Proceedings of the Standing Senate Committee on
National Security and Defence
Issue 9 - Evidence - Meeting of October 20, 2014
OTTAWA, Monday, October 20, 2014
The Standing Senate Committee on National Security and Defence met this day at 2 p.m. to study and report on security threats facing Canada and on national security and defence issues in Indo-Asia Pacific Relations and their implications for Canada's national security and defence policies, practices, circumstances and capabilities.
Senator Daniel Lang (Chair) in the chair.
[English]
The Chair: We have an hour for this panel. I know that we are anxious to get on with the business, so I would like to call the meeting to order.
Welcome to the Senate Standing Committee on National Security and Defence for Monday, October 20, 2014. Before we welcome our witnesses, I would like to begin by introducing the people around the table. My name is Dan Lang, senator for Yukon. To my immediate left is the clerk of the committee, Josée Thérien, and on my right is our Library of Parliament analyst assigned to the committee, Holly Porteous. I would like to go around the table and invite the senators to introduce themselves and state the region they represent, starting with our deputy chair, Senator Mitchell.
Senator Mitchell: Grant Mitchell, Alberta.
Senator White: Vern White, Ontario.
Senator Beyak: Senator Lynn Beyak, Ontario.
Carolyn Stewart Olsen: Carolyn Stewart Olsen, New Brunswick.
[Translation]
Senator Dagenais: Jean-Guy Dagenais, senator, Quebec.
[English]
The Chair: Thank you. This afternoon, the committee will be meeting to commence two new studies pertaining to our mandate of national security and defence. Before we begin our study, I wish to welcome our new deputy chair to the committee, Senator Grant Mitchell from Alberta, and two new members, Senator Carolyn Stewart Olsen and Senator Ngo, who will be with us soon. I would also like to welcome back to the committee Senator Colin Kenney who is our dean and perhaps the longest-serving member of the committee. That's the official representation on the committee.
I would also acknowledge the new chair of the Subcommittee on Veterans Affairs, Senator Joseph Day, and the new deputy chair, Senator Carolyn Stewart Olsen. Also, I would be remiss if we, as a committee, did not formally acknowledge the excellent work of Senators Segal, Wells and Dallaire, our previous members.
On June 19, 2014, the Senate agreed that the Senate Standing Committee on National Security and Defence be authorized to study and report on security threats facing Canada, including, but not limited to, cyberespionage, threats to critical infrastructure, terrorist recruitment and financing and terrorist operations and prosecutions, and that the committee report to the Senate no later than December 31, 2015.
This new study will build on the work of the Special Senate Committee on Anti-terrorism, published in March 2011. In the next few weeks, we will have the deputy chair of that committee appear before us to provide an update on their report that was published back in March 2011, entitled Security, Freedom and the Complex Terrorist Threat: Positive Steps Ahead. The committee was chaired by Senator Hugh Segal and Senator Serge Joyal.
As part of our present study, we will be focusing on the threats that Canada and Canadians face from terrorism. Terrorism is not new to Canada. We have seen the terrorist attack on Air India Flight 182, which departed Canada on June 22, 1985, and exploded the next morning above the Irish waters not far from Cork, killing all 329 passengers, mostly Canadians. This act of terror did not occur without notice or without victims. Many of our fellow citizens were left without mothers, fathers, brothers or sisters, a grandparent, an aunt or an uncle.
In 2007 Prime Minister Stephen Harper announced a public commission into the Air India tragedy, and in 2011 the Kanishka Project was launched to help Canadians learn more about terrorism.
On September 11, 2001, many of us witnessed the 9/11 terrorist attack on the United States, which left 24 Canadians dead. On that fateful day, Canada played a vital role at NORAD, and many Canadians, from Yukon to Newfoundland and Labrador, opened their homes and hearts to those in need.
Colleagues, on our televisions, in our newspapers and on our computers, we see a daily rise in terrorism, mainly from Islamic jihadists fighting for dominance over fellow citizens. Canada has listed a number of new entities since 2006. The threat is on the rise. It is important to understand it and take appropriate action in a reasoned and well- informed manner.
One key point is that money and ideology drive terrorism.
Today, to commence our look at the terrorist threat, we are pleased to have with us Mr. Gérald Cossette, Director of the Financial Transactions and Reports Analysis Centre of Canada, FINTRAC, and Mr. Luc Beaudry. Mr. Cossette, I understand you have an opening statement. We have one hour for this panel. Please begin.
[Translation]
Gérald Cossette, Director, Financial Transactions and Reports Analysis Centre of Canada: Good afternoon, honourable senators. Thank you for inviting FINTRAC to speak with you today regarding your broader study on security threats.
Before I get started, I would like to take a moment to introduce my colleague, Luc Beaudry, FINTRAC's manager of our terrorist financing intelligence group. Mr. Beaudry will assist me in addressing your questions this afternoon. I can assure you that we will be as forthcoming as we can with our answers today; however, I know you understand that we cannot provide classified information in this public venue. We are also limited by our legislation — the Proceeds of Crime (Money Laundering) and Terrorist Financing Act — in what we can say about the information we hold.
Before getting to your questions, I would like to describe briefly FINTRAC's mandate and the role we play in helping to protect Canadians and the integrity of Canada's financial system. I will focus, in particular, on the contribution we make, in close cooperation with our police and national security regime partners, to detecting and combatting terrorist financing.
FINTRAC was created in 2000 by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to deter, prevent and detect money laundering and terrorist financing. Under this legislation, FINTRAC, police, intelligence and national security agencies, prosecutors and approximately 31,000 businesses across the country all have a role to play in creating a hostile environment for those who seek to abuse our financial system and threaten the safety of Canadians.
The legislation establishes obligations for financial services entities, money services businesses, casinos and other businesses subject to the act to establish a compliance program, identify clients, monitor business relationships, keep certain records and report specific types of financial transactions to FINTRAC. As well, reports of terrorist property that are sent directly to the RCMP and CSIS must also be sent to FINTRAC.
With the 20 million financial transaction reports we receive every year, the centre provides actionable financial intelligence that assists police and national security agencies in protecting Canada and Canadians.
[English]
During the past fiscal year, we provided 1,143 disclosures of actionable financial intelligence to our regime partners to assist them in their investigations of money laundering, terrorist financing and threats to the security of Canada. Of these disclosures, 234 were specifically related to terrorist financing and threats to the security of Canada in response to information provided by our partners. This is up 50 per cent from last year and 450 per cent from 2008.
FINTRAC also produces classified strategic financial intelligence reports on suspected terrorist financing activities and trends by groups formally listed as terrorist entities by the Government of Canada.
The threat of terrorism is real, and it is not going away. A number of individuals are currently making their way through our criminal justice system for terrorist acts that they have allegedly planned to commit here in Canada. Just last month, an Ottawa resident entered a guilty plea to terrorism charges in an Ottawa court, and he received a 24-year sentence for his crimes. Over the past many months, we have also seen violent attacks in many parts of the world, a number of which involved Canadians.
The Director of CSIS recently confirmed that his organization has identified more than 130 Canadians who have gone abroad in support of extremist activities. He also said that at least 80 of these individuals have subsequently returned to Canada.
Terrorist activities require funding, and we know this funding is obtained from illegitimate sources as well as from legitimate ones. We also know that some of the funds that are raised to finance these violent crimes originate in Canada or transit through our country. As an example, I would cite the case of Momin Khawaja, who was found guilty of, among other charges, providing funds to facilitate terrorist activities. With ISIL, we have seen very clearly the devastation that terrorist groups can inflict when they have access to substantial resources.
FINTRAC disclosures, which are often based on hundreds or even thousands of financial transactions reported by Canadian businesses, help establish links between individuals and groups in Canada and abroad suspected of financing and supporting terrorist activities.
For example, at the end of April, the RCMP Integrated National Security Enforcement Teams in Ontario and Quebec recognized our contribution to a terrorist financing investigation on the International Relief Fund for the Afflicted and Needy — Canada, or IRFAN-Canada, an organization allegedly linked to the terrorist entity Hamas.
Last year, the RCMP also acknowledged FINTRAC's contribution to Project Smooth, following the arrest of two individuals for conspiring to carry out a terrorist attack against a VIA passenger train.
Given the complex and transnational nature of terrorism, we maintain very strong and productive working relationships with our police and national security partners. In order for our financial intelligence to be actionable, it must be closely aligned with our partners' priorities. We ensure this alignment through regular contact, as well as our participation in the Canadian Association of Chiefs of Police and its committees dealing with organized crime and national security.
FINTRAC also works closely with other financial intelligence units around the world in order to share intelligence and expertise, broadening our reach and analysis of international financial transactions.
Financial intelligence — both tactical and strategic — has become a key component of our regime partners' terrorist investigations. FINTRAC has provided timely and relevant disclosures as part of the government's broader effort to combat ISIL and others who have supported terrorists at home and abroad.
[Translation]
In conclusion, Mr. Chair, the success of Canada's anti-money laundering and anti-terrorist financing regime is dependent on the dedicated efforts of all players, from businesses on the front lines of Canada's financial system to prosecutors securing convictions of money launderers and terrorist financiers. Together, we are producing significant results for Canadians.
Thank you, Mr. Chair, honourable senators. We would be pleased to answer your questions.
[English]
The Chair: Thank you very much. We certainly appreciate the presentation that you've presented to us here today.
I would like to begin with a couple of short questions. One is in reference to your statement that there were 234 disclosures specifically related to terrorist financing and threats to the security of Canada this past year.
Can you provide us with a full list of disclosures shared per year since 2006 as they relate to terrorism? Can you tell us how many were related, when it comes to terrorism, to charities and non-profit agencies?
Mr. Cossette: I don't have those numbers with me, Mr. Chair. We could provide those numbers to you, and we will do that.
The Chair: I want to follow up further, colleagues, in respect to the question of charities and non-profit agencies. As has been stated, government action has been involved in reviewing some of these agencies from that point of view and financing terrorism. Has your organization been involved in government action against terrorist organizations benefiting from charitable status under the Income Tax Act? Can you provide further examples of that?
Mr. Cossette: When it comes to monitoring and reporting on activities, FINTRAC does not monitor organizations or non-government organizations. FINTRAC monitors transactions and transaction reports that are provided to us by reporting entities.
The fusion of transactions and names, or individuals or specific organizations, happens when we receive from our partners specific information about organizations. For instance, Mr. Chair, if I were to receive a transaction about Gérald Cossette, it doesn't say whether I am a member of a specific organization according to the banking transaction reports. It is the mix of the information we receive from financial institutions and what we may receive from our security partners that brings these two things together.
In answer to whether we monitor specific organizations, we do not monitor specific organizations. CSIS, the RCMP and CRA use the information we disclose and then go after specific targets or investigations.
[Translation]
Senator Mitchell: Thank you very much, gentlemen, for your presentation. It was very interesting and very good.
[English]
I'm struck by the point you make in your presentation that you have worked and made your contribution in close cooperation with our police and national security regime partners. That is very important and very significant, and you do mention that you have provided information. What is the nature of that relationship with the CRA, CSIS and the RCMP on sharing information? What are your thoughts about those organizations having direct access to your data banks in that respect?
A corollary of all of that is how exactly would you ensure proper use and proper privacy consideration protections?
Mr. Cossette: If I may, I will answer the second question first. That will explain the kind of relationship we have with our partners.
No one and no organization but FINTRAC has access to FINTRAC's database. Our security partners do not directly access our database, be it the RCMP, CSIS or police forces. We do receive information from financial institutions according to our legislation. If we do establish that that information may be useful in the context of an investigation on money laundering or terrorism financing or a threat to Canada, and if it meets that threshold, then we would communicate to the relevant partner.
It is not as if we collect the information and it sits there and people come and tap into it. We do have to establish that threshold that there is suspicion of money laundering or terrorism financing or national security before we can communicate the information to our security partners.
In terms of meeting their requirements, we do sit with them when they establish their priorities. Is it organized crime, and what is it under organized crime? We do that with the RCMP, for instance. We do the same with regard to CSIS. What kind of target are they after? Are there certain regions of the world that are of interest to them? We consider lists that the United Nations Security Council may have released.
We work with them at the outset to establish the priorities, and then we disclose tactical information. As we disclose to them, we also ask for their feedback as to whether what we are providing is useful, relevant, timely and so on.
Senator Mitchell: One of the key elements of the usefulness of this kind of information, among other things including relevance, accuracy, predictability and tailored to the point, is timeliness. There has been some concern in the intelligence community about not just FINTRAC to others but about the timeliness with which information is shared. There has been a specific criticism in the case of FINTRAC — I may be wrong. Can you give us some idea about whether that criticism is legitimate and what you do to ensure either reaction to that criticism or fixing it or ensuring timeliness in the sharing of information?
Mr. Cossette: Our partners today are telling us that the information is very useful, relevant and timely. This is the feedback we get. Over the past couple of years, and Luc could expand on that if it is of interest, we have improved the processes that allow us to disclose now much more quickly than in the past.
Over time, of course, we have accumulated information that is looked at on an ongoing basis. We don't necessarily wait for requests before analyzing the information that comes in. We have a process that allows us to disclose much more quickly than we've disclosed in the past. If we have names of individuals and organizations provided to us by our partners, we may keep those files open so we don't have to start the process every time there's a request.
Senator White: Thanks for your presentation. I have an understanding around the $10,000 trigger that we would see. Is there consideration around multiple triggers? In other words, we have seen in the past where known groups that certainly were training in terrorism in other countries were moving amounts of money less than $10,000 — $9,999 might be the number, I guess. You are saying that you don't get access to information that allows you to look for second or third triggers. Would it be helpful to you if you did? It certainly would be helpful to Canada if we did.
A story comes out of Quebec, to be fair, about the amount of money that travels to one particular Caribbean island every Friday night, and it is always less than $10,000, from a movement of illegal funding. It would make sense to me that we have other potential triggers that would allow us to do this, if you don't already. I think you are telling me you don't do that now. Is that correct?
Mr. Cossette: There are three things I would say in response to that question. Given the limitations provided by the $10,000, when people transact at a lower threshold, we work with the financial institutions more and more to reinforce their suspicious transaction reports, which have no threshold. If financial institutions see patterns that they consider to be abnormal given the regular behaviour of their customers, they can disclose to us. The amount of money in those cases is irrelevant. It may be $200 or $300; it doesn't really matter. Given the limitation of $10,000, we have worked with the financial institutions a lot to reinforce the capacity to produce useful suspicious transaction reports.
When we're looking at thresholds below $10,000, and it is often even more relevant in the context of terrorist financing, the issue there to be honest so far has been the capacity to process that information because then you would be talking about millions and millions and millions of transactions. Numbers and technology have to work hand in hand. We are in the process of acquiring a system that will be able to process many more transactions in the right amount of time than we can process now. Once we have acquired that capacity, the time will arrive for us to review. As we speak, the tools we have are sufficient.
Senator White: I appreciate that. Have you given consideration to ''will fly'' lists of people whose names come through banking to actually share that intelligence across the spectrum of enforcement agencies to identify them? For example, if Vern White has been identified at Toronto Pearson and has only $4,000 but happens to be noted in some of our investigations as being involved in some suspicious transactions, officials at Toronto Pearson could do something and notify our on-site officials in the country of destination that the individual is travelling there.
Have you had that type of dialogue? If you can't answer me now, it's okay.
Mr. Cossette: We haven't had that type of dialogue. We do have financial institutions reporting more and more on suspicion of either money laundering or terrorism financing. The number of suspicious transaction reports has increased by 16 per cent over the past two years. We're convinced that it is because we work with them to make sure they understand that such a report makes a difference. Recently, we have seen suspicious transaction reports being sent to FINTRAC for which there was not necessarily a request from CSIS or the RCMP. We disclose, from our perspective, to those organizations without waiting for a specific request. We do that as well.
Of course, we respond mainly to requests we receive, but there is also an attempt to be proactive, as much as we can be, in terms of disclosing information that may not be available to our partners.
Senator Stewart Olsen: I have a few questions following up with the report that Banking did on FINTRAC. I have to note, Mr. Cossette, that you made several changes already that I can hear in some of the questions.
To my specific questions, how do you follow up once you report this to your various partners? Do you get a regular follow-up, perhaps quarterly, as we recommended? What happens once you have reported what you would consider to be suspicious transactions?
Mr. Cossette: We ask our partners to report to us on each disclosure we send to them. We ask a certain number of questions to assess whether the information and the format are useful. We also ask what makes a difference to them in all the information we convey to them. Is it the beneficiary ownership? What is it in a suspicious transaction report or series of reports, because some of our disclosures may have hundreds of different reports, that makes a difference so we can have the feedback.
We also have an ongoing dialogue. Once in a while, we try to bring the financial institutions and the security partners together so that we can explain to the financial institutions how it works and what makes a difference.
A couple of weeks ago, Luc gave a presentation to a number of financial institutions on suspicious transaction reports that are useful in the context of terrorism financing. We have feedback, as much as we can get, from both the financial institutions and the partners.
Senator Stewart Olsen: Does that feedback include whether they would prosecute based on your information? Do you have that kind of feedback?
Mr. Cossette: We're being told, for instance, ''This is a name we did not have. This is a link we did not see before.'' The advantage we bring to the table is the horizontality of what we see. Investigators look at their investigation. We may see something in Newfoundland that is related to Alberta that is related to Quebec, or what have you. We're told very often that this picture is new to them. They may change the focus of their investigation because of the information we provide. They may launch new investigations because of the information we provide. Sometimes they're not as specific as one would ask, in a sense that our job is to provide intelligence and their job is to investigate; so what we don't need to know, they don't tell us. That's the understanding we have with both security agencies and police forces.
I don't know if there's more you want to add.
Luc Beaudry, Manager, Terrorist Financing Intelligence Group, Financial Transactions and Reports Analysis Centre of Canada: Our job essentially is to draw the picture and point the finger toward where they need to investigate. That's their job.
The feedback we receive can be different at different stages of the investigation. At the start of an investigation and at the end the feedback is different, but it is important to have it. We collect the statistics, but we also get informal feedback because we talk with the investigators. We want to make sure that our product is useful and that we're not wasting their time.
Senator Ngo: In your presentation you say that you work closely with other financial intelligence units around the world and so on. In light of the demonstrated interests in foreign intelligence services, criminal organizations, terrorist groups try to gain access to the government-held information. What is the state of FINTRAC's cybersecurity defence? What is the state of FINTRAC's personal security, particularly in the context of insider threats and risk, potentially involving FINTRAC by a third party?
Mr. Cossette: When it comes to cybersecurity, we're of the view that we are as well protected as any of our sister organizations. We have the right system. When we're looking at the classified information, which is where we mesh together information provided by financial institutions with the information provided to our partners, this is a Top Secret system. It's on a separate floor; it has limited access. From an outside threat potential, it is as well protected as any other organization.
We follow the standard. In fact, we have CSIS come once in a while to do an analysis of internal and external threats. We work with the Communications Security Establishment in order to establish our requirements when it comes to cybersecurity. We have a robust regime when it comes to insider threats in the sense that the Privacy Commissioner comes to our organization every two years and assesses whether the information is used for the purpose it is intended. Our legislation also has a robust framework. If people were to be found, for instance, they can be charged for up to five years and $500,000 in penalties. Moreover, we do encourage a culture of security.
To give you a specific example, tomorrow I'm launching a series of presentations for all the employees at FINTRAC, reminding them of the external threat, the internal threat, what they should and should not put on the Web. We also have limited access — not technically but from a policy perspective — to social media. We do not encourage our people to use social media, and, at the office, they are prevented from using social media. We try as much as we can to make them understand the context they are operating in, which is a security agency.
Senator Ngo: Could you provide the committee with what security screening is practiced in FINTRAC, for example, and with what frequency?
Mr. Cossette: If you look at the security level of our employees, all our employees need Top Secret level security; it's not only enhanced security, it's secret. Then there is a Top Secret requirement to it. And even for employees working in other departments that come to join FINTRAC, either short-term or long-term, sometimes we redo some of the screening to ensure that they meet our own standard. From that standpoint, we're as high as the Government of Canada allows us to be.
Senator Beyak: Gentlemen, it's my understanding that since FINTRAC was established, Canada has convicted only one person of terrorism financing. Could you elaborate on that a little bit and tell me if there's a reason, to your knowledge?
Mr. Cossette: I would say this is outside of our mandate. Our contribution in the whole process is basically to receive information, process it and disclose it. What happens after that step would be much better answered by our police forces or the Public Prosecution Service of Canada because, as I said, the information we provide is intelligence, not evidence, so why that evidence does not lead to convictions is difficult for me to answer.
Senator Mitchell: I'd like to pursue a point raised by Senator Ngo with respect to your relationships with international agencies that would be your counterparts. I would like to know specifically what your mandate is to develop and to deal with them; where does that come from? And in light of the Arar case, which hangs over a lot of what you do and what this committee will be discussing, what safeguards do you have about agencies that you deal with using this information and giving it to a third party?
Mr. Cossette: First, we do not share information with counterpart organizations that don't have an MOU with us, a memorandum of understanding, which is reviewed and approved by the Minister of Finance. We have fewer than 90 MOUs as we speak, and the MOUs request foreign countries with which we're doing business to have a privacy regime similar to ours. It does not have to have the same shape, but it needs to provide the same safeguards.
The second thing is that the MOUs do not oblige us to disclose, so if we would prefer not to communicate information for all kinds of reasons, there is no binding obligation to do so. We decide on our own whether the country requesting the information should get it or not.
The third thing is that we do disclose exclusively to other financial intelligence units that are like FINTRAC. We have no authority to disclose our information to the FBI in the U.S. or to any other law enforcement agencies worldwide. What we can disclose, how we can disclose it is fairly well protected by the mechanisms we have. We do receive and send requests — very specific — and if there is a requirement to go above and beyond what we would provide according to our legislation, we ask the foreign country to go through our RCMP or enforcement agencies. That mechanism is in place and is properly used.
Moreover, we do not do business with countries that are not members of the Egmont Group of Financial Intelligence Units, which is an international group, so we know with whom we're doing business.
Senator Mitchell: I have several more questions, but I'll come back later. I think you said that the information you might give to your counterpart in the U.S. wouldn't go to the FBI.
Mr. Cossette: We cannot disclose directly. We disclose exclusively to our —
Senator Mitchell: Is there any element of your MOU with your U.S. counterpart that they cannot disclose it to the FBI?
Mr. Cossette: We would ask them to ask our permission.
Senator Mitchell: That's not binding, necessarily.
Mr. Cossette: Once they get the information, they have the information.
Senator Beyak: If your information was expected to be available or involved, was there any time, to your knowledge, that an attorney general did not consent to that information being used to convict for terrorism financing?
Mr. Cossette: Our information is rarely used directly. Our information is used by enforcement partners to obtain a production order, a search warrant and other things. It is not evidence. It's not like what the police do, which is build a case to demonstrate that something has occurred. We are in the intelligence business, so we signal potential things. How that information is used by the police forces is their own decision. We did have to testify in court once or twice to explain how our financial information was used, but as I said, it is part of a much larger way of working.
Senator Dagenais: Mr. Cossette, thank you for being here.
Why has it been more difficult to convict a person believed to have engaged in terrorism financing compared to money laundering?
Mr. Cossette: Once again, it's difficult for me to assess how the judicial system works, once outside the realm of my own mandate. The only thing I would say is that terrorism, unfortunately, is international activity. International activities are always more difficult and complex in nature than national ones. I will stop there. Lawyers or prosecutors would be in a better place to explain how the system works.
Senator Dagenais: I have another question. FINTRAC says it has analyzed trends in money laundering and terrorism financing. What kinds of general trends have you discerned in terrorism financing? Do specific countries, regions and other causes stand out statistically in this regard, and do certain categories of Canadians and dual nationals from specific regions figure more prominently statistically?
Mr. Cossette: If I may, I will not provide specific numbers. This is information that of course cannot be made public. What I will say, though, is that we are looking at money transfer from Canada to conflict zones. If you're asking us if we're looking at what's going on in Syria, yes, we are. If you're asking us if we're looking at what is going on in Iran, yes, we are. Yes, we are looking at what's going on in Iraq right now, to identify whether patterns that occurred before those conflicts have changed. Are there individuals or companies in Canada that used to send money to Syria, let us say, for the sake of argument, that don't any longer because Syria falls under sanctions, but that are sending the money all of a sudden to a border country with which they never did business before?
We look at these kinds of things for patterns. These patterns may be used not only by our security partners but also by a larger number of partners, such as the Department of Foreign Affairs, Trade and Development or the Department of Transport or even the banking system, if it may be relevant.
In that context, we look at transactions, as I said, toward conflict zones. But we do the same thing when it comes to specific groups in Canada, where their money may be going and whether these patterns are changing. We may be looking as well at money coming into Canada. Take, for instance, a sampling, a kind of transaction, and see whether, if you compare that with another group, you see the same kind of pattern. At the macro level, we do that as well, but of course we cannot disclose. Even in the communications we have with partners such as DFATD, we cannot disclose the name of the individual, the name of the banks or that kind of information.
The Chair: I want to follow up, if I could, in respect to the question of laundering money for organized crime versus terrorism. Following up with the money with organized crime, you obviously have the ability to identify, at least in part, that type of criminal organization that is actually laundering money to somewhere in the world; is that not correct? Through FINTRAC you at least identify in a general sense?
Mr. Cossette: We do identify groups because our enforcement partners provide us with the names and the connections between that name and the group. As I said before, if I see a transaction under my name, it doesn't say ''Gérald Cossette, member of X criminal group,'' but we do receive information from our partners saying, ''Gérald Cossette belongs to such a group.''
The Chair: I want to follow up with organized crime, because it has been said that perhaps in some cases organized crime is involved in one way or another in financing some of this terrorism activity. Is there any truth to that? Perhaps you could expand further on that particular question.
Mr. Cossette: Criminal organizations and terrorist organizations use illegitimate money and they acquire that illegitimate money the same way: fraud, credit card fraud and so on. So how they make money is similar to what organized crime does. Where it differs is that there is illegitimate money, proceeds of crime, but there is also legitimate money. People may contribute to terrorist organizations from their salary. So the money is not necessarily illegitimate; the source of that money is legitimate.
The second difference is that organized crime commits crime for profit. Terrorists collect money as a means to finance terrorist activities and terror. That's the main difference. But the way they accumulate wealth as it pertains to illegal means are more or less the same: credit card fraud, stealing, Ponzi schemes, extortion.
Senator Day: Mr. Cossette and Mr. Beaudry, my apologies for being a wee bit late. I did have the opportunity, Mr. Cossette, to review your written comments, so I know generally what happened when I wasn't here.
Could you tell me how many employees and how many analysts you have in your organization?
Mr. Cossette: We have about 360 employees, split in different groups. The groups which would be of interest to this committee are basically the compliance group, which is in charge of the interface with the reporting entities, and then the financial analysts, the group to which Luc belongs, where they do the financial analysis.
Senator Day: So what you're providing is financial intelligence to your enforcement partners, those entities you're entitled to reveal the information to. So that is financial information you've received from all the financial institutions, et cetera, that has been analyzed. Are all the analysts analyzing that according to your mandate, money laundering and anti-terrorism, or do you fine-tune your analysis and different analysts look at the information from a different point of view, depending on whom you're giving the information to and passing it on to?
Mr. Cossette: Our mandate is very clear and narrow. It's about money laundering, terrorism financing and national security. In order for us to disclose information to our law enforcement and security partners, we need to reach that threshold, which means that we do receive reports from financial institutions that may never be disclosed because there is nothing in the report that shows suspicion of money laundering or terrorism financing, unless we get a specific name of a terrorist. But even then, the transaction has to suggest something; otherwise we would be disclosing everything we received.
Our legislation has been written in such a way that it has to be based on suspicion of money laundering and terrorism financing. We do not disclose on proceeds of crime. We do not disclose for fraud. We disclose as long as it pertains to money laundering. As you know, proceeds of crime lead to money laundering most of the time.
Senator Mitchell: I'm interested in the example you used, Mr. Cossette, of a company that may have been sending money to Syria and then, due to changes with that relationship, they're sending it to a border state, and that raises suspicions. How do you get on to that company in the first place? Are the banks letting you know, or do you need a warrant to then go the next step to check them? What's the legal relationship to your being able to get that information?
Mr. Cossette: We have no investigative power. That has to be clear. Investigative powers reside with police forces. So how it works is that the legislation compels financial institutions to report on a certain number of things. Once we get the information and we establish that it's suspicious or there is a change in pattern which may suggest something, we may disclose to the police force and say, ''We see here a change in patterns that suggests either money laundering or terrorism financing.'' The police force decides if they want to proceed. If they do, then they may obtain a warrant or a production order, but we have no legal authority to do that.
We're being asked that very often: ''Why don't you go back to financial institutions?'' Our legislation does not allow that. That's for the enforcement agencies to do. If they decide to pursue their investigation, then they do what they have to do.
Senator Mitchell: Do you have an opinion about whether your legislation should allow that?
Mr. Cossette: The regime allows it in the sense that the police force can do that job.
Senator Mitchell: You don't think it's something that you need to be able to do?
Mr. Cossette: I think Parliament has to decide how far we want to challenge the privacy of Canadians. Our legislation provides us with a very low threshold for receiving the personal information of Canadians. If we wanted to go further, I think parliamentarians would have to assess whether privacy in this context is more important than security.
Given the fact that our threshold is low, because we receive the information, the way we may use that information is limited by our mandate in legislation.
Senator White: Thanks for your answers. They're excellent. You made a comment earlier about X criminal group or criminal organization. In the case of terrorists or terrorist organizations, we list them in this country, and it's pretty easy to identify when they're sending money to a specific country. We can quickly identify whether or not they're going to a listed terrorist group. Would it help if we listed criminal organizations as well?
Hell's Angels are a criminal organization; everybody in the country knows it, yet we still don't list them as one, even though I think we're saying it publicly today. Would that be helpful to the manner in which you provide information, that the information could go back and forth if we start listing known criminal organizations that have been identified in courts a number of times, for example? How we list them is up to Parliament, I guess.
Mr. Cossette: It would not be helpful in the sense that we're tracking individual and business transactions. So even a terrorist group in Canada, Hamas or any terrorist group, unless you have names associated with people belonging to Hamas, it's impossible for us to know that they're Hamas. From that standpoint it has its limitations.
Senator White: But the fact is, with Hamas there are names attached to it. So it does help at some point. An investigative authority at least, if they're coming back and saying so-and-so belongs to Hamas, we have a couple of transactions, obviously you want to know when they're doing transactions. Don't you think the next step in the criminal organization would also do it? I'm not trying to be argumentative.
Mr. Cossette: To a certain extent, that's what happens now.
Senator White: With terrorism?
Mr. Cossette: With criminal organizations as well, because the investigators may come in and say we are investigating Mr. S, who is allegedly part of organization Y. That's how at the strategic level we can track, for instance, the amount of money we may see related to the Hell's Angels or any other criminal organization.
It really depends on the information provided to us on specific cases. Sometimes the information requests are very comprehensive and they tell us the whole story. Other times, it's more limited.
Senator Day: I have two questions and I have a limited amount of time, so I'm going to try to combine the questions if I can. They relate to the analysts, again.
You analyze according to your mandate, but some of the entities in Canada, in particular, may have an interest that is a little bit different because of the particular entity. What are your views with respect to your database being made available to these other entities so that they could analyze according to their particular mandate as opposed to taking the intelligence that is a result of your analysis?
One of the entities I am thinking of is Revenue Canada. They may well be interested in tax evasion, which could easily be tied in to anti-terrorism if you wanted to take a broad perspective like you did earlier in relation to laundering.
Mr. Cossette: Mr. Chair, we already disclose to CRA. We disclose for tax evasion purposes, as long as the information which is provided to us meets two thresholds. The first is money laundering; the second is tax evasion. So we disclose to CRA as we speak.
Moreover, in Budget 2014, if I'm right, or in other legislation, in fact CRA will now have access to the same international electronic fund transfer that FINTRAC accesses right now. CRA will not have access to our database. Technically the information will come from the financial institutions, one way to FINTRAC, one way to CRA, exactly the same international electronic funds transfer. Not all the other information, but that information because it's relevant to them when it comes to tax evasion.
What may have been perceived in the past as a lack of sharing of information between our two agencies is disappearing very quickly because that capacity will be made available as of January 2015.
Senator Stewart Olsen: Just very briefly, and it's more a point of clarification, is this information tracked two ways? For instance, can an investigative agency, say CSIS or the RCMP, give FINTRAC a name or an organization and ask for information on that?
Mr. Cossette: That's what works most of the time. That's how we proceed. I don't know what the percentage of the business is.
Mr. Beaudry: Approximately 80 to 85 per cent of our cases are based on information voluntarily provided by our partners, and 15 to 20 per cent of the cases are those we proactively initiated. That's roughly, I would say, the breakdown.
Mr. Cossette: For precision, we received more than 1,300 requests from CSIS and the RCMP last year, to which we responded 1,143 times.
Senator Mitchell: I'm interested in the question of, again, the relationship with these other agencies and the sharing of information. You made the point, Mr. Cossette, which was very pertinent, that you've sped it up. You implied that you've changed the process to some extent to do that. I wonder if there's a way that you could reveal that to us.
It was suggested by the Banking Committee that actually other agencies, CBSA, CSIS, have direct access. I'm maybe rehashing that ground. Do you think it would speed it up even more and there wouldn't be too much downside if they did have direct access? Or are you a proponent of keeping the two separate and having the door they have to pass through and you have to pass through to make sure things are contained?
Mr. Cossette: When it comes to speeding up the process, I'll let Luc explain the changes we've made to our processes so it goes faster. But when it comes to direct access, there are two things.
Our legislation flows from the Criminal Code, so therefore the threshold is very low. That explains why we have no investigative powers and why police enforcement agencies need warrants and so on. If you were to give access to our database to other organizations, you would need to change the nature of the relationship. The legislation has been created explicitly not to give access, given this very low threshold. That's the first issue.
The second issue is if you work to give them direct access they would need to develop their own capacity in terms of analyzing the information and making sense of it. So we have developed, since 2000, an expertise which is exclusive to us. Yes, provincial police and large municipal police forces have analytic capabilities as well, but that's what we specialize in. If you were to move that elsewhere, you would need to reproduce that same capacity in a series of organizations. The service is very much in demand, so therefore if we did not do it somebody else would have to.
Mr. Beaudry: Very succinctly, we've instructed our front-line analysts, who is reviewing all the STRs, all the information that is coming up, with the authority to bring up to the line of management directly when they see issues of national interest rapidly. Essentially we've cut the red tape around the review of important alerts.
When it's time to get management's approval to release the disclosure, this is something we can do within a matter of minutes. If we see it as an important aspect, we've done disclosures within an hour. It's possible to do it. So when people ask if we're timely, we pay very close attention to the issue at hand, and if it requires immediate action we immediately disclose.
The Chair: I want to follow up on one other question here, and that has to do with a statement that you made in your opening remarks. You said that at the end of April the RCMP's Integrated National Security Enforcement Teams in Ontario and Quebec recognized your contribution to a terrorist financing investigation on IRFAN-Canada, an organization allegedly linked to the terrorist entity Hamas.
My understanding is that that particular organization was under scrutiny or investigation for a number of years. Finally, at this point in time, in April, it was identified and certain steps were taken.
In view of the information that you provided us today — that there were, I think, 234 disclosures this past year, twice as many as the year before, and I don't know how many the year before — are we going to see a further coordination of government responsibilities to ensure that if an organization such as this is utilizing its charitable status to finance terrorism, we're going to be able to lay charges earlier than later as opposed to this situation we're facing right here?
Mr. Cossette: The thing I can say about this, not this specific instance but the approach that is being taken when it comes to non-governmental organizations, is that work is being done right now under the Financial Action Task Force to better understand how non-governmental organizations are used, in fact, to channel money to terrorists or illegitimate organizations.
With regard to this specific case, it is a long story of knowing what is happening and not knowing what is happening, and when it became clear enough then there was a possibility for the enforcement agencies to take action, but it is very difficult just at the outset to understand or, basically, to establish whether an organization does provide money to a terrorist organization.
It was possible to establish the relationship between IRFAN and Hamas, but it is not necessarily possible, given the way they hide their money sometimes, or the way they transfer the money around the world before it hits the final destination, the same way criminals do. It is a field which, in fact, is of significant interest not only to Canada, but to a number of countries, to have research work done.
The Chair: Colleagues, I want to follow up on this. Is this just an example of where a charitable organization is identified with a direct link with a terrorist group, and yet we're not in a position to affect any changes in respect to what is transpiring because we haven't got enough records there on the financing going from one country to another?
Mr. Cossette: In the case of IRFAN, or any organization, you need to establish a relationship between this organization and the organization abroad.
The Chair: Right.
Mr. Cossette: Organizations that would like to provide money to terrorist organizations would use, more or less, the same kind of technique they use for laundering money, so it is difficult to establish the direct link between the people providing funding here and how the funding is used on the other end.
In terms of terrorism, you need to establish that the fund at the other end is used for support, planning and so on. It is difficult; it is more difficult than we would like it to be.
The Chair: Colleagues, we have gone over time. I want to thank our witnesses.
Mr. Cossette, you have been very informative. Thank you for the time you have taken to present your information. This is part of the public conversation that we intend to have on this issue over the coming months so that Canadians become aware of the threats we face and the responsibilities that government is taking on to see that they protect our peace and security. Thank you for coming. We appreciate your work on behalf of all Canadians.
We will now continue our look at the terrorist threats to Canada. We are pleased to have with us Mr. Jeff Yaworski, Deputy Director of Operations, Canadian Security Intelligence Service. Mr. Yaworski, we appreciate your taking the time to be here with us today. I understand that you have an opening statement. Please begin.
Jeff Yaworski, Deputy Director of Operations, Canadian Security Intelligence Service: Good afternoon, honourable senators. Thank you for your invitation today to discuss terrorist threats. I will focus my remarks on the threat to Canada from terrorism and how the terrorist threat is rapidly evolving given recent world events.
As the director of CSIS stated on October 8 to a committee of the House of Commons, the threat from terrorism is real, and Canada must be vigilant in the face of it. The rise of the terrorist group known as the Islamic State in Iraq and the Levant, or ISIL, after breaking from al Qaeda over a year ago, represents a significant shift in the internal politics of global Sunni extremism and increased the complexity of the threat both internationally and to Canada.
ISIL's successes over the past year are largely due to its aggressive recruitment, fundraising and propaganda efforts and its opportunistic territorial expansion into Iraq and Syria. Canadian interests could be affected by the region's continued slide into instability. This includes the security of our Armed Forces who are deployed and in the process of deploying to the region, the security of our regional allies and the potential for greater refugee flows and displacement of persons. CSIS will continue to appropriately advise the government on these threats and issues just as we have in the past, for instance, on Afghanistan and the conflict in Libya.
ISIL's recruitment and propaganda efforts, alongside other extremist groups, continue to attract violent radical Muslims worldwide to join its ranks. ISIL has engaged in one of the most sophisticated and successful social media campaigns of any terrorist group to date. While some of ISIL's propaganda videos are certainly gruesome, they also work. ISIL has recruited thousands of individuals from across the West and the Middle East, particularly young, disenfranchised males with a fascination and penchant for violence.
Honourable senators, as we know, Canadians are not immune to such efforts. The service is aware of at least 50 Canadians involved in terrorist-related activities with ISIL and other extremist groups in the region. Of these individuals, we are aware of approximately 30 in Syria alone, with the remainder located in Iraq, Turkey and associated border regions. The participation of Canadians in these conflicts is harmful to our international reputation and destabilizes regional security. Canada has an obligation to do her part to prevent such travel.
As the director of CSIS noted recently, we also remain concerned over the threat posed by individuals returning to Canada after having engaged in threat-related activities abroad, whether with ISIL or other groups, like Jabhat Al- Nusra in Syria. While such individuals' experience and determination vary widely, it only takes one individual or a small group of individuals to cause great harm. We are currently aware of approximately 80 individuals in this regard, and we actively monitor them, some under judicial warrant, for any threat to public safety.
We also remain concerned that global events could shape the threat environment in other ways detrimental to Canadian interests. For obvious reasons, CSIS remains concerned that ISIL's message and successful social media strategy could inspire radicalized individuals to undertake attacks here in Canada. Senators would be aware of such a possibility from recent arrests in Australia, where an ISIL-inspired terrorist group planned to engage in random acts of violence against innocent civilians. CSIS is actively investigating any such possibilities and will, of course, advise the appropriate parties on such matters, but I would also like to stress that, as the director has stated, CSIS has no information to indicate that a terrorist attack in Canada is imminent.
In addition to domestic threats, global events increase the threat to the safety of Canadians in embassies throughout the world. CSIS works cooperatively with and provides advice to our partners at DFATD to address such threats. However, as always, I would certainly encourage Canadians to check DFATD's travel advisories before travelling internationally to make informed decisions on these matters.
Honourable senators, the dynamics between global jihadist groups are of concern for CSIS. How the competition between ISIL and al Qaeda plays out will determine much of the evolution of future threats. For instance, given the rise of ISIL, al Qaeda and its affiliates may increase their operational tempo against Western targets as a means to maintain relevance with followers who are increasingly leaving al Qaeda to join ISIL. Such a scenario is of plain concern. Conversely, one could also see a rapprochement between the two groups, which could lead to a leveraging and coordination of resources between the groups.
CSIS is working with our international partners to keep a keen eye on such developments to ensure that the Government of Canada is well advised in this increasingly complex threat environment. In that regard, we welcome the minister's announcements last week proposing various amendments to the Canadian Security Intelligence Service Act, particularly by confirming our ability to operate internationally.
As the discussions over terrorism and ISIL today demonstrate, the ability of CSIS to work abroad is vital in addressing threats to Canada's national security. Without such an international presence, Canada would lack understanding of threats to the security of Canada that originate or form overseas.
Senators, I say these things to put the threat in plain sight. The men and women of CSIS are actively engaged in investigating all of these potential dangers with our partners at home and abroad.
As senators would be aware, the government recently released its public terrorist threat report, which updates the government's four-pronged strategy to prevent, detect, deny and respond to the terrorist threat. The service's primary role in this strategy is to detect the terrorist threat and provide the government with threat-related advice. Such a role is entirely consistent with CSIS's mandate under its act, which is to provide advice on threats to the security of Canada to a variety of government departments and agencies.
In that regard, such advice can take many forms and can address the threat at different stages. For instance, CSIS provides screening advice to the CBSA to prevent dangerous individuals from entering Canada in the first place. For Passport Canada, we provide advice that can lead to the revocation of passports to prevent Canadians from travelling to places like Syria and Iraq to engage in armed conflict. Of course, we continue to work with our colleagues in the RCMP, who can initiate criminal investigations upon receiving a disclosure letter from CSIS. In this regard, CSIS is proud of our part in many of the successful prosecutions since the attacks of 9/11. I understand the RCMP is scheduled to appear later on this topic. I am sure they can provide further context on these matters.
Senators, while cooperation with our government partners is essential, our work also relies on the cooperation of citizens. As I have stated before, CSIS has no information indicating an imminent threat, and I would encourage all Canadians to go about their daily lives. That said, national security is everybody's business, and I would encourage Canadians to be vigilant and to report any potential threat to national security to CSIS or their local police or by making use of the RCMP's national security tip line.
With that, I welcome your questions.
The Chair: Thank you very much, Mr. Yaworski. We appreciate your coming here this afternoon to discuss a very serious issue that Canadians face, and I would like to begin with the first questioner, Senator Mitchell, the deputy chair.
Senator Mitchell: Thank you, Mr. Yaworski, for being here with us. I'm interested, as I'm sure most Canadians are, in the announcement by Public Safety Minister Blaney about changes that he's contemplating to your ability to do what you need to do.
If you were him for a few moments, what changes would you want in your act or in your mandate and your authority to do what you feel you are not able to do now?
Mr. Yaworski: I have to be careful in my answer to this question, senator. As you are well aware, the bill hasn't been introduced yet. It will be introduced this week, and I would feel much more comfortable addressing those sorts of questions after the bill is actually introduced.
There has been some speculation on the content of that bill, some speculation that perhaps is not as well-educated as it could be, and, certainly, I think those issues will be addressed in significant detail once the bill is introduced in the House of Commons.
One issues that does come up and that I know has already generated media attention concerns CSIS's human sources. What I would like to say on that point is that the service relies extensively on information that is provided to us by human sources. We can't do our job without it. They provide us with lead intelligence that helps to save Canadian lives. They're operating against some very nefarious groups. It doesn't take much imagination to look at what we have already seen in terms of what these groups are capable of with individual, innocent civilians. For them to discover a perceived traitor in their midst, who is providing information or intelligence to CSIS, would be extremely risky for that individual, as well as for that individual's family.
Senator Mitchell: To get more specific, you use the number of 80 individuals, approximately, that your organization believes have returned from fighting in some sort of a terrorist organization and are now in Canada. At face value, that might be disconcerting to people. What reassurance can you give? Do they still have passports? Do they walk freely? What do you do about them? Are you watching them so that you can see if they have networks?
Mr. Yaworski: Certainly, those 80 individuals that I referred to have had different experiences over there. While you refer to fighting with these groups, that's not fair to say for each and every one of them. Some have been involved in fundraising. Some have been used to assist with their media and their Facebook pages. They're very media savvy, and they've been used for that purpose. Others have attended language schools. Some have attended more radical schools that we are quite concerned about, but not all of them are hardened fighters as you described it. Each of their experiences has been different.
Therefore, when they do come back to Canada, obviously, we have to monitor their activities as much as we can but prioritize as well. We can't devote all of our resources to all of them all of the time. So we do have to prioritize those individuals. We do know where they are. We share information with the RCMP wherever possible. Your question about passports is a valid one. In order to get back into the country, they would have had their passports. In order to leave the country, they would have had passports.
It is important to note, as well, that, in terms of tracking these individuals when they leave, Canada does not have an exit information system. It is not always easy to know when these individuals have left.
Senator White: Thank you very much for being here, Mr. Yaworski, and for your responses. We have heard the terminology ''extremist traveller'' a lot lately. I'm trying to get my head around why there's been a change from jihadist to extremist traveller. Is there something that has changed, or is it just a new terminology?
Mr. Yaworski: I think it is probably more of a terminology thing than anything else. As I said in my answer to Senator Mitchell, they're not all involved in jihadist-type activity. ''Jihadist'' I would attribute to actually fighting and potentially seeking to be killed in combat. The experiences of others, as I have already indicated, are quite different.
Senator White: Can you walk us through your key areas of concern outside of ISIL? Before ISIL came along, I know you guys were plenty busy. Can you give us an idea of what you are busy with besides ISIL right now?
Mr. Yaworski: It's particularly CT threats because they still remain the most prominent threats. If you look at radicalization, it comes in many forms. Each individual's path to radicalization is quite different and unique. There's no one descriptor that can explain how one person went from sitting in the basement of his parents' home, surfing certain radical websites, to actually being engaged in the conflict in Syria itself. That step of radicalization and those individuals that are radicalized are quite concerning.
The al Qaeda core has probably diminished in terms of importance, but its message continues to resonate throughout the Internet. In this day of the Internet, these messages are readily available, and they're influencing the next generation. It is not simply to go and fight with ISIL. ISIL is the group today, but there will be other groups; there are other groups.
Canada has between 130 and probably 145 Canadians right now that are over there fighting. They're not all with ISIL. They're with other terrorist groups, such as Hezbollah, and in other parts of the country and in North Africa, East Africa and West Africa. These Canadians are involved in activities overseas that they shouldn't be. The CT threat is much broader than just the ISIL group. It is something that concerns us greatly and is our number one priority.
Senator Stewart Olsen: You mentioned that we have about 130 Canadians, and then you said there are about 145. Is that number to the best of your knowledge, or can you share that with us?
Mr. Yaworski: On any given day, the number changes. Individuals are put on the list when we acquire additional information that confirms their identity — that confirms their nexus to Canada. Individuals come off the list when they have returned to Canada or if we believe they have been killed in action. That number is a snapshot in time. Over the past year, the number has ranged between 130 and 145.
Senator Stewart Olsen: Of the 80 Canadians you are monitoring, you said you can't monitor them all the time. How would you say you are monitoring them? Do you pick the most dangerous? How would you monitor them? How many man-hours are involved, approximately?
Mr. Yaworski: It is difficult to attribute man-hours. I don't want to give away all of our methodology in terms of what we're doing.
Senator Stewart Olsen: I understand.
Mr. Yaworski: With a number as significant as that, we have to prioritize. The point I was trying to make, Senator Stewart Olsen, is that we have to prioritize these organizations. We have to dedicate our limited resources to those we think are the greatest threat. For some of that, we have a wide variety of techniques we can use. I spoke about human sources earlier, which are our bread and butter in terms of determining what is going on and which individuals are more radical than others. We have the capability to acquire warranted powers on those who are the most significant risk to the country in terms of the activities that we believe they're involved in. The spectrum is quite wide, but we prioritize those targets as much as we possibly can.
The Chair: If I may, I'll follow up on this with respect to your knowledge as an organization and other government departments. We know that there are up to 145 people actively fighting or fundraising or doing something else in respect of terrorist groups outside this country. We have 80 who have returned and are resident in Canada. I assume they are Canadian citizens.
Mr. Yaworski: Yes.
The Chair: Do you have an estimate of how many supporters here are actively involved with those 200 or 215 identified terrorist activists? How many Canadians are involved in supporting them? They have to have family; they have to go home; they have to do something. Do you have any idea? Are we talking about 300 or 400 or 500 people?
Mr. Yaworski: It is a good question, senator, because you are introducing another concept here of what we don't know, quite honestly. These are numbers we know. What keeps me up at night is those who haven't come across our radar screen. We're very dependent domestically, obviously, on working with our close partners at CBSA and CSE and with the RCMP. Overseas, where many of these threats originate, we rely very much on our close cooperation with our allies.
The threat of terrorism is not something we can manage on our own through our own platforms. We leverage heavily our partner agencies, as they do us, quite frankly. We cannot do it alone and neither can they. We have many partners that help us with this.
With respect to those we don't know in Canada, the support network, as you say, each day we reassess our target inventory and learn about new individuals. When we're focused on one particular target, the ripple, if you will, when you cast the stone on the pond, broadens quite extensively; and there are others who are affiliated with it. Our job is to determine which of those supporters, as you have described them, warrant further targeting. We constantly reappraise our target list and ensure that resources are dedicated to those at the top of the list.
Senator Day: May I have a point of clarification, Mr. Yaworski?
Mr. Yaworski: Sure, Senator Day.
Senator Day: ISIL and ISIS: What relation, if any, do they have to one another?
Mr. Yaworski: A close relation. They're the same thing. ISIL and ISIS are one and the same — Islamic State of Iraq and the Levant or Islamic State of Iraq and Syria. It is a different translation of the same group, but they are the same. They are also sometimes known simply as Islamic State.
Senator Day: Have they contacted you and said they would rather be called ISIL than ISIS?
Mr. Yaworski: No, the communication channels are not that good.
Senator Day: Let's talk about the Integrated Terrorism Assessment Centre.
Mr. Yaworski: Yes.
Senator Day: Our information is that it brings together federal intelligence resources and various Canadian entities along with the analysts and their database. Is FINTRAC part of that group?
Mr. Yaworski: I believe FINTRAC has representation on ITAC. ITAC as you described it is exactly that — a collective community effort that provides assessments on counterterrorism files. While it is housed in CSIS, it is an independent entity. The intent of ITAC is to bring together those agencies as well as access to their respective databases.
Senator Day: We just heard from FINTRAC, which has a good number of analysts, that they don't share their database with others, yet maybe they do share indirectly through the Integrated Terrorism Assessment Centre. We will have to try to trace that.
Mr. Yaworski: Yes.
Senator Day: Are you aware of the analyses done and provided by FINTRAC on financial transactions that could possibly relate to terrorism? Is that information helpful to you in its existing form, or do you have to analyze it more from the point of view of CSIS?
Mr. Yaworski: First, let me clarify with respect to ITAC. While their employees are members of ITAC, it is their respective employees who have access to their database. They extrapolate from those databases what is germane to whatever file they're working on. It is not as if their databases are housed in CSIS, as they're completely separate.
Second, in terms of what FINTRAC has provided us, because of their access to financial institutions, FINTRAC is provided information with respect to banking transactions. Through the information that they provide to the service, we're able to make connections between individuals in Canada who are transferring funds to other parts of the world.
Senator Day: Yes.
Mr. Yaworski: We're also able to see, through our own investigations, where the recipients of that money are. In some cases, the recipients are affiliated with terrorist organizations. We can solicit information from FINTRAC directly. Also, on occasion, FINTRAC provides lead information to us for potential investigative purposes. We get both.
Certainly, in the past couple of years, the volume of information we're getting from FINTRAC is on the increase and has proven to be very valuable to our investigations.
Senator Day: How long has ITAC, with the various policing and information-gathering entities, been in operation?
Mr. Yaworski: It just celebrated its tenth anniversary. CSIS celebrated 30 years and FINTRAC has celebrated 10 years.
Senator Beyak: It's my understanding that CSIS and the RCMP participate in outreach to terror threats and those who would perpetrate them. Is it working, in your opinion? On balance, is it interfering with the possible laying of criminal charges before they go further?
Mr. Yaworski: The service has been involved in outreach. We do meet with members of the community on a fairly regular basis, but I wouldn't say to the extent of the RCMP in terms of the work they are doing on counter and radicalization. They've devoted a lot of effort, and if the RCMP does speak to the committee they will be able to expand more on what they're doing to learn more about radicalization and countering radicalization in its very early stages. I can't help but think that would be a wonderful thing.
CSIS is not in that space. We have individuals who have an expertise in radicalization, but our focus is more on targeting and ensuring that we're aware of those individuals that are problematic, engaged in threat-related activities. In terms of whether outreach impacts criminal charges or not, that's best put to the RCMP.
Senator Dagenais: How are terrorists glorified in Canada and what can be done to prevent any further glorification of radicals at schools, temples, mosques or other such places?
Mr. Yaworski: It is a very good question, Senator Dagenais. It speaks directly to the radicalization process itself. We are concerned that certain individuals who come back after having experienced combat, in many cases from far- reaching places like Syria and Iraq currently, and who have been exposed to the military aspects will have obtained training in explosives, and those who have been directly engaged in the conflict do come back to Canada with additional street credibility and the ability to further radicalize others within the community.
The glorification of those individuals happens not only in small circles. It is a big part of the radicalization process online. ISIL is extremely media savvy. They have a very good media program that helps in the radicalization, and they do put great effort into trying to romanticize the conflict, romanticize what is truly a bloody and gruesome activity into something that has a more romantic appeal to it. From that point of view, they are trying to glorify what are effectively terrorists engaged in terrorist activity.
Senator Dagenais: We read last week that those living around nuclear plants in Ontario were given anti-radiation tablets. Can you describe the threat to our electricity grid and our power supply from terrorists?
Mr. Yaworski: Probably not as well as I should. I can tell you that nuclear facilities themselves are extremely secure. They have their own security facilities and guards who are functioning there. Obviously if the service was to acquire information on a specific threat to a nuclear facility, we would be directly engaged with them. We have no such information at this time in terms of Canadian nuclear facilities.
There is a threat out there to them. They are a potential target, but at this point there is certainly nothing, senator, that I would say is imminent in terms of a specific threat directed against our nuclear facilities.
Senator Kenny: Welcome, Mr. Yaworski. I'm concerned about your resources. It wasn't too long ago that Jim Judd appeared before this committee and said that 50 per cent of CSIS resources were directed at Chinese spying in this country. We have also received testimony from members of your organization that it takes between 10 and 12 personnel to plant a listening device, and as many as 26 to 28 to follow somebody surreptitiously. If you have 80 people in the country now — and I did hear you say you prioritized — it sounds like you are going to have to put a lot of focus on a relatively small number just because your resources are limited.
Mr. Yaworski: Thank you for the question, senator. I can tell you that like other agencies and departments, we work within the budget that is assigned to us. We do have to prioritize. The foreign fighter threat is growing. The returnees concern me a great deal.
Every extremist we prevent from going overseas to engage in extremist activity is one more individual we have to investigate closely because they're radicalized to the point where they want to leave.
Saying all of that, there is nothing more we can do with the budget we have except to prioritize internally as effectively as we can, and I think we're doing that.
Our success rate has been quite good. I say that with some pride about what we have been able to accomplish. I would be foolhardy to say we have all the bases covered. We do what we can with the budget we have, sir.
Senator Kenny: In Afghanistan, CSIS played a very significant role. Currently we have a situation where Americans are bombing targets in the Middle East and they're using CIA and SOF to assist in targeting their aircraft. When the time comes for Canadian aircraft to be flying, do you anticipate that role will be taken by Canadian Special Operations Forces or by CSIS?
Mr. Yaworski: CSIS has not been asked to play a role yet in our combat mission in Syria. If we are, we certainly will be there. As you are well aware, senator, we have played the role, as you have described it, in Afghanistan, and we continue to have a presence in Afghanistan. Now we're focused on areas outside of the immediate conflict zone, and we're covering what we can through the deployment of human sources into the area.
It is a very difficult area, and the ability to get clear visibility on Canadian targets that might be there, or any other targets from an ISIL perspective, is a very difficult one.
I am speaking from a CSIS intelligence perspective, not from a military perspective. I can't answer your question on targeting. That's best posed to the military in terms of how they're going about their targeting. I would imagine based on what I know that it is a collective effort of all those who have representation, in terms of their air forces and the specific targets that are being selected.
The Chair: I would like to ask a question for more information. Do you have a list of how many Canadians or dual citizens with Canadian citizenship have been convicted of terrorism outside of Canada over the course of the last 10 years?
Mr. Yaworski: Canadians and dual Canadian citizens that have been convicted outside of Canada for terrorism? I don't have that information, senator. Certainly in the last five years, that number is not a large one. We have had some success domestically in terms of the convictions we had from a counterterrorist perspective, and there are cases before the courts right now of Canadians and dual citizens. But in terms of convictions overseas, senator, I don't have that information.
The Chair: Could you get us that list if there is one?
Mr. Yaworski: Certainly I can endeavour to get that.
Senator Mitchell: I would like to follow up on Senator Kenny's point about resources, because if you are prioritizing the 80, how many resources do you have for the others that you say you're not sure you even know about? I will ask a question that probably broaches policy and maybe you can't answer it. Hopefully I can ask it in a way that you will.
It does beg the question of the need for a parliamentary oversight body that has both sides, as it were. It is not so that your community isn't just relating to a minister and a cabinet, which could do a great job, but might not have another perspective.
In your relationship with the Five Eyes — the other countries, including the U.S. and certainly the U.K., have such a body — are you aware if it is useful to the intelligence communities in those countries to have that kind of oversight and body to confide policy issues, to confide budgetary issues and problems in a way that they can be dealt with in a balanced fashion?
Mr. Yaworski: Thank you for the question, senator. I can tell you that this is a policy issue for government to decide. However they decide, we will accommodate whatever that final decision ultimately is, but I'm quite confident in the role that SIRC, the Security Intelligence Review Committee, plays in review of everything that we do. All of our investigations, all of our human resources, all of the activities of our investigators, on the street, domestically and overseas, they have access to all of that. That's not something that the Five Eyes community has access to, and we rely very heavily on the advice and the questions that SIRC puts to us. They keep us on our toes. They challenge us when they think it's appropriate, and we respond to their advice and counsel in terms of what things need remedying. It has made us a better organization over the past 30 years. So I'm quite confident that the review we have in place provides Canadians the assurances they require to have comfort that we do everything we do within constitutional and legal frameworks.
Senator White: Thank you for your responses. You referred to radicalization and the RCMP being at the front end or the pointy end of that stick, not CSIS. I accept that, but Ontario and Quebec and every major city in Canada have a police service other than the RCMP that's a service of jurisdiction. Are you working with them and providing the education and the advice they need to make sure that they're drawing on that information as well? The RCMP doesn't have the resources any more than many do.
Mr. Yaworski: We do certainly interact with the local police forces as well as the RCMP. The RCMP has connectivity through the Canadian Association of Chiefs of Police, as you're well aware, Senator White, and they are often the venue for that information. But to Senator Day's question earlier, ITAC also plays a role in informing first responders on any threats of that nature. I indicated that the RCMP has the lead in terms of advanced work in countering radicalization. Public Safety is also directly involved in that space and is working on the radicalization issue as well. So it's not just law enforcement; Public Safety has taken a lead role as well.
Senator Day: I'm going to your earlier comments and I would just like to confirm what CSIS is entitled to do internationally now. You were talking about the minister's announcement and said that you were pleased with it, and particularly his confirming your ability to operate internationally. So you are operating internationally now and he's confirming it?
Mr. Yaworski: We are operating internationally. We have had that ability for the 30 years that the CSIS Act has been in place. There's no geographic limitation on where we can investigate threats to the security of Canada. We do it both domestically and abroad. The issue I believe the minister was referring to is that our overseas mandate is not as clearly articulated within the CSIS Act itself.
Senator Day: When you go on and say Canada would lack understanding on threats to the security of Canada which originate from overseas, you're saying that would be the case if there happened to be legislation saying you couldn't operate internationally. But you can, and you don't lack that information now, and then the minister is just going to confirm that you can continue to do that?
Mr. Yaworski: That's correct, sir. Many of the threats we're facing originate overseas. You just have to look at the recent media releases of ISIL, who have threatened Canada directly. Osama bin Laden, in his Abbottabad compound, had documentation naming Canada as a target. The threats to us are not unique to our own borders; they do originate from outside the country, and in order to acquire the intelligence, we do have to engage in overseas activities.
Senator Day: Which you're doing?
Mr. Yaworski: Which we're doing.
Senator Beyak: Thank you very much, Mr. Yaworski. I wonder if you would be able to tell me if we have a list or the actual number of terrorists or terrorist organizations operating in or from Canada.
Mr. Yaworski: That's a difficult question to answer. We do have supporters, certainly, of a vast number of terrorist organizations within Canada. I think the best way to answer that question is to point to the number of terrorist entities that the Canadian government has determined are worthy of a terrorist listing. That number is 53. Canada has listed 53 terrorist organizations. Therefore, I think it's safe to say that Canada is concerned about those organizations, and we probably, in one shape or another, have individuals that at the very least support their respective causes.
Senator Mitchell: You do a good deal of work with the Five Eyes. You do need to leverage information, ours and theirs, one compounding the other. What about this question of third parties and the information, again in the context of Arar, that goes to them? Do we have control over whether or not it can go somewhere else? If not, what can we do about that and what should we do about that?
Mr. Yaworski: That's a very good question, senator. As I said in earlier comments, we're very reliant on the intelligence that we receive from our partners across the board, Five Eyes in particular. The service has formal arrangements with 290 separate organizations in about 150 countries, so that gives you an idea of the breath of intelligence cooperation that we have. As I indicated, Canada cannot operate on our own intelligence platform alone. We do leverage the resources of other organizations in that space.
That said, when we do share intelligence, we caveat the intelligence that we share. By ''caveat,'' I mean there are specific directions about how our information can be used, and we do that to ensure that it's used within our own legal framework and our own constitution. When we share information, there are limits on how other agencies can use that. They cannot further disseminate that information without coming back to us and requesting our permission to do so. That's effectively the third-party rule that you're referring to, senator. They cannot pass on information without our direct consent.
Senator Mitchell: One of the concerns raised by the minister in his discussion of why he would be changing the act was the problem, as he puts it, I think, or officials say, that judges have constrained the agency's powers in the name of preserving civil liberties. That would be a pretty important constraint in anybody's assessment.
It's a delicate issue to start addressing that balance. Could you give us some clarification of how it has been constrained and how that is, in turn, limiting your ability to do what you think you need to do?
Mr. Yaworski: On that point, senator, I'm afraid I'll have to defer to the actual introduction of the legislation. What I can say is that we respect fundamentally the decisions of the court, and everything we do must be within the framework of Canadian law and speak to Canadian values.
SIRC plays a great role in oversight and review. We do all of our investigative activities. If there are specific issues that speak to concerns of the courts, SIRC will look into those, and they have done on a regular basis. With respect to the legislative changes, I think it's only fair to wait until they're debated in Parliament.
The Chair: Colleagues, I would like to pursue a question that has to do with the legal framework that Canada presently has in place. What is actually happening day to day, which we read about, is Canadians going to, in this case, Syria, Iraq or other countries, joining terrorist groups, maybe even fundraising for terrorist groups and then coming back as a Canadian, and as far as I know they're working at Walmart now and you're watching them, the way you described it earlier.
Are there other countries where the legal framework is such that if someone leaves their country, joins a terrorist group, fights or fundraises with a terrorist group, then comes back as a citizen of that country, they can be charged under their legal framework? Then we don't have limited resources, watching these 80 individuals who we are led to believe and have every reason to believe have been taking actions that we, as Canadians, don't agree with.
Mr. Yaworski: If I understand your question, senator, certainly other countries do have laws that are different from our own. Other Western countries have a much larger problem than we do in terms of the volume, the numbers that are actually involved.
But you do touch on another issue that I think is fundamental for the discussion. We have great relationships with other countries around the world. We respect the citizens of those countries who may be travelling on their passports. So if an individual from Sweden or Norway travels to a conflict zone, is engaged in terrorist activities in support of ISIL and then decides to come to Canada, without the cooperation of those countries in Sweden and Norway who provide us lead information on that individual we would naturally let them into the country without the requirement for a visa. So that is an additional concern, certainly, that we have, senator.
In terms of their own legal thresholds to convict these individuals, I'm not knowledgeable on the specifics of what other countries may have.
In our own country, we have recently adopted legislation that makes it illegal to travel or attempt to travel to conflict zones to engage in or support terrorist activity, and we have had some success to this point. I think the RCMP will be able to provide you more detail on that, but there is legislation in place currently that will help us in that space.
The Chair: This is legislation that was just recently passed?
Mr. Yaworski: Yes, the Combating Terrorism Act in July of 2013.
Senator Day: I think it would be helpful for the record if we could clarify this issue of caveats that you mentioned and leveraging, so that the record will be clear on what we're talking about in the context of anti-terrorism and gathering information.
You indicated that whenever you share information you may put a caveat on there that the third party that you've passed it to not be able to pass it on to somebody else. Presumably that also applies to some of the information that you receive?
Mr. Yaworski: Yes.
Senator Day: So it flows both ways?
Mr. Yaworski: It does indeed flow both ways. Certainly the third-party rule is one of the major requirements of any interaction with any other service. We're also quite selective in what we share and who we share it with. We take into account the potential for human rights violations in a country that may receive it, and certainly with our Five Eyes partners we're at liberty to share more information than we would with some other countries that have questionable human rights records.
Senator Day: Are there caveats on the information you receive from these major partners of ours, the Five Eyes?
Mr. Yaworski: There are caveats in some cases. There is a requirement to respect the third-party rule in all cases. Not all organizations provide the same caveats as we do on the information they share.
Senator Day: The leveraging of the information, if it has the caveat you can't leverage. Could you explain what, in your context, leveraging would entail?
Mr. Yaworski: I should be clear on that point. We can certainly receive the information. We can use it for intelligence purposes to inform our own investigations, to advance those investigations as appropriate, and we can use that intelligence to help us acquire further warranted powers, for example, should that be required. But those are in- house tools that we use with the intelligence we receive to further our own investigations. We can't take that information because we think it's interesting and share it with another organization or another country. So that's where the restriction is, senator, in terms of what we can do with the information.
Certainly in house, and within the circles of informing the Government of Canada, we can use it. That's one of the purposes it was provided to us for.
Senator Day: And the term ''leveraging''?
Mr. Yaworski: Leveraging is about resources and capabilities that other organizations might bring to bear on a certain target, which we don't. Filling intelligence gaps is a better way to describe it.
Senator Day: Just so it's clear, are you saying that you take information that you acquire from another country, one of the Five Eyes countries, and give that to some other nation in exchange for information back? Is that the leveraging that you're talking about?
Mr. Yaworski: No, quite the opposite, senator. If information comes to us from a third party, another country, we are prevented from sharing that with an additional country. We use that information internally. We may use it to provide assessments and advice to government internally, but we cannot share other parties' information with a third party.
Senator Day: My difficulty is I don't understand the term ''leveraging.'' What are we talking about?
Mr. Yaworski: Leveraging is taking advantage of the capabilities and access that other organizations have. They may have very good coverage on one terrorist group or one particular cell which we have no knowledge of but are very interested in.
Similarly, or conversely, we may have access to a certain particular organization or a certain particular activity. We may wish to share that information with them, and in turn they share information with us that's relevant to the threat we're investigating.
Senator Kenny: Mr. Yaworski, it's been widely reported that Canadians have been spied upon by other members of Five Eyes at the request of Canadian intelligence agencies. Is this possible?
Mr. Yaworski: Canadians have been spied upon by other Five Eyes partners?
Senator Kenny: At the request of Canadian intelligence agencies.
Mr. Yaworski: I think what you're referring to, at least in the context of individuals who have travelled overseas, is the ability for other agencies with certain capabilities, particularly in a technical space, to acquire intelligence on Canadian citizens. Where that has happened and where we've had any role in it, it has been based on warranted targets that we have had covered. But other agencies have the ability to target whomever they see fit, based on risks to their own countries or their own national interests. We do not have any control over that; it's based on their own laws and their own capabilities. But the general rule is that Five Eyes partners will not spy on each other.
Senator Kenny: Would I be fair to interpret your answer as saying this is principally a Communications Security Establishment problem?
Mr. Yaworski: I don't think it's a problem. I think the Communications Security Establishment has very good relationships with their signals intelligence counterparts, particularly in the Five Eyes. It's a cooperative relationship. It's like us with our fellow human intelligence services. The relationships are strong and they work closely together in identifying and targeting common threats.
The Chair: I'd like to pursue a question that was earlier put by me and others, and that has to do with the 80 individuals who have left the country, have been active in a terrorism act of some kind or identified and have come back to Canada.
I asked how they could come back here and not have any charges of any kind laid against them in view of the knowledge that we have. The response, if I'm not mistaken, was that under the new legislation, the Combating Terrorism Act, individuals who left the country with the intention of getting involved in terrorism could be possibly charged.
Am I correct in that? This new legislation should, at least in part, deal with these individuals if they do come back to Canada?
Mr. Yaworski: I'll try to answer that question, senator, but I would encourage you to put those questions to the RCMP, who obviously have expertise in this area.
I think one of the difficulties they're facing is the burden of proof, proving intent to commit an act or to join a certain group.
These individuals, when they're about to leave the country, will not advertise where they're going. They will not purchase a direct ticket from here to Syria. They will travel to other parts of the world where it's very difficult to then connect the dots in terms of where they subsequently travel and when they actually end up in a conflict zone in Syria.
They obfuscate their routes. In certain cases, when they are prevented, they borrow or steal passports of other individuals to facilitate their travel. They engage in activities to hide their trails and to make it difficult to prevent their departure. When they return to Canada again, it's one thing for us to be able to provide to the RCMP lead information saying such-and-such an individual was in Syria and was engaged, we believe, in operating with a terrorist group like Jabhat Al-Nusrah, but it's something else for them to prove it in a court of law, and the threshold to prove that they've committed an act that is worthy of terrorism charges in this space has been a difficult one.
There has been some success. Certainly the new legislation that we're referring to provides an extra tool for law enforcement to use, but it's not an easy prospect to go from a wilful desire to go engage in activities overseas and to be able to prove that in a court of law once they return to Canada. I would encourage you to put those questions to the RCMP, sir.
Senator Kenny: I have a follow-up to that. Would it also be the case, Mr. Yaworski, that the RCMP and CSIS would in fact have different points of view on somebody coming back from time to time? And in fact, your folks might be more interested in running an agent and trying to collect more information through him, and the RCMP are really primarily interested in collecting enough evidence that they can go to court?
Mr. Yaworski: Senator Kenny, clearly there are differences in our mandates, between us and the force. We work very cooperatively on CT issues, but to your point, absolutely. There is a difference between an intelligence investigation and a criminal investigation, which is why in the counterterrorist area we run parallel investigations. The RCMP, as you indicated, is looking to lay charges. We have an interest in developing further intelligence and perhaps recruiting that individual that you say came back to acquire additional information on where the next threat is coming from. So there are differences in our mandate, and yes, you're absolutely correct in that regard.
Senator Kenny: Chair, would you find it useful if we asked for a description of the parallel investigations?
The Chair: Go ahead, ask him.
Senator Kenny: Could you describe for the committee, if you would, how the two processes run in parallel and how you resolve issues where you disagree on whether somebody should be charged or somebody should be run?
Mr. Yaworski: The success that we've had over the past several years, but even with the cases that are before the courts right now, the VIA Rail threat, for example, which I'm sure you're aware of, and other cases that we've had, the Canada Day attempt to bomb the Victoria legislature, these cases, while they're before the courts, are similar in nature; and I'm not going to get into any specifics in those cases, but generally to answer your question I'll say that what we've learned over the years in terms of improving the relationship with ourselves and the RCMP has led to a system where we will provide them lead information, because it's only natural we will be the first ones to come across that counterterrorism-type information. We have a lower threshold in terms of acquiring our warrant of powers. We have a lower threshold to use those intrusive techniques that will lead to the intelligence that indicates a clear threat.
At some point we will receive information that suggests this is going to proceed from an intelligence investigation to a criminal investigation because they've met that threshold. At that point, we will provide a disclosure to the RCMP, who will then initiate their own investigation. That disclosure is relatively light in terms of content. That disclosure gives the RCMP just the bare bones of what they need to initiate their own investigation, to deploy their own resources, to deploy their own surveillance, to go up in their own Part VI applications to get their own warranted coverage. They use our lead information to advance to a point where they can initiate their own investigation, and they will take over primacy on those targets that are now being looked at from a criminal perspective.
Our parallel intelligence investigation will look at those others in the periphery, perhaps those that haven't made the top list of RCMP from a criminal threshold perspective. They're focused on those; we're looking at the others around the outer side, the perimeter, because our concern is not on the case that we've uncovered. The RCMP handles that. Our concern is on what's coming next, who else may be implicated in this — if there is an investigation over here, what's going on over there. I've tried to answer your question that way, senator.
The Chair: I want to ask one further question that the witness mentioned earlier, and that was a question of an exit information system at the borders. Perhaps you could expand on how helpful this would be for you to be able to do your job and your other departments that you work with.
Mr. Yaworski: Thank you, senator, and I did choose those words quite carefully. An exit information system is not exit control. There is no control. Canadians have every right to leave the country and enter the country again whenever they wish.
Exit information is something we're lacking right now, and it's quite germane to the foreign fighter issue. We don't know when certain individuals on Canadian documentation have left the country. We just don't have that information available to us right now in terms of something that can be corroborated such as a passport that has been swiped on the way out of Canada. As a result, we have to rely on other techniques. We have to rely on other investigative methods to determine when subjects of interest to us have left the country. In many cases it's through allied reporting from a certain other country that they land in, but we do not have that exit information on the way out. To your point, it would be extremely helpful moving forward in addressing the foreign fighter phenomenon.
The Chair: Thank you very much, Mr. Yaworski. You were very forthright, and I felt you gave a very good presentation. This has been of benefit to us as a committee.
On June 19, 2014, the Senate approved the following reference for this committee:
That the Senate Standing Committee on National Security and Defence be authorized to study and report on national security and defence issues in Indo-Asia-Pacific Relations and their implications for Canada's national security and defence policies, practices, circumstances and capabilities; and
That the Committee report to the Senate no later than December 31, 2015 . . .
The Indo-Asia-Pacific is a new term for Canadians. It is important that we recognize that the region is not simply Asia, a term that is very limiting from a security and defence perspective; rather, it stretches from India over to Japan, down to Australia and New Zealand.
With us to set the stage for our study is a gentleman who is perhaps Canada's preeminent scholar and authority in this region, Dr. James A. Boutilier. Dr. Boutilier is the Special Adviser on Policy at Canada's Maritime Forces Pacific headquarters based in Esquimalt, British Columbia. Dr. Boutilier's current responsibilities include advising the Commander of Maritime Forces Pacific on matters related to foreign policy, defence and maritime security in the Asia- Pacific region.
Dr. Boutilier recently hosted the maritime security conference in Victoria, which brought together many of the nations in this region and allowed Canada to play a foremost role as a maritime nation by hosting this biannual gathering.
As an aside, Senator Kenny and I were able to attend that conference, and I want to congratulate you on a very well-run and informative conference.
Dr. Boutilier, welcome back to the committee. I understand you have an opening statement. Please begin. We have one hour for this panel.
James A. Boutilier, Adjunct Professor, Pacific Studies, University of Victoria, as an individual: Thank you, Mr. Chair, and greetings to your fellow committee members.
I think probably the most important issue for us to wrestle with at present is the trans-Pacific relationship between Washington and Beijing. If the rise of China in the last quarter of the 20th century was the most important global phenomenon, certainly the management of the relationship between the United States and China is the most important and compelling challenge for the first quarter of this century. It is a relationship undergirded, I would suggest, with profound strategic ambiguity and a lack of trust. Despite efforts at the highest level to build bridges between Washington and Beijing, there is a great deal of uncertainty as to what China's endgame is.
Part of the issue is the so-called American rebalance into the Pacific. It is important to note that the Americans have been deeply engaged in the Pacific for many years indeed. What we see now in the post-Iraq, post-Afghanistan period is a reanimation of their ties and activities in the region. It is a critical development. From Beijing's perspective, however, they see all of their — that is to say, China's — activities as entirely legitimate and in response to Washington's activities in the region.
There is a sense of victimhood in China, which is a prism through which the Chinese see almost all of their actions. It's very difficult to wean them off this sort of world view. It governs all of their activities in the Western Pacific and into the Indian Ocean.
I think it is also important for us to pay passing attention — or perhaps more than passing attention — to the question of the energy and effectiveness of the Chinese economy. Some years ago, we were concerned about a China that was too powerful. Now I would suggest to you that there may be an argument for being concerned about a China that is not necessarily weak but is weakening. Certainly the level of economic activity is in a state of decline, and there is a profound array of structural challenges that face Chinese leadership. How will these manifest themselves in terms of China's foreign policy, its interaction with other players in the region? I would suggest further that an architecture of containment has begun to arise. It is informal, but it is there nonetheless, and it plays to China's sense of paranoia that surrounding the whole of China and denying China its legitimate ambitions is a structure of countries all dedicated to trying to check China's rise.
One of the sources of concern, of course, as all of you are aware, is the dramatic growth in Chinese military capability over the past quarter century. The Chinese, of course, would maintain that their defence budget, which has risen at a double-digit rate for more than two decades, is simply a reflection of comparable growth in their national GDP. The fact of the matter remains, however, that the maritime architecture of the region has changed profoundly. The Economist news magazine, for example, would suggest in a rather simplified graph that China has now surpassed the United States in the number of naval hulls. That, of course, is something of a cartoon because it lacks the qualitative nuances that are critical for your consideration. Nevertheless, the dramatic appearance of an increasingly large and sophisticated Chinese navy is something that makes Washington's calculations more and more challenging.
Where do we fit in all of this as a modest, mid-level nation with modest, mid-level military assets? I would suggest to you that we are very late in the day in coming to grips with the importance of Asia. If we go back to 1983, what we see is that trans-Pacific trade exceeded trans-Atlantic trade, and that phenomenon has continued to the present day. A three and a half times greater proportion of world trade moves across the Pacific to Canada than across the Atlantic.
But for a variety of reasons, historic and structural, Canada, I would suggest to you, has ignored the new realities emerging in Asia and is coming to them at the eleventh hour. One of the big challenges for Canada is how to establish our brand, our sense of commitment to the region, because throughout much of Asia, we are, frankly, invisible. One of the things we have to do is build up a reputation for being actually and truly committed to the region, and in the process, we have to remember that disaggregating security from trade is almost impossible in the Asian context.
We need a great deal more focus and energy. Rhetoric alone will not sustain us, and we have to be much more strategic in terms of how we advance in a region that is vast and increasingly challenging.
Let me leave it there, Mr. Chair, and then I would be happy to entertain questions.
The Chair: Thank you, Dr. Boutilier. I would like to set the stage, if I could, in respect to questions overall as far as the Indo-Asia-Pacific region is concerned.
The Canadian Security Intelligence Service has commented on the economic, demographic and political changes under way in that region. They have gone so far as to say that threat assessments have identified a number of key concerns, including terrorism, the proliferation of weapons of mass destruction, espionage, foreign interference and cybersecurity.
Doctor, what are your thoughts on the terrorism and extremism in the Indo-Asia-Pacific region, and to what extent do these activities threaten Canada's national security?
Mr. Boutilier: We are faced straightaway with a sort of theological issue in terms of where the Indo-Pacific region stretches to where. But if we, in fact, take the northwest Indian Ocean as the western frontier of the Indo-Pacific, then that clearly encompasses countries like Iran, Pakistan, Afghanistan, India and so forth.
We can see that coming out of Southwest Asia, there are certainly influences that affect Muslim states in Southeast Asia. For example, and there are forces that stimulate radical activities in a state like Indonesia, where 90 per cent of the population adhere to Islam. In fact, the Indonesians have acted fairly effectively over the years to try to eliminate terrorist activity in Indonesia, but it spills over to the Southern Philippines, and it occasionally appears in Malaysia.
It has not been an enormous threat in the way that the activities of ISIL in Iraq and Syria have been. Islam in Indonesia is a much more relaxed and informal form than it appears in Southwest Asia.
Terrorism is an issue. It is partly in the eyes of the beholder, as well, because up in Western China, there is a Turkmen population whose eagerness to achieve a degree of independence is a source of deep dismay for the authorities in Beijing. That's an area of constant tension and unrest in Western China.
Senator Mitchell: Thank you very much, professor. We met with you some years ago when I was in Victoria when our committee was there, and it was very impressive, as it is today.
The question I would like to get at is the nature of the threat of China, if it is a threat, or what it proposes in the context in which you are discussing. It is known that China holds trillions of dollars of U.S. bonds, which begs the very question: Why would China do anything to threaten the U.S. economy if the U.S. owes it so much money? Isn't that in itself a stabilizing factor in that relationship?
Mr. Boutilier: Well, it certainly is. I always compare it to two climbers on the north face of the Eiger. They're roped together, and as long as the two economies are functioning in tandem, they're in a safe condition. It would be catastrophic — suicidal, I would suggest — for the Chinese to begin selling off treasury bills on a major scale. That would, in fact, weaken fundamentally an already problematic economy in the United States.
I don't see that. What I do see is the Chinese are increasingly using their $4 trillion in foreign exchange to target, by way of sovereign funds, major projects around the world. In Africa, even in places like Iceland and Greenland, they're the largest purchasers of land in those two north Atlantic areas.
They're increasingly concerned about how to turn this array of foreign exchange into political instruments, but I think your basic premise is entirely correct.
Senator Mitchell: In a sense your observation of the velocity, if I can use that word, with which their military is being increased or enhanced is startling. At face value, that might look like a military threat to the rest of the world or to the region. But is it also not the case that while we consider the Chinese government to be a dictatorship and, ultimately, completely in control, it is a country of 1.4 billion people, give or take, that's extremely difficult to control? At the back of the leadership's mind, is it not possible that they're concerned with economic pressures, with the geographic diversity, with minority groups, et cetera, and that, in fact, they might have a stability problem within their own country and that some of that militarization is a reflection of that and of creating jobs for a massive population that in some regions doesn't have economic opportunity?
Mr. Boutilier: Indeed, you have targeted many of the critical concerns for the senior leadership in Beijing.
One of the things that are worthy of note is that a highly developed sense of nationalism prevails in northeastern Asia, a nationalism that we might compare with the nationalism that was exhibited in Europe on the eve of the First World War. This makes national responses increasingly emotional and sensitive. This, of course, is also an instrument which the leadership is able to play to on occasion when it wishes to generate, for example, anti-Japanese sentiment and so forth. But the leadership has an enormous array of challenges.
Clearly, one of the biggest issues is the unequal distribution of wealth within the nation. In the sense that we often think of high levels of distinction between those of wealth and those without in a nation like the United States, in fact, the Gini coefficient, which measures that relationship, is significantly higher in China. So the leadership is dedicated to trying to spread the wealth, but it has not been very successful in doing that.
It is also faced with an array of fundamental issues related to the environment. The environment is, in a word, a mess, and while they're attempting to remediate it, it has become increasingly a check on economic growth.
We also see that in keeping with a long tradition in China, the fiats or directions that go out from Beijing are, in many cases, ignored by local party cadres in distant provinces. So they're wrestling with that challenge.
They see themselves as a nation that has now arrived after more than a century and a half of humiliation, and the growth of their military capability and, more specifically in this case, their navy, is seen as a hallmark of a nation which is now a nation of global standing. One of the critiques, of course, is that while the Chinese may wish to be seen in that way, they have failed in the eyes of many Western observers to observe international norms and to be a responsible global player.
So you are quite right in suggesting that the leadership faces an array of challenges, internal, external and throughout the region.
I would suggest that there's a profound sense of uncertainty as to what China's endgame is. Virtually all the major nations have China as their number one or two trade partner, but they're all keeping their powder dry because they don't know how China is going to utilize its burgeoning military capability.
Senator White: Thanks for appearing today, Mr. Boutilier. We see Canada looking at moving more greatly into international trade and into the Asia-Pacific area. What do you see as some of the national security threats that we can expect to face?
Mr. Boutilier: It is important, among other things, to underscore the fact that the American rebalance into Asia, while frequently denominated in military terms, is, in fact, a rebalance that has a profound economic component, of which the Trans-Pacific Partnership is a key element. And we, of course, are becoming partners in that trans-Pacific economic relationship.
Asia is not, in many cases, an easy world in which to do business. We find that the opaque nature of business in China, the lack of legal predictability, makes it a challenge for firms large and small to conduct operations.
Similar critiques could possibly be raised with respect to doing business in India, even though India is a good deal more open in many ways and predictable than is the case in China.
One of the challenges we face as a nation is that very few of our companies are major companies, although there are many small companies that have expertise or products or capabilities which are very much sought after in Asia.
The big challenge, of course, is that you have got to be there. We're arriving at the eleventh hour and we're faced with some very strong competition.
I had the good fortune of addressing an audience of international barristers recently, and I said if there's one thing you take away from my presentation, it should be a sense of urgency. While I would not wish to undermine the collaborative and inclusive processes to which we're dedicated here in Canada, we have to realize that many of our competitors are moving much faster than we are to try to establish economic bridgeheads in the region.
We do have areas of expertise, whether in environment, air traffic and engineering or in offshore activities and so forth, that have very considerable market potential in Asia. However, if you were to look at the statistics, our share of Asian trade has continued to shrink, relatively speaking. It has grown in overall terms, but over and against many of our competitors, we are simply not holding our own.
Senator White: What do you see is necessary to reverse that trend?
Mr. Boutilier: This is a very good question. It raises some theological questions about the degree to which the government can actually create a more conducive atmosphere or environment for trade. There are some big challenges in Asia in terms of distances, language capability and acquiring the right sort of partners. Now, these sorts of concerns affect business anywhere internationally.
We have begun to turn our attention to Asia, but we continually are distracted by other developments internationally. We have to demonstrate that we are fully committed to the region, because in many quarters we're seen as pleasant companions and colleagues, but never here, and we have not built the track record of continued commitment to the region. Of course, as I suggested earlier, security and trade are in many cases indistinguishable in terms of building our presence, our track record, in the region. It is an area that places enormous importance on security, and an area in which many people who have been in the security business have moved on into senior political or advisory roles. We see that in countries like Thailand, China and elsewhere.
It is a question of much more and much more quickly developing a track record in the region, or we turn our back on the region and focus elsewhere. One of the issues, for the moment, is that we're technically committed to developing our priorities in Latin America, and, yet, I would argue that Asian markets are a good deal more compelling in terms of their potential than the ones south of us.
Senator Beyak: We have recently heard about the South China Sea and the stable Pacific. U.S. scholar Robert Kaplan writes that for too long the West has taken that stability for granted. Do you have any thoughts on that?
Mr. Boutilier: One of the ironies of the Pacific arena is the fact that the dramatic growth in the Chinese economy owes a good deal to the overall stability provided by the United States Navy and the United States' presence throughout the region. Indeed, throughout the whole of the Indo-Pacific region, all of the players are eager to have Washington remain involved. They have a deep, inchoate anxiety that, somehow, they're going to wake up one day and find that the Americans are gone.
Leaving that aside, if we look more specifically at the South China Sea, you will see that the South China Sea is part of the critical connection between the Indian Ocean and the Pacific Ocean, and $5 trillion worth of trade flows through that complex, enclosed sea, coming from and going to the Indian Ocean and into the Pacific. Similarly, if we look at energy flows, which are critical to connecting those two oceans, Japan, South Korea and China depend very heavily on those flows of energy.
One of the issues for us is that ownership of islands and other geographic features in the South China Sea would normally be considered to be under the UN Convention on the Law of the Sea. The Chinese, however, I would suggest, are providing a highly aberrant interpretation of that convention, and that puts them squarely at odds with many of the other claimants. In the South China Sea, the maritime areas of a number of states overlap. The Americans have stood at arm's length in the sense that they have not supported one claimant over another, but they are increasingly concerned about peace and stability at sea.
What we see, not in only the South China Sea but also in the East China Sea and in Northeast Asia, are ships actually firing on one another and people dying at sea. You will recall, perhaps, the tragic case, in 2010, of a South Korean corvette that was blown up by a North Korean submarine.
So this is an arena that is increasingly brittle and problematic and where the area of miscalculation is very considerable indeed. It may not happen at the level of admirals and generals, but it could very well happen at the level of local area commanders or even ship captains. So it is a concern to analysts throughout the region and beyond that serious hostilities could erupt because of a lack of tranquility at sea.
Senator Beyak: Thank you, sir. With your knowledge of this area, would you have any advice for Canada for a strategy in that region?
Mr. Boutilier: Of course, Canada was one of the iconic founders of the UN Convention on the Law of the Sea in the late 1970s, early 1980s. Subsequent to that, for a period of almost 10 years, Canada was the co-chair of the Indonesia- Canada South China Sea Informal Working Group. That working group did not address the prickly issues of state ownership. However, they addressed an array of other issues related to fish stocks, hydrography and so forth, and, for a very modest sum of money, they established Canada's bona fides in the region as being genuinely concerned about ensuring peace and stability. We were not drawn into hard security, but we were seen throughout Southeast Asia as being friends and partners in this process.
I know for a fact, having spoken with the Indonesian co-chair of that process, who was here in Canada only a fortnight ago, that they're very eager to reanimate that and would be delighted to see Canada deeply involved once again.
The Chair: I would like to enter the fray here with you, Mr. Boutilier, regarding your response to Senator White on Canada's involvement and what further involvement we could have in that particular area of the world. You were saying that we're in the eleventh hour. Perhaps that may be true, but I would say that, in the last number of years, some pretty significant steps have been taken with respect to establishing Canada's presence — for instance, the agreement in the Philippines on defence. There was an agreement in Japan a number of years ago, and they're negotiating still for a free trade agreement. There's a free trade agreement with South Korea. Our bilateral trade with Taiwan is exceeding $6 billion. That has been ever escalating over the last number of years.
I would like to ask you, with respect to where we are today, what more should we be doing over and above the various trade agreements and defence agreements that we either have negotiated or are negotiating? Second, what should we be doing with respect to our navy and establishing its presence in that particular area of the world?
Mr. Boutilier: The facts that you have enumerated are compelling. However, I would suggest that they are, in many cases, products of the last half-decade and not the past 25 years. If we look at some of our competitors, like Australia, for example, one could argue, parenthetically, that the area is of even greater concern to Canberra than it is to Ottawa, but the fact of the matter remains that they have been far more aggressive, in a positive sense, in terms of forging these necessary ties.
Once again, I come back to the sense of urgency. I would suggest that, increasingly, countries that may have seemed distant or even remote to us are open for business, like South Korea, Japan, Singapore and so forth. Some of these negotiations drag on endlessly, I will be the first to admit, but we need to enhance our attention to and pressure on these agreements, which in many cases set the stage for many other things that follow from them.
With respect to maritime issues, our navy is small but highly professional, but the bulk of the navy, relatively speaking, is in the Atlantic. It should be noted, of course, that were you to work on the principle of sheer distance, one can reach the northwest Indian Ocean more effectively from Halifax than one can from Esquimalt, but, if we turn to Esquimalt, we're looking out on the world's largest ocean and the ocean that is likely to be the most volatile in terms of maritime interactions.
How can we affect the course of events? Well, we can clearly do so, as I suggested with the previous question, in an informal, soft-power way. Probably, the location of our assets further forward into the Pacific, in a strategic way, would be one of the things that are really critical. It was certainly a lesson that the United States Navy learned in World War II that the tyranny of distance had, somehow, to be overcome.
Whether it is a case of moving some of our assets into, for example, Northeast Asian waters to work with the United States Navy or whether it is a question of moving them elsewhere, the deployment times from the West Coast of Canada into the depths of Asia are very considerable indeed.
I think that a forward presence would probably be welcomed by our Five Eyes colleagues, who were the subject of your earlier discussions with the previous speaker. I think there are ways in which we can leverage relatively modest maritime resources by targeting them and having them in the right location. It is a question, in many cases, of symbolism, which may seem like a weak reed. However, it's critical for our Asian colleagues that they see we're actually committed to doing something to contribute to the peace and stability in the region.
Senator Day: You made a comment early in your presentation that you think China is in a state of decline. I understood from your comment that it is a permanent state of decline as opposed to a cyclical downturn in the economy. Would you like to expand on that?
Mr. Boutilier: I certainly wouldn't want you to go away from this interaction with the impression that China is in a state of decline. However, I would agree that what we're witnessing now is probably cyclical in terms of the downturn in the Chinese economy. We were accustomed, of course, in the 1990s and in the first decade of this century to seeing growth rates in the 10 per cent to 12 per cent range. Now, we're probably down to 7.3 per cent to 7.4 per cent. Some analysts would suggest that going forward we may be down to 4 per cent. Others would argue that despite the one- child policy, with the sheer numbers being added — probably every 30 to 36 months China adds a population equal to Canada — you have to have an economy that's operating at 6 per cent or 7 per cent to meet the internal demand.
The Chinese leadership is faced with, as I suggested earlier, the whole array of structural issues. They are trying desperately to reform the economy. They realize that the export-led model, which was the key to their explosive growth over the past 30 years, has become, in fact, increasingly a thing of the past. Their wages are beginning to climb, and some international firms are relocating to Vietnam, Bangladesh and elsewhere in search of cheap labour.
We can also see that the Chinese are dedicated to probably the largest internal movement of people in world history with several hundred million people moving out of the countryside and into the cities of China. This, of course, has the effect of increasing the environmental costs in the sense that energy demands, pollution and so forth all begin to soar when we have enhanced urban populations.
For a variety of reasons, the Chinese are desperate to try to stimulate a new wave of economic growth predicated on domestic demand. It remains to be seen, and I am quite pessimistic about it, how quickly they can generate that transition. It's probably a 20-year phenomenon at the very least. There isn't the money in the countryside, where hundreds of millions of people still live on US$2 a day, to develop the sort of domestic consumption engine that will replace the export-led engine of the past.
We're seeing a period of consolidation, and the dramatic growth of the past may very well be a thing of the past, in the same way that it was in Japan once we got to the early 1990s. Some would suggest, by the way, that the banking system and infrastructure inventory are as over-reached in China today as they are in Japan; but that remains very much to be seen.
Senator Day: I didn't appreciate that the answer would be quite that long. It was an excellent answer to a complex issue. There's a lot of reading of green tea leaves on this one. Are you aware of the Xiangshan Forum that China is hosting in November? I'm not familiar with it. It is a regional security conference. Are you familiar with that forum, and should we be taking it seriously?
Mr. Boutilier: I am aware of it. It will be November 20-23 in Beijing. I hope to attend to get an assessment of its legitimacy and value. I was not aware of it before, to be frank with you. I was at the Academy of Military Sciences in Beijing 10 weeks ago, which is a think tank that advises the Central Military Commission. They invited me to attend so I'm happy to accept their invitation. Like you, I'm eager to assess the validity of this undertaking.
It should be noted that there are many security forums throughout the Asia-Pacific region in Indonesia, South Korea, Japan and so forth. I will be very interested to see how this is organized. To date, it has not been wildly impressive, but some of the plenary sessions promise to provide an interesting window on Chinese thinking.
Senator Day: I don't think this committee is planning to send anyone, so we'll be interested in your comments once you've had an opportunity to attend.
Mr. Boutilier: Absolutely, Senator Day.
Senator Mitchell: It seems, in a way, that there are two competing forces coming from your testimony. One is that we need to be more visible in China because of the economic opportunity, and the other is that with their mounting military and strong nationalism there could be a military threat and we need to be repositioning perhaps naval and other assets. Aren't the two in complete conflict, in a sense? One would be intrinsically threatening while jeopardizing the opportunity in the other?
Mr. Boutilier: You could probably draw that inference from what I've suggested — that we're looking at a competitive state of affairs. First, I wouldn't want to confine myself to China alone, in the sense that there are many other opportunities for international trade across Asia, whether in South Korea, the Philippines, Indonesia and so forth. That would be my first comment.
Second, compared with the economies of many parts of the world, the Chinese economy, even in a period of slowdown, is still very muscular, especially compared with European economies currently.
Third, I would suggest that there is a good deal of anxiety about what China's endgame is. That should not prevent us for the moment from utilizing our trade opportunities, where appropriate. It may well be that this will continue for a very long time, or it may be resolved. I think that the whole of the region provides potentially greater opportunity than elsewhere, and China is clearly at the centre of the economic growth throughout the region. There are still opportunities despite the anxieties. Of course, this is borne out by what I said a moment ago that China is probably the number one trade partner for almost every major power in the Indo-Asian area.
Senator Mitchell: A couple of times you mentioned other countries of economic opportunity, including Vietnam, in passing but not in that context. Vietnam has the twelfth largest population in the world; and it's flexing its muscles. Having been there, I would have to conclude that the communists actually lost that war because it now has a robust capitalist economy. What are the opportunities there, and should we be looking at those?
Mr. Boutilier: Vietnam has promise. I would suggest that probably about 10 years ago Vietnam was the economic poster boy of the region. More recently, its economy has slowed. One commentator said that the Vietnamese, having waged war for 50 years, had to learn how to wage peace. They're faced with the same challenges that sclerotic communist systems encounter in making the transition from a command economy to one that's driven by the marketplace. They're eager to effect reforms. They realize that corruption is a significant issue. They have not had the sort of growth in the past couple of years that they would like, but they're increasingly looking to emulate the Chinese model. They're looking outwards in the security realm to countries like the United States and India. I think that, in time, Vietnam may hold considerable promise for international trade.
It also is an area very much in need of talents in terms of engineering, offshore oil and so forth, of the sort that I enumerated earlier. It is an economy that is beginning to rise, but it's not without problems.
The Chair: Colleagues, are there no further questions? I would like to thank Dr. Boutilier for spending his time here today with us. It was very informative.
Senator Ngo: I have a question, if we have time.
The Chair: Yes, we have time.
Senator Ngo: Thank you, professor. The Indo-Asia Pacific region is now highly militarized. Seven of the world's 10 largest standing armies are in the region, including Vietnam, China, North Korea and South Korea, and they also have five of the world's declared nuclear powers; China is there. In your presentation you say that China's ambition with Beijing is aggressive in the area of South Asia, the South China Sea. Recently China unilaterally declared ownership of those islands or lands in the particular dispute area, and is bullying countries such as Japan, Philippines, Vietnam, and so on.
What are the security challenges posed by this level of dispute? I'm talking about military in this region.
Mr. Boutilier: Your question is an extremely sound and appropriate one. Clearly, when we look at global arms sales, for example, the Indo-Pacific region is at the top of the tables. Indeed there is an anxiety among many analysts that there's an arms race unfolding in the region, that we've moved beyond sheer modernization of navies and armies to an action-reaction model in which countries are beginning to acquire assets in response to what their neighbours are doing. You can see that, for example, between Japan and South Korea.
One of the issues of particular concern is the dramatic growth in the submarine fleets of the region. The Chinese are building submarines three or four times as fast as Americans, and we probably have some 200 submarines active throughout the region. So at the time when we turned our backs on the Atlantic thinking that the Cold War was over, we failed to appreciate the way in which new levels of instability would appear.
What's interesting, among other things, is that if you go back to 2010, the Chinese hosted an international maritime conference in Qingdao, the centre of their northern fleet. Central to that was the so-called harmonious seas concept. This was the maritime equivalent of the peaceful rise of China. Then almost immediately thereafter, Chinese body language and activities took a dramatic turn. Far from harmonious seas, they in fact became increasingly bullying and aggressive in the South China Sea at the expense of nations like the Philippines and Vietnam. Some of their actions are deeply reprehensible. In the case of Vietnam, as you know, a Vietnam vessel trailing hydrographic equipment had the equipment cut through by Chinese vessels twice. We can see that the Chinese have strong-armed the Filipinos when it has come to resupply of one of their atolls.
One could go on with this long and dismal catalogue. It makes you wonder what's happening internally in China. Was it a perception of a lame duck presidency under Hu Jintao? Was it the party military getting out ahead of itself? What were the reasons for this sudden change in China's actions? Certainly I think there is growing awareness in Southeast Asia, which has been characterized by a high degree of passivity over the past decades, that this is a real threat to the sovereignty of many of the players. Even countries that were on the margins, like Malaysia, have now begun to adopt a rather anti-Chinese sentiment.
It will be very interesting to see whether the Filipino case to the international tribunal prevails. I think it will, and this will certainly be to the detriment of China's reputation at least.
Senator Ngo: Can I follow up?
The Chair: Go ahead.
Senator Ngo: You say Canada is one of the countries that initiated the law of the sea. Since the dispute in the South China Sea, we didn't say anything. What do you think Canada can do in these dispute areas with China? Are we, like the United States and other countries, also going to condone Beijing's aggressive behaviour in this dispute area because of trade? What can we do?
Mr. Boutilier: No, I don't think we should condone these actions, which are in many ways in direct contravention to the UN Convention on the Law of the Sea. One of the challenges, if you go back to 1996 and the Chinese ratification of UNCLOS, is that the Chinese caveat at that ratification was half a dozen issues, which in effect means that Chinese domestic law prevails when it comes to the application of UNCLOS. One could ask parenthetically whether the spirit of the convention has been completely undermined in the process. It's very challenging when a major party like China adopts these aberrant interpretations.
For example, we all recognize internationally the 12 nautical miles. The Chinese intention is to apply that same territorial authority to the 200-mile nautical zone, and there are other issues in terms of how ships conduct themselves within that zone, whether national permission is needed from China or not. The Chinese, of course, would maintain that it is. I think it's very much in our interest to try to uphold, in any form, the integrity of UNCLOS. This is a critical issue because the Chinese approach, I would suggest, is to repeat the aberrant interpretations frequently in the hope that these will somehow become accepted and customary. I don't think this should be permitted to happen.
Senator Ngo: Thank you, professor.
The Chair: I would like to wind up with one last question, if I could. If you could comment on this, doctor, what should Canada's main security priorities be in the Indo-Asia Pacific region? What should Canada's priorities be?
Mr. Boutilier: I think that clearly what we've got to do is work through regional organizations, and we attempted to join the ASEAN Defence Ministers' Meeting, but our membership was turned down flat because the perception in the region — and this was several years ago — was that we simply had no profile whatsoever, that we simply weren't committed to the region.
We have to work through those organizations. There's a maritime organization, the Western Pacific Naval Symposium, which brings together the heads of all navies. This is another agency through which we have to try to encourage, in whatever way we can, greater peace and stability because this is an area that is increasingly volatile and in which Chinese moves in particular are opaque. So it behooves us, I think, to be as involved as we can in the region and to try to exploit opportunities for maritime collaboration, which will in fact be confidence-building measures because it's only in this way that we can begin to break down some of the barriers that exist in terms of the narratives between some of the major players.
Senator Day: Doctor, just for the record and for your information, the Senate has participated in the ASEAN parliamentary forum for a good number of years, and that may be an area where we can make some inroads, where other levels of government may not have been able to do so.
Mr. Boutilier: Absolutely. I think one of the critical issues is consistency, in the sense that if you're partaking, you have to turn up every year. This is really critical. You can't appear episodically. That's almost worse than not at all. It's essential to build relationships, from which almost everything else stems in this region. I can't underscore enough the importance of relationship building in Asia.
Senator Day: I agree wholeheartedly. AIPA is the ASEAN inter-parliamentary group, and I have attended for about 10 years in a row, so we have had representation there, not just me, but a number of parliamentarians for a good number of years. But you're absolutely right. It takes a long time in Asia to build trust.
Mr. Boutilier: Absolutely.
The Chair: Colleagues, I would like to thank Dr. Boutilier for appearing before us and giving his testimony.
You certainly bring a perspective in respect to an area that you know very well. I'm sure that we'll be calling upon your expertise at a later date as we go further into the study. Once again, thank you very much, Dr. Boutilier.
(The committee adjourned.)