Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 24 - Evidence - October 17, 2012
OTTAWA, Wednesday, October 17, 2012
The Standing Senate Committee on Banking, Trade and Commerce met this day
at 4:15 p.m. for the review of the Proceeds of Crime (Money Laundering)
and Terrorist Financing Act (S.C. 2000, c. 17), pursuant to section 72
of the said Act.
Senator Irving Gerstein (Chair) in the chair.
The Chair: This afternoon, we continue the five-year parliamentary
review of the Proceeds of Crime (Money Laundering) and Terrorist Financing
Act. This is our nineteenth meeting on the subject. In conducting this
review, the committee has heard from a number of the so-called regime
partners involved in the implementation and administration of this
legislation. Also, our committee has been hearing from those familiar with
and impacted by the regime, including industry groups and associations.
This afternoon, we are delighted to welcome Chris Chandler, President of
the Canadian Bank Machine Association, the CBMA. This association represents
the non-bank ATMs throughout Canada.
We have scheduled an hour for this portion of our meeting. Mr. Chandler
will make an opening statement, which will be followed by questions. At the
end of the hour, there will be an in camera meeting to discuss future
With that, Mr. Chandler, the floor is yours.
Chris Chandler, President, Canadian Bank Machine Association:
Thank you for the invitation to appear before the committee. I am President
of the Canadian Bank Machine Association and also a director of the ATM
Industry Association. I will provide you today with an overview of our
business and the services that we provide to Canadians.
We also welcome the opportunity to offer our perspective on current money
laundering regulations, including the new regulations for non-bank ATMs that
were enacted after the 2008 FATF report.
The CBMA represents the four largest non-bank ATM or ABM service
providers in Canada. We have operations from coast to coast. We operate in
more than 1,500 rural and urban centres. We are in small towns and large
cities; we are in airports and in your local convenience stores. We provide
consumers with convenient, secure access to their currency, often in
locations where they have been underserved by their banks.
The ATMIA, to which I belong, is a global non-profit trade association,
with over 3,500 members in 60 countries. This organization promotes ATM best
practices and security. I sit on the ATMIA Canada Board of Directors, and I
am also a member of the ATMIA Global Board of Directors.
As of December 31, CBMA members operated approximately 15,000 ABMs, or 26
per cent of all ABMs in Canada. These ABMs conducted 33 per cent of all
Interac ABM cash withdrawal transactions during the year. There are
approximately 60,000 ABMs in Canada, two thirds of which are non-bank ABMs.
CBMA members are compliant with all applicable anti-money laundering
regulations in Canada.
Canadian ABM access is considered to be one of the most convenient,
efficient, safe and competitive in the world. With two thirds of the ABMs,
the non-bank ABM industry clearly contributes to this success. Canadian
citizens take advantage of the greater access to ABMs provided by the
non-bank ABM industry.
The Bank of Canada recently released a discussion paper, their 2009
Methods-of-Payment survey, where they stated that the most popular way for
Canadians to access cash is through ABMs. They further said that Canadians
take cash out of ABMs on average once a week.
For small businesses and merchants that have ABMs in their store or bar
or location, non-bank ABMs can provide for increased customer traffic in the
store, increased sales and an additional source of revenue through fees
charged for the ABM services. In addition to these cardholder benefits and
merchant benefits, transaction processors, independent sales organization,
service companies, paper providers, ABM manufacturers, armoured carriers and
telecommunications companies all benefit from the business activities of the
non-bank ABM sector.
For Canadian banks and debit card issuers, our ABM networks allow their
cardholders broad and convenient access to their accounts across the
country. Non-bank ABMs have extended the reach of the Interac system across
Canada in a highly competitive and cost-effective way.
The non-bank ABM industry continues to mature and evolve. Each CBMA
member is a financially strong business with professional management. The
Canadian payments landscape continues to undergo change with the emergence
of alternative payment technologies and new challenges with the emergence of
mobile payments. The government has begun consultations to add mobile
payments to the Code of Conduct for the Credit and Debit Card Industry.
However, throughout all of this change, cash continues to be a valuable and
important component of the payments system.
Canadian consumers can be confident that their use of non-bank ABMs is
safe and secure. ABMs follow stringent reporting methods and create,
generate and retain detailed records of the flow of funds from each and
every ABM. All non-bank ABMs deposit their funds into Canadian bank
accounts. Every dollar that passes through an ABM is easily traced and
tracked with the records being held by a Qualified Members of Interac, who
are almost certainly also an independent third parties from the ABM cash
owners. In addition, every ABM cash owner must provide customer due
diligence information before activating the related ABM, and they must sign
a contract stating that they will comply with Interac regulations, which
include anti-money laundering regulations. For high-risk ABM cash owners,
these cash owners must also provide compliant criminal background checks to
qualify for the operation of an ABM.
The CBMA has been and continues to be very supportive of the government's
efforts around anti-money laundering. In February 2008, the Financial Action
Task Force report, Anti-Money Laundering and Combating the Financing of
Terrorism in Canada, included a reference to the non-bank ABM industry.
The report identified that there were no specific AML regulations documented
for the non-bank ABMs and indicated that there should be. While the third
party recordkeeping and the maintained detailed funds flow is a significant
deterrent to any criminal trying to deposit criminal funds via an ATM, the
industry embraced the opportunity to join the Department of Finance task
force and help to lead the development of new AML regulations for non-bank
ABMs to further mitigate any risk of money laundering.
In 2009, CBMA and ATM Industry Association members worked closely with
the Department of Finance, Interac, the RCMP, the Sûreté du Quebec, the
Ontario Provincial Police, Visa, MasterCard, AMEX and FINTRAC collectively
in a task force to create and implement anti-money laundering regulations
for non-bank ATMs and their cash owners. The result was Interac Security
Regulation SCD8 that specifically addresses customer due diligence
requirements, source of funds declarations, criminal background checks for
high-risk cash owners, and annual audits to ensure compliance. These new
regulations have been fully executed.
The CBMA has most recently participated in the 2011 Department of Finance
consultation reviewing the anti- money laundering and anti-terrorist
financing regime. I note that our sector was not identified as an area of
concern within that departmental consultation paper.
We read with interest the response by the Minister of Justice on the
report of the Standing Committee on Justice and Human Rights on the state of
organized crime. We were pleased by the minister's stated goal of continuing
to work to combat money laundering. The CBMA does not support, however, the
standing committee's recommendation that would require companies operating
private or non-bank ATMs to report cash transactions of $7,500 or more to
The standing committee began their study in 2009 and concluded their
report in 2012. The final report does not appear to reflect knowledge or
understanding of the ABM/AML regulations that are in force today. The
non-bank ABM/AML regulations were developed through a year-long process that
included FINTRAC. The Finance Department confirmed that these AML
regulations satisfied the issues raised in the 2008 FATF report. While we
likely need to do a better job of informing lawmakers and other relevant
regulators that these regulations exist and are in full force and effect, we
do not believe that any additional regulations are required.
Mr. Chair, when the minister's response to the report was published, I
was called by a reporter who asked me about the need to better regulate
non-bank ABMs and, in particular, to scrutinize cash owners. I said to him
that any criminal looking to put proceeds of crime into an ABM should think
twice because there is extensive third party documentation related to those
cash flows and the Canadian bank account that they are deposited into.
Thank you for the invitation to appear. I appreciate the opportunity to
share with you this information about the non-bank ABM industry, and I
welcome any questions you may have.
The Chair: Thank you for your presentation today. I will start by
referring to prepaid and disposable credit cards. They can be found in many
retail outlets and bought for a fixed amount; and some are reloadable. As I
understand it, you can assign a PIN to these cards and use them at an
Recently we heard about a case in Halifax in which a naval espionage case
took place. It came out that the lieutenant was being paid by the Russians
with this type of card. Can you explain to the committee how this fits into
the whole question of how it varies when using one of your machines versus a
bank debit card? Perhaps you could expand on the whole area of prepaid and
disposable credit cards.
Mr. Chandler: I can expand on that with respect to ATMs. Bank and
non-bank ATMS operate on payment networks. In Canada, the primary network is
Interac. We also accept international cards through MasterCard, Cirrus,
Maestro, Visa/Plus, China Union Pay, and so on.
The non-bank or bank ATM is designed and functions by allowing a
cardholder with a PIN to access cash that is in an account where the issuer
of that card identifies that the cash is available for withdrawal. As an ATM
operator, I really have no insight whatsoever into who set up the account on
the back end and what their purpose would be. Our job is to accept the card.
If they have the card and the PIN, we will communicate with the issuer — we
know who that is — and provide the cash to that person. I do not think we
would play a role in that type of criminal activity at all. It is really a
matter of who is issuing that card and who is holding those accounts with
the funds as a qualified financial institution in one of the payments
The Chair: You are talking about money that is in an account. If
someone shows up with a reloadable card they have bought at a retail outlet,
this money is not in an account; it is in the card.
Mr. Chandler: No. Money is never in a card. If you put $100 on a
prepaid card, that $100 is in an account somewhere. Someone has created an
account associated with that prepaid card. When it is put in an ATM, it is
withdrawing money from that account. That account would be either the
merchant's account if they have set up a payment account like that, but more
likely a bank or trust company account.
Senator Ringuette: I have to apologize; I was late for the start
of your presentation and you may have answered these questions.
How many machines do you have in Canada?
Mr. Chandler: The four CBMA members have approximately 15,000
Senator Ringuette: You indicated to the previous questioner that
you communicate with the issuer. Is that a bank within Canada or outside of
Canada as well?
Mr. Chandler: Through international networks such as MasterCard,
Cirrus, we can function within international accounts. There are two things
to think about. The person withdrawing the money can be from anywhere in the
world, so their bank account can be anywhere in the world. I also stated
that with every ATM in Canada, with respect to the money inside the ATM,
when those funds are withdrawn they are being electronically deposited into
a Canadian bank account only. Do you understand the —
Senator Ringuette: Please continue.
Mr. Chandler: You cannot have an ATM and put money in an ATM. When
a cardholder withdraws money, they receive cash. Wherever their bank account
is, the cash is removed and is essentially deposited to the person who owns
the cash in the ATM. If it is my bar and I have money in my cash register
and I put money in my ATM, it is my company's money, so that money should go
to my company's bank account. That company bank account must be a Canadian
bank account; I cannot put money in my ATM and have it deposited into
Senator Ringuette: I understand the process, but ultimately, if a
person in Canada has an account in the Cayman Islands and a debit card from
that account, they can go to your machine. Is that right?
Mr. Chandler: To my ABM?
Senator Ringuette: Yes.
Mr. Chandler: If they have an account in the Cayman Islands with a
bank that, in this case, is certified by MasterCard or Visa and has gone
through the MasterCard or Visa due diligence process to be certified on
their network, then, yes, they can use our ABMs to withdraw cash.
Senator Ringuette: You say that you are a non-bank operation. Who
owns those 15,000 machines? I understand you are an association, but who are
Mr. Chandler: The CBMA is made up of four large ATM operators:
Access Cash, which is my company; DirectCash; Frisco Bay ATMs; and Threshold
Senator Ringuette: Who owns those companies?
Mr. Chandler: My company is owned by Morgan Stanley Global Private
Equity; DirectCash is on the Toronto Stock Exchange; Frisco Bay is owned by
Stanley Works, which is a large multinational company in the United States;
and Threshold is owned by Brink's.
Senator Ringuette: The multinational company in the United States,
what is their raison d'être?
Mr. Chandler: I am not an expert on Stanley, but I understand they
have two large business units. One is security. Stanley Security does alarm
systems. They also do the garage door openers that you may have. They own
Black & Decker tools. It is a very large business.
Senator Ringuette: You have absolutely no agreement with Canadian
Mr. Chandler: I did not say that.
Senator Ringuette: No? How do you enter into an agreement with
Canadian banks? What would be the purpose here?
Mr. Chandler: For example, speaking for my company, we have an
agreement with the Bank of Montreal where we are in partnership with them
and we are now deploying Bank of Montreal ATMs. The vast majority of my ATMs
are non-bank or private ATMs, but I also have hundreds of Bank of Montreal
ATMs that I operate and are free to Bank of Montreal customers.
Senator Ringuette: There is a portion of ATM bank machines that
Mr. Chandler: Yes.
Senator Ringuette: Are any of the other three partners in the same
situation as you with the banks?
Mr. Chandler: Again, I am no expert on their specific businesses,
but I believe DirectCash operates machines for their sister company called
DirectCash Bank, which is a Schedule II bank in Canada. I believe Frisco Bay
has a relationship with Scotiabank where they are servicing some machines
for the Bank of Nova Scotia. Threshold, I believe, has relationships with a
number of credit unions in Canada, but you would have to ask them directly
to verify that.
Senator Ringuette: Coming back to your specific situation — and I
am sorry but you are the one here to answer questions — and your partnership
with the Bank of Montreal, would that include reporting with regard to money
laundering potential and the requirements from the regime?
Mr. Chandler: Yes, of course.
Senator Ringuette: Could you give us examples of when and how that
Mr. Chandler: Any ATMs that I have deployed are in compliance with
the AML regulations related to the ATMs in the marketplace.
Senator Ringuette: Who does the reporting? Do you do the reporting
or does the Bank of Montreal do the reporting?
Mr. Chandler: We do the reporting and we work with the bank to
make sure they are also satisfied with it.
Senator Ringuette: How can you report when your customer, in
reality, is anonymous?
Mr. Chandler: I am sorry?
Senator Ringuette: Part of the reporting requires that you provide
client information, or at that you at least have client information. How can
you comply if you do not know who the client is?
Mr. Chandler: We always know who the client is.
Senator Ringuette: You always know? How do you do that with a
Mr. Chandler: I think we are confusing the cardholder who is
withdrawing money from the bank, who we do not know. The AML regulations for
non-bank ATMs are focused specifically on the domain that is somewhat in the
control of the ATM operators and Interac, and that is who owns the money
inside the ATMs. That is the relevant question and the relevant portion
regulated by the AML regulations. That is the risk area and that can be
Senator Greene: I just have one question. It is basically a
follow-up to the line of questioning from Senator Ringuette.
Are your reporting arrangements and requirements through FINTRAC
different for the Bank of Montreal ATMs that you operate and the non-bank
ATMs that you operate?
Mr. Chandler: Yes, there are contractual differences.
Senator Greene: What practical differences are there?
Mr. Chandler: I cannot disclose the differences, but the white
label ATMs are all being regulated by the Interac regulations that we have
today, and the bank ATMs are at a higher standard than that.
Senator Greene: What does that mean in terms of money laundering?
Mr. Chandler: I do not believe that it means anything. We are
focused on cash owners, and the standard that is used for the white label
ATM is the standard that all the ATMs that we operate meet. The primary
difference with the Bank of Montreal is that we have someone other than
Interac also looking at it because they are putting their brand on those
machines. They are looking at it at the exact same level as Interac looks at
it. It is just another set of eyes.
Senator Greene: Is it a more secure set of eyes?
Mr. Chandler: No, it is the same.
The Chair: Let me understand, Mr. Chandler. Can you not take cash,
deposit that into an ATM machine and buy a prepaid credit card?
Mr. Chandler: No.
The Chair: You cannot?
Mr. Chandler: You cannot.
The Chair: You cannot go into a retail store and buy a loaded card
by depositing cash?
Mr. Chandler: Into an ATM?
The Chair: You deposit the cash into the machine to buy the loaded
card, and then you take the loaded card and go to the ATM.
Mr. Chandler: I have done a lot of investigation into and
discussion of the concept of money laundering at ATMs. We are quite
confident that there is an extremely low risk of people using white label
ATMs for money laundering. We do, however, continue to hear that law
enforcement has identified ABMs as a source of money laundering.
Those two things sound contradictory, so we continued to dig into that.
We have become aware of a supposed study by the FBI in New York that has
identified ABM use by criminals. When you really look below that headline,
which sounds very sensational, you find that it is in two ways. The first
way in which that study apparently documented criminal use of ABMs was along
the lines that you are talking about. It describes situations where smaller
criminals on the street were using ABM cards to deposit money, presumably
from the sale of goods, into bank accounts essentially anonymously. They
were depositing through ABMs, and that was contributing to criminal money
I have no reason to believe that that is not happening. However, none of
the CBMA or ATMIA ABMs in Canada and, to my knowledge, none of the white
label ATMs in Canada accept deposits. It is impossible for anyone to go to a
non-bank ABM and make such a deposit. They do not accept deposits. They only
One of the big perception gaps is due to this documentation from the FBI
that I know the RCMP and others have that says that criminals are using ABMs
for money laundering. That is the first example I got, and immediately
people think that that means that non-bank ABMs are being used that way.
They physically cannot be. It is impossible. I think that is an answer to
Senator Campbell: Can you tell me how many times, to your
knowledge, an ATM has ever been used as described in the myth scenario here?
Mr. Chandler: To my knowledge, no one has ever been charged with
or convicted of doing that.
Senator Campbell: Has it happened?
Mr. Chandler: I do not believe so.
Senator Campbell: Is there really an issue here?
Mr. Chandler: There is a perception. I have spoken to a number of
law enforcement officers who, at first blush, will describe that myth and
say, "I know this happened." I say, "Wow, I will finally hear of one
instance." Then sit down and walk through it, and it turns out that the
story was that they were investigating a criminal for something else and
that he also owned a bar that had an ATM. Was he using it for money
laundering? "Oh, I do not know; I always assumed he did." All the stories
ended up with "I assumed he did," but there was never anybody who said,
"Yes, we have evidence of that."
Senator Campbell: I have to apologize to you because I once wrote
a script for Da Vinci's Inquest where we did exactly that.
Mr. Chandler: I saw that episode, and I was quite upset, actually.
Senator Campbell: Maybe I am helping to get that going.
How might these machines be used? Could they be used to launder money
outside of the scenario of owning the bar, having cash and wanting to get
rid of it? Are there any other scenarios where you could use the machine to
Mr. Chandler: The only other one is the second scenario described
to me as being part of this FBI study. I do not believe anyone operating an
ATM has control over it. Criminals have money in a bank account. They got
the money in there somehow. Other criminals are accessing that bank account,
often in a different country — Mexico, Colombia, wherever — and are
withdrawing funds from that account from ABMs in that country. That was the
second scenario that was described to me.
Senator Campbell: That is not laundering; it is transferring.
Mr. Chandler: It is using an ATM as a tool to facilitate the money
laundering but is actually not part of the money laundering. It is part of
the brush that is painting ABMs as being used by criminals. That is how it
was described to me.
Senator Campbell: I am a little concerned when somebody says
"higher standard," and I would like to know why the banks would have a
higher standard of reporting. Is that correct?
Mr. Chandler: I do not think that they do, and I may have
misspoken. The regulations that we drafted in conjunction with the payment
associations, Finance, FINTRAC and so on not only have customer due
diligence that meets or exceeds what you need to open a new bank account,
but we also added to that a risk threshold for high-risk where we get
criminal checks and verify it against a list of crimes provided to us by the
RCMP. That high-risk definition has a threshold of $5,000, not the $10,000
used in reporting in banks. I think I would have misspoken earlier because
we were looking throughout to meet or exceed the levels that you would find
in opening a bank account.
Senator Tkachuk: How much can you take out at one time? Is it
Mr. Chandler: That is the typical maximum. You can have a higher
limit if it is set up that way, but the typical maximum is $400.
Senator Tkachuk: Can you go to an ATM every hour and withdraw
Mr. Chandler: There are two different restrictions. There is a
restriction set at the ATM that is typically $400; then there is a
restriction set by your card issuer. Your bank may say that you can withdraw
$2,000 per day and that I am not as good a credit risk and can only withdraw
$500 per day. We have nothing to do with that limit. If you had a $2,000
limit, you could go five times and take out $400, and I could go once and
take out $400 and once and take out $100.
Senator Tkachuk: If I were taking that $2,000 from Colombia you
would think that the bank would say, "I think something is going on here."
Senator Maltais: You may correct me if I am wrong, but most white
label bank machines are in buildings and stores where there are no ATMs
belonging to the main Canadian banks. Is there a special reason for this?
Mr. Chandler: I do not think that is necessarily correct. Non-bank
ATMs are often found where there are no bank ATMs; but they are also found
close to where there are bank ATMs. There are about 40,000 non-bank ATMs and
20,000 bank ATMs — the ratio is roughly 2:1. There is saturation in the
cities. For example, in Ottawa at the Byward Market you will see bank ATMs
and non-bank ATMs within feet of each other. The reality of the system and
the competitiveness that Interac opened up is that it allowed non-bank ATMs
to be cost-effective and economical in areas where the banks were not. We
have actually increased consumer convenience and access to their cash in
many locations that the banks were not servicing. However, it does not mean
that we are not also operating very close to where the banks are operating.
Senator Maltais: You said a while ago that your institution was
affiliated with the international network CIRRUS. Here is an example: I am a
bad guy, I am in Europe and somebody could have deposited money in an
account in Canada. What is the maximum amount of cash I can withdraw in
Mr. Chandler: I have no idea. That is set by the Cirrus network
owned by MasterCard and/or the operator of the ATM in Europe.
Senator Maltais: Then your businesses help transfer money on
behalf of a customer or a bank? You are an intermediary?
Mr. Chandler: We are an intermediary with clear visibility to one
side of the transaction.
Senator Maltais: What fee do you charge the customer who withdraws
Mr. Chandler: The limit is typically $400.
Senator Maltais: For $400 then, how much do you charge?
Mr. Chandler: I believe that the average rate within all of the
ATMs of CBMA members is something like $1.75 per withdrawal. I do not have
the exact number.
Senator Maltais: For withdrawals of $400?
Mr. Chandler: It is for any amount from $20 to $400.
Senator Massicotte: Mr. Chandler, we appreciate your argument
about why in your case money laundering could not happen. You represent four
reasonably large companies and approximately one third of all transactions.
The financial institutions represent another third. Is that correct?
Mr. Chandler: They are about 40 per cent of the Interac ABM
Senator Massicotte: The other 30 per cent, I presume, comprises
many owners of ATMs. Is that the case? How many owners would there be?
Mr. Chandler: We estimate that there are between 100 and 120
smaller ATM operators. The comfort for those operators comes from the fact
that each of them can only access the Interac or Cirrus network by
contracting with a member of Interac. They cannot get directly into the
Interac network without being connected to a member of the Interac network;
and those members are responsible for ensuring that the smaller operators
My understanding is that all of those members and every ATM today are in
compliance with the Interac anti-money laundering regulations.
Senator Massicotte: Where is the issue? In 2007, FINTRAC raised an
issue of concern. You are saying that since then, you sat down with the
Department of Finance and came up with a different governance structure,
which you describe in your submission. The House of Commons committee
recently said that they have to bear down on your industry because there is
still some risk. You are saying that they have it wrong and there is no
risk. Does FINTRAC believe that you should be subject to greater regulation?
Mr. Chandler: I do not believe so. As far as I know, they never
did think that — at least no one ever told me they did. It is my
understanding that there has never been an issue with this and no one has
been charged or convicted of money laundering through an ATM in Canada. The
Financial Action Task Force noted that there were no documented rules saying
that you should not or could not launder money through ATMs. The FATF is
part of a G8 anti-terrorism and anti-money laundering effort. This has been
driven out of that report. There was a 400-page report, I understand, of
which half a page was dedicated to saying that there are no rules written
down. They did not say there is money laundering going on.
Senator Massicotte: What year was that?
Mr. Chandler: It was 2007.
Senator Massicotte: That was before you sat down with the
Department of Finance to develop the governance structure.
Mr. Chandler: It was the catalyst for this. Shortly after that
report was released, we received a call from the Department of Finance. They
said that this was a gap in the documentation identified by the Financial
Action Task Force and that we should talk about it. They established a broad
task force that included all of those groups I mentioned. We sat down and
came to them essentially with the same myth and reality document that you
see there, but people did not know. There is a real perception that this
might be happening. In fact, people have made television programs about it,
To be very candid, the first two meetings were pretty tense because all
these groups of people had a preconceived notion that this was a real
problem. After a couple of meetings and thorough explanations of how it
works, the documentation, the tracking and how independent it is, people
became relaxed about the concept. However, we still said that we need to
document and have rules. The process continued to document and produce these
rules; and it was a three-month piece.
Senator Massicotte: There must be some reason for some concern. I
understand that Australia had a similar problem. They issued a report that
they did have a problem. Are you saying that there is no relevancy to this
Mr. Chandler: I can tell you only that I am not aware of anyone
being charged or convicted. I am not saying that no one has tried it. I am
not saying that no one has ever done it. I know that if a criminal is using
an ATM for money laundering, it is a challenging place to do it because the
minute they are investigated and the police access the records they have a
lot of explaining to do. The documentation is clear, and there is no
anonymity. You cannot hide the money, the time, the date or the amount. It
is all crystal clear and we would know where the money went. I cannot tell
you that no one is doing it, but I am telling you that I do not think it is
a smart place to do it and that the RCMP who dealt with us agreed.
Senator Massicotte: The House of Commons committee recommended
that any withdrawal in excess of $7,500 be reported by you. I gather you do
not think it is necessary.
Mr. Chandler: I do not.
Senator Massicotte: Why would you object to it? Some banks allow
withdrawals of as much as $5,000 a day, depending on the customer. I know
your average is $400 a day. Very many ATMs allow that kind of withdrawal
depending on the type of client. It can come up significantly. Why do you
object to reporting, given that it never happens? What is so bothersome
about reporting transactions in excess of $7,500?
Mr. Chandler: I am a pragmatic guy, so I do not believe in putting
anything in place for something that will never happen.
Senator Massicotte: If you are pragmatic and it never occurs, why
would you be concerned?
Mr. Chandler: I do not believe it is sensible. You cannot take
$7,500 out of an ATM. If you want to put in a regulation that is impossible
to achieve, then I would not stand in the way of it. However, I do not think
it is very pragmatic.
Senator Massicotte: The other concern is the prepaid cards. Some
countries are much less fussy and more flexible with respect to who they
deal with. I will not name a country. You can choose different names. Let us
say organized crime is working in different countries. We read the
newspapers and that happens quite frequently. They make a deposit in a
significant bank. It is deposited there, but they want to get into our
country. What stops them from transferring those sums through existing ATMs,
yours or the banks', in Canada?
Mr. Chandler: They cannot transfer money through the ATMs. What
they can do is provide —
Senator Massicotte: They can use Interac or Cirrus, though?
Mr. Chandler: If they had a bank certified by Cirrus or Plus to
issue cards to them, they could come to Canada and be able to withdraw $400
at a time in cash.
Senator Massicotte: Or $5,000, using my example.
Mr. Chandler: I do not know of any ATMs from which you can
Senator Massicotte: I have.
Senator Moore: I want to follow on Senator Massicotte's
questioning. We heard there are more than 60,000 ABMs across Canada and that
17,590 are bank-owned, which is about 29 per cent. I think you told Senator
Ringuette that your association has 25 per cent, or 15,000 machines. That
leaves 46 per cent owned by others, not the 30 per cent you indicated. You
said that 46 per cent is owned by small operators. What rules do they
Mr. Chandler: As mentioned, any smaller operator that represents
all of those ATMs all operate under the same Interac rules that we do. The
only way they can connect to the Interac network and transactions is through
a member of Interac. Those members of Interac are responsible to ensure
compliance. In fact, the AML documentation, the customer due diligence, is
actually stored at Interac.
There is no operator, big or small, that can say, "Yes, I have all my
customers' AML documentation, trust me." You cannot do that. You must have
it vetted by the Interac member, who is the processor, and then it is also
posted at Interac. If you do not do that, they turn it off. You cannot be
lying or hiding behind saying, "Yes, I have it." It is not possible.
Senator Moore: Senator Greene was asking about the reporting to
FINTRAC. When do you report? If a member of your organization has a machine,
do you report upon putting money into the machine? We put in $50,000 today.
Do you report that to FINTRAC? What is reported? You cannot take out more
than $400 a day or whatever the average is, so what is reported and when?
Mr. Chandler: Throughout the course of the one-year task force on
this topic, it was determined that reporting to FINTRAC was not practical at
that time and did not add value. Instead, we added a risk layer for getting
criminal background checks on the cash owners and the ATMs.
Essentially, it is doing the work as though you had sent a report to
FINTRAC, they identified that there may or may not be a problem and they
asked for a criminal background check. We just jumped to that step. Let us
cut all that out, and if you are considered to be a high-risk cash owner,
you must provide a criminal background check. I think there were 15 crimes
identified, and if you have any one of those, you cannot have an ATM. It is
Senator Moore: As a member of your organization, do you report to
FINTRAC or the banks? Do they report to FINTRAC upon putting $10,000 or more
into their machine?
Mr. Chandler: No.
Senator Moore: They do not?
Mr. Chandler: No. Why would they?
Senator Moore: Well, that is what we are here to find out. I am
trying to figure out how we can make sure cash that might be proceeds of
crime or whatever does not end up in a machine. You said you do a criminal
check. Do you do that on all of the small operators?
Mr. Chandler: Yes, if the ATM is —
Senator Moore: Connected with Interac?
Mr. Chandler: Yes, which it has to be.
Senator Moore: In order to flow through the system.
Mr. Chandler: Correct. If it is not connected to Interac, then you
put your card in and it does not work. You cannot access your bank account.
The network is critical, and 98 per cent of all the ATM withdrawals
through non-bank ATMs are Interac withdrawals. First, if I was not connected
to Interac, it is very unlikely that I would be connected to Cirrus or Plus.
It is the same switches. They would not let me connect to Cirrus and not to
Interac. Hypothetically, let us say I was. Only people with international
cards can use my ATM. Then I would be meeting the standard of Cirrus and not
Interac. It is illogical. I am not aware of any ATMs that are structured
Senator Moore: You could not get dirty money, as it were, into a
Mr. Chandler: Not without being connected to the network. It is
Senator Harb: You basically cannot withdraw money from your
machines unless you have a bank account; is that correct?
Mr. Chandler: There has to be an account connected to the card.
Historically, in the vast majority of transactions, the person using the
card is connected to their bank account.
To the chair's point, more recently there are prepaid cards that can also
be used. They are also connected to an account, but it may not be your
Senator Harb: FINTRAC can get it from the other end when someone
deposits an amount in a bank account in excess of $10,000 now; the bank or
financial institution must report it to FINTRAC. It is not your
responsibility to report that yourself because you are not dealing with
deposits, you are dealing with withdrawals; is that correct?
Mr. Chandler: We are dealing with withdrawal.
Senator Harb: You already have a limit of $400. I am not aware of
anyone in the country who can withdraw $2,000 or more from a cash machine. I
do not understand why the committee from the House of Commons would make
such a recommendation. I guess I could. It could be either out of ignorance
or naivety, to include you in one of the companies or organizations, such as
racetracks, law firms, home renovation, et cetera.
Mr. Chandler: I believe we were included there because, as I
understand it, they were —
Senator Harb: Ill informed.
Mr. Chandler: They were not ill informed at the time they started.
They had the 2008 FATF report which said there were no rules. I believe at
the time they started the rules were not implemented. Quite frankly, the
rules are housed at Interac. We have done a terrible job letting people know
the rules are there. That is part of the reason I am here today.
Senator Harb: Absolutely. In other words, there is absolutely no
difference between your machines and any other bank's machine when it comes
to someone taking money out of a machine?
Mr. Chandler: Correct.
Senator Harb: Case closed. My recommendation is to write back to
the committee that made this recommendation to inform and educate them more
so they can understand what you have told us today.
Mr. Chandler: That is a terrific idea. I will do that.
Senator Ringuette: You deal with three entities. Interac, which is
issued by the Canadian banks or caisses populaires, has a mandate to report
to FINTRAC. However, your other connections — MasterCard, Cirrus and Visa
Plus — have told us that they have no mandate to report to FINTRAC because
they do not issue the product. It is the banks that issue the products. You
have two entities within your system that have no reporting responsibilities
The Chair: Can we get to the question?
Senator Ringuette: How can Canadians and FINTRAC be sure that the
transactions that go through your machines — be it Cirrus or Visa Plus — are
reported, as per the regime request, to FINTRAC?
Mr. Chandler: I think that is out of my purview, quite frankly.
You are asking how FINTRAC is regulating Cirrus and Visa Plus, and I have no
Senator Ringuette: They told us that they do not issue the cards;
they only operate the system. Therefore, they do not report.
Senator Greene: If you had a preloaded card to $10,000, what is
the maximum that you could take out on that card?
Mr. Chandler: Again, most ATMs have a maximum of $400.
Senator Greene: How long would that maximum be in effect? Would
you have to wait an hour before you —
Mr. Chandler: That is a question for the issuer. Whoever provided
you with that prepaid card would have their own limitations on the size of
each withdrawal and the number you could do daily. That would be controlled
by the issuer, not the ATM.
Senator Greene: How about going around the corner to another ATM?
If you took it out of one of your non-bank ATMs, and then, almost
instantaneously, you went around the corner and tried a Bank of Montreal
ATM, would you be able to take out another $400?
Mr. Chandler: Again, that is completely related to the issuer, in
my opinion. It would depend on how the issuer structured your card
agreement. It has nothing to do with the ATM.
Senator Campbell: Do you know of any FINTRAC investigation
regarding an ATM in Canada?
Mr. Chandler: I do not.
Senator Campbell: I will leave it at that.
Senator Massicotte: You are trying to tell us that anybody who is
not one of the majors — one of your four financial institutions — must be
sponsored and have a relationship with an existing Interac member who
guarantees the integrity of their transactions. Is that approval totally
private and discretionary, or if they meet the criteria you had in your one
example, must they be accepted as an associate of an Interac member?
Mr. Chandler: No. Is your question whether there is a threshold
where you, if you meet it, have to be admitted?
Senator Massicotte: Is there something that they must satisfy, and
if they do, they will be sponsored by an Interac member?
Mr. Chandler: No. There is always the — for lack of a better
phrase — smell test. If someone meets the criteria on paper and you do not
feel comfortable, then you have no absolutely obligation to take their ATM.
Senator Massicotte: It is a private agreement between that person
and the Interac member. Is that correct?
Mr. Chandler: That person being the ATM company?
Senator Massicotte: The guy who wants to have ATMs — one of the
small guys who has 10 of them — if he gets an Interac member to sponsor him,
he can then join the system. Is that accurate?
Mr. Chandler: If he gets an Interac member to sponsor and connect
him and he provides all of the appropriate documentation to comply with the
AML regulations, then he would be allowed to participate if that entity
Senator Massicotte: Is there not a risk there? You see what is
happening in Quebec with the Charbonneau commission, where someone is
clearly a criminal and his sons own the company. Is there not an opening
there to manipulate the system to gain access, irrespective of the fact that
the intention was not to allow that person to have access?
Mr. Chandler: I have spoken to a number of experts on money
laundering, and they tell me that absolutely no segment of the economy is
completely insulated from or immune to these criminals. They are very clever
and creative folks, and we ought not to be striving for or holding ourselves
to a standard of zero criminal activity because no one can meet that. What
we are trying to do is to make the non-bank ATM one of the last places that
criminals would ever want to go. We believe that we have achieved that
because the data is there. What we have learned from money laundering
experts and law enforcement and so on is that, in their experience,
criminals do not want to be where there is such a detailed documentation
trail held by third parties. They do not want to have to explain, in an
investigation, where these proceeds came from and where they went.
Again, speaking of trying to make pragmatic rules, not only is this
documentation required and then required to be hosted with our regulator,
which is Interac, but at Interac we have also established a secure liaison
with law enforcement so that there is a streamlined and secure manner for
law enforcement, in the appropriate conditions, to access this data. It is a
huge risk for law enforcement. They told us that any time they are going
after organized crime, it is typically an undercover operation. If they ask
for data openly, it can put at risk both the investigation and the safety of
the officers involved.
The Chair: Thank you, Mr. Chandler. We have wrapped up our hour,
but you have stimulated such interest that we have two clarifications.
Senator Greene: I am just trying to understand this. With regard
to preloaded cards, suppose it is an amount of $4,000 or $5,000. Of course,
that money does not come out of your account, but it comes out of someone
else's account or some other account. Maybe it is an account that is set up
by someone just for you, which is conceivable, or for a certain group of
people. Is it not also conceivable that there would not be a limit on what
you could withdraw using that card except up to the value of the card,
whether it was $2,000, $3,000, $4,000 or $5,000?
Mr. Chandler: Again, I do not know. Anyone issuing that card, if
it is going to be used in an ATM, needs to get the blessing of Interac,
Cirrus, Visa Plus or one of these associations.
Senator Greene: Assuming they can do that.
Mr. Chandler: I do not know what the rules are to do that. Those
rules alone may have restrictions. I am not privy to those.
Senator Moore: I am not sure if you answered my question earlier,
and I am trying to get a handle on this reporting to FINTRAC. Does an
institution or an owner of a machine report to FINTRAC that they have put in
more than $10,000? When does the reporting take place? I am not clear on
that. We can only take out $400 a day, as the example we are discussing
here. How do we get to even talk about FINTRAC unless there is a larger sum?
Is it when you put the money into the machine?
Mr. Chandler: Again, FINTRAC participated in our year-long task
force, and there was no reporting from our industry to FINTRAC before that
task force was struck. At the end of that year, it was concluded that there
would be no reporting to FINTRAC. Again, we are working with Interac, and we
post all of our due diligence material with Interac. We have the risk
assessment structure in place that we use and that was found to be
acceptable for meeting all the objectives.
The Chair: Mr. Chandler, I think it is evident from the interest
shown by all members of the committee how informative and helpful your
presentation has been today. On behalf of all of the members of the
committee, I would like to express our great appreciation for your