well taken.
Senator L. Smith: Mr. St-Pierre, Ms. Hawara had brought up two proposals that had been implemented from your side. Are there proposals that you would submit that could be helpful for moving your area of responsibility forward?
Mr. St-Pierre: As she mentioned, and I agree, we were very much involved in consulting and coming up with the recommendations. We fully support the ones that are currently here and would not have anything to add that has not been covered.
The Chair: Witnesses, on behalf of the committee I thank you for your appearance today. It has been very helpful and informative.
Next, we are pleased to welcome, from Foreign Affairs and International Trade Canada, Ms. Sabine Nolke, Director General, Major Programs, International Security Branch; and Mr. Michael Walma, Director, International Crime and Terrorism Division. Thank you for being before us today.
Sabine Nolke, Director General, Major Programs, International Security Branch, Foreign Affairs and International Trade Canada: Thank you, honourable senators, for having us here today. It is a great pleasure and honour to be here. I have with me two colleagues from our legal bureau in case there are specific questions.
[Translation]
Criminals and terrorists do not respect national borders. Criminals and terrorists operating from other countries maintain the capability and intent to harm Canadians and Canadian interests overseas as well as here in Canada. Similarly, money laundering and financing of terrorism elsewhere impacts upon Canada. Transnational crime and terrorism, terrorist financing and money laundering are global problems that require global solutions.
[English]
As a result, DFAIT is an active and necessary partner in the broader efforts of the Government of Canada to counter illicit financial flows. DFAIT does not have direct responsibilities under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and does not receive funding through Canada's anti-money laundering, anti- terrorist financing regime. Nevertheless, our activities support the regime's goals of detecting and deterring money laundering and terrorist financing.
DFAIT's engagement is carried out in a number of ways. One is through advocacy by raising awareness of the problems and generating the will within other governments to combat them. Another is through diplomacy and negotiation through the development of international norms and legal instruments that impose obligations on states and through them on financial institutions. On both these tracks, DFAIT fosters collaboration between Canada, other governments and international organizations and actors. In addition, DFAIT provides capacity building funding to help other governments meet their obligations and international standards. I will come back to this last point in a little while.
Of particular interest to this committee will be the role that DFAIT plays in the domestic implementation of Canada's international legal obligations with regard to terrorist financing, as well as the role we play in freezing the assets or restricting financial and other transactions with states that insist on acting outside of international norms.
DFAIT has two legislative means to respond: the United Nations Act, which gives effect to decisions by the UN Security Council; or the Special Economic Measures Act, which permits the imposition of sanctions imposed by other international organizations or unilateral sanctions, where the Governor-in-Council determines that a state's conduct constitutes a grave breach of international peace and security that has resulted or is likely to result in a serious international crisis. I have provided the clerk of the committee with a list of states currently covered under regulations pursuant to each act. This information is also publicly available on DFAIT's website. I have a few extra handouts if you require them.
While most states are on the list for reasons other than money laundering or terrorist financing, many of the regulations serve to freeze assets and restrict financial transactions. They also impose measures of less interest to this committee.
Two of the regulations under the United Nations Act directly target terrorist entities and individuals suspected of terrorist activity rather than states. These are the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism and the United Nations Al-Qaida and Taliban Regulations, which implement Canada's obligations under relevant Security Council resolutions to restrict the access of listed entity and individuals to financial support.
The Department of Finance, FINTRAC and others will have spoke to you about the Financial Action Task Force and Canada's active engagement therein. The two states that FATF has listed as requiring specific countermeasures, North Korea and Iran, are covered by existing country-specific sanctions under both the United Nations Act and the Special Economic Measures Act.
It is not enough to set standards and threaten measures against states that do not comply. We also need to help states with the will but not the knowledge or the resources to bring their laws and institutions up to standard. This is where capacity building comes in.
[Translation]
The department's limited capacity-building funds have helped a number of countries establish financial investigation units, modeled on Canada's own FINTRAC, using a cost-effective "train the trainer " approach. Our contributions to a topical trust fund of the International Monetary Fund on anti-money-laundering and counterterrorist financing have served to leverage that institution's experts and resources, and to bring in other donors. Concrete results of these efforts include the development of national legislation, more capable national institutions, trained staff, completion of national risk assessments, enhanced regional collaboration, and the placement of regional advisers and highly targeted money laundering and terrorist financing research.
As a result, 25 countries have benefited directly from the IMF work thus far, while still others have gained through the regional projects. The World Bank is another important partner for Canada's programming.
[English]
Since the last such Senate review, it is worth noting that Canada has given itself additional tools to fight corruption by seizing illicitly obtained assets. On March 23, 2011, the Governor-in-Council passed the Freezing Assets of Corrupt Foreign Officials Act, FACFO, which permits the freezing of the assets or property of politically exposed foreign persons at the written request of a foreign state, upon the Governor-in-Council making certain determinations. The FACFO Tunisia and Egypt regulations passed at the time give effect to written requests from Tunisia and Egypt to freeze assets of names of former leaders, senior officials, associates and family members suspected of having misappropriated state funds or having obtained property inappropriately. The regulations create a freeze of the assets of the individuals listed in them by prohibiting the following activities by anyone in Canada: to deal directly or indirectly in any property, wherever situated, of a listed politically exposed foreign person; to enter into or facilitate directly or indirectly any financial transaction related to a dealing referred to in the first point; and to provide financial services or other related services in respect of any property of such a person.
To date, 268 persons have been listed under these regulations, with 123 for Tunisia and 145 for Egypt. All the Canadian-situated assets of these persons are subject to freezing. To this end, FACFO provides that financial entities in Canada, as well as Canadians outside Canada, shall determine and disclose to the RCMP the existence of property in their control and possession, which they have reason to believe is the property belonging to such persons.
While we cannot disclose the details of individual cases in order not to affect the integrity of investigations, we can confirm that over $2.5 million in assets have been frozen under this legislation, including a residential property valued at $2.55 million and bank accounts in the amount of $122,000.
It is important to note that no assets have been seized under the FACFO regulations. Rather, they have been frozen and will be held safe for a maximum of five years, allowing the relevant government to pursue its investigations and gather evidence to support a more formal request for the seizure and forfeiture of these assets under existing legal instruments such as the Mutual Legal Assistance Act or the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
The FACFO is a bridge to those pieces of legislation.
[Translation]
Thank you for your attention; I would be more than happy to answer any questions you may have on my department's role on these issues.
[English]
The Chair: Thank you very much.
Mr. Walma, do you have anything that you would like to add at this point, or will you just respond to questions?
Michael Walma, Director, International Crime and Terrorism Division, Foreign Affairs and International Trade Canada: I would be happy to respond to questions.
The Chair: Ms. Nolke, have you been involved in the consultation process that has taken place on this act?
Ms. Nolke: Not directly, no. I took my current position in September. In the actual evolution of this consultation, no, I have not been personally involved.
The Chair: The department has, though.
Ms. Nolke: I believe that is the case.
The Chair: Can you confirm that, Mr. Walma?
Mr. Walma: That would be in the legal department. It would not have been in ours.
The Chair: Can we find out if DFAIT has been consulted?
Ms. Nolke: I brought my lawyers with me. Let me see if they can tell us.
The Chair: That does not sound like a very legal question. It is just, were you consulted? I think the answer is either "yes " or "no. "
Ms. Nolke: Apparently we get consulted in the development of regulations, but the actual legislation, apparently not.
The Chair: You have not been. Have you had an opportunity to review the recommendations that are being made?
Ms. Nolke: No, I have not. I had been tasked to give you the extent of my department's involvement with the act and that was essentially the subject of my presentation.
As I said earlier in my statement, we do not have any direct responsibility for this legislation. We assist around the margins with regard to its intent and purposes as it touches on our international activities.
The Chair: Thank you.
Senator Ringuette: FINTRAC has indicated to us that they have MOU with 127 countries. You have indicated that you have been instrumental in facilitating these MOUs?
Ms. Nolke: What we facilitate is FINTRAC's work with other agencies, including the International Monetary Fund and the World Bank, and providing their expertise through capacity building exercises on which we are leading. Concerning the individual agency-to-agency MOUs that FINTRAC may have with individual states, no, we do not get involved in those.
Senator Ringuette: You do not get involved in those. Do you get involved in Interpol issues?
Ms. Nolke: We do in the context of our capacity building programs. For example, we provide funding to certain projects that allows Interpol to build up the ability of other law enforcement agencies in countries that need our assistance to bring them up to international standards, so yes; to that extent we do get involved in Interpol.
Senator Ringuette: Can you provide us with a list of countries where you have helped Interpol bring national police force to standards? I am interested because I would like to compare that with the list of countries that we have MOUs with.
Ms. Nolke: I brought with me a list of projects that my program, the Counterterrorism Capacity Building Program, and the Anti-crime Capacity Building Program has done. On those, I actually at this point do not see any current Interpol projects. What I do see is a large number of projects that do involve directly FINTRAC and various multi- donor funds. I can make that available to you.
Senator Ringuette: Is it possible for you to provide the list that you have to the clerk?
Ms. Nolke: It should be possible, yes.
Senator Ringuette: In that list, you state here that you collaborate with the IMF, which is through the channel that you seem to be using the most, with 25 countries. Those 25 countries would be listed in your IMF partnership?
Ms. Nolke: That is correct. One project that we have is with the World Bank. It involves a list of countries going from Albania, Antigua, Anguilla, et cetera, all the way down to Serbia, Kazakhstan and the Marshall Islands. It is a list of countries that is very long; it is quite a bit more than 25. Again, the assistance there is provided through a trust fund with the World Bank, so we would not deal with each of those countries on a bilateral basis.
Senator Ringuette: When FINTRAC was here, I asked if, of the 127 MOUs, one of them was with Algeria. They said no. Do you have any agreement with Algeria?
Ms. Nolke: I am not aware that we do, no. We have various arrangements and treaties on a bilateral basis with Algeria, but I am not aware that one directly deals with the tracking of finances. However, I believe both Algeria and Canada are both parties, for example, to the UN Convention on the Suppression of Terrorist Financing. That convention serves as a legal basis for cooperation and, for example, mutual legal assistance for judicial investigations, information sharing, et cetera.
Senator Ringuette: Moving on, and this will be interesting looking into the future, 268 persons have been listed from Tunisia and Egypt. Have they been listed in Canada or worldwide through your international agreements?
Ms. Nolke: These persons were listed in the Tunisia and Egypt regulations under the Freezing Assets of Corrupt Former Officials Act, so their listing is specific to Canada. They are on that list pursuant to requests by Egypt and Tunisia respectively. These are the names of former officials and their families and associates that were provided to us by the requesting governments.
Senator Ringuette: Are these names provided to countries all over the world?
Ms. Nolke: I am only aware of what they have provided to us. In that particular case the suggestion was that one of the president's close relatives had connections to Canada. In fact, he had a residence in Montreal so the request for assistance was very pointedly directed at Canada. I am not certain that these particular individuals would be of interest to any other state.
Senator Ringuette: You indicated that you found a bank account with $122,000 and a residential property of $2.5 million. On a yearly basis, how many resources do you dedicate to this?
Ms. Nolke: The regulations are very specific to the listed individuals. We had one request from Tunisia, pursuant to which we passed the regulations which then obliged any person in Canada with knowledge of assets to report these to the RCMP. This was essentially a one-time exercise. If further property belonging to these individuals would come to the attention of, say, a bank or an insurance company, then those would also be obliged to report, but it is not an exercise where we necessarily actively go looking. There are reporting obligations on the part of the financial institutions. The notice gets sent out to the Office of the Supervisor of Financial Institutions when such listings are made and they pass it through their channels to all relevant institutions which then check their records. That would be a one-time exercise by each institution. They report back.
Senator Ringuette: Last summer there were at least two reports with regard to analyzing Interpol Red Notices, indicating that countries were using that regime to prosecute based on political reasons or economic reasons. Before your department proceeds to freezing these assets, do you do any kind of investigation to determine if the requests are justified?
Ms. Nolke: Yes, as a matter of fact I testified to exactly the processes that we would go through before we would make recommendations for the Governor-in-Council to make his determination.
Senator Ringuette: What is the process that you would go through?
Ms. Nolke: The process would be that we would receive the request from the country concerned with the list of the names. We look at things such as public records. We look at information available from our posts which will have personal knowledge of some of these individuals. We also discuss with allies. Essentially, there is a fairly rigorous vetting process to ensure it is not a purely political gesture. In addition, under the act there is required a determination that the country concerned is in political turmoil and cannot, for example, avail itself of the usual channels for requests for assistance, which would require, for example, an existing judicial proceeding, a criminal charge or a criminal investigation.
At the time they made their requests, Tunisia and Egypt were undergoing regime changes. You will remember the days of the Arab Spring in those countries. They essentially asked us to act quickly. That is why there must be a determination by the Governor-in-Council, which has to be fact-backed, and there will be decisions made that could be subject to challenge, for example, under the Federal Court for judicial review. Therefore that determination has to be made first and then the assets can be frozen. It is only a temporary freeze because, again, this is a country that wants to have the rule of law and we want to make sure that there are proper judicial proceedings in place before we would hand these assets over. It is a temporary measure.
Senator Oliver: The reason that we are here today is to do a review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, and your job is the director general, major programs, international security branch at DFAIT. In your day-to-day job, are you looking into and under and about this money laundering act, or do you do other things?
Ms. Nolke: No, we do other things. As I tried to explain in my statement, and I apologize if that was not clear, we work around the edges to support the objectives and purposes of that legislation. However, it is not my department that has direct responsibility. It is a purely domestic piece of legislation.
Senator Oliver: You have talked throughout your remarks today about two countries in relation to the Freezing Assets of Corrupt Foreign Officials Act. You talked about the Arab Spring and you mentioned Tunisia and Egypt. I read in the Canadian newspapers a while ago about a number of assets of the Gadhafi regime that were frozen in Canada. Would that have come under your jurisdiction and, if so, why was that not mentioned? You say the amounts involved are $2.5 million, which is not very much money. In fact, it is a small amount of money, particularly when one of them was a house worth about that. There is not very much activity in the freezing of these assets from these corrupt regimes so are you not very busy in it?
Ms. Nolke: Actually I would beg to differ, sir. It is not my current responsibility to deal with the sanctions regimes, but it happens to have been my former job so I am fairly familiar with exactly how much work goes into other sanctions regimes and other asset freeze regimes. The reason I have pointed at FACFO is since your last review that is a new development. That is a new piece of legislation that was given Royal Assent to last March. I thought I would draw special attention to that. The remainder of our asset freezes are done either pursuant to the United Nations Act, if the Security Council of the United Nations orders states or decides that states should freeze assets of certain regimes. Most of our Libya asset freezes went pursuant to that.
In the other half, where this government decided to go beyond what the United Nations imposed, we imposed additional sanctions on Libya under the Special Economic Measures Act, which allows for the imposition of unilateral sanctions. We did, I think, three rounds of various freezes of Libyan assets at the time. I cannot recall the figure but it was over $2 billion that were frozen at the time. The $2.5 million is only under the FACFO and that is because that is a new piece of legislation that requires the specific request of a nation to us, whereas the United Nations Act is a Security Council decision and the Special Economic Measures Act allows us to impose sanctions on states that this government, the Governor-in-Council, determines to essentially have been worth sanctioning for very specified criteria.
The paper I brought with me, which is the list of our sanctions regimes, actually shows how busy we are. This is the list of current sanctions regimes in place in Canada. It goes over two pages; in both official languages it comes to three pages. It is quite extensive.
Senator Oliver: What is the total number of assets under DFAIT that are frozen in Canada today from all countries and from all legislation?
Ms. Nolke: I do not think we have that figure available because that requires reporting from the RCMP that we can really only get in extremely specific and limited circumstances.
Let me turn to my counsel in the back and see if we have that figure. I do not think we do.
We do not have that figure.
The Chair: Just following up on Senator Oliver's question, in your remarks you say:
It is important to note that no assets have been seized under FACFO regulations. Rather, they have been frozen and will be held safe for a maximum of five years, allowing the relevant Government to pursue its investigations . . . .
What is the result if nothing happens within five years?
Ms. Nolke: They get thawed or, if the government makes a request for an extension, there can be a one-time extension.
Senator Harb: Thank you for your presentation. You seem to be very diplomatic in your paragraph 2. You make your introduction, you talk about the importance of fighting money laundering and financing of terrorism, but then you say DFAIT is an active and necessary partner in the broader effort of the Government of Canada to counter illicit financial flow. Then you go on and talk about what it is you do internationally which is an extremely important component of this whole puzzle.
Why are you not a full-fledged member of the regime? You seem to be carrying a big load of it.
Ms. Nolke: As you say, we do help around the edges. The regime itself is purely domestic, and DFAIT's statutory mandate under the foreign affairs act has certain limitations and certain ranges, so we do not deal per se with domestic banking regimes. That is simply not our role. If we were to do this, I think the list of domestic statutes we could be engaged in would be rather a long one. However, we do recognize that money flows these days are transnational in nature more often than not. We do essentially everything but the domestic regime. We deal with relations with other governments in ensuring that they can do what we can do at home, so if money leaves Canada, comes into Canada, we can connect the dots and track it across the borders. That is where we become involved.
Senator Harb: That is precisely what FINTRAC does in its international transactions because FINTRAC does not deal with domestic transactions. They mostly deal with international transactions, so that in a sense fits exactly with your regime.
Mr. Walma: I think perhaps just in terms of clarification, we do not get involved in the operational aspects of the financial flows. We try to promote an international environment where our regulations match the regulations and practices of other jurisdictions. We try to make cooperation easier amongst our domestic agencies and their matching domestic agencies abroad, but we do not have an operational role in doing that.
Senator Harb: I will ask this question differently, and that will be the end of my questioning. You talked about the fact that you do advocacy and then awareness and capacity building, so obviously when you do those kinds of tasks, very important tasks, you have to bring in players in the field, whether that would be Canadian agencies such as CRA or the RCMP or FINTRAC or whomever. I am a bit puzzled, although you do that, you work with them, why are you not part of the regime? Why do you not sit at the table with them, and should you not be at the table?
Mr. Walma: If I may, that is not a decision that we were engaged upon. That was a decision of the government of the day when it created the statute and the regulations.
Senator Harb: Now we are reviewing the act, do you think it is a good idea for us to ask you to sit as a part of the regime?
Ms. Nolke: I think that would be a matter for policy. As a mere civil servant, I am not in a position to comment; but yes, if you wish to make the recommendation and if the recommendation gets accepted, we would certainly play our role.
The Chair: Ms. Nolke, perhaps I will ask Senator Harb's question a different way. You have used the expression in your presentation tonight three times that you operate on the edges. Not many people would describe their position as being one that they operate on the edges, so perhaps for the edification of the committee, could you indicate to the committee, what is the main focus of your position, that being Director General, Major Programs, International Security Branch?
Ms. Nolke: I would be very happy to do that. With respect to the role that I play in the department, I have under my hat four different divisions. The one that Mr. Walma heads is the International Crime and Counter-Terrorism Division. I also have the capacity building division which administers a number of programs that have been given cabinet mandates, for example the Counter-terrorism Capacity Building Program which has $15 million a year. We also have the Anti-Crime Capacity Building Program which has $15 million a year. We have a number of other programs that would not be of as much interest to this particular committee, counter-narcotics, for example, in Afghanistan, et cetera.
That is one section. It is in that particular area that most of the action that your committee is interested in happens, namely our programs and projects that we run through the IMF or through the World Bank, with FINTRAC, with the assistance of other implementing partners.
The other half of my shop is what is called the global partnership where we deal with weapons of mass destruction threat reduction. We implement the Global Partnership Program for Canada, which is a creature initially of the G8 aimed at reducing the possibility that terrorists or proliferating states gain access to sensitive radiological, nuclear, biological or chemical weapons. In that capacity, I have a fairly large number of dollars available to me because some of these projects that we carry on, securing nuclear facilities worldwide, tend to be fairly large. That is where the major end of the programs comes in.
The Chair: Thank you, Ms. Nolke, for that clarification.
Senator L. Smith: I am afraid to ask this question, chair.
I had written down early in your presentation one word, which was your role. It has been asked three or four different ways. I guess I would just further that question, and you just gave us a more complete answer. You talked consulting, advocacy, diplomacy. We asked you should your role be increased. May I ask one other question?
In the present context, is your role, your group, a proactive or a reactive role? When you look at, if we just take an example, the drug trade and the way that the drug trade appears to be, it is a major issue, and you look at countries and people from different countries coming in to Canada, out of Canada, et cetera, say Mexico to Canada, is that role that you have right now a proactive role or is it a reactive role? Should it be, if it is not a proactive role, a real proactive role; and then where does that position you in the future of the regime?
Ms. Nolke: It is a mixture of both. Reactive in the sense that when criminals move, we move with them, so we determine where the threat is, and sometimes that determination gets made after the threat has manifested itself. That is number one. However, proactive, we also monitor trends. For example, just last week I was in bilateral security consultations with Colombia, and there we had a look at some of the impacts of the Colombian success with their counter-narcotics and counterterrorism operations and how that has impacted the region around them as the criminals move out from under law enforcement, they move into the region. We monitor those trends, and part of our program is proactive in the sense that we also try to inoculate countries that could become vulnerable to criminal activity down the line.
I will let Mr. Walma take a stab at your question. It is a very good one.
Mr. Walma: Another example would be the work that we are doing in a newly established body called the Global Counterterrorism Forum where Canada and Algeria co-chair a working group devoted to counterterrorism efforts in West Africa, the Sahel. One of the areas in which we are promoting regional cooperation is on counterterrorism financing and, related but not a specific goal of the group, anti-money laundering. So, for example, we are working with our partners in the region to promote capacity building among the countries of West Africa to build up their FINTRAC equivalents, their FIUs, in these country regions so as to prevent them from becoming havens for counterterrorism financing.
In that way, it is a proactive role. It is an international role but it is one of helping to create international momentum in the fight against counterterrorism financing without being engaged directly in the operational aspects of it itself. In doing so, we engage with experts from the Department of Justice, from Finance and from FINTRAC to be able to provide expert-level assistance to these countries.
Senator L. Smith: With the number of players, the role that you have now, and the suggestion that maybe your role should grow, do you have enough jurisdictional powers to be able to move forward as the world gets even smaller? Criminals, factions and groups will possibly have more movement between countries. I would like to hear your comments. You would be a great person to compete against because you are a sleeper, and you would shoot me before I would even ask you the first question. That is a compliment and I hope you take it that way.
Ms. Nolke: I will take it as a compliment even as it makes me a little disquiet.
I am a lawyer by background so maybe I hear something different when I hear the word "jurisdiction. "
Right now, the role of our capacity building programs, for example, has been circumscribed by cabinet and Treasury Board. For example, the Anti-Crime Capacity Building Program is geared specifically at Central America and the Caribbean, so that is where the money is being spent. We cannot spend money out of that pot on any other region.
For the Counter-Terrorism Capacity Building Program, we have a focus on the Sahel, but we also have a global mandate, so we can do our activities wherever the threat might arise.
As I said, the mandates for the particular programs are established by both Treasury Board and cabinet, of course. The global partnership mandate is worldwide. Yes, we could move on.
You have a suggestion that perhaps DFAIT should be a given a greater role in the actual legislation that is of interest here today. That would be a matter, I think, for cabinet to determine, but it might go beyond that because I am not certain at this point whether the Department of Foreign Affairs and International Trade Act would be wide enough to circumscribe that kind of activity.
Mr. Walma: To my knowledge, our cooperation with other government departments on these matters has been very effective. We are in good communication. We have excellent working relationships, and I am not aware of any problems that have resulted from mandates or other issues. It seems to be working pretty well.
Senator L. Smith: With all the players, is there no bumping that goes on?
Ms. Nolke: If there is any bumping it is only because our resources are relatively limited and there is a lot of crime and terrorism out there that needs to be countered. Of course, various departments that we are cooperating with are interested in getting access to some of the projects.
The security programs that we do always have as a primary interest the security interests of Canadians and of Canada. International security programming contains a certain amount of enlightened self interest. When we do our programming in the Caribbean, for example, it is because whatever affects the Caribbean today will also affect Canadians down the road or even on a daily basis, as so many Canadians go there.
We do a lot of programming that directly or indirectly also benefits Canada.
Our line departments know this, so the RCMP will come up to us with a project. FINTRAC will come to us with a project as will Justice. The projects total X number of millions of dollars, and we only have X minus Y millions of dollars. That is where the bumping happens.
For that purpose, we have annual priority review exercises that will set out exactly what we are looking at, where we spot the trends for the coming year, where we should ideally place our money, and that exercise involves all the interested departments. We are going through it right now. It is a collegial exercise that has first and foremost the interests of Canadians and of Canadians' security at heart.
Senator L. Smith: Do you have a five-year projection in terms of capacity and money needs that you will have as the whole process evolves and you evolve with all the other departments? Do you have that forecast?
Ms. Nolke: That forecasting is part of the program review. The ACCBP will need to be renewed next year. It sunsets at the end of 2013, and we look forward to renewal for that. Part of the projections will be part of the exercise to seek new funding, to seek an additional mandate, absolutely.
Senator Eaton: What connection do you have with CSIS? Is CSIS one of your partners?
Ms. Nolke: They absolutely are, yes.
The Chair: On behalf of all of us, thank you very much for appearing before us and for a most informative presentation. We wish you well, and, again, thank you for appearing before us.
Ms. Nolke: Thank you, very much. It has been a pleasure.
(The committee adjourned.)