Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 28 - Evidence - December 6, 2012
OTTAWA, Thursday, December 6, 2012
The Standing Senate Committee on Banking, Trade and Commerce met this day at 10:31 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: Members of the committee, it is a pleasure to call this meeting of the Standing Senate Committee on Banking, Trade and Commerce to order.
I would like to welcome Mr. Cossette today. This morning, we are continuing the five-year parliamentary review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. This is our twenty-third meeting on the subject, Mr. Cossette, and we are delighted that you are here and in your new capacity as head of FINTRAC. As members of the committee are aware, Mr. Cossette was appointed to this position on October 15, 2012. We appreciate your coming so quickly after your appointment. Prior to that, he was Associate Deputy Minister of Foreign Affairs and the Prime Minister's personal representative for the G8 and Nuclear Security Summit.
We offer you our congratulations and we look forward to your opening statement, which will be followed by questions from the committee.
Gérald Cossette, Director, Financial Transactions and Reports Analysis Centre of Canada: Honourable senators, good morning. Thank you for inviting me to speak with you regarding the parliamentary review of Canada's Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
While this is my first encounter with this committee, my colleagues have appeared on two separate occasions earlier this year to provide input and answer questions related to FINTRAC's mandate, its operations and its relationship with the intelligence and law enforcement communities.
As you may know, I began my work as FINTRAC's director in mid-October. While my time at the agency has been brief, I do have experience with FINTRAC and with the environment within which it operates from my previous roles, including, most recently, at Foreign Affairs.
Since arriving at the centre, three observations have stood out for me: first, the growing hunger of the intelligence and law enforcement agencies for FINTRAC's tactical disclosures and strategic analysis; second, the misconceptions surrounding FINTRAC's contribution to the fight against money laundering and terrorist activity funding; and, third, the need for FINTRAC, despite its successful past, to catch up to an increasingly challenging environment. My remarks this morning will be guided by these three observations.
Why is there such a demand for FINTRAC's products?
A first reason is the issue at stake, which, I would argue, is the protection of the safety and security of Canadians.
In his recent report to Parliament, CSIS Director Richard Fadden characterized the threat environment that Canada faces in the following terms. He stated:
Today's world is interconnected in ways we are only beginning to understand. . . . The complexity of the threat environment — evolving as rapidly as technology itself — presents an unprecedented challenge for the national security community.
Of course, we also see daily on national television the work of the Charbonneau Commission, which is revealing the pervasive corrosion of institutions.
Finally, there is now an important body of literature that details the criminal and terrorist elements operating in Canada and the threat they represent to our national security and the security of our close allies.
A second reason for the increased demand for our financial intelligence is the ability of FINTRAC to follow the money. With its database, its international connections and its 12 years of experience and expertise, the centre can draw a picture of financial behaviours out of a million bits of data for our intelligence and enforcement partners.
FINTRAC's unique focus on financial transactions and the flow of money offers a valuable piece of the puzzle to those seeking to better understand the connections between individuals in the current threat environment. Following the money reveals vital connections: who knows who and who speaks to whom.
[Translation]
Our partners, CSIS and CSEC, play a major role in issues of national security. The RCMP and other international partners are also key players when it comes to the sharing of intelligence related to terrorist activity financing and money laundering. Canadian law enforcement agencies investigate drugs, corruption and fraud, along with the various other offences that generate proceeds of crime. Money laundering is ultimately tied to these profit-motivated crimes, and investigations of money laundering are seldom conducted in isolation from these other criminal investigations.
In a strictly legal context, money laundering, terrorist financing and threats to the security of Canada are three distinct and separate concepts. On the street, however, things are murkier and much less distinguishable. Terrorist financing can comprise the laundering of proceeds of crime as terrorist groups look to fraud and smuggling as ways to finance their operations. And, as I indicated earlier, organized criminal activities can threaten our national security by corroding the institutions of government and compromising the integrity of the Canadian financial system. In such an environment, FINTRAC's intelligence is used by a variety of agencies to support their work.
[English]
This brings me to my second observation, the misconceptions about FINTRAC's contribution to the anti-money laundering/anti-terrorist financing regime.
As I interact with the business sectors that provide financial transaction reports to FINTRAC, I am often asked about the real value of the intelligence that the centre discloses to its partners. Does it lead to arrests and convictions? If not, what is it good for?
I know that members of this committee have expressed similar concerns with what is being perceived as a lack of tangible results.
In order to dispel a few misconceptions about the contribution of FINTRAC to the anti-money laundering/anti- terrorist financing regime, I would like to start by paraphrasing General Brent Scowcroft, former National Security Advisor to the first President Bush.
General Scowcroft used to point out that unveiling evidence comes after an event has occurred. The investigators work back from the event in order to build a credible account of what happened.
Intelligence, for its part, is the process of trying to make sense out of a series of unrelated pieces that may or may not lead to an event. Therefore, intelligence is not evidence.
Once FINTRAC has transferred its financial intelligence to security and enforcement agencies, it has and should have no influence as to how this intelligence is used, whether to build the evidence required to lay charges and convict criminals or for other purposes.
[Translation]
I also want to make it clear that, contrary to conventional wisdom, FINTRAC has no capacity and no authority to access the bank accounts of Canadians or to monitor their financial activities. The centre builds its intelligence from the financial transaction reports provided by reporting entities when and how they communicate them. It does not and cannot chase the reports in response to specific investigative needs because FINTRAC is not an investigative agency.
Finally, the mandate of FINTRAC is limited to the disclosure of financial intelligence strictly pertaining to money laundering and terrorist activity financing. The centre does not disclose financial intelligence based on its suspicion of drug dealing, tax evasion or other designated offences under the Criminal Code or other Canadian legislation.
In the complex web of agencies, legislations, courts and reporting entities that constitute the anti-money laundering and anti-terrorist financing regime, FINTRAC's mandate and set of tools must be looked at in conjunction with the assets and limitations of all the other players.
With this as our operating context, I come to my third observation, the need for FINTRAC to adapt to an ever- changing environment.
FINTRAC's legislation is the most important tool we possess — and one that could be strengthened to improve Canada's anti-money laundering and anti-terrorist financing regime. There may be opportunities to improve the provision of information with changes to the law that would allow more intelligence to flow more quickly. If the legislation allowed it, for example, FINTRAC could contribute strategic intelligence on threats to national security, not just tactical disclosures.
In order to keep pace with the dynamic environment that CSIS Director Richard Fadden has described, some countries are expanding the types or amounts of information that are received, such as reports of wire transfers of amounts less than $10,000. This, too, could be considered as part of the parliamentary review.
As an agency that deals in information, FINTRAC has also invested in information technology to allow us to do our work more effectively. These systems need to be kept current to ensure that we do not fall behind sophisticated criminals and terrorists.
[English]
As we look to the future, the centre should strengthen its capacity as an intelligence agency, which I believe will improve the regime as a whole.
To achieve this, we will focus our efforts in five key areas. First, FINTRAC results are determined by the quality, usefulness and timeliness of the intelligence it discloses to partners. Consequently, we should look at deepening and strengthening the relationship we have with them, and even expand this relationship from one focused on the tactical level to one that would also include the strategic level.
Second, based on our analysis of the information at our disposal, we must better define the risk factors we should monitor more closely. The establishment of risk profiles by sector would facilitate the work of businesses that send us transaction reports.
Third, the parliamentary review could address some of the limitations of the legislation, particularly as they relate to the information we should receive and the production and disclosure of intelligence.
Fourth, once we have established risk profiles for both receipt and disclosure, and agreed on the blueprint for an end-to-end process, we need to buy the best electronic overlay to ensure a seamless flow of data among the participants in the Anti-Money Laundering and Anti-Terrorist Financing Regime. This capability should also allow for the electronic manipulation of data and the move from a clerical work, such as data entry, to more value-added work such as analysis.
Fifth, the training provided to FINTRAC employees should respond to the new reality of our changing work environment.
Honourable senators, as this committee reviews the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, I would respectfully encourage members to ask if changes to the law would make FINTRAC a stronger, more effective intelligence agency, and whether these changes would improve the tools that we have at our disposal to fulfill our mandate, including what information is collected, how it is analyzed, and what intelligence is shared, under what conditions and with whom.
Thank you. I would be pleased to answer your questions in English or French.
The Chair: Thank you for the comprehensive presentation, particularly in view of the fact that you have not yet been in the position for two months.
I must say that I was particularly drawn to your closing paragraph. In essence, you ask that the senators be self- reflective in their review of the act. As you can imagine, senators, particularly on this committee, have a tendency to think that we ask questions, as opposed to someone asking us questions. However, you are obviously aware of our study. In fact, one of your five key focus areas for improvement to the regime centres on our review. You stated, ``The parliamentary review could address some of the limitations of the legislation, particularly as they relate to the information we should receive and the production and disclosure of intelligence.''
I would like to turn the self-reflection you have asked of us back to you and ask you to amplify. When you say ``the limitations of the legislation,'' what do you mean and what do you feel we should be recommending to government?
Mr. Cossette: For instance, one element that we are looking at — which has been advanced by the Finance Department as something which everyone looking at the act right now should review — is the threshold we are using for electronic fund transfers. As you know, electronic fund transfers of more than $10,000 are reported to FINTRAC. Should that threshold, for instance, be reduced? Other organizations, such as our counterpart in Australia, have a threshold of $1,000 for electronic fund transfers. Should we look at a threshold that would be lower than the $10,000 we have now?
The Chair: What are you suggesting?
Mr. Cossette: We are of the view that we should.
The Chair: What do you think it should be lowered to?
Mr. Cossette: I think $1,000. Right now the banks already register any transfer of funds at the international level. If we were to lower the threshold to $1,000, it would provide us with more information, mainly on the terrorist financing side, because then it provides us with much more information which would allow us to draw a more comprehensive picture.
The Chair: This is very clearly a recommendation — you are being very specific to us — that you would like us to consider?
Mr. Cossette: Yes.
Senator Stewart Olsen: Is that on the international transfers or all?
Mr. Cossette: All.
Senator Stewart Olsen: All wire transfers?
Mr. Cossette: We do not monitor wire transfers that Canadians send to one another in Canada, for instance. We are talking about international wire transfers.
The Chair: Thank you for that clarification. I will go to my list of questioners, which is quite lengthy, and start with the deputy chair of the committee, Senator Hervieux-Payette.
[Translation]
Senator Hervieux-Payette: Welcome, Mr. Cossette, and all the best in your new position. Your success means that Canadians will be successful in finding numerous people who launder money.
I would like to discuss the report we received the day before yesterday; it gives an example of individuals who have used the stock market to make transactions, deceive citizens, and profit from a network that starts in Canada, runs outside the country and comes back to Canada. On pages 12, 13 and 14 of the report, a snapshot of a case appears. I assume Pumped Inc. and the Green family are made up.
You describe fictional transactions where artificial inflation is used to send share prices soaring. We all recall Bre-X and even Nortel, where the Americans intervened before the Canadians and held the company's senior leadership criminally responsible for significantly inflating share prices. Shareholders obviously lost a tremendous amount of money.
I remember what happened with BioChem, as may some of my colleagues from Quebec. Gangsters manipulated the company's securities, causing quite a stir in the area.
I want to discuss the whole issue of using stocks to considerably inflate prices overnight. Let us consider the UraMin and Areva case. In 2009, a bid of $425 million was made, and in 2010, the company was sold for $2.5 billion. Areva had to write off $1.8 billion. It is safe to assume that someone did something shady. It was done from Canada using European companies. And all of a sudden, the French government lost $1.8 billion.
Examples of such practices are not hard to find, and in popular sectors, no less. We experienced the tech bubble, and it can happen in other sectors as well.
Do you closely monitor these kinds of transactions, cases where share prices shoot up overnight, to ultimately pinpoint who is responsible for this abusive speculation affecting our pension funds and our citizens? This is an area where it is extremely easy to manipulate sums far greater than $1,000 or $10,000. We are talking about millions. I would like to know what type of monitoring system you have in place, whether it is for the Montreal, Toronto, Calgary or Vancouver stock exchanges or for the derivatives market.
Mr. Cossette: The centre's job is not to monitor. The centre stays abreast of major trends through newspapers, as well as classified and unclassified sources. Essentially, the centre receives information from all kinds of financial institutions when they consider a transaction to be suspect. What that means is, when we are looking at a particular case, we do not go to the banks to ask them whether they have anything to report or whether any transactions appear to involve illegal activities. We are an intelligence agency. We receive the information that financial institutions provide voluntarily. Clearly, they are subject to obligations and limits, such as the $10,000 amount. They also report suspicious transactions. So we collect that information. And depending on the information, we either can or cannot build a profile of a suspicious activity. Once we determine that a transaction appears suspicious, we can transfer the information to police. But we do not have the capacity to monitor. Our mandate is not to identify or monitor anything. The financial institutions through which money changes hands are responsible for reporting any suspicious activity to FINTRAC.
Senator Hervieux-Payette: There are two and a half pages on the subject. Your predecessor wrote that the process was an example of the ``layering'' stage of money laundering, where perpetrators endeavour to conceal the illegal origin of the funds. That example came from your organization. You are telling me that if the financial institution does not report the activity, it can carry on, be happening as we speak, and you do not intervene. In the case of amounts involving $1,000 or $10,000, you have the information and you address it. But I am talking about millions of dollars.
Mr. Cossette: Yes.
Senator Hervieux-Payette: You have no way of implementing some sort of mechanism to see to it that our financial system is in fact worthy of our trust and does not allow this type of illegal activity to happen regularly? These transactions affect the very integrity of our entire system.
Mr. Cossette: You are absolutely right. FINTRAC is but one player in the whole system. There are other players, including the superintendent of financial institutions and the various securities commissions. A web of players, so to speak, contribute to the entire regime, and our role is limited.
Whether we are talking about $1,000 or $10,000, we receive reports of financial transactions that amount to far more than that. In looking at the financial transaction or series of transactions, the issue is whether a link with money laundering or terrorist financing exists. Money transfers can be tied to corruption, drug and other offences. We disclose intelligence to police only after we have determined that the activity is related to money laundering or terrorist financing. If police are conducting an investigation, regardless of the activity — share price manipulation or other — they may ask us whether we have suspicious information on certain individuals or institutions that might prove useful. Law enforcement bodies are the ones who intervene in the process. We are simply an intelligence agency. We give police the information, and police decide whether that information helps establish the evidence needed to justify their involvement.
Senator Hervieux-Payette: So you do not do any monitoring.
[English]
The Chair: Senator Hervieux-Payette, may I put you down for a second round?
Senator Hervieux-Payette: I want Mr. Cossette to be very specific. He says he does not undertake any action unless he has been advised. We are studying how the system works, who initiates what, and who will do what. What you are telling me does not explain who is doing what in the system.
The Chair: Thank you. Mr. Cossette, do you confirm that that is the message you wanted to convey?
Mr. Cossette: No. From our perspective, the process is rather clear. You end up with a disclosure. People are asking us to provide them intelligence, and we backtrack. Police forces tell us that it would be of interest to them to know the following. If we have that information, we provide it, but we are not an investigative agency and have neither the mandate nor the legal authority to seek information about people because, according to something we have read in the paper, their actions seem to be illegal. That is the role of the police, not of FINTRAC.
Senator Oliver: I would like to follow up on the question put to you by our chairman at the beginning. Your first recommendation was that international wire transfers be reduced from $10,000 to $1,000. Also, in your paper you said that if the legislation allowed it, for example, it could include FINTRAC contributing strategic intelligence on threats to national security.
Is that the number two recommendation you would like this committee to look at?
Mr. Cossette: Thirty-five proposals have been submitted by the Department of Finance that senators and others may look at. The strategic aspect of the work we do is interesting. We develop an overall picture of a sector. For instance, we just released a strategic study about the security sector. However, when we do that, we do not release publicly or to the police the reason we reached that conclusion. We do not say that we have drawn a picture from certain suspicious transactions. We are not authorized to do that.
Senator Oliver: Would it be good if you were authorized?
Mr. Cossette: Yes, it would, but we have to be cognizant of the privacy of Canadians. How far do the government, parliamentarians and Canadians want FINTRAC to go in its capacity to look at specific individuals? When police forces do that, they have to go to court to get a warrant. We are under a very different regime, so the issue is how far Canadians want us to go to find information, while at the same time protecting their privacy.
Senator Oliver: It is something you would like us to look at?
Mr. Cossette: It is something that is worth looking at.
Senator Oliver: In your report you said that, in the complex web of agencies, legislators, courts, reporting agencies and money laundering, you are but one small part of many different groups. Might the concept of embedding or cohabiting other agencies with you assist you in that you could, as they do in the United States and elsewhere, have some of these agencies right in your office so that you could talk to one another and share information? It seems that there are currently four, five or six different groups or agencies handling little pieces of the puzzle. Would it not assist FINTRAC if you could have more people in the same room with you?
Mr. Cossette: I would say yes and no in the sense that, as I said, there is a continuum from receiving the information that falls under the regulation obligations, because we need to understand what is going on from a financial standpoint.
Senator Oliver: However, there may be time lost in getting that information to the next agency.
Mr. Cossette: Yes, there might be time lost. We are trying, through technology and the simplification of processes, to accelerate the transfer of information. If it were done electronically, in real time, of course it would be better, however the capacity we have is not only to receive and manipulate the information, but also to try to make sense out of it.
Last year, 18 million reports were received. Out of the 18 million, you have to make sense of which ones relate to cases that are already being investigated by the police forces and which ones are just information that does not seem to show anything suspicious. Things might be there, just dormant. Six months later, we receive more information and then we start establishing the relationship.
Above and beyond the strict money — the transactions themselves — our capacity is about establishing a link between Mr. or Mme. So-and-so and Mr. or Mme. So-and-so. There is an issue of relationship portrayed through a transaction. It is not only about the transaction, but also about relationships.
Senator Oliver: Surely, if you could talk to other agencies and groups of people who are also studying those relationships and they were in the same room with you, it would help you, would it not?
Mr. Cossette: Yes, and we do work with the RCMP, CSIS and others, on an ongoing basis. They tell us, ``We are following the following files. If you ever see something on this, please disclose it to us.''
The first priority of the centre is to better develop our relationships with partners so that the flow of information is not only faster but also of much better quality such that we are really providing them with the major indicators that would lead to evidence, if possible.
Senator Oliver: Is there any recommendation that you would like from this committee that might help to facilitate that cooperation and interaction — embedding — with other agencies?
Mr. Cossette: The problem we face is always this balance between access to information and privacy. You could have a wide open system through which we would access everything. The question, I think, is for Canadians to respond to that through Parliament. Are they willing to accept such an intrusive regime?
Senator Ringuette: Mr. Cossette, FINTRAC has 300 employees. For the last 10 years that it has been in place, it has received, from the taxpayers of Canada, over $60 million. There is no doubt in my mind that we need to gather financial intelligence. What is most important to me and, I think, to the majority of Canadians out there, is what you do with it in regard to obtaining the objective to do with money laundering.
In your short experience within FINTRAC and your larger experience close to it, do you see yourself as a financial unit or as an enforcement unit? Which one would you see as closer to your existence as FINTRAC?
Mr. Cossette: I would argue that we are an intelligence unit.
Senator Ringuette: For what purpose?
Mr. Cossette: For the provision to police forces and security agencies of financial information, which is one part of the information that they need.
Senator Ringuette: The existence of FINTRAC, essentially and ultimately, is for enforcement.
Mr. Cossette: It is for the disclosure of information.
Senator Ringuette: The ultimate objective is enforcement, is it not? If it is not, then one must question that
Mr. Cossette: I am not sure that I understand what is meant here by ``enforcement.'' Enforcement agencies are the police forces in Canada. They have an enforcement mandate.
Senator Ringuette: It is not your place to gather information for enforcement?
Mr. Cossette: For enforcement, but also to deter money laundering and the financing of terrorism.
Senator Ringuette: It is quite a lot of money in the last 10 years. You might think that it is a misconception about the purpose of FINTRAC and how it goes about it, but, I reiterate, from the last 10 months of evidence that I have heard within this committee, I understand the need, nationally and internationally, to have a financial data collection centre. However, if the end result, the means and the operation is not with the objective of being part of an enforcement team, I think that we have more to review than what has been presented to us.
The Chair: Are you asking Mr. Cossette to respond to the fact that, in your view, FINTRAC is only a financial data collection centre? Is that what you would like him to respond to?
Senator Ringuette: That is what Mr. Cossette has reinforced three times in regard to my question. That is its sole purpose. I think that, in the minds of taxpayers, it is and should be more. The ultimate purpose of FINTRAC should be to be part of enforcement with regard to money laundering schemes.
The Chair: Thank you for that comment. Mr. Cossette, would you like to comment?
Mr. Cossette: If you look at the regime itself, from imposing a certain number of obligations on financial institutions to prosecuting and charging — if you take the whole process, with the ultimate goal of catching the bad guy — yes, we may call that enforcement, but we are not an enforcement agency. The police forces are the enforcement agencies. We are part of that continuum; we are not the continuum.
The Chair: Thank you very much for that clarification.
Senator L. Smith: To follow up on a couple of issues raised by Senator Oliver and Senator Ringuette, in your conclusions, you stated:
FINTRAC's results are determined by . . . usefulness, timeliness . . . . Consequently, we should look at deepening and strengthening the relationships we have with them —
— these are the enforcement groups, I understand —
— and even expand these relationships from one focused on the tactical level to one that also includes the strategic level.
I would ask you to expand on that in reference to Senator Oliver's and Senator Ringuette's questions.
I understand when you say that your job is to develop financial data that can be used as financial intelligence, but I think that also, when you talk about going from a tactical level to a relationship that includes the strategic level, you are taking it to a level which may have some bearing on the ultimate result.
Could you expand on that for me, please? I would like you to speak to how you can make the relationships with these third parties not necessarily more formal but more effective. That goes back to Senator Oliver's question. Then I have one short one after that that I would like to tie in, if that is okay, chair.
Mr. Cossette: When talking about ``tactical,'' we refer strictly to the information that we communicate to enforcement agencies — the large cash transactions, the suspicious transactions, the electronic transfer of money. We basically provide these people with pages and pages of bits of information. That money came from here and went there. That is tactical.
The enforcement agencies take this information and see if, in fact, that information may be used as evidence, because to charge you need evidence; you do not need intelligence, but evidence. They take the information and decide from their own standpoint if this information is useful in the context of what they do.
We used to send it one way. We do not do it exclusively one way nowadays. We sit with the RCMP and the police forces of the major cities in Canada and ask what their investigation priorities are so, if we see something coming in, we will not wait for them to ask for it, but will basically provide them with the information. Once we receive it, we clean it up and organize it in a way that makes sense. Millions of bits of information do not mean anything unless you start establishing relationships among these pieces. It has to be a two-way street, and it is helpful to have the ongoing dialogue.
Moreover, it is also helpful for us when police forces let us know information in the reports is missing and if we had included this information it would have been helpful. For instance, if we are looking at a transfer of money between companies, if you do not know who the shareholders are and if something illegal is happening, who do you chase?
There may be bits of information that we provide which are not that helpful and bits of information that they should receive that we are not providing because the information we receive from the banks did not cover that ground.
Senator L. Smith: Is that on an ad hoc or case-by-case basis, or is this on a planned basis?
Mr. Cossette: It is on a planned basis if you look at what they are asking for. They may say they are working on investigation A, B, C, D, so if we see something about these four, please send them something.
Senator L. Smith: How do you go from tactical to strategic?
Mr. Cossette: Strategic is when we look, for instance, at transactions that may occur in a specific area. I am from Rouyn-Noranda. If all of a sudden you see movement of money for no specific reason, why is it that all of a sudden in that part of the province all these transactions are occurring either in cash or large transactions? We may go back to them and show them what we see. We have seen an increase of this or that which allows the enforcement organizations to look elsewhere, above and beyond what they are doing as their own investigation priorities. That is what we mean when we say ``strategic.''
We may look at one sector. Do we see something in the banking sector? What kind of transactions do we see and at what level? Has it changed vis-à-vis last year, or two or three years ago? That provides enforcement agencies with other things to look at. They do not have the millions of bits of information that we have. They do not have the database we have, which is our strength, basically. We have 12 years' worth of information and we can go back to some of that information, which is what police forces do not have at their disposal.
Senator L. Smith: There is one point I am trying to understand. If there was a structure with autonomy to do what you do, which is creating and developing intelligence, with a more formalized relationship with the third parties you deal with to develop a stronger strategic level, would that be helpful? You could look at four or five areas, for instance, money laundering, terrorist financing, cross-border issues, international, and develop a strategic approach which follows the legislation the government is trying to outline. Would that be helpful?
Now you say you do it, but it may be more on an ad hoc case-by-case basis, as opposed to a planned basis.
Mr. Cossette: You are absolutely right. Right now we look at the data and determine it is interesting and know it could be of interest to different partners, domestically or internationally, to have a strategic picture. Since the enforcement agencies do not know overall what we have in our database, it is difficult for them to ask us to do something about banking, but they could.
For instance, we released something a couple of weeks ago on the securities side to provide everyone with an understanding of what is happening in the security sector. We have issued over the past years — I cannot remember; my memory is failing me — a certain number of what we call typology studies, which are about geographically located operations, sectoral-related operations. We do that on an ongoing basis.
Senator L. Smith: Can we take this to a higher level of sophistication which may improve your efficiency and, at the ultimate, more convictions?
Mr. Cossette: That is something we need to look at, but, yes, it would be a good thing.
Senator L. Smith: Do you think that would be a good thing?
Mr. Cossette: On the national security side, I think it would be a good thing.
[Translation]
Senator Massicotte: Thank you, Mr. Cossette, for being here this morning. In response to the previous questions, you have made it clear that FINTRAC is an intelligence agency. You are not responsible for putting people behind bars; you are merely a cog in a rather large machine.
I realize that the number of convicted perpetrators is not the most important factor. However, hundreds of millions of dollars are being spent and private firms and banks are being asked to produce rather lengthy and expensive reports. It is important, then, to find a way to measure the results against the cost and burden of producing them.
You are the expert, so how can we assess a decrease in international fund transfers between $10,000 and $1,000? How can we gauge whether it is worth the effort? The answers are vague. Is there a way to do it internationally? In comparison with the U.S., how much has Canada collected in the past five years? How many people have been put behind bars, as compared with the U.S.? Are there any comparisons we can use to give us a better idea of where things stand?
Mr. Cossette: The contribution of an intelligence agency is virtually impossible to measure in advance, given the amorphous nature of information.
Senator Massicotte: Go back five years, then. We will be patient.
Mr. Cossette: If we look back five years, the challenge lies in distinguishing offences that fall exclusively under the realm of money laundering from other types of charges laid against criminals in cases that the Department of Justice decided to pursue. Did the department opt to pursue a drug trafficking charge instead of a money-laundering charge, for example?
Prosecutors and police are the ones who decide which charges to pursue. Money laundering is extremely difficult to prove.
As I said earlier, in Canada this area comprises three distinct offences. That is unlike other countries, where regardless of the reason, be it drugs, corruption or something else, as long as the activity results in the use of dirty money, the organization can provide the information.
Senator Massicotte: I realize that is not your role. But we still have to be accountable for results. We want to minimize money laundering. Yes, we want to measure FINTRAC's effort, but we are looking at the big picture and the results are not very convincing. You said there were no measures. You want taxpayers to spend hundreds of millions of dollars in the hope that it will make a difference. But it is hard to have trust in this environment.
Even though the U.S. is 10 times bigger than Canada, my understanding is that, last year, they collected $2 billion in funds that they froze and took control of. In Canada, the figure is $20 million. It is true that these are somewhat random facts whose effectiveness cannot be measured directly.
Given that the RCMP tells us between $5 billion and $15 billion is laundered every year, and here we are, collecting just $20 million with 4 people convicted, you do not seem to be doing all that well. And yet you are asking Canadians to trust you. That is a hard case to make, Mr. Cossette.
Mr. Cossette: Once again, it is necessary to break down the process. FINTRAC cannot be held accountable for how the RCMP defines its evidence and how lawyers at the justice department use that evidence to win a case in court.
Senator Massicotte: You say it is not your responsibility and that you want to do your part. But you also say that the results are not acceptable and that someone else is to blame. If we look at the whole situation, are we to understand that you are working towards a shared outcome?
Mr. Cossette: Yes.
Senator Massicotte: And we get the sense that that shared outcome is not all that satisfactory. I appreciate your answer. You do not decide who goes to jail. I am simply telling you how the findings we have here look.
Mr. Cossette: Banks are always asking us the same question. Last year, 18,000 reports were made to FINTRAC. And then they say to us, ``You made just 790 disclosures. How is that possible?''
What people may not necessarily realize is that a single disclosure can be related to hundreds of transactions. So it is not a one-to-one ratio. It will never be possible to translate the intelligence we receive into a measurable result.
That is true for all intelligence agencies. Take CSIS, for example. You will have a very tough time trying to put a number on how many crimes CSIS has prevented in Canada.
Senator Massicotte: I think this is becoming repetitive, Mr. Chair.
[English]
Senator Stewart Olsen: Thank you for coming here today, Mr. Cossette. I hope that you understand that these questions to you are made with the premise that we are going to try to help here.
I see this situation as you having a dueling agency within your agency. On the one hand, you say you are not investigative; on the other hand, you say you are limited to the disclosure of money to the financial intelligence agencies information that pertains to money laundering and terrorists activities. You have to be investigative to sort out those things.
I wonder if you have the right mandate. I am trying to get around my head if you are hamstrung by your mandate. You have no methodology of follow-up, for instance. You really do not know how the information that you have collected has been used. You provide it, but you have no idea how it has been used — at least according to some of the testimony we received. How, then, do you decide if the intelligence you are gathering is the correct intelligence? Do you see what I mean? There is not communication among a lot of agencies, but, in the end, it kind of comes down to your own mandate and what you are doing with that.
Some of the people we spoke with said that we collect information and we give it out to those who ask. You are saying that. I see your new goals, your new focus, going further and probably to the way the modern-day FINTRAC should operate. How do you feel about your own mandate?
Mr. Cossette: When we are being asked about our results and when we are being asked to compare the results with the association in the U.S., the difference is that we disclose as we suspect money laundering and terrorist financing. If we were to disclose about tax evasions, drug dealings, and what have you, we would need to speculate as to whether this is drugs or whether it is something else. Police forces do not speculate; they backtrack and demonstrate beyond reasonable doubt what happened. Therefore, there is a charge and, potentially, a conviction.
We get the information at the outset of the process. We do not start like the police and backtrack. We get the information when we get it. It has no meaning in itself as we get it.
Senator Stewart Olsen: No; we understand that part. However, we wonder if the information that you get is appropriate to assist with the prosecutions as necessary. How would you know that if you do not know the results of any prosecutions? Do you see what I mean? There is no closing of the loop, which I think is crucial; that is, has that information you provided resulted in a conviction or a prosecution? Otherwise, you may be collecting thousands and millions of documents that are of no use and will not be of any use. I think that is a concern that we have. Do you see where I am going?
Mr. Cossette: Unfortunately, that is the challenge with intelligence.
Senator Stewart Olsen: That is the challenge of your mandate, I would suggest.
Mr. Cossette: Potentially, but it is also the challenge of intelligence. I used to do intelligence, as well as foreign affairs. If you see something coming through the wire that says there may be an attack against a Canadian mission, for instance, but it does not tell you when, or by whom, or anything else, you start watching what may happen. However, if you see the same thing five times in two days and you can corroborate it with the Americans, and with others who received the same information, then you see a pattern.
Senator Stewart Olsen: You are saying that is investigative. At Foreign Affairs, I am pretty sure that, if you sorted that out and spoke with RCMP or CSIS, you would have found out that, yes, that resulted in a conviction.
Mr. Cossette: We do survey our partners. We do know from the RCMP if the information is useful. About 88 per cent of the time, yes, the information is timely. How they specifically use that information in terms of building their evidence and then for the prosecutor to take that evidence to court, I have no control. I am not saying that I am passing the buck to someone else. I am saying that I have no mandate, no legal authority, to go further than that.
Senator Stewart Olsen: No, and I am not saying that you should prosecute. I am saying that to collect a bunch of information and hand it out, how do you figure out if it is the right information you are collecting? Sorry, I know I am taking up more than my time.
Mr. Cossette: You do not know. You receive information from the reporting entities. Some of that information does not mean anything; you are absolutely right. Out of millions reports, which ones show you something and which do not? It is the aggregation that starts making sense. When the police forces come to us specifically and say, ``With regard to investigation A, B and C, do you have something?'' If we do have something that is related, we transfer the information and continue to monitor the information that is coming in and then transfer it to them. What we can do, which has no direct impact on the investigations themselves, is to bring the work of the police force sometimes beyond their investigation.
I do not know if FINTRAC ever came to show you what a disclosure looks like. This may be easier for people to understand. There is the financial side of it, but there is also the communication side of it in terms of them seeing a larger framework.
Senator Moore: Thank you, Mr. Cossette, for being here. I want to follow along a bit on this line of questioning. I might be able to help you a bit.
Talking about tangible results, we heard that there was only one conviction in the past number of years. Yet, when I look at page 7 of your report, you state that:
The RCMP receives the most significant number of FINTRAC's case disclosures of financial intelligence. A review of the RCMP's Integrated Proceeds of Crime major cases in the 2010 and 2011 calendar years showed that FINTRAC assisted investigations that resulted in 71 charges and 37 convictions. These results include 10 money laundering charges (4 convictions), 20 proceeds of crime charges (8 convictions), 9 organized crime charges and convictions . . .
Someone is keeping track somewhere. That is a lot more than the one conviction we heard about.
I do not know who is keeping score or how, but you are obviously communicating with the RCMP to see how you have been able to help them. Can you explain that to me? I do not understand. We heard before repeatedly that there was only one conviction and it was a small sum of money. There are no dollars attached to the convictions on page 7, but there are certainly more convictions.
Mr. Cossette: We have asked Statistics Canada to provide us with numbers, because they will need to look at the number of cases, the number of convictions and on what grounds people were convicted. The information we provide may help to identify or convict on money laundering, but it also helps to convict on drug dealing, corruption and on other things.
The charge that is being used may have been built on our financial evidence, even if money laundering is not the reason why the police are going after someone or the court will convict.
Senator Moore: You call upon Statistics Canada to give you that information. Someone has to be inputting that information into Statistics Canada so they can collate it and give it back to you. Who is giving them the information? The RCMP? What other agencies? I would have thought you would have been the source; I do not know, maybe I got that backwards. I find it interesting you would be asking someone else for results of your work.
I want to move to the section on ``Working Relationships Internationally'' on page 12. You say that overall progression increased in the number of inquiries from international agencies went up quite markedly, but the number of responses you issued has gone down. In 2008-09, you responded to 33 per cent of the inquiries, but this past year was 22 per cent. The number of inquiries has gone up substantially, but the responses have not. Is there a reason for that?
Mr. Cossette: It depends what is being asked by others and what we are asking. For instance, if we see things happening in Canada and we think there is an international connection, we may ask our equivalent in the U.S., Australia, Germany or wherever, to provide us with information on specific cases. When we enter into communications with international partners, it is not as if we are shooting in all directions to get information. We go after something specific. It changes from year to year, based on the informants.
Senator Moore: On page 17 there is a graph. The sentence before it states that this year, FINTRAC received 18 million financial transaction reports, and there is a graph for the past five years labelled Large Cash Transaction Reports. What is large? We assume that all transactions $10,000 and more are being reported. What is large?
Mr. Cossette: That is what we call large. It may be $10,000 and more.
Senator Moore: Yes, but this sentence says 18.5 million and the graph shows 8 million. I do not understand that.
Mr. Cossette: I do not have the page you have in front of you.
Senator Moore: Page 17, sir.
Mr. Cossette: The 18.5 million is divided into electronic fund transfer, large cash, suspicious transaction, casino disbursement and the number of requests we receive. The 18.5 is everything from a transactional standpoint that we have released, disclosed or received from banks.
Senator Moore: The decrease in the number of electronic fund transfer reports is interesting. Why is that? Do you have an answer? I know have you only been on the job for two months, but do you have any sense of why the reports have gone down? Is it fewer large transactions or fewer transactions in total? Are you getting onto the bad guys? It is a substantial decrease over the last two or three years.
Mr. Cossette: I do not have an explanation for you today.
[Translation]
Senator Maltais: Thank you, Mr. Chair. Mr. Cossette, congratulations on your appointment. It is a position that comes with tremendous responsibility.
I do not want to go backwards since we spent 10 months hearing from just about every financial stakeholder out there. No one engages in money laundering, as you would expect; no problem. That is fine.
And yet, you are the first person to appear before us with an action plan for the years ahead. I like that. No one told us what they were going to do. At least you are saying to us, here is what I am going to do.
You said that, using your analysis of the information at your disposal, you needed to better define the risk factors that you should monitor more closely. How are you going to do that?
Mr. Cossette: The current legislation imposes a certain number of obligations on financial institutions. They report different things, names, addresses, what have you. We are provided with a profile of the client or the client and the transactions.
I think the time has come to look at all the information we have collected for the past 12 years. We need to figure out whether certain items more directly lead to a finding of money laundering or terrorist financing.
For instance, do our disclosures contain certain pieces of information that appear to be more useful to law enforcement than others? And if so, why ask for all kinds of information, when say — I do not know — of 80 pieces of information, 40 items appear to be more effective?
What I would like to do is to avoid taking a shotgun approach as much as possible. I would like to have a risk profile that tells us a certain type of information appears to be a lot more indicative of money laundering, for instance. It is possible to look at cases where the police have been able to lay charges and to establish a more direct correlation between the analysis factors and the outcomes.
Senator Maltais: At the beginning of your brief — You received 18 million reports.
Mr. Cossette: It was 18.5 million.
Senator Maltais: That is quite a bit. What do you do with all those reports once you determine that they are not useful? Do you destroy them?
Mr. Cossette: We keep the information we receive for a minimum of 10 years, and we have to destroy it after 15, if the information was not shared with police. The profile of a criminal operation often takes a few years to become clear. So it is important that we hold on to that information. Most criminal trials last years, as you know. And if we were to get rid of information we did not consider very important initially, we might not be fulfilling our obligations.
Senator Maltais: According to your fifth recommendation, which I think is a good one, the training provided to FINTRAC employees should respond to the new reality of your changing work environment.
Have you thought about sending someone to the Charbonneau commission?
Mr. Cossette: We have a team who is keeping track of the commission's investigation.
Senator Maltais: That is the place to learn how to launder money. It is like taking Money Laundering 101. That is fantastic, good for you, if you have people on that. The commission has done a good job of explaining how it all works.
Senator Ringuette: Speaking of the Charbonneau commission, how much financial information has FINTRAC shared over the years to expose the money laundering that goes on in the construction industry? Does your information pertain solely to Quebec or do similar activities go on in Canada? Is that the type of intelligence you would disclose to police?
Mr. Cossette: That is the type of strategic analysis we share, yes. For example, you might be looking at a group that likely operates in Quebec, and our incoming transaction reports may show that all the transactions are done in Ontario or appear to go through Ontario's banking system. And the police will decide whether the group's operations appear to have moved from one particular region to another.
Those are things we work on with them. I could not give you a number, though. I could not say whether we transferred 33 or 53 reports on this person or that person to the Sûreté du Québec. That is confidential information. Nevertheless, clearly, we do pay attention to media reports, whether Canadian or international, on the big names under scrutiny, and we do check whether we have anything on them.
Senator Ringuette: Forgive me, but that is being reactive, and your mandate is to be proactive.
[English]
Senator Tkachuk: Welcome, Mr. Cossette. I was intrigued by your statement that the actual information that you garner is considered intelligence and not evidence. Is not the very act of money laundering a crime in itself?
Mr. Cossette: Yes.
Senator Tkachuk: The criminals are transacting cash by one means or another, and you are receiving reports. Is that not evidence?
Mr. Cossette: Not necessarily. A large cash transaction may be a legal one. It does not mean that it is an illegal one.
Senator Tkachuk: I understand that. I might have gotten this wrong. You said that the information that you gather is intelligence, not evidence, but surely sometimes it has to be evidence because you prove that the actual person in court is laundering money through the fact that you have pieces of paper that say that he moved money from one place to the other. Would that not be evidence?
Mr. Cossette: It could be evidence.
Senator Tkachuk: That is very important.
Mr. Cossette: However, the police forces will decide how they build their own evidence. They have to build a case. It may be a piece of evidence.
Senator Tkachuk: I understand that.
Mr. Cossette, you have only been on the job two months. I am trying very hard, but, if you do not have the information, you can forward it to us. How many times has the information you gathered been used as evidence?
Mr. Cossette: I do not have that information with me.
Senator Tkachuk: Somehow I think that that would be important to us, if you could ask the people who have been there before, because that is the crux of it all. I understand the intelligence part. I do not get the evidence part, because I think that, in the end, that is why you are doing all of this.
The Chair: Is that something that could be provided to the committee?
Mr. Cossette: We will look at the numbers, Mr. Chair, but it has been very, very difficult to ascertain these numbers so far.
Senator Tkachuk: It would be important that he would know. Maybe that is something that he could undertake to do.
The Chair: If you could forward that to the clerk, we would appreciate it.
Senator Tkachuk: The other item is the question of $1,000, which is just, to me, way more information to be provided. As far as I can tell, we are not getting bang for the buck. That is my opinion. I am not sure that having more pieces of information being transmitted would be helpful, because I think it would take away time from the serious amount of money being transmitted. You did mention that something like $1,000 or $2,000 would be helpful in the case of terrorists. I really do not see it, but perhaps you could explain to me why the $1,000 level would be helpful to FINTRAC.
Mr. Cossette: What the evidence seems to suggest is that terrorists do not transfer money or launder money at the same kind of level as organized crime. People might raise money in Canada and transfer it to wherever in the world in much smaller amounts. You would not see, for instance, group X take $100,000 and transfer it. You would you see that, but you also see a lot of small amounts of money on an ongoing basis.
These small amounts of money we do not pick up. We do not have an idea when they are occurring or between which parties. Does it go through smaller money services businesses? The banks already register everything, so, from their standpoint, it is not a big issue or a big burden.
We would need to reorganize our systems, but it would provide us with a different picture. If you are asking me, in advance, whether we will find something out of that picture, I cannot give you a satisfactory answer. I cannot tell you, ``Yes, I will find group X,'' because we do not know until we see it.
Senator Tkachuk: Okay. I have no more questions.
Senator Greene: I am intrigued by your answer to Senator Moore's question about the number of prosecutions, et cetera, and the fact that you said that the information came from Statistics Canada. I am surprised that they collect and keep that kind of information, so I would like you to comment on that. If they do, why has it taken so long for that information to reach this committee? We were told earlier that there was just one. We have been at this now for eight or nine months, so I am puzzled by this.
Mr. Cossette: Unfortunately, I do not have a good answer for you. We have asked our partners for that information: the RCMP.
Senator Greene: If Statistics Canada keeps the information, it should be there.
Mr. Cossette: What I do not know is how they will come up with that information. I have no idea, to be frank, the kind of methodology they will come up with in terms of providing the numbers we are asking them to provide. We will see what numbers they provide first and whether it makes sense, but Statistics Canada has a capacity to look at all kinds of things. They record all kinds of statistics. Will they come up with a product that will acceptable? That is another issue, and I have no answer for you today.
The Chair: That concludes round one. We will move to round two of questions for you now.
I would like to start by referring to page 4 of your opening remarks, paragraph 6, in which you stated:
The Centre builds its intelligence from the financial transaction reports provided by reporting entities when and how they communicate them.
My question, Mr. Cossette, is: Do you have concerns regarding when and how they communicate?
Mr. Cossette: They have an obligation, when they see, for instance, a suspicious transaction, to communicate it within a certain time frame. I do not want to mislead you with regard to the time frame, since I am still trying to figure out how these mechanisms function, but they have an obligation to report within a specific time frame.
The Chair: So there is a formal specific time?
Mr. Cossette: Yes, they have an obligation under the regulations and the legislation. Part of our job is to ensure the compliance of the reporting entities with their obligations, so we do audit them and check if they have done what they are supposed to do.
We have conducted a series of audits, but that is the issue. When we do conduct a compliance audit, we are in a position to have a conversation with the entity and say, ``Listen, how is it that this transaction was not reported? Why is it that it took so long? This would have been helpful to us. Why did it not happen?''
From our standpoint, there is a job of compliance to be done, but not compliance for the sake of compliance; compliance because the better the information is, the more useful it is for everyone. However, there is a timeline within which we are supposed to operate.
The Chair: And you are satisfied with what they are currently, to the best of your knowledge?
Mr. Cossette: Yes, the timelines are fine, as long as they work within the timelines. If they work outside the timelines, we have an issue.
The Chair: But that is a compliance issue?
Mr. Cossette: Yes.
[Translation]
Senator Hervieux-Payette: I want to turn to page 28 of FINTRAC's annual report.
I see that in 2011-12, you had a salaries budget of $36 million, and in 2012-13, you lost $4.3 million.
Under the last budget, did you have to cut that $32 million even further? Were you asked to make more staffing cuts?
Mr. Cossette: No. If memory serves, the reduction in the last budget was $1.3 million. It is a program that is not being renewed, and only a few positions will be cut. That is all.
Senator Hervieux-Payette: Do you have enough money as far as employee training goes? Do your experts have the opportunity to better understand the international context, to learn more about how certain industries work, to stay on top of the latest computer updates — how to use the equipment and so forth?
Mr. Cossette: We have a highly developed training program, given that we are a relatively young organization that is being asked to do a number of things that have never been done. In response to that, we have an internal training system for the different sectors, be it compliance or disclosures regarding entities. Staff are trained to understand their job, to use computer systems and to partner with the other entities. I think our people are well-trained.
We have various experts. For example, we have someone with expertise in Italian organized crime who recently went to Rome to upgrade his skills. What is more, our organization recruits heavily from the private sector, meaning that many of our staff have experience working in banks or other parts of the financial system. Some of our employees come to us from Canadian border services and others from the Canada Revenue Agency. Our hiring structure, then, ensures we have a blend of skills.
As we look at upgrading our computer systems, for example, and as new technologies emerge, we do indeed have to stay on top of those developments. So instead of waiting to buy systems and train people, we try to ensure everyone is up to speed when the training is done.
Senator Massicotte: In your opening remarks, you stressed the importance of training and technology. Is your budget for 2012-13 sufficient; does it meet your requirements as far as information technology is concerned? Does the budget allow for that?
Mr. Cossette: It is sufficient for the time being. But what we are wondering about is how the parliamentary review findings and any changes the government introduces will affect us. We are in the midst of looking at the technological impact those changes, if approved, could have on us. For the time being, however, the budget is sufficient.
Senator Hervieux-Payette: A moment ago, you said that your staff has come to you from various sectors. Do you have people from specific sectors where manipulation is more likely to occur? My colleague mentioned the Charbonneau commission. The construction industry seems to be quite adept at using money laundering. Not as many contractors seem to be arrested as others who are involved in similar activities.
You have teams of experts, and you have support teams, secretaries and accounting staff. What is the ratio of employees who conduct inquiries before disclosing information to the RCMP or other partners, as compared with support staff? Do you have a sizeable team?
Mr. Cossette: I would say our team of support staff is fairly small in relation to the size of the organization.
Our staff is active in two areas. The first is compliance, those who liaise with the financial institutions and other organizations, and we have offices in Montreal, Toronto and Vancouver. The other area we have people working in is disclosures. Those are our two biggest teams. Our human resources and financial management teams are small. Our tech team is fairly robust, given that we use a lot of technology.
Senator Hervieux-Payette: What do you mean when you say ``communications'' in French?
Mr. Cossette: Disclosures, the reports we share with law enforcement agencies.
Senator Hervieux-Payette: So it has nothing to do with media communications?
Mr. Cossette: No.
[English]
Senator L. Smith: I have two specific questions. First, what is your number one priority in your job? Second, if there is one major improvement you would like to make to FINTRAC, what is it?
The Chair: That sets the ground for quick, snappy answers.
Mr. Cossette: My first priority is to understand my business. I think I cannot be a good CEO if I do not understand in detail what FINTRAC is all about. I am currently sitting with analysts doing compliance audits so that I will know exactly how they are done and doing disclosures to understand exactly how they are done.
With regard to an improvement, we have legislation, tools, practices and technology, but they are not as well aligned as I would like them to be. The conversation we are having with all our staff right now is, if you start at the end, what is a successful disclosure; what is the top information we could provide to the enforcement agencies? Start there and backtrack, then eliminate everything that is not necessary and increase everything that would make a difference.
Senator L. Smith: From your preliminary evaluation, are you seeing something that you can make better?
Mr. Cossette: Yes, we need to be more specific about what we are asking for. We are asking for lots of things and, at least at this stage, I am not convinced that all this information is as important or relevant as we think it is. As I said before, if we could be more focused we would, first, reduce the burden on reporting entities and, second, the information could be manipulated much more easily and provided to enforcement agencies much more quickly.
However, before you change your electronic overlay, you need to know what you are looking at, why it makes a difference and how you want the continuum to unfold. Then you need to put in place the technology that allows you to do that. Unfortunately, too often we buy the technology and then try to fit the rest of the organization into a technological pattern. I want to see the end result and then backtrack from there. Everything should be about the best disclosure possible.
Senator L. Smith: I think there are two issues. There is technology and there are people and knowledge, which goes back to Senator Hervieux-Payette's question. Do you have a comment on the people perspective?
Mr. Cossette: We have an extremely strong team and a good mix of people at FINTRAC.
Senator L. Smith: With knowledge of crime and money laundering?
Mr. Cossette: Yes. The senator talked about construction. We need to look at new fields where it may happen in the future. We need to become more strategic in determining where it is happening and, if we do not have the capacity and the knowledge to do that, we need to build that capacity and knowledge.
Senator L. Smith: Two words that come to mind are ``proactive'' versus ``reactive,'' and many of our questions today are leading to potentially being proactive versus reactive.
Senator Oliver: I would like to follow on the chair's second set of questions to you, when he turned to page 4 of your presentation and asked about paragraph 6. I want to ask about paragraph 7.
When I read your remarks before you came, I marked on paragraph 7 that it was the key to your presentation. You stated:
. . . the mandate of FINTRAC is limited to the disclosure of financial intelligence strictly pertaining to money laundering and terrorist activity financing. The Centre does not disclose financial intelligence based on its suspicion of drug dealing, tax evasion or other designated (predicate) offences.
Should FINTRAC disclose this type of intelligence? Would disclosure of this type of intelligence improve the efficiency of Canada's regime as, for example, drug dealing and money laundering are thought to be linked? Is this something on which you would like to see a form of recommendation from this Senate committee?
Mr. Cossette: I do not want to be cagey on this, but it is a bit early for me to determine right now how far the legislation should, in fact, go. We are helpful to enforcement agencies in all the activities you just mentioned, such as drug dealing and tax evasion. We do not want, given the expertise we have, to specify at the outset that this is ``drug dealing.'' That being said, proceeds of crime comes from a crime so, whatever the crime is, should we be entitled to release everything that relates to any crime? That is a question I am not in a position to answer now but it is a question we need to examine.
Senator Oliver: Thank you.
Mr. Cossette: An enforcement agency would have a much better answer than I would have with regard to this.
Senator Harb: Would you turn your attention to page 5 of your presentation, please?
In the second point you say:
. . . we must better define, based on our analysis of the information at our disposal, the risk factors we should monitor more closely. The establishment of risk profiles by sector . . .
I appreciate your frankness. This is an admission of the fact that we are not properly defining now. Is that true?
Mr. Cossette: I would not say that. I would say we are asking for lots of information right now, and we are asking for lots of information from different players.
If you look at the banking system versus the insurance sector, versus the money business sector, do we see different patterns from one sector to another? If that is the case, should we ask specific sectors to look at specific factors, instead of imposing more or less the same thing to everyone?
Senator Harb: You are saying that we better define and what we have now is not good enough. I appreciate that.
Mr. Cossette: What we have now is very broad, because we need it to start somewhere.
Senator Harb: I will take it to your third point of what it is you want to do. There you want to see if Parliament could address some of the limitations of the legislation. Could you be specific on exactly the limitations you want this committee to take into regard when it does its report?
Mr. Cossette: I would say that Senator Oliver's question was exactly about that. We are looking at money laundering and terrorist financing. Would parliamentarians want us to look at drugs, tax evasion and other things? What are the different issues that our centre may look at above and beyond money laundering and terrorist financing?
We must bear in mind that going further than what we are doing now must also be looked at in the context of protecting the privacy of Canadians. If we were an investigating agency we could go further, but we would need warrants or others things. Right now we do not need that. That is why, to a certain extent, the legislation is prohibitive. ``You will not release the information unless,'' and then it states the conditions under which you can.
Senator Harb: Your legislation is up for review and you have been in power now for two months. One would suspect the first thing you would have done is called on all your other stakeholders because you are part of the chain and you are not the whole chain. I am surprised that nowhere in your presentation do you talk about the cooperative approach and the stakeholder approach that I would personally think you are in the best position to do and to take.
The only thing I see in your fourth point is that you want to have a bigger database, you want to have more people, and you want to have more equipment, and so on. That would drive me crazy. This indicates that you want to build a bigger bureaucracy. Based on the fact that you are asking to remove the limits in terms of what can be reported from $10,000 to zero, or whatever that is, you will have a massive amount of data coming into your system. Maybe you do not agree, but in my estimation this will stray away from the focus on the probability of risk and doing things based on risk assessment and focusing on the big fish.
Mr. Cossette: In terms of partnerships, I have already met with the big five banks. I have met with the RCMP. I am going to Montreal next week to meet with the provincial police, Montreal police and Loto-Québec, so I have already engaged partners. I was in Toronto last week, I will be in Montreal next week, and I will be in Vancouver in January. I have met all the deputy ministers involved in the security portfolio, including CSIS, Justice and the Privy Council Office. In terms of relationships, that is where I started. As I said, I need to understand the business and one part of the business is partnering with the different players. That will continue.
In terms of technology and numbers, I used to run a much larger operation and larger is not necessarily better. The issue is not to get more technologies, but to get different technologies. There is now software, for example, called Big Data which allows you to draw patterns out of millions of bits of information.
Right now a lot of the work we do is still being done manually. Some of the pictures we draw are done manually, so it takes forever. If a computer could come up with a pattern, then you can analyze that and decide if the investigation is worth pursuing. It is not an issue of more technology; it is an issue of different technology.
Senator Massicotte: What do you think of reduction of international money transfers from $10,000 to $1,000? Do they support that?
Mr. Cossette: They record that already. To them it is not an issue.
Senator Massicotte: Is there an additional cost?
Mr. Cossette: Not for them, as far as I am aware.
Senator Massicotte: When they come here as witnesses and say they do not like it, are they not telling us the truth? Are they are totally in favour?
Mr. Cossette: We did not discuss that specific issue. I doubt very much they will tell you they would like more information.
Senator Massicotte: I presume you are right.
The Chair: Mr. Cossette, when we asked you to appear before this committee we very much recognized you were new on the job. I must say, from your opening comments and from your response to our questions, it is very clear to us that you have hit the road running and we are very appreciate of that.
On behalf of all of the members of the committee I would like to express our great appreciation to you for a most enlightening presentation. Thank you.
Some Hon. Senators: Hear, hear.
The Chair: I would like to ask the members of the committee to remain for a brief in camera meeting.
(The committee continued in camera.)