Proceedings of the Standing Senate Committee on
National Finance
Issue 32 - Evidence - February 12, 2013
OTTAWA, Tuesday, February 12, 2013
The Standing Senate Committee on National Finance met this day at 9:30 a.m. to examine the expenditures set out in the Main Estimates for the fiscal year ending March 31, 2013.
Senator Joseph A. Day (Chair) in the chair.
[English]
The Chair: Before proceeding with the business of the day, I would like to congratulate all of us with respect to The CANADA-US Price Gap report and the considerable coverage that we have received. Senators Buth, Smith and I presented the report, and we had a number of colleagues out at the time the report was presented last week. I do not have the statistics, but we will have them for you. Since then, it has been considerable. The fact that we were on the front page of the two national newspapers is, I think, very good.
[Translation]
I want to thank all those who gave interviews, especially Senator Bellemare. Did anyone else have interviews?
[English]
I had several interviews, and I know Senator Smith also gave several. If any of you have done interviews, either radio or television, let us know so that we can include those in our statistics.
[Translation]
Honourable senators, this morning, we are continuing our study of Main Estimates 2012-13.
[English]
As you know, we have almost completed the fiscal year 2012-13, and we look forward to receiving in the fairly near future the 2013-14 Main Estimates. That system, as we know, proceeds separately from the budget, although we will be seeing the budget. That impacts the supplementary estimates, and the Main Estimates are in for the next year and will be referred to us irrespective of the date of the budget.
That said, it has been a while since we have had the opportunity to speak to officials before us in the context of the Main Estimates. We will be required to conclude the Main Estimates for this year and then do an interim for the estimates for next year, so we will be busy come late February, March and April. All of that work with interim supply must be all done before April.
This morning we are very pleased to welcome officials from the Financial Transactions and Reports Analysis Centre of Canada, more easily referred to as FINTRAC. Appearing before us this morning are Hélène Filion, Assistant Director and Chief Financial Officer; and Darlene Boileau, Deputy Director, Strategic Policy and Public Affairs Sector.
We are also pleased to welcome Guy Arseneau from the Office of the Superintendent of Financial Institutions. He is Managing Director of the Finance and Corporate Planning Office.
We understand that Ms. Filion and Mr. Arseneau each have some brief introductory remarks. Most of us will have before us our estimates for 2012-13. Let us refer to the pertinent pages, which will be somewhere under ``finance,'' around pages 113, 120 and 122 in the English version. I am sorry — I do not have the equivalent French pages, but maybe someone will help us with those.
Senator Bellemare: I believe it is page 177.
[Translation]
The Chair: On page 177 of the French version of the Main Estimates. We will begin with Ms. Filion.
[English]
Hélène Filion, Assistant Director, Chief Financial Officer, Financial Transactions and Reports Analysis Centre of Canada: Good morning, Mr. Chair and committee members.
[Translation]
We are pleased to appear before this committee today to provide an update on FINTRAC's main estimates for 2012-2013. My name is Hélène Filion, and I am Chief Financial Officer at FINTRAC. Joining me today is my colleague, Darleen Boileau, Deputy Director of Strategic Policy and Public Affairs.
[English]
I will begin with FINTRAC's Main Estimates and then offer brief descriptions of our operations and mandate.
Our forecasted spending for 2012-13, including all authorities — Main Estimates and supplementary estimates — equals $56.2 million.
As for FINTRAC's overall budget, it is relatively straightforward. It is largely comprised of two main elements: staff and operations. Our staff costs are $40.5 million, or 72 per cent of our expenditures. We spend $15.7 million, or 28 per cent, in support of our operations, which is mainly for information technology at $2.7 million, security at $1 million, and accommodations at $8.3 million. FINTRAC currently employs 352 employees, located here in Ottawa and in three regional offices: We have an office in Montreal, Toronto and Vancouver. That figure is expected to be the same next year.
FINTRAC is subject to Treasury Board standards for financial disclosure, including quality reporting of our financial statements, proactive disclosure and annual, audited financial statements. We also produce an annual report to Parliament each fall, as well as yearly departmental performance reports and reports on plans and priorities, which are all tabled in Parliament.
As committee members are aware, FINTRAC was created in July 2000 to assist with the detection, deterrence and prevention of money laundering, terrorist activity financing and other threats to the security of Canada. FINTRAC is an independent agency reporting to the Minister of Finance, who is accountable to Parliament for the activities of the centre.
[Translation]
As one of the partners in Canada's anti-money laundering and anti-terrorist financing initiative, FINTRAC is Canada's financial intelligence unit. Our role is to receive financial transaction reports and other information, analyze them, and, when appropriate, pass them on to our partners in law enforcement, intelligence and national security.
FINTRAC produces financial intelligence that assists in the investigation and prosecution of offences that involve money laundering, terrorist activity financing, and other threats to Canada's security. Those investigations are carried out by national, provincial and municipal law enforcement agencies, as well as the Canadian Security Intelligence Service, CSIS. FINTRAC is an analytic, not an investigative, body. The centre sits at the front end of the process, providing financial intelligence that helps investigators.
FINTRAC assists criminal investigations by shedding light on the proceeds of crime. Last year, we provided 796 case disclosures to law enforcement agencies. That financial intelligence supported investigations of suspected drug trafficking, fraud, tax evasion, corruption, human trafficking and illegal gambling, among other offences. All of those crimes are committed for profit, and their proceeds leave a trail in the legitimate financial system that FINTRAC tries to capture through its analysis in order to assist investigators. Our analysis of financial transactions often reveals individuals that were previously unknown to law enforcement or provides investigators with information they can use to seek evidence.
FINTRAC has made and will continue to make a significant contribution — along with our partners in law enforcement and national security — to combatting money laundering and terrorist activity financing. This investment in FINTRAC is an investment in the safety and security of Canadians.
I will conclude my presentation here. We would be pleased to answer your questions in French or in English. Since I have been at FINTRAC for only two weeks, I will let Ms. Boileau answer more detailed questions.
The Chair: Thank you. Congratulations!
Ms. Filion: Thank you.
[English]
Guy Arseneau, Managing Director, Finance and Corporate Planning Office, Office of the Superintendent of Financial Institutions: Good morning, Mr. Chair and honourable senators. Thank you for allowing me to appear before the committee. As the chair mentioned, I am the CFO and Managing Director of Finance and Corporate Planning for the Office of the Superintendent of Financial Institutions, commonly referred to as OSFI.
As the 2012-13 Main Estimates show, OSFI's total budget was roughly $127 million. Nearly all of the funds in our budget are recovered through asset-based, premium-based or membership-based assessments on the financial services industry and a user-pay program for selected services. A small portion of OSFI's revenue, around $910,000, roughly 0.8 per cent, is received through an appropriation from the Government of Canada for actuarial valuation and advisory services provided by the Chief Actuary relating to various public sector pension and benefit plans.
[Translation]
I would be pleased to answer your questions on the 2012-2013 Main Estimates and OSFI's budget.
The Chair: Thank you very much, Mr. Arseneau. We will begin our question and answer period with the senator from Manitoba, Senator Buth.
[English]
Senator Buth: I hope I am in the right place. We have many documents.
The Chair: This is the Finance Committee.
Senator Buth: I am in the right place if this is the Finance Committee; I am not sure I am in the right place in terms of the Main Estimates.
I am at 2012-13, page 113, which shows 2012-13 estimates for FINTRAC at $52.230 million, and last year, Main Estimates at $40 million. Can you tell me what the difference is in those amounts?
Ms. Filion: Yes. There is a difference of $12 million. It is mainly due to an increase of $16.2 million on the renewal of the National Initiative to Combat Money Laundering. There is also $2.5 million related to Budget 2010 to ensure compliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. There is a decrease of $5.6 million related to the transfer of Shared Services Canada, a decrease of $0.7 million related to DRAP, which is the sunset of the funding for the National Anti-Drug Strategy, and a decrease of $0.3 million related to reductions in the contribution to the employee benefit plan.
Senator Buth: Can you go back to that $16.2 million? You said it was for what?
Ms. Filion: For the National Initiative to Combat Money Laundering.
The Chair: Is that a new initiative?
Ms. Filion: No, it was allocated in Budget 2006 and was sunsetting in 2011 and 2012. Following some reports we had to do, we were getting it back.
Senator Buth: Okay. What does this initiative do?
Ms. Filion: This initiative represents 92 FTEs in FINTRAC. Perhaps Ms. Boileau can answer that better than I can.
Darlene Boileau, Deputy Director, Strategic Policy and Public Affairs Sector, Financial Transactions and Reports Analysis Centre of Canada: This is our main budget with regard to our activities around anti-money laundering and anti- terrorist financing vis-à-vis the types of disclosure work we do in support of law enforcement and other national law security agencies. However, it is also representative of our law compliance activities with the various reporting entities under our legislation.
Senator Buth: You reported in your comments that last year you provided 796 case disclosures to law enforcement agencies. Do you track what happens to those disclosures afterward? Can you tell me what the success might be?
Ms. Boileau: We do. As we appeared in front of the Standing Senate Committee on Banking, Trade and Commerce in December, we provided some of the members with a few stories and completions around our results. I can leave that same information with you today. We have copies both in English and French. It is worthwhile seeing how our disclosures have supported the RCMP or various law enforcement initiatives across the country.
The Chair: That would be helpful for us. Even though some of our members are also members of the Banking Committee, not all are. If you could provide those to our clerk, we will see that everyone gets a copy of them in each official language.
Ms. Filion, as a point of clarification on what you have told us — and maybe Ms. Boileau can help us as well — we were looking at page 113 of the Main Estimates. All of what you have talked about, I assume, is under vote 30, program expenditures?
Ms. Filion: Yes.
The Chair: Is there another place? Page 121 in the English version is a bit more elaborate, but is there a breakdown of vote 30 showing the items up and down and a breakdown of your operating expenditures? Is page 121 where we would go?
Ms. Filion: Yes. This is presented by the PAA, the program activity architecture, but the information I gave you is related to this exactly.
The Chair: Page 121 is not in as much detail as you provided, so we must have you come here? Where else would we go to find that breakdown that you just talked about?
Ms. Filion: You have it on page 120.
The Chair: In words. Thank you. That is helpful. The only other question that flows from Senator Buth, which I think all senators would be interested in, is that this was the Main Estimates summary you have given us. We have had two supplementary estimates and another one coming. Has there been any change with respect to your estimates as a result of those supplementary estimates?
Ms. Filion: Yes. We did not have any Supplementary Estimates (B) or (C), but in Supplementary Estimates (A) we requested $1.8 million as a reprofile and we also had the amount for the carry forward of $1.7 million. That gives us a total appropriation of $56 million.
The Chair: Where do I find the carry forward?
Ms. Filion: You do not see the carry forward directly. It is in Supplementary Estimates (A), but it is given through the Treasury Board Secretariat.
The Chair: The reprofiling is for what purpose?
Ms. Filion: For the accommodation. Right know we are consolidating our offices in one building. Presently, we have three offices in Ottawa. This is for improvements and the consolidation of the offices at 234 Laurier.
The Chair: Is this for changes in the furnishings and that kind of thing or for the square footage?
Ms. Filion: No, it is just for improvement in the offices.
The Chair: When it says ``accommodation,'' you are not paying for the square footage of the offices that you have?
Ms. Filion: In our budget we pay for it. Since we are a separate agency, we pay for it. We pay about $8.3 million per year for our accommodation and the improvements.
The Chair: Some of this is cost recovery, but some of it is voted by Parliament and then you pay to another government agency for accommodation?
Ms. Filion: We pay directly to the supplier.
The Chair: It is not necessarily a government-owned building?
Ms. Filion: No.
The Chair: Thank you. Is there anything else flowing from those questions?
Senator Ringuette: Who is the supplier?
Ms. Filion: It is Gillin.
Senator Finley: You say you are consolidating three office buildings in Ottawa but you also said you are an analytic organization, not an investigative one. What purposes do the three offices in remote locations, Toronto, Vancouver and Montreal, serve? Surely being analytical, the information can be gathered in one place.
Ms. Boileau: We have three regional offices. Those offices are mostly for compliance purposes. Therefore, they do site audits vis-à-vis our reporting entities. They also do a lot of outreach through our reporting entities with communication about what reporting is required and the type of information we require. They also have some interaction with our enforcement partners, ensuring that we are abreast of what their priorities are locally as well as provincially, not just federally.
Senator Finley: How many people are involved in those three offices? You talked about a total number of something.
Ms. Boileau: There are between 30 and 40 individuals in those three regional offices. They are small regional offices.
Senator Callbeck: Thank you for coming here this morning.
Mr. Arseneau, you said that 8 per cent of the budget for the Office of the Superintendent of Financial Institutions comes from the government?
Mr. Arseneau: I said 0.8 per cent.
Senator Callbeck: Has that been that pretty consistent through the last 10 years? Has it done up or down?
Mr. Arseneau: It has been relatively consistent in the last couple of years.
Senator Callbeck: The last couple. What was it before that?
Mr. Arseneau: A few years ago it was around $700,000 and it has gone up to about $910,000, where it stands today. That will remain consistent in our 2013-14 Main Estimates as well.
Senator Callbeck: Is there work that should be done but is not getting done simply because you do not have the resources?
Mr. Arseneau: As part of our annual planning around resources, we review our mandate, and as our mandate changes through legislation, we ensure the appropriate resources are in place. We feel confident that they are in place now.
Senator Callbeck: You are very comfortable with it?
Mr. Arseneau: Yes, we are.
Senator Callbeck: Do you regulate Internet banks such as ING DIRECT or Ally Canada, although I guess that has been taken over by Royal Bank?
Mr. Arseneau: We regulate deposit-taking institutions. In terms of the actual institutions, I do not have a listing of those actual institutions.
Senator Callbeck: However, you regulate the Internet banks? That is what I am getting at. My understanding is they have no physical presence. Everything is done on the Internet.
Mr. Arseneau: That would be correct. In terms of the financial institutions we regulate, I can give you a listing of those whose activities we regulate.
We regulate deposit-taking institutions, which are banks, including domestic, full-service and foreign banks; trust companies; loan companies; cooperative credit associations; and cooperative retail associations.
Senator Callbeck: Does that include the Internet deposit-taking institutions?
Mr. Arseneau: I would have to confirm that.
Senator Callbeck: I really would like to know that.
I want to ask you about the student loan program. It used to be that the limit was $15 billion, and the Chief Actuary from your office said in a report that was tabled in June 2010 that we would hit that limit in 2014 or 2015, but we hit it in 2010, which was four years before the actuarial report said we would hit it. Now we have another report by the actuary that says the limit will be hit in 2020-21, and the limit has gone up to $19 billion from $15 billion. Has there been a change in how the actuary calculates that?
Mr. Arseneau: In terms of the Office of the Chief Actuary, it is complex; there are many variables in terms of their actuarial valuations, so I would rely on their expertise regarding those changes. Yes, it would be as a result of changing circumstances.
Senator Callbeck: The previous report was off by four years. Have changes been made so that this latest report that says it will be up in 2020 and 2021 is more reliable? Have changes been made in that regard?
Mr. Arseneau: I would not be aware of those specifics. It would have to be through the Office of the Chief Actuary.
Senator Callbeck: Could you find that out and get back to the committee, please?
I want to ask you about another report that the Chief Actuary did on Old Age Security where they pointed out that in 2012 the percentage of GDP for that program would be 2.43. It then goes up in 2030 to 3.16, and then it starts going down so that in 2060 it is 2.35, which is lower than what it is now. When the actuary does a report like this, in this case on Old Age Security, do they make any comments or do they simply present the figures? What is in that report?
Mr. Arseneau: The report typically includes the figures as you have referenced, as well as some of the analysis behind it. I believe Jean-Claude Ménard, our Chief Actuary, has presented to the Senate committee in the past.
Senator Callbeck: Are there generally things flagged in an actuarial report? What is in that report other than figures?
Mr. Arseneau: I cannot provide the details of what is in the report, but we can certainly make the report available to the committee members.
Senator Callbeck: All right. Thank you.
FINTRAC detects and deters money laundering. Do you operate only within Canada?
Ms. Filion: We are also international. We have international partners with whom we work. Sometimes they ask us questions about transfers.
Senator Callbeck: Right, but the people that work for FINTRAC reside where?
Ms. Filion: They are only in Canada, yes.
Senator Callbeck: Would you comment on the most common ways money laundering is carried out?
Ms. Boileau: Criminals are quite innovative. As we are all reading about what is going on in Quebec right now around with the Charbonneau inquiry, we see various activities of how institutions have been used to launder money to bring it into the legitimate economy. There are areas that are all predicate offences in the Canadian Criminal Code from drugs, fraud and various other types of activities where proceeds are used to be able to bring it back into the economy and then launder it with regard to various other activities.
The list is endless; people are using technology today; people are using various other mechanisms such as prepaid cards, PayPal accounts and other innovative ways to launder money.
Senator Callbeck: Can you give a specific example of one of those innovative ways?
Ms. Boileau: Our annual report, which we will be pleased to leave with you, has an example of what we call a ``pump and dump'' scheme. Criminals have used securities organizations to be able to raise the values of securities, increase the amounts, and then be able to bring that money back through changes and movement within their banking system to generate money and basically are able to profit from these types of activities.
I will leave you the annual report. There is a specific example in the report. We also have an example of a Ponzi scheme. If you remember various activities going on in the Canadian economy, people have lost money through those, but people have criminally generated funds illegally.
Senator Callbeck: Okay. You have a specific example in that report?
Ms. Boileau: We do.
Senator Callbeck: I would appreciate getting that report.
The Chair: We will look forward to those. We probably could have looked those reports up on our own; they are all public.
Ms. Boileau: They are on our website.
The Chair: Anything you can do to help us out would be appreciated.
[Translation]
Senator Bellemare: Ms. Filion, you were saying in your presentation that your organization sits at the front end of the process. You often conduct analyses in the early phases of the process, and you do not carry out investigations.
I would like you to provide us with a short explanation of how you do your work. How can analytical work raise the alarm with investigators? I thought the analysis centre conducted extensive research at investigators' request, but that is not what you said. So I would like to hear an example of how your analytical work is carried out.
Ms. Boileau: We have two methods — one is responsive and the other one is more proactive. We receive voluntary information from our partners, who often send us intelligence and ask us to check our database for any information about a specific transaction or individual.
They ask us to monitor any money transfers over $10,000. We also receive information on electronic funds transfers exceeding $10,000. Those transactions are made internationally. In a context of criminal investigations conducted by the RCMP, we can draw a portrait to find out between whom the transactions are being made.
They send us intelligence; we analyze our information and then submit our case to them. They gather that information and continue their investigation in order to eventually lay charges.
We can also follow media reports. We know that a great deal happens in the world, and we research a bit more proactively based on the priorities se by the security agencies or international police that ask us if we have any information that could help them.
In that context, we conduct our analysis based on the information we receive from reporting entities, and we check for patterns. We check whether any activity groups operate in a specific region where there may be more activity. We can provide that information to specific entities the legislation allows us to share our information with.
Senator Bellemare: So do you conduct studies and analyses of individual cases or use a broader approach?
Ms. Boileau: Yes, exactly.
Ms. Filion: The groups of individuals or sectors subject to the law include accountants and notaries from British Columbia. Casinos are also covered by the legislation, and we are informed of any money transfers made there. In addition, we monitor dealers in precious metals and stones, financial entities, lawyers, brokerage firms and life insurance agents, financial services companies, real estate brokers and sales representatives, as well as stockbrokers. All those groups must produce a report.
Senator Bellemare: Does that cover all the illegal activities related to casinos?
Ms. Boileau: I am not sure I understand what you mean.
Senator Bellemare: I am talking about any gambling organizations that are not part of casinos, such as sports or Internet betting.
Ms. Boileau: Casinos represent a very defined entity under the law.
Senator Bellemare: So we are really talking about money laundering?
Ms. Boileau: That really depends on the context. The activities must involve money laundering or terrorism financing, and not anything else that may or may not be legal. I do not want to belabour this point either way.
[English]
The Chair: Senator Gerstein has been waiting patiently on my list of senators who would like to intervene. Senator Gerstein is the former deputy chair of this committee and is currently Chair of the Banking Committee.
Senator Gerstein: Thank you, Mr. Chair, and thank you, witnesses, for being before us today.
You very clearly established that FINTRAC is an intelligence-gathering entity, not a law-enforcement operation. I was particularly drawn to your statement investment in FINTRAC is an investment in the safety and security of Canadians.
When one makes a financial investment, you can very clearly evaluate specifically how it has performed. It is not quite as easy when it comes to talking about making an investment in the safety and security of Canadians. However, we are investing $56 million, not an inconsequential sum.
Could you share with the committee what type of criteria you use to evaluate whether the Canadian taxpayer is getting good value for his or her money in terms of the investment being made in the safety and security of Canadians?
Ms. Boileau: It is a question I believe every government agency struggles with in regard to ensuring we give good value to Canadian taxpayers.
Senator Gerstein: How do you approach it?
Ms. Boileau: We look at it from the perspective of our clients. The clients are the enforcement agencies and the national security organizations that we provide disclosures to.
We have constant conversations, and I cannot give you the sense of magnitude, but we are, in some instances on a daily basis, talking to certain organizations about the value of the information we have provided. We know for a fact, based on feedback surveys that we get on all our disclosures, the value vis-à-vis any investigation that was successful based on our disclosures.
We can speak publicly to activities that have gone on. Unfortunately, we cannot speak to things still in play, but we know for a fact that we have assisted in some major cases that occurred in Canada, from SNC, to the Charbonneau commission, to a major case in Alberta and to the quadrant project. Those are major investigations that have taken place, from a law enforcement perspective, that have used our intelligence to pursue their investigation to generate the evidence, to get to the convictions and put people in jail. That is our measure.
[Translation]
Senator Ringuette: My question is for Mr. Arseneau. I see that over 99 per cent of your budget comes from the agencies you regulate. How are those agencies billed?
Is that billing based on the number of people/hours and on a percentage of your operating costs? How do you bill all those entities to recover the $126 million?
Mr. Arseneau: They are billed twice a year, and that covers all the costs. We operate in various sectors, such as banking, insurance and pension planning. Every industry is attributed its cost portion based on the allocation of human resources and time spent in the industries. Each entity is billed according to its portion of the industry.
Senator Ringuette: So you do have a set formula?
Mr. Arseneau: Yes, we have a set formula.
Senator Ringuette: Earlier, you said that 8 per cent of your budget comes from the consolidated fund and now represents some 200,000 loans more than a few years ago.
When it comes to the consolidated fund, you have asked for additional funding. How do you request additional funding for your operations from the organizations you regulate? Do you tell them twice a year that your costs were an X amount of dollars higher than last year? Is that what happens?
Mr. Arseneau: As part of our annual planning — when we set our budgets in May — we make presentations before industry associations. We tell them about our priorities, our plans and the required financial resources.
Senator Ringuette: I suppose they can question but cannot reject your request?
Mr. Arseneau: Exactly.
Senator Ringuette: Thank you, Mr. Arseneau.
Ms. Boileau, when you talked about the Ottawa office and the three satellite offices, you said that there were 30 to 40 people per office.
Ms. Boileau: No; there are 30 to 40 people in the regional offices.
Senator Ringuette: So there are about 10 people per office?
Ms. Boileau: About 10 to 12 people. I do not have the exact numbers with me, but that is the approximation.
[English]
Senator Ringuette: Do these 10 to 12 persons in these three satellite offices deal strictly with compliance issues?
Ms. Boileau: Yes.
Senator Ringuette: How many in the Ottawa office deal with compliance issues?
[Translation]
Ms. Filion: In total, 79 people work on non-compliance.
Senator Ringuette: Okay. A total of 79 people is pretty significant.
[English]
Can you give us for the last five years — on a yearly basis if possible — what have been the non-compliance numbers that the 79 persons have found?
Ms. Boileau: I am not sure I understand the question — the non-compliance numbers?
Senator Ringuette: If you do not understand the non-compliance, then maybe you will understand the compliance. Is compliance to your legislation at 100 per cent?
Ms. Boileau: Oh, no. Compliance is one component of our program activity. The balance of it is —
Senator Ringuette: Maybe my question needs to be clearer than that. Of all the institutions within your act that have to comply — to supply you with the transactional information in your system — are 100 per cent providing that information? Is it 90 per cent or 80 per cent? What percentage of them are complying?
Ms. Boileau: As Ms. Filion explained, we have around 11 reporting entities or sectors. They represent approximately 32,000 specific entities that comprise 90 per cent of the volume of reports that are received on a yearly basis by FINTRAC.
The total reports that are received annually for the last year were around 18.5 million. We have another number that —
Senator Ringuette: Ms. Boileau, basically you are saying that 10 per cent of the group that should be complying are not; is that right?
Ms. Boileau: That is not what I am saying. Of the volume we get — of the 18.5 million reports — 90 per cent of that 18.5 million is from about 32,000 entities.
Senator Ringuette: Can you answer my question? FINTRAC has been in operation for 10 years. What are the non- compliance numbers for last year, the last three years, et cetera? What is the non-compliance?
Ms. Filion: They have to comply. That is the first thing.
Senator Ringuette: We understand that.
Ms. Filion: If they do not comply, there are penalties we can charge.
Senator Ringuette: How many penalties have you charged on a yearly basis?
Ms. Boileau: Here is the issue. I know what you are asking.
Senator Ringuette: Tell me the answer then.
Ms. Boileau: We know what we know. We know who reports and who submits information to us because we receive those reports. By law, those sectors that are covered, from the banking institutions, to real estate, to securities, to life insurance, must submit reports as dictated or as identified within the legislation and on a yearly basis. Last year, we did approximately 1,100 audit exams of that percentage of the population. From there, I believe we had a number of non- compliant, but non-compliant —
Senator Ringuette: What was that?
Ms. Boileau: — does not necessarily mean they have not reported; it means that information is not correct or inaccurate.
Senator Ringuette: What is that number?
Ms. Boileau: We have different measures of activity for non-compliance, from action plans, to letters, to administrative monetary penalties. Not everyone automatically gets an administrative monetary penalty, depending on the seriousness of the infraction.
Senator Ringuette: How many received an administrative penalty?
Ms. Boileau: I believe the number last year was between six and eight.
Senator Ringuette: What was the total amount of the penalties collected?
Ms. Boileau: We can get back to you.
Senator Ringuette: With the chair's permission, I will move on to a more specific issue.
The Chair: Could we have clarification on the reports first? I will let you get your breath.
Senator Ringuette: Okay.
The Chair: Are these reports prepared according to regulation, as you indicated, specifically for FINTRAC, or are they transactional reports that they would have for other purposes that they share with you so you can review them?
Ms. Boileau: There are reports that are specifically prepared under the legislation — the large cash transfers, the casino disbursement report, the electronic funds transfers — but we also receive reports that are prepared for CBSA regarding cross-border, but those are copies of that information and not specifically prepared for us. There is a combination.
The Chair: Thank you.
Senator Ringuette: In the last year in the U.S., USBS has been charged phenomenal amounts of money for non- compliance to a similar organization in the U.S. Have you received all compliant reporting from HSBC Canada?
Ms. Boileau: We have 18 million reports —
Senator Ringuette: Have you received any or all of the information that is required by the Canadian legislation in regard to HSBC Canada?
Ms. Boileau: We can go back and look. I cannot answer that question at this point in time, because I do not have that information with me.
Senator Ringuette: Of the five or six penalties that you have indicated every year, have any of those penalties been to HSBC Canada?
Ms. Boileau: No.
Senator Ringuette: None of them? Can you tell us which entities had to pay a penalty?
Ms. Boileau: The law, specifically section 63 of our legislation, identifies when we can publicly release that information, and that is once those proceedings are terminated. If the proceedings are terminated, we can provide you those names. If they are not, we cannot.
Senator Ringuette: Could you provide the names for the ones that you can?
Ms. Boileau: Yes.
The Chair: I presume you cannot do that now, so maybe you can send it to us.
Ms. Boileau: We are making notes.
Senator Ringuette: In your statement, Ms. Filion, you said that FINTRAC last year provided 796 case disclosures to law enforcement agencies. How many of them were from the border services' $10,000 cash legislation?
Ms. Filion: This might not be exactly the answer to your question. However, I can tell you that of those 796 disclosures, 637 were related to money laundering.
Senator Ringuette: To money laundering?
Ms. Filion: Yes; 116 were related to terrorist financing threats to the security of Canada, and 43 were related to money laundering terrorist financing threats to the security of Canada.
Senator Ringuette: How do you determine what is money laundering, what is terrorist financing and what is both?
Ms. Boileau: Oftentimes, from an activity that looks at our analysis, we can see there is a nexus of activities both on the money laundering side as well as on the terrorist financing side. We have certain thresholds and indicators that help with regard to the analysis that we can provide.
Sometimes we receive that information from law enforcement or national security organizations, and they will say, ``We believe this is going on and can you look vis-à-vis the bits of information that you have to help us put some of that puzzle together?''
Regarding your question on CBSA, we released 89 disclosures in 2011-12 to CBSA specifically.
Senator Ringuette: Approximately 700. Of the 996 disclosures, was it as a result of the analysis that you did within and you pushed the information to the law enforcement agencies, or was it a request from the different agencies to your organization requesting a certain analysis and then it was provided? Is it both ways?
Ms. Boileau: There is a push-pull.
Senator Ringuette: How many would be push and how many would be pull? Fifty per cent?
Ms. Boileau: I cannot tell you that at this time. If you want me to come back and provide that information, we can provide that to you.
Senator Ringuette: I certainly would because you indicated that you provided information for the SNC-Lavalin case, the Charbonneau commission and another major investigation in Alberta. Would that have been pushing information to the enforcement agency or them requiring information from you in these major cases?
Ms. Boileau: Those were examples that we provided as to what is public out there and what we can speak about. We also provided additional examples of those cases to the Standing Senate Committee on Banking, Trade and Commerce. In some instances, I can say it was a pull and in other instances it was a push.
Can I specifically say which one? No, I cannot.
Senator Ringuette: Is that because you do not know or you do not have the information with you? Could you provide the information in consultation with your colleagues?
Ms. Boileau: It is because of what the legislation permits me to say and not say.
Senator Ringuette: Okay.
Senator McInnis: Thank you very much. My question was going to be a supplementary, but I think I am getting my answer.
Yours is not an investigative role. Is it always in response to an investigation, or is it something that you can trigger yourselves, something that you come upon?
Ms. Boileau: It is both. It is a proactive as well as a reactive, analytical function that we play. Yes, it is in response, but we can also trigger information to our partners.
Senator McInnis: Let me come to a specific: gambling.
Would this come more often from investigative work and they would approach you for information with respect to —
Ms. Boileau: The action of gambling is not illegal. We focus on issues around money laundering and terrorist financing, and that is the threshold of what we look at. Gambling in itself is not an illegal activity.
Senator McInnis: Well, it is in certain aspects. You have illegal gambling here, and specifically single-game betting, which is prevalent and current here in the Senate. Are you saying that you are not involved?
Ms. Filion: It is more in money laundering. We know that in some instances, people will go and buy a certain amount of money in chips, will play five minutes and then go back and cash out. This time, the money becomes legal when they cash it out. We are trying to figure out the casinos and the money laundering.
Ms. Boileau: Simply going into a casino to gamble is not, by definition, someone trying to launder illegal money. However, there are many who use those institutions and willingly or unwillingly those institutions are being used to bring illegal money into a legitimate economy.
We look at pieces of information on those transactions to ensure that if there is laundering of funds, we are able to provide that information to our partners.
Senator McInnis: I was referring to criminals that are actually involved.
Ms. Boileau: If we have a voluntary information report from a law enforcement or national security entity that is looking at an individual and wants to see if there are patterns or transactions of that type of activity for that nature, we are then in a responsive mode. We look at our bits of information in order to provide an analysis, and ultimately a disclosure, to that law enforcement partner to pursue if there is an investigation on that front. I am not sure if that answers your question.
Senator McInnis: Yes, it does.
The Chair: Thank you. In the instance where you are asked to provide information, do you have any cost recovery in that case?
Ms. Boileau: No, we are not structured to cost recover.
Senator De Bané: What is the ranking of our country by those institutions that evaluate the performance of countries in the world about their efficiency in fighting money laundering and terrorism, et cetera? Where do we rank compared to the other countries on those kinds of things?
Ms. Boileau: Canada is a member of the Financial Action Task Force.
[Translation]
We are a member of the Financial Action Task Force, FATF, an entity that deals with money laundering and terrorist financing in the global context. We are among the 12 large countries that are very effective in that regard.
[English]
Senator De Bané: I know that we are a member of a number of very advanced countries that fight money laundering, but where do independent institutions that study the system rank Canada? Are we efficient? Are others better than us?
Ms. Boileau: We are ranked among the best or most efficient.
Senator De Bané: Good. Can you give me an idea of the amount of billions that are transferred electronically per day in the world? Surely you have seen that number; it is well known. Is it $100 billion, $200 billion or $300 billion? A trillion? You have no idea?
Ms. Boileau: No, I do not have this number available to me. We can get that information to you.
Senator De Bané: It is public knowledge how many trillions of dollars are, on a daily basis, transferred electronically.
Next, as you know, many countries guarantee total privacy of banking transactions to their depositors. Everything is secret; they will never divulge to anyone. You know those countries. They also accept money laundering, terrorist money, whatever.
How many of those banking institutions are there in the world in different countries that I will not name but that you know better than I do?
Ms. Filion: We do not know the number of institutions. On the other hand, we know what leaves Canada. They have to report any transaction over $10,000. We receive information from the banking system and the money transfer system if there has been a transfer. After that, what they do with the money, if they transfer it to a Swiss bank, how it moves is something that we do not know. However, we know that it has left Canada.
Senator De Bané: However, Joe Blow puts in a country — I will not name it — millions of dollars of money laundering and later that money, that deposit in that bank, goes through different banking institutions around the world and then comes here. Do you have a system that allows you to know that the money coming from Barclays bank started several months ago in a country where there is absolutely no filtering of deposits and has total secrecy? Do you know anything about that?
Mr. Arseneau: No, that would not be part of our mandate.
Ms. Filion: This is also in the analysis basis. We receive information from our partners in other countries. We receive questions from them as well as information when we ask for it. When there is an investigation, there are questions. The RCMP will ask questions. It will be done more at the RCMP level, for example, where they will ask us if we have seen any transfers to Joe Blow, and then they will talk to their counterpart in other countries to get information about Joe Below. It is more like a consolidation of a lot of information.
Senator De Bané: The point is the following: Some countries receive large deposits precisely because they guarantee the depositor that they will never divulge his identity and the source of that deposit, et cetera. Because of that, they have billions of dollars.
If ever you realize that the money transferred to Canada started in a bank that does not participate in your program, et cetera, and they hide all the information that you need, is there any way to stop that?
Ms. Boileau: Canada has, as you know, a very reputable banking system from the perspective of the banking regulations in place.
Senator De Bané: Absolutely.
Ms. Boileau: That is what OSFI looks at. We also have a piece of legislation around AML and ATF that we look at for proceeds of crime, which requires the reporting entities with the banks to provide that information to us.
Ms. Filion: We work with CRA related to tax evasion.
Senator De Bané: One last question. You have been explaining to us how efficient you are. I want to put it to you another way. Because you know the system so well, could you inform our committee what the weak points are in that system that prevent us from preventing money laundering and funding of terrorism? Surely you know those links, those parts that are missing in the whole system that you control and try to have information about; surely you can give us some ideas about the blanks and the weak points.
I am happy to hear you tell us about how good and competent you are, the thousands of reports that you get, but surely, at the end of the day, you know some parts are missing. If you had a wish list, what are the parts that we should complement?
Ms. Filion: That is a big question.
Ms. Boileau: It is a very big question. I think it is a question that we all struggle with because if there were no weak links we would not be having this philosophical conversation about money laundering and financing terrorism. We would be talking about other things like poverty and various other issues.
Obviously, people are using our institutions in a way that they were never meant to be used. Therefore, we need to think about why that is and how that is available today. When you talk about money flowing in from other countries coming into Canada and obviously going into the legitimate economy, why is that? How is that? Those are questions that we struggle with on a daily basis when we are asked why these large sums of money are moving within the system.
Some money is not even moving within the system; it is still on the street. Large amounts of money are still on the street. How do we put barriers in place that will stop those types of movement? I am just a public servant. I, unfortunately, do not have the answer you are specifically looking for. Unfortunately for us, the criminals are always a step ahead because of the technology and resources available to them. We always need to be able to have better tools, which means the right legislation; better information, which means ensuring our reporting entities like our banks and financial institutions are submitting the information appropriately to whomever they need to; but also keeping in mind that we also want to be able to safeguard the privacy of Canadians vis-à-vis the transactions they do, because not every transaction is a transaction around money laundering.
Senator De Bané: Thank you very much.
The Chair: Senator Chaput has a supplementary to clarify a point.
Senator Chaput: Do you have an idea how much money leaves Canada a year through money laundering? You said you did know when it was $10,000. Do you have an idea how much a year?
Ms. Boileau: We have the information of how much money leaves Canada, not necessarily how much money is laundered out of Canada. Those are two different things.
Senator Chaput: Absolutely. You know how much money leaves but cannot say what percentage of that money is through money laundering?
Ms. Boileau: No, because the banks report information to us around the electronic funds transferred outside of Canada.
Senator Chaput: There is nothing you can do about the money laundering. There is nothing you can do to stop it if you do not even have an idea of the amount; or is it not part of your mandate to do anything about it?
Ms. Filion: We cannot stop it, but we can give the information, for example, to the RCMP if they are doing an investigation, so that they can use that information in their investigation for prosecution.
Senator Chaput: However, the information that you have does not relate specifically to the money laundering amount; is that correct?
Ms. Boileau: Yes.
Senator Finley: I have a few points to clarify in my mind. You said you had 375 employees in total.
Ms. Filion: No, 350.
Senator Finley: Okay, 350 in total. Your areas of jurisdiction obviously must, at some point, impinge on provincial legislation or provincial jurisdiction of casinos, lawyers or something; it is not all federal jurisdiction, right? You are dealing with the provinces. You are also dealing with multiple enforcement and investigative agencies, right? Those would be ones such as the RCMP, presumably the provincial police, border security, et cetera.
Ms. Filion: Yes.
Senator Finley: Could you remind me what you said about the number of reports you receive a year? I think it was 18 million.
Ms. Filion: Yes.
Senator Finley: Let us take the whole group of your staff, which is 350 people. Forgetting all of the interfaces they have with provincial law enforcement agencies and everything else, that would mean 5,000 reports per year per employee, based on your numbers. If it is 5,000 a year, that is what — 100 a week, per employee? Where do they get the time to analyze 18.5 million reports to either launch investigations or analyses, or to respond to all of the questions that could encompass 18.5 million reports a year? I do not see how that is possible. Perhaps you could tell me how that is done.
Ms. Boileau: The 18 million reports that we receive do not all include information that would necessarily trigger an analysis or interest from a law enforcement entity that is outside of our transactions.
Senator Finley: How do you tell when the 18.5 million are coming in the door? Do you have a triage system? Is there a filtering system? Is there a preordained profile you are looking for?
Ms. Boileau: Yes.
Senator Finley: Why do you need the rest?
Ms. Boileau: The information we receive is based on the triggers in the legislation. We receive large cash transfers, electronic fund transfers and suspicious transaction reports submitted by the reporting entities themselves when they believe that the transaction occurring in their institution is suspicious by nature.
Senator Finley: Excuse me, but that still amounts to 18.5 million or 18 million reports, in your own words, right? No matter where they come from or what they are, either you have an unbelievably efficient process for dealing with them, superhuman investigators or analysts, or most of the reports are a waste of time in the first place. You cannot square that circle that I can see, anyway.
Ms. Filion: We have a computer system. The computer system will make links. If your name comes up only once over the 18 million, we might not do further analysis on you.
Senator Finley: You will still ask me to report.
Ms. Filion: Yes. However, on the other hand, if your name comes up 1,000 times, we will start to ask what you are doing and will begin to do some analysis. Based on this system, we do some matches and we look at where it is going. Sometimes we are more interested in money going to Mali, for example. Therefore, we will look at all money going to Mali, or money coming from Libya or other countries we have identified as having certain problems.
The system will allow us to know where the money goes or where the money we receive comes from, as well as names; we will match names. We will match some information that we are looking for.
No, we are not looking at 18 million transactions that we receive, but we do some matches with the computer system.
Senator Finley: All right. I do a banking transaction. For example, I send $15,000 offshore to my brother or whatever.
Ms. Filion: You have to be offshore.
Senator Finley: I have relatives all over the place.
Do I come up in this report?
Ms. Boileau: If you are over $10,000, yes.
Senator Finley: So I am tracked in the system somewhere.
Ms. Filion: Yes.
Senator Finley: How much personal information is tracked in the system? Do you go from its being ``Doug Finley made a banking transaction with the Royal Bank'' to ``Here is his social security number, his visa number, et cetera''?
Ms. Filion: No, we do not have this kind of information. We will have the name of the person, citizenship —
Ms. Boileau: We will have your address, your banking information — the bank account, potentially — and, depending on what the report is, we might also ask for a date of birth if it is a suspicious transaction report.
Senator Finley: In effect, you are asking for the keys to every single piece of my life.
Ms. Filion: No. What is important is what we do with that information.
Senator Finley: For 796 case disclosures a year?
Ms. Filion: We keep it secret. We have to ensure our system is very secure. That is why people working for FINTRAC are top secret.
Senator Finley: There is no such thing as top secret. I happen to be married to someone who runs a department that just had 600,000 names taken on a little portable disk, so do not tell me —
Ms. Filion: This is not a little portable disk.
We certainly have a lot of confidential information. We have to ensure that this information is given to law enforcement based on our legislation, because we cannot give them just any information; there are specific things we can give to CRA, for example.
Senator Finley: With all due respect, 18.5 million reports funnelled through 350 people with many other responsibilities, apparently, results in 796 case disclosures.
Ms. Filion: Do not forget the 796 could be something like a million transactions, okay? We match transactions. We receive 18 million transactions. We match transactions. It could be 1,000 transactions in your name, so that will be a case among the 796. I do not know exactly how many transactions are related to the 796 but it is not 796 transactions; it could be a million transactions.
Senator Finley: Thank you.
The Chair: With respect to tax evasion, you indicated that you are involved in helping the government and CRA. Could you tell us if you deal with your foreign partners in pursuing tax evasion from the Canadian point of view?
Ms. Boileau: We provide the intelligence to CRA. If CRA is pursuing issues with other entities or if the police are pursuing with foreign partners on work around tax evasion, our intelligence information goes to the appropriate partners, and the appropriate partners may link to international groups.
The Chair: What I am wondering about is whether the intelligence that you provide is intelligence you that have gathered through your review plus what you have learned from outside partners in other countries?
Ms. Boileau: If we have specific queries from other financial intelligence units that are asking us about information on a tax evasion case, we can provide that information and disclose to a foreign entity, yes.
The Chair: And vice versa?
Ms. Boileau: Yes.
The Chair: From the point of view of registered charities, are all registered charities in Canada listed as a reporting entity to you?
Ms. Boileau: No. They report to CRA.
The Chair: Is that a bit of a gap that you might want to look into? Have you made requests to include registered charities?
Ms. Boileau: I do not know whether it was part of the proposals that were put forward under the legislation specifically on the parliamentary review, but I am looking to senators here.
The Chair: I am surprised that you do not oversee registered charities, because it is an obvious area of abuse.
Ms. Filion: If they transfer money, we will know. If they transfer money for more than $10,000, we will know. It is more CRA that receives all the information about those organizations and what they do. If they transfer money, more than $10,000, we will know, internationally.
The Chair: You do not have a regular report; it is all secondary information that you have to gather?
Ms. Filion: Yes.
Senator Nancy Ruth: I want to go back to the line of questioning Senator Finley had. Say it is Christmas time and I transfer $9,999 to three of my godchildren. You will never see this.
Ms. Filion: No.
Senator Nancy Ruth: If I do this repeatedly every quarter will the bank get suspicious and maybe report to you even though it is under $10,000?
Ms. Filion: They could get suspicious and inform us. It depends where you are sending the money, also.
Senator Nancy Ruth: Say it is to an individual within Canada.
Ms. Filion: In Canada, no. We are talking about international transfers.
Senator Nancy Ruth: Only?
Ms. Filion: Yes.
Senator Nancy Ruth: You do not hear about transfers over $10,000 within Canada?
Ms. Filion: No.
Ms. Boileau: Over $10,000, yes, but internationally over $10,000. In Canada, no.
Senator Nancy Ruth: Okay.
Senator Ringuette: I have two different areas of questioning that I want to pursue.
You have indicated that you collaborate with international associations similar to yours. Have you collaborated with your counterpart association in the U.S.A. with regard to their investigation on USBC?
Ms. Boileau: You are asking me a question that, by law, we cannot provide an answer to.
Senator Ringuette: Do you have a system within your detection programs that would flag a major international issue that could have potential implications in Canada?
Ms. Boileau: We have flags for specific activities that we work on with our partners internationally. Yes, we do have some areas of mutual interest.
Senator Ringuette: Has the investigation in the U.S. been flagged to you?
Ms. Boileau: You are asking me a question that, by law, I cannot answer.
The Chair: Just say you cannot answer.
Ms. Boileau: I cannot answer.
Senator Ringuette: I just want to bring home the fact that if a certain entity in the U.S., which has branch offices throughout the world, is the subject of a major investigation with regard to money laundering, would that flag a particular interest on your part to supply information and examine further that entity within Canada?
[Translation]
The Chair: Possibly.
Ms. Boileau: Yes, possibly.
[English]
Ms. Filion: For sure we are informed of what is going on around the world. We look at the newspaper and get some information from our partners.
Senator Ringuette: Okay. My question was what are you doing about it?
Ms. Filion: For sure, if we have some doubt, we will look to see if we can find something, okay?
Senator Ringuette: You indicated that last year you made 996 case disclosures, of which 89 were the $10,000 at border services, which is an automatic supply of information to you. Basically we are looking at 700 disclosures that you gave to law enforcement agencies. How many of them led to law enforcement investigations?
Ms. Boileau: This is a question that we have had at different committees. As we have indicated, we know as fact, based on our partners, that in every major investigation the RCMP undertakes, they ask FINTRAC if we have information.
How many have led to investigations and how many have they pursued based on our disclosures? I do not have that information. The RCMP are in a much better position to answer that question, or law enforcement generally. We provide intelligence. We provide information that is then given to law enforcement organizations. How and what they pursue with those are outside of our control and outside of our areas of direction or guidance.
Senator Ringuette: Out of the 700 disclosures, how many requested information from law enforcement agencies?
Ms. Boileau: That comes back to the question you asked about how much is push and how much is pull. We are not in a position to be able to tell you that today.
Senator Ringuette: All of my questioning comes back to the essential question asked by Senator Gerstein earlier, which is trying to identify the value for money of your organization. It is very hard, because statistics are missing for a major data-gathering agency. You have mentioned 18.5 million reports. That is a lot of data analysis and statistics. However, when it comes to your entity, your agency, it is very hard to get those statistics in order for us to at least try to come to a value-for-money scenario in our minds. Year after year, it is a lot of money that you are asking taxpayers to supply.
You indicated that information technology takes up almost 28 per cent of your budget. I cannot believe that in 10 years you have not been able to gather the pertinent statistics for your organization to validate your existence.
I am not saying that your role is unimportant, but it is hard, without all the statistics, to ascertain that and say that we agree that you should spend $56 million of taxpayer money in the next year. Perhaps that is too much of a personal comment.
Ms. Filion: A parliamentary committee has been looking at regulations. The RCMP and CSIS were invited, and they all said that what we are giving them is very useful. However, they have difficulty to say that this information gets to this, and unfortunately, we cannot get those statistics because we measure ourselves by asking them if they are happy with the information that we provide. Does it bring them to the next level of investigation? They all say yes, but statistically it comes from the law enforcement.
Senator Ringuette: Then should you not be an integral part of a law enforcement entity? You could have decent statistics and follow up on the information, and the push and pull would be probably to a greater extent.
Ms. Boileau: That is for others to decide.
The Chair: Thank you, Senator Ringuette. Senator Buth has a point of clarification.
Senator Buth: I am wondering if other countries have similar agencies, and are they run on a similar basis?
Ms. Boileau: Yes, we are considered an administrative financial intelligence unit. Other countries around the world have similar organizations. FinCEN is similar to ours, which is in the U.S. Australia is similar to ours. The U.K. also has a similar organization to ours vis-à-vis the analysis they do. Australia has both the components, compliance as well as analysis aspects, so there are countries within the G20 and G8 realm that are similar to our organization.
Senator Buth: Thank you.
The Chair: The services and the functions performed are similar, but is a stand-alone agency a similar situation in the other countries?
Ms. Boileau: We all have to have operational independence vis-à-vis the information we provide.
The Chair: That helps you do your job.
Ms. Boileau: Yes.
[Translation]
Senator Bellemare: Mr. Arseneau, I would like to talk about your mandate when it comes to private pension plans subject to federal regulations.
We know that private pension plans are struggling, especially defined benefit pension plans, which have run up large deficits. What kind of support do you provide to those plans to help them obtain bailouts? Is your monitoring fairly strict when it comes to companies whose survival may be in jeopardy? Do you have a mandate to intervene quickly or try to protect people who have contributed to their pension plan over many years? I would like you to explain your mandate to me.
Mr. Arseneau: Regarding private pension plans, we use, in our monitoring role, a risk-based oversight framework. Risks are assessed. Based on the assessment, we provide institutions in difficulty with intervention and follow-up in order to ensure that corrective measures are taken.
That monitoring continues, and our resources increase as corrective measures to remedy those problems are taken. So that monitoring is very formal.
Senator Bellemare: Does the legislation provide for the bailing out of pension funds over five or six years, for instance?
Mr. Arseneau: Yes, our framework calls for corrective measures according to the bailout. However, those are obviously not financial measures. Some institutions will succeed, and others will fail. What we want to do is get involved on time, as soon as possible, so that corrective measures can be implemented.
Senator Bellemare: We know that your budget is funded by the institutions you regulate. But how do you fund your activities related to private pension plans?
Mr. Arseneau: That is funded through the same channels. So they become an institution in a group, among the pension groups, and they receive their portion of allocated fees.
Senator Bellemare: So the pension plans pay you? You bill them?
Mr. Arseneau: Exactly.
Senator Bellemare: And you talk to those committees to tell them to monitor their affairs?
Mr. Arseneau: Yes, we talk to the committees of all the industries we regulate.
[English]
Senator De Bané: Ms. Filion, you have said that a transfer to Canada coming from certain countries — you did mention two of them — will trigger something to attract our attention.
Now, if that money comes from those countries but through a transit route of another Western country, et cetera, is there a system to trigger your attention?
Ms. Filion: If it goes always to the same person, there could be some questions. We will make some links.
Senator De Bané: Of course, every day a person can register a dozen corporate entities, numbered entities, as many as he or she wants, and that will fool the system.
Ms. Filion: Yes, but we know some links also that Joe Blow has those kinds of entities, so we have those links and also are informed by the RCMP.
Senator De Bané: The gist of your testimony today is to show us how efficient you are. On the other hand, we all know that trillions of dollars are transferred electronically every day, that in some parts of the world there are absolutely no restrictions on deposits of drug money, terrorist money and so forth, and there is total secrecy.
I think our committee would like to have the expertise of the Superintendent of Financial Institutions of what the weak links are that prevent us from having an even better system and to cover all the weak links. That would be very interesting to us, not only because we know that you are very good and efficient, but what else should be done to improve the situation. Canada is a country that many foreign forces want to enter.
We saw that recently with the Canadian who decided to spy for a foreign country. We know that many foreign influences try to enter the Canadian market. We are the closest neighbour to the richest country in the world. Therefore, surely you know the things that are still missing and you should reflect on those and help our committee with ideas so we will understand better. It is good to tell us how good you are, but we need to know what other things can be done to improve this monitoring that you do. Thank you very much.
Senator Finley: I have three filler questions — for me, anyway.
First, when your organization started 10 years ago, there must have been some kind of genesis or something of reporting requirements to begin with, such as ``you have to report this, and do so by such and such and in such and such a form.'' Can you tell me generally how much over the 10 years this reporting requirement has expanded in terms of data requirements, frequency, et cetera? In other words, how big has the baby grown?
Ms. Boileau: Ten years ago when the legislation was created, the regulations requiring what we have in front of us are very similar to what we have now. The only thing added in 2006 or 2008 — and forgive me because I have also been at FINTRAC for a year now — is the casino disbursement reports. That is the addition that was added in terms of reporting.
Senator Finley: That is the only one in 10 years?
What is your mechanism or process, for example, in feeding back to committees such as this, legislators or whatever, for information or frequency that could make your job easier, more efficient or more comprehensive? You must have had some over the 10 years, because the world changes. I am not sure that Internet banking, for example, was as big a deal 10 years ago as it is today.
Therefore, what is your feedback mechanism, and how effective can that be if, in the past 10 years, you have basically added casino disbursements?
Ms. Boileau: Every five years there is a parliamentary review that looks at where the legislation is and where Canadian society is vis-à-vis the technological improvements for the banking systems or various other reporting entities. That is one of the feedback mechanisms where we can indicate if there is any need for change.
We currently have in front of the Senate Banking Committee proposals for consideration on how we could see one aspect modified. As you have noted, things have changed over the last number of years, and our experience in the last 10 years show that the $10,000 threshold for electronic fund transfers when it comes to terrorism financing is too high because a lot smaller amounts move for that specific purpose.
Senator Finley: I understand you might be aiming for zero or $1. Is that possible?
Ms. Boileau: That is the proposal in front of the committee, I believe, yes.
Senator Finley: I have one last question about the 18 million or 18.5 million reports. There are reports and there are reports. There are statutorily required reports, presumably, on a periodic basis — once a week, once a day or once a year perhaps. There must be a component of the 18 million that is what I would call a live, real-time report — namely, ``Doug Finley just sent Senator Nancy Ruth $20 million because she is in Singapore'' — and that instantly flashes up on your screens. Are those the two kinds of reports, or does the second one not exist?
Ms. Boileau: The reports that you are referring to specifically, which are electronic funds transfers, are batch transfers. They are done on a certain number of days, so it is not just-in-time information, as you are indicating in that instance, that we receive from the reporting entities. They have a specific amount of time in which they must submit the reports. I cannot tell you whether it is five, three or seven days, but those are then received within the centre for review.
The Chair: You referred to the recommendations that you had presented to the Senate Banking Committee. This is one of those areas where Finance and Banking overlap.
Would the Banking Committee have any objections if we asked for those recommendations as well, or is that something that should be exclusively at Banking?
Senator Gerstein: There is some public information that has been circulated.
The Chair: If Banking has no objection, perhaps you could make what you had recommended as changes and improvements.
Ms. Boileau: They are the Department of Finance Canada's proposals, and I believe they are public — they are on the website. We could make that available.
The Chair: That would be helpful if you could help us with that. We do not want to step on anyone else's toes, but that has been discussed here.
We would like to thank the Office of the Superintendent of Financial Institutions. Mr. Arseneau, thank you. FINTRAC, thank you for helping us understand why the public purse is being asked to sponsor and support your activities — FINTRAC a lot more than the OSFI because of cost recovery, but that cost recovery may be something that we could be looking more at in the future. I will look forward to seeing your recommendations to see whether there is anything in that regard in there. Thank you very much.
Colleagues, we will be meeting tomorrow evening at our usual time and will be dealing with very important background information for members of Finance. They deal with plans, priorities and performance reports and how they tie in with Main Estimates. Treasury Board will be helping us through those documents tomorrow evening. That is just background to help us better be able to do our job. The meeting is now concluded.
(The committee adjourned.)