THE STANDING SENATE COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL TRADE
EVIDENCE
OTTAWA, Thursday, May 11, 2023
The Standing Senate Committee on Foreign Affairs and International Trade met this day with videoconference at 11:30 a.m. [ET] to study the subject matter of Divisions 4, 5, 10 and 11 of Part 4, and Subdivision A of Division 3 of Part 4 of Bill C-47, An Act to implement certain provisions of the budget tabled in Parliament on March 28, 2023; and, in camera, to consider a draft agenda (future business).
Senator Peter M. Boehm (Chair) in the chair.
[Translation]
The Chair: Honourable senators, my name is Peter Boehm. I am a senator from Ontario and the chair of the Standing Senate Committee on Foreign Affairs and International Trade.
[English]
I wish to invite committee members participating in today’s meeting to introduce themselves, starting on my left.
Senator Ravalia: Good morning and welcome. I am Senator Mohamed Ravalia from Newfoundland and Labrador.
Senator MacDonald: Michael MacDonald from Nova Scotia.
Senator M. Deacon: Hello. Marty Deacon from Ontario.
Senator Duncan: Good morning and thank you for coming. I am Senator Pat Duncan from Yukon.
Senator Coyle: Mary Coyle, Antigonish, Nova Scotia.
The Chair: Thank you very much, colleagues. I think a few more senators will join us shortly.
I wish to welcome you all to the meeting today and to those who are watching us across the country on Senate ParlVU.
Today we are continuing our study of the subject matter of Bill C-47, An Act to implement certain provisions of the budget tabled in Parliament on March 28, 2023. The specific elements referred to this committee by the Senate on April 27 are Divisions 4, 5, 10 and 11 of Part 4; and Subdivision A of Division 3 of Part 4.
We will focus on Division 10 of Part 4 today, which relates to economic sanctions and contains amendments to the Special Economic Measures Act, or SEMA, the Sergei Magnitsky Act and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act; and on Subdivision A of Division 3 of Part 4, which contains amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
Colleagues, you know from our work at previous committee meetings that we are all fairly familiar with both of those sanctions’ instruments.
To discuss the matter, we are pleased to welcome, from the Department of Finance Canada, Erin Hunt, Director General, Financial Crimes and Security Division. Are you calling yourselves directors general at Finance Canada? It used to be general director.
Erin Hunt, Director General, Financial Crimes and Security Division, Department of Finance Canada: We are calling ourselves director general. That’s my title, yes.
The Chair: It’s been awhile for me, obviously.
From Finance Canada, we also have Jeremy Weil, Acting Senior Director, Financial Crimes Governance and Operations; Oliver Kanter, Senior Policy Analyst; Charlene Davidson, Director, Financial Crimes Policy; and Anna Nawrotek, Senior Policy Analyst. From Global Affairs Canada, Marie-Josée Langlois, Director General, Strategic Policy Branch; and from the Financial Transactions and Reports Analysis Centre of Canada — otherwise known as FINTRAC — Patricia Bennett, Manager, Strategic Policy and Reviews.
Welcome to the committee. Thank you for being with us today.
I will make an announcement about our technical matters here. Before we hear your remarks and proceed to questions and answers, please refrain from leaning in too close to the microphone or remove your earpiece when doing so. This will avoid any sound feedback that could negatively affect the committee staff on the technical side, in particular, our interpreters who are using earpieces themselves.
We are now ready to hear opening statements, but before that, I’d like to recognize that Senator Gerba of Quebec has also joined the proceedings today.
Opening statements are five minutes, and that will be followed by questions from the senators and answers from our witnesses.
Ms. Hunt, I believe you’re going first, so you have the floor.
Ms. Hunt: Thank you for the opportunity to appear before you to discuss the measures in Bill C-47 related to anti-money laundering, anti-terrorist financing and sanctions.
My name is Erin Hunt. I’m the Director General of the Financial Crimes and Security Division at the Department of Finance Canada. I’m joined here by Charlene Davidson and Jeremy Weil. They are responsible for domestic and international aspects of our anti-money laundering, anti-terrorist financing program. I’m also joined by Patricia Bennett from the Financial Transactions and Reports Analysis Centre. We work together on anti-money laundering and anti-terrorist financing considerations as well as sanctions.
I will let Ms. Langlois introduce herself.
[Translation]
Marie-Josée Langlois, Director General, Strategic Policy Branch, Global Affairs Canada: Mr. Chair, I would like to begin my remarks by stating that the Government of Canada takes financial crime seriously and is continually reviewing Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime to ensure it is responsive to emerging and new risks. Combatting money laundering and terrorist financing is a collaborative effort that requires coordination among all levels of government, the public and private sectors, and our international partners.
To remain effective, the regime must continually adapt to changes in its operating environment and must ensure that it puts forward changes, laws and regulations that keep pace with evolving threats and new technologies.
[English]
Ms. Hunt: This leads me to the measures first announced in Budget 2023 and now proposed in Bill C-47 before you. The bill introduces legislative amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the Criminal Code to strengthen Canada’s ability to combat financial crimes and other risks to the financial system, such as foreign interference.
The proposed measures would fulfill a commitment from Budget 2022 to strengthen the anti-money laundering and anti‑terrorist financing investigations, prosecutions and information‑sharing tools, which remain operational challenges in Canada. The measures help respond to findings from the Commission of Inquiry into Money Laundering in British Columbia, also known as the Cullen commission, and other domestic and international reviews of Canada’s anti-money laundering, anti-terrorist financing regime.
These proposed amendments would expand measures in the Criminal Code that may assist in the investigation and prosecution of profit-motivating crimes by enabling the Attorneys General to seek judicial authorization for the search and seizure of digital assets that may be confiscated as proceeds of crime and expanding the number of offences for which Attorneys General may obtain, with prior judicial authorization, disclosure of income tax information by the Minister of National Revenue for the purposes of criminal investigations.
The proposed measures would also enhance enforcement and operations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act by strengthening the registration framework for money services businesses and creating an offence if they operate while unregistered. The use of unregistered money services businesses is a technique used by money launderers. It will criminalize the structuring of transactions to avoid triggering FINTRAC reporting — another money-laundering technique. It would enhance FINTRAC’s tactical information sharing with police and its strategic intelligence analysis related to threats to national security; provide whistle-blower protections for employees who report information to FINTRAC; require regulated businesses to report sanctions-related information to FINTRAC where there’s a nexus between sanctions evasion and money laundering or terrorist financing — this type of intelligence may assist in identifying assets of sanctioned persons. Further, it would audit the use of non-compliance reports by FINTRAC in criminal investigations, and make technical amendments to ensure that FINTRAC’s forthcoming cost recovery program is a success.
Budget 2023 also proposes measures to enhance information-sharing powers within the finance portfolio and allow FINTRAC to better support decision making, including on national security risks. It also allows for enhanced due diligence measures by entities already subject to the act to protect the security of Canada’s financial system.
Further, to support Global Affairs Canada’s capacity to make, administer and enforce orders or regulations under the Special Economic Measures Act and the Justice for Victims of Corrupt Foreign Officials Act, an amendment to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act is proposed. It would require FINTRAC to disclose information to Global Affairs Canada where there are reasonable grounds to suspect that the intelligence would be relevant to investigating and prosecuting a money laundering or terrorist activity financing effect and where the information would be relevant to the Minister of Foreign Affairs’ sanctions mandate.
These measures will help Canada keep pace with an ever-evolving financial crime landscape by ensuring our anti-money laundering, anti-terrorist financing regime partners can share information by providing new tools to help investigate and prosecute financial crimes and by supporting Canada’s sanctions regime.
We know that even with these measures, more work needs to be done. That’s why, in keeping with the requirements of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, the federal government will launch a parliamentary review of the act this year. This review will include a public consultation that will examine ways we can continue improving the regime and ensure Canada is effective in countering illicit financing flows.
These measures and the forthcoming review will help position Canada ahead of our next mutual evaluation by the Financial Action Task Force, the international anti-money laundering and anti-terrorist financing standard setter, which is set for 2025-26.
Thank you, Mr. Chair. My colleagues and I will be very pleased to answer questions.
The Chair: Thank you very much, Ms. Hunt. Ms. Langlois, the floor is yours.
Ms. Langlois: Thank you, honourable senators, for inviting us to speak to you about the proposed amendments to Canada’s sanction regime in Division 10 of Part 4 of the budget implementation act. I know that you’re familiar with this regime since the committee has just completed its review of Canada’s autonomous sanctions legislation.
I’m pleased to be here today to provide an overview of the latest changes being proposed to the Special Economic Measures Act and the Justice for Victims of Corrupt Foreign Officials Act.
As you remember, almost a year ago, just a few months into the war in Ukraine, we amended our acts to give the Minister of Foreign Affairs the authority to seize and forfeit the assets of sanctioned individuals that are held in Canada and use the funds to compensate victims, support reconstruction efforts or restore international peace and security.
[Translation]
Since then, with Russia’s continued aggression in Ukraine as well as increasing internal tensions in Iran, Haiti, Myanmar, Sri Lanka and elsewhere, Canada and our allies have broadened the use of sanctions. As the targets of those sanctions are responding by employing various evasion tactics, including relying on persons in third states, it is crucial for the Government of Canada to continuously review, adapt and strengthen its sanctions regime. That is why we are currently seeking to make additional legislative changes to both SEMA and JVCFOA: to bolster our autonomous sanctions regime, make processes more efficient and clarify certain provisions.
There are five proposed groups of amendments that I now would like to explain. The first group of amendments will clarify the definitions for ownership and control. This is meant to provide more certainty to stakeholders as to whether they may deal with specific entities, including the subsidiaries, affiliates and related companies of listed persons.
The second amendment confirms that only persons or foreign states that are listed under the Special Economic Measures Act or the Justice for Victims of Corrupt Foreign Officials Act can have their assets seized or forfeited.
The third group of amendments streamlines how persons situated in third countries who assist or support the egregious conduct of the primary sanctioned state can be designated. The amendments propose that such individuals or entities are designated directly in the primary state’s regulation, rather than through making separate regulations for the third country.
The fourth amendment clarifies that under the Special Economic Measures Act, transferring any form of property to designated persons is prohibited and that Canada’s sanctions regime captures the widest array of transfers.
Finally, the fifth group of amendments increases and improves the government’s information-sharing channels by authorizing information sharing with key ministers and between the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and the Minister of Foreign Affairs to improve the efficiency of Canada’s autonomous sanctions regime.
Thank you. We are ready to answer any questions you may have.
The Chair: Thank you very much.
[English]
I’d like to acknowledge that Senator Woo of British Columbia has joined us as well.
[Translation]
Dear colleagues, I would like to remind you that you have four minutes each for the first round of questions, which includes questions and answers.
I would therefore ask senators and witnesses to be brief. We can always go to another round if time permits.
[English]
Senator M. Deacon: Thank you all for being here today. Just looking at a couple of pieces of this, I’m going to look at clause 254 of the legislation, which amends section 4(2) of SEMA. This would allow for the sanctioning of persons in a third country who are complicit in the conduct of a country sanctioned under SEMA within the regulations related to the country rather than making separate SEMA regulations for the third country. I hope that makes sense.
In the case of a national whose country is not sanctioned under SEMA, why can we not use the Sergei Magnitsky Act? Why is this change needed in SEMA?
Ms. Langlois: Thank you for the question. The acts are quite different. SEMA is targeted, as you know, at countries, entities and individuals that are within those countries. The Sergei Magnitsky Act is targeted directly at individuals. While there are similarities, both acts contain triggers that are related to violations of human rights and grave corruption. SEMA has also extended triggers that include an association of states, of which Canada is a party, that have decided to take measures. Importantly also, grave breaches of international peace and security.
So every time there is a decision to choose sanctions as the tool to employ to address an issue, this evaluation is done as to whether a sanction is the right tool, but also in the sanctions context, which of the two pieces of legislation better suits the situation at hand. In the case of individuals within third countries, the question would also be about what the situation is that generated the intention to list a person. For example, if it’s a grave breach of international peace and security, that would point to a SEMA listing. If it’s for human rights and corruption, then there would be a discussion in terms of what would be the right tool.
For someone in a third country that’s related to a grave breach, under SEMA you can now use the initial country’s regulations rather than create new ones. Whether there’s a choice to use the Justice for Victims of Corrupt Foreign Officials Act, then that would be distinct and wouldn’t apply.
Senator M. Deacon: Thank you very much. Speaking of tools, I’m going to move to another area.
It’s clear from the changes in Bill C-47 that the war in Ukraine has shown some need for tweaks in our sanctions regime. That’s not a bad idea. In fact, it’s good to be nimble and make those adjustments. However, it can feel like a game of Whac-a-Mole at times because the private sector has to keep up and keep attuned to the changes and the responsibilities under them.
I’m curious from your vantage point what the government is doing to make sure that all institutions — private and public — are aware of their responsibilities with these emerging and new changes.
Ms. Langlois: Thank you for the question. When there’s a decision to make a sanctions listing, the government makes all the information available on our website. There are different tools on the Government of Canada’s website to help stakeholders in Canada or Canadians abroad be able to check who they’re dealing with. We’ve put together a consolidated sanctions list, which is basically a tool where you can put in the name of the person and it will show whether they’re included on a list and which lists.
Each regulation for every country and every regime is available on the website. In addition, there’s a frequently asked questions area that answers the questions that we receive the most often. That is available. Of course, we have also put in tools where individuals can reach us in the government to clarify questions. There is a mailbox and a form —
The Chair: I’m going to interrupt because we’re over the four-minute threshold in that segment. Would you like to be on the second round, Senator Deacon?
Senator M. Deacon: I probably will be. Yes, please.
The Chair: In the meantime, we’ll get the right translation for “Whac-a-Mole.”
Senator Duncan: Again, thank you for your attendance here today. I’m filling in for Senator Boniface this morning, so I’m new to this committee. I’d like to follow up on Senator Deacon’s line of questioning about the federal government working with others and with the private sector.
I’m interested in the work being done with provinces and territories in terms of their corporations acts, provincial registries and so on. In reference to the Whac-a-Mole comment and government silos, I really see the issue of money laundering, foreign investment and sanctions all in one envelope as opposed to two separate issues. I believe there is a relation there.
I’m curious about the interaction with the provinces and territories, to start with.
Ms. Hunt: Thank you for the question. I’m happy to start, and I may turn to my colleague Mr. Weil to add additional information.
The government is moving forward with implementing a federal beneficial ownership registry. They have put forward Bill C-42 with the final tranche of legislative amendments that are necessary to be able to bring to force a federal beneficial ownership registry. Obviously, that’s only part of the question because corporations are registered both at the federal level and at the provincial level.
Budget 2023 makes clear that the government will continue to work closely with provinces and territories to bring forward a pan-Canadian approach to a beneficial ownership registry. We are engaging regularly with the provinces on this issue, and we are creating a federal beneficial ownership registry that will allow provinces to join. It’s scalable and searchable, so other provinces can join when they are ready to be able to be part of the registry.
We have very active engagement, and we recognize that to be able to tackle this from a pan-Canadian level, engagement with the provinces and territories is necessary.
Senator Duncan: I understand that nine provinces have signed on, but Alberta has not and the three territories have not. My concern with the territories is that the role of the Crown has not been devolved to any of the three territories, so there’s no director of public prosecutions. It’s a federal Crown. The only law enforcement is the RCMP. So we’ve added to their responsibilities, and the territorial governments might not have capacity.
Who’s assisting them? There is concern from my area, with our proximity and close ties with British Columbia and the money laundering issues that you’ve mentioned. Who’s looking after this? Is it falling between the cracks?
Ms. Hunt: That’s an excellent question. Thank you for it.
We’re focusing on the federal level to ensure that we can create a federal registry that the provinces and territories can join. That will allow the territories to join when the federal registry is established.
There’s an ongoing dialogue. We recognize the importance of having a pan-Canadian approach. Therefore, there is continued collaboration to look at ways to bring more provinces and territories on board, in line with the pan-Canadian approach, starting with a federal registry.
The Chair: Thank you very much.
Senator Coyle: Thank you very much to our witnesses for the work that you’ve done to get to this point and for being here to explain your work and rationale to us today. I think we’re all pleased to see these measures designed to improve SEMA and the Sergei Magnitsky Act in terms of effectiveness and information sharing. Those are things we’ve been digging into together before.
I have a quick question, and then a slightly more detailed question. The quick one is this: Why now? Why is this being included in the budget implementation act? Could you answer that question?
Ms. Langlois: Certainly. Thank you very much.
The last year, as we all know, was quite a year from an international perspective and from a sanctions perspective. What we’ve seen, as I mentioned in my opening comments, is that in addition to a lot more sanctions being put forward in terms of volume, there have also been activities on the other side in trying to evade those sanctions.
This provided an opportunity to try to address some of the comments and feedback that we received and to strengthen our regime so we can keep it up to date and continue to maximize impact and effect.
Senator Coyle: Thank you.
The Proceeds of Crime (Money Laundering) and Terrorist Financing Act is there to enforce safeguards, part of it for whistle-blowers. I want to get into the issue of whistle-blowers. This provision makes it an offence for an employer to punish or threaten to punish an employee for fulfilling their whistle‑blowing obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act or for complying with them.
If found guilty, the employer may face imprisonment for a period of up to five years. Existing protections for whistle‑blowers are still there, so notwithstanding what’s there, what specific actions will be undertaken to protect whistle‑blowers reporting wrongdoing in the area of illicit business deals with sanctioned individuals, and how will employees be made aware of those protections that are there and available to them?
Charlene Davidson, Director, Financial Crimes Policy, Department of Finance Canada: Thank you very much for the question. We’re pleased to be proposing this measure through Budget 2023.
The proposed amendments trace closely what already exists in the Criminal Code. They will protect employees who are trying to meet the obligations to report on employers or owners of businesses who may be involved in criminal activity or be pressuring employees not to fulfill their regulatory obligations, such as making reports to FINTRAC.
We believe these measures would mitigate the potential for these employees to be discouraged, and that would also offer a level of protection or encouragement to employees to know there are protections within the Proceeds of Crime (Money Laundering) and Terrorist Financing Act for them.
With regard to your specific question about how these will be specifically dealt with, these would be matters for law enforcement to deal with, as with any criminal offence in our legislation. We will be working with industry over the next year to two years during the parliamentary review process and consultations that we have on a regular basis with the private sector to provide education about the new measures that are contained in this budget, as well as other documents that were released in March pertaining to national inherent risks in Canada related to money laundering, terrorist financing and the government’s strategy to combat financial crimes.
[Translation]
Senator Gerba: Thank you to our guests for being here. My question is probably for Ms. Hunt or Ms. Bennett.
The March 2022 Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) bulletin states that the use of certain financial channels such as cryptocurrencies and other emerging technologies may also play a significant role in illicit financial movements linked to Russia and other proceeds of crime.
In your view, does Bill C-47 sufficiently address these new technologies and, generally speaking, what are the specific challenges posed by these technological innovations?
[English]
Ms. Hunt: The proposed measures do make some changes to address virtual currencies, and the amendments to the Criminal Code are going to make it easier for the police to seize virtual currencies in this climate.
We’ve also made sure that amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act were made to capture virtual currencies in previous iterations of the act. Ms. Davidson may be able to provide a bit more detail on that, if that’s required.
Ms. Davidson: Sure.
One additional detail is that the Proceeds of Crime (Money Laundering) and Terrorist Financing Act was amended in recent years to include the regulation of virtual asset service providers, including domestic and foreign virtual asset service providers.
In addition, in Budget 2019, the government provided additional funds to FINTRAC to help with our capacity to deal with virtual currencies and virtual asset tracing on the intelligence side of their program.
[Translation]
Senator Gerba: I want to go back to Senator Duncan’s question about assistance to businesses and training for SMEs. Is there any legal support for them to comply with the new sanctions?
Ms. Langlois: Thank you very much for the question.
The department and the government make a lot of information available to SMEs and businesses generally. The sanctions group had an outreach program for different stakeholders across Canada. Obviously, COVID-19 affected that and we had to go virtual. The past year has also been very busy, but we continue to talk to our stakeholders and look at what we can do to support them. We answer their questions as diligently as possible when we do get them.
With respect to legal support in particular, we can’t give legal advice to the Canadian public, unfortunately. So people have to get their own legal advice, but we provide all the information we can and we make it available to support their compliance efforts. We look forward to continuing these discussions in the future.
[English]
Senator Ravalia: Thank you to all of you for appearing.
Would you be able to elaborate on the Government of Canada’s current proposal to expand the list of ministers who could assist the Minister of Foreign Affairs in the administration and enforcement of an order of regulation made under the Sergei Magnitsky Act? Furthermore, have any issues arisen to this point with just the Minister of Foreign Affairs working on this file?
Ms. Langlois: Thank you very much for the question. While the Minister of Foreign Affairs is the responsible minister under the act and the administrator of the act, as mentioned in it, sanctioning is really a whole-of-government effort. There are different authorities and different departments that contribute to the implementation of sanctions. There was already a list of ministers who could share information with the Minister of Foreign Affairs to advance our work on sanctions. We’ve expanded that list with the experience of the last few years. We’ve expanded that list to make it more efficient. Of course, any information exchanged would be following proper rules and procedures that are applicable to government information exchange. That’s why we are making that change right now.
I’m sorry, you had a second part to your question?
Senator Ravalia: To date, has the fact that it is only the Minister of Foreign Affairs working on this file had any implications for the potential contribution of other ministers?
Ms. Langlois: As I mentioned, it’s really an effort that is across the government. There is a lot of collaboration between the different departments and between ministers as needed in terms of discussions.
Senator Ravalia: So these discussions might happen at the cabinet table, et cetera?
Ms. Langlois: Yes.
Senator Ravalia: Okay. Just to follow up, obviously the illegal invasion of Ukraine by Russia has been one of the paramount talking points in media highlights, et cetera. Is focusing on our work on Russian elites, oligarchs and the like taking away from other parts of the world where we may be seeing sanctions busting happening through Canada?
Ms. Langlois: Thank you for the question. As you know, a number of sanctions were put out in the last year, not only on Russia but on other countries. Haiti and Iran come to mind as countries where a number of sanctioning measures were taken, as well as Myanmar and Sri Lanka.
In terms of the implementation of the sanctions and their enforcement, that’s of an equal nature across all of our regimes. We apply the same approach to all the sanctions in place to ensure that they are having the maximum impact and effect to help foster change.
Senator Ravalia: Thank you very much.
The Chair: I would like to acknowledge that Senator Harder, our deputy chair, has joined the meeting.
Senator MacDonald: This is a very complex matter, and it must be difficult to trace some of this stuff. It is like a game of Whac-a-Mole, obviously, tracing these transgressors. I am curious, what patterns do you see emerging when it comes to those who are involved in money laundering and the proceeds of crime? What industries are most vulnerable? Which is the most likely route to be pursued by people who want to launder money? What parts of the world are more likely to be money laundering through Canada?
Ms. Hunt: Thank you for the question. It is a very complicated one, and I don’t think we have time to get through all of the answers today, unfortunately. We recently published, alongside Budget 2023, Canada’s national inherent risks assessment. It goes into detail about the sectors and areas of our economy that are most at risk of money laundering and terrorist financing.
It’s a very important report that is used by our reporting entities, under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, to really address and understand the risks that they face, as well as the basis upon which they can take mitigation measures. There are certain types of crimes that are also more prevalent in Canada and more likely to lead to money laundering and terrorist financing.
I will do my best to summarize this in a couple of lines. There are many types of fraud and illegal drug trafficking, and they remain among the highest-risk crimes to support money laundering and terrorist financing. In terms of high-risk areas, our banking sector is one of our highest-risk sectors simply because of how concentrated, big and multi-product they are within this space. As well, we see money services businesses as often being high-risk. That’s one of the reasons we are proposing measures to strengthen the framework around money services businesses in Budget 2023 and with the budget implementation act.
Senator MacDonald: Profiling has always been a controversial thing. I’ve been to the airport in Tel Aviv. They profile everybody at the airport in Tel Aviv. That is also the safest airport in the world. Profiling works.
Do we have a method of profiling when it comes to tracing? Is anyone down the line profiling when it comes to tracing those who are most likely to be involved in money laundering?
Ms. Hunt: Thank you for the question. That’s a very good question.
One of Canada’s strengths is our multicultural society. We have many people who come from many different places in the world and have connections with the places in the world that they may have left when they came to Canada. So it is a very important consideration and a strength in our system.
We take a comprehensive approach to combating financial crimes, which promotes the integrity of our financial system and the safety and security of all Canadians. While our national risk assessment does identify certain groups — for example, terrorist groups across the world and other things that pose a risk to Canada — it should not in any way be a basis for discrimination in any fashion. Measures taken by the government or the private sector to mitigate risks, with respect to money laundering and terrorist financing, should be considered on a case-by-case basis. They should in no way be targeting or being a blanket for discrimination.
Senator MacDonald: There is no policy of profiling, basically? I just want to clarify that.
Ms. Hunt: That is not one of the principles behind the money laundering and terrorist financing regime.
Senator Woo: Thank you, witnesses. To answer Senator MacDonald’s question on the major sources of money laundering, I might point him and all of you to the 2019 B.C. report on money laundering which found that the primary sources are North America and Europe.
For Ms. Langlois, I wanted to ask you about the compendium of sanctioned individuals, which I believe you mentioned will be classified under the countries where they are located.
But under this new provision where an individual may be sanctioned under existing regulations for a given country rather than the actual country where that person belongs, would that classification then appear under the targeted country or the jurisdiction where that person is residing?
Ms. Langlois: Thank you very much for the question. The amendment that is proposed would see us listing individuals in third countries who are contributing to, for example, a grave breach of international peace and security in the initial country of regulatory focus, within that regulation.
Under the current system, we would do a listing on someone in a third country and it would be to create a third country regulation with reference to the first country where the situation is happening. In this case, we would not create that. We would list them in the initial country. The way the amendment is proposed, it would allow the government to pursue both types of regulatory processes. It doesn’t change any of the regulations that are currently applicable, but it would provide the opportunity for the government to do this type of listing should it wish to do so, once the authorities are in place.
Senator Woo: It could happen either way. It could be listed under the third country, under the existing provisions, or under the original source country, is that correct? What would be the choice for one over the other?
Ms. Langlois: Thank you for the question. In terms of when the amendment comes into force, then it would be part of the assessment that’s made when there is a decision to list people. So we would be choosing, for example, which foreign policy tool, which sanctions tool and then how best to list the individual or entity in the current situation that applies in that circumstance.
Senator Woo: Insofar as you list individuals in third countries explicitly as part of third countries, presumably some of these third countries are not ordinarily sanctioned. It just so happens that the individual happens to be in that jurisdiction. Are there special diplomatic complexities and problems that come with these types of listings? You are essentially targeting an individual who is a national or resident in a jurisdiction that may not normally be sanctioned and may be above board in other respects.
Ms. Langlois: Thank you very much. As you know, we currently have listings that are made under third country listings, for example, and there has been discussion about that with the countries in question. There is always a lot of collaboration at the diplomatic level between the countries.
In terms of the circumstance you describe, when we go forward, there has been a lot of collaboration and a lot of statements by various like-minded countries on the importance of addressing sanction evasion and circumvention tactics. That would be part, I would assume, of discussions that would take place in such circumstances.
The basis for listing an individual or an entity is grounded in the triggers that are under the act. It would be their contribution to a grave breach of international peace and security or their contribution to violations of human rights or to grave corruption. So there would also be clarity on what the basis is for listing the person that would factor into those discussions.
The Chair: Thank you very much. I will use my prerogative as chair to ask a question both of Ms. Hunt and Ms. Langlois.
We’ve heard some interesting testimony in the past and also materials that we have read concerning sanction evasion, particularly by the Russians or Russian individuals. There is a task force that has been set up, the Russian Elites, Proxies, and Oligarchs Task Force, or REPO, and in its report back in March, there was an indication that while tens of billions of dollars have been sanctioned and frozen, there is still a lot of evasion going on.
When finance officials get together, whether it is on the margins of meetings of the international financial institutions or in another context, is there talk about extending pressures to other countries that are serving as havens for these funds?
Ms. Hunt: Thank you for the question. It is an excellent one, and I can say the answer is yes.
Canada is very active in the Russian Elites, Proxies, and Oligarchs Task Force, and through those conversations, we are talking among our international partners about ways to try to limit sanctions evasion both within the financial system, but also through other methods such as export controls and other methods that we are seeing used to evade the sanctions.
The use of those types of tools means that other countries are enabling the use of, for example, exports going through a third country to be able to go into Russia. Part of that engagement is to leverage the partners on the REPO Task Force to engage with those other countries to try to limit those types of sanctions evasion tactics.
The Chair: Thank you.
Ms. Langlois, you have been tasked with, basically, building a bureau over at Global Affairs Canada. That’s what we’ve heard in previous testimony at this committee. The sanctions business is not really new, but its intensity, of course, in the past couple of years has really increased, and everyone is developing new methods and training up their people.
As you are doing the same, are you speaking with other countries who are setting up their own structures — whether it is a task force or whether it is a bureau — and their experiences? I’m thinking in particular of the G7, plus close partners like Australia, for example.
Ms. Langlois: Thank you very much for the question. Yes, it is a good question too. As you know, there is a lot of international discussion and collaboration on sanctions generally, and that also extends to administrative set-ups or structures that we put in place to see how best we can address the pressures and the questions that are faced internationally. So in that context, yes, we are talking with other countries in terms of what led to their choice of administrative structures or the set-up of how they are doing things. We are looking at best practices, of course, and that’s inspiring us in terms of how we will continue to build and set up the shop to be as fit for purpose as possible and maximizing the resources we have.
The Chair: I imagine training is a priority because normally foreign service officers have not dealt too much with this subject. Is that fair?
Ms. Langlois: That’s fair. It is a regulatory process. There is a lot that is available government-wide for regulators, which we are tapping into, of course, as well as continuing those discussions, as I mentioned, with our like-minded partners on how they are doing things. It is not training as such, but it is quite a learning experience and a great opportunity for exchanges.
The Chair: Thank you very much.
Senator Duncan: I have two questions. The first one might be for Ms. Bennett. We were speaking of working between provinces and territories and corporations. I am wondering if this might be closing the barn door after the horse has left? It might be a hard question. In terms of interprovincial cooperation, being able to exchange information between provinces and what that information might reveal, when it’s finally established and working, if we might be closing the barn door after the horse has left.
Patricia Bennett, Manager, Strategic Policy & Reviews, Financial Transactions and Reports Analysis Centre of Canada: I think, certainly, we will have to see how the registry is implemented and what information we are able to get out of the registry itself when it is implemented. At FINTRAC, we already have extensive relationships with the provinces both in terms of law enforcement and regulators. We are tackling this issue on an ongoing basis even in advance of a beneficial ownership registry.
Senator Duncan: Thank you. That’s what I was hoping to hear.
The other question is regarding section 58.1(2). Are there privacy implications in the repeal of this section? Just to recall, “The Centre shall not disclose under subsection (1) . . .” — that is, disclosure from FINTRAC to the minister — “. . . any information that would directly or indirectly identify any person or entity . . . .” This section is being repealed. Will that now allow the minister to receive information directly or indirectly? Are there privacy implications with this?
Ms. Davidson: Could I ask you to point us to the clause that you are reading from?
Senator Duncan: 58.1(2).
Ms. Davidson: That’s the section number? Do you have the clause?
Senator Duncan: You know what? That would be fine to respond in writing if you like, if that would be preferable. That would give you more time, and if you need clarification, I can follow up.
The Chair: We need to move fairly quickly on this because it is in the budget implementation act — you have it? Excellent.
Ms. Davidson: I want to confirm you’re speaking to clause 197. This clause removes the limitation for identifying foreign entities in the information that is shared.
The foreign persons and entities do not carry the same privacy protections in Canada as domestic persons and entities. That’s one consideration.
The other is that, through all of these amendments, we did carefully consult the Department of Justice on Charter and privacy implications.
The Chair: Thank you.
[Translation]
Senator Gerba: We know that information sharing is really key to the success of Bill C-47. How do you envision sharing information with the sanctions regimes of our allies? Do you have a way of doing things that would really allow for better information sharing?
Ms. Langlois: Thank you for the question.
There are a lot of discussions happening between Canada and allied countries about the current situation, but also about other situations. I’m thinking of Iran or Haiti, or other situations. There is collaboration on sanctions, but each country’s regime is a bit different.
The sharing of information is more general, more focused on interests and what we want to achieve, because we have similar goals even though our regimes are different. These discussions continue and we often find, too, that when there are announcements, we try to work together to maximize the impact of our sanctions and have a greater effect in order to bring about a change in behaviour or compliance with international laws and standards.
Senator Gerba: Thank you.
[English]
The Chair: Are there any other senators who want to ask a question? We have some time.
[Translation]
Senator Gerba: I know you said that profiling was not part of this bill, but I’d still like to know if there are any provisions in place to ensure that immigrants in general — and there are many in this country, since Canada is a country of immigration — who are exporters, who are in business, some whose families have stayed in their home countries, are not targeted by this bill.
[English]
Ms. Hunt: Thank you for the question. As I said before, it is not a principle of the regime to be able to target communities. Many Canadians have ties to communities around the world, and these relationships are not in and of themselves an indication of terrorist financing or money laundering risks. That’s a very important principle that’s upheld throughout the regime. All of our national risk assessments and other documents repeat that consideration. We urge our reporting entities and our partners within the federal and provincial governments to look at any cases on a case-by-case basis to ensure that we are not in and of ourselves causing a basis for discrimination across the regime.
None of the measures proposed target those types of considerations and are upholding broader ways to enhance the information sharing to be able to address case-by-case considerations.
[Translation]
Senator Gerba: Thank you.
[English]
Senator Woo: That just got me thinking about a situation where an individual is deemed by another country to have received the proceeds of his or her wealth illegally, through corruption or whatever, and perhaps is residing in Canada now. But Canada does not necessarily accept that assessment by a legitimate foreign government. What happens in a situation like that? This is not hypothetical, by the way. If there isn’t an answer, that’s fine.
Ms. Hunt: I think we would have to take that question back. I think we would be better off consulting with our colleagues. From a principles perspective and from a policy perspective, we don’t look at the regime in that kind of consideration. That would be a case-by-case consideration that we would need to look at that particular individual.
Ms. Bennett: If you did want to look at it from an operational point of view, certainly that international cooperation is key to effective operations. We have relations with foreign counterparts across the world, and they are able to provide us with suspicions of persons in their jurisdictions that feed into our analysis and we can make those networks to see if it helps us meet our threshold at FINTRAC for disclosing information to law enforcement. We would take it into account, but it would not necessarily result in a disclosure to law enforcement. It would depend on the full analysis of the information.
Senator Woo: If there is disclosure or a claim by a foreign government that there is somebody in the country that has gotten funds illegally out of that country, with impunity, that information is shared with you? You don’t necessarily act on it unless it meets all of the criteria and your regulations? Yes? Thank you.
The Chair: Thank you very much. That last one is a bit of a teaser for the report that will be coming out from this committee, hopefully fairly soon, where we will have some recommendations on both pieces of legislation as we go forward. If there are no more questions, colleagues, I would like to go in camera, after our witnesses leave, for a brief period of time only.
I express the thanks of this committee to our witnesses for their frank answers on a very complex subject. We appreciate you being here. We appreciate the work you do as public servants in our country. Thank you very much.
We will briefly suspend and then continue.
(The committee continued in camera.)