Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 28 - Evidence - December 6, 2012
OTTAWA, Thursday, December 6, 2012
The Standing Senate Committee on Banking, Trade and Commerce met this day at
10:31 a.m. for the review of the
Proceeds of Crime (Money Laundering) and Terrorist Financing Act (S.C.
2000, c. 17), pursuant to section 72 of the said Act.
Senator Irving Gerstein (Chair) in the chair.
The Chair: Members of the committee, it is a pleasure to call this
meeting of the Standing Senate Committee on Banking, Trade and Commerce to
I would like to welcome Mr. Cossette today. This morning, we are continuing
the five-year parliamentary review of the Proceeds of Crime (Money Laundering)
and Terrorist Financing Act. This is our twenty-third meeting on the subject,
Mr. Cossette, and we are delighted that you are here and in your new capacity as
head of FINTRAC. As members of the committee are aware, Mr. Cossette was
appointed to this position on October 15, 2012. We appreciate your coming so
quickly after your appointment. Prior to that, he was Associate Deputy Minister
of Foreign Affairs and the Prime Minister's personal representative for the G8
and Nuclear Security Summit.
We offer you our congratulations and we look forward to your opening
statement, which will be followed by questions from the committee.
Gérald Cossette, Director, Financial Transactions and Reports Analysis
Centre of Canada: Honourable senators, good morning. Thank you for inviting
me to speak with you regarding the parliamentary review of Canada's Proceeds of
Crime (Money Laundering) and Terrorist Financing Act.
While this is my first encounter with this committee, my colleagues have
appeared on two separate occasions earlier this year to provide input and answer
questions related to FINTRAC's mandate, its operations and its relationship with
the intelligence and law enforcement communities.
As you may know, I began my work as FINTRAC's director in mid-October. While
my time at the agency has been brief, I do have experience with FINTRAC and with
the environment within which it operates from my previous roles, including, most
recently, at Foreign Affairs.
Since arriving at the centre, three observations have stood out for me:
first, the growing hunger of the intelligence and law enforcement agencies for
FINTRAC's tactical disclosures and strategic analysis; second, the
misconceptions surrounding FINTRAC's contribution to the fight against money
laundering and terrorist activity funding; and, third, the need for FINTRAC,
despite its successful past, to catch up to an increasingly challenging
environment. My remarks this morning will be guided by these three observations.
Why is there such a demand for FINTRAC's products?
A first reason is the issue at stake, which, I would argue, is the protection
of the safety and security of Canadians.
In his recent report to Parliament, CSIS Director Richard Fadden
characterized the threat environment that Canada faces in the following terms.
Today's world is interconnected in ways we are only beginning to
understand. . . . The complexity of the threat environment — evolving as
rapidly as technology itself — presents an unprecedented challenge for the
national security community.
Of course, we also see daily on national television the work of the
Charbonneau Commission, which is revealing the pervasive corrosion of
Finally, there is now an important body of literature that details the
criminal and terrorist elements operating in Canada and the threat they
represent to our national security and the security of our close allies.
A second reason for the increased demand for our financial intelligence is
the ability of FINTRAC to follow the money. With its database, its international
connections and its 12 years of experience and expertise, the centre can draw a
picture of financial behaviours out of a million bits of data for our
intelligence and enforcement partners.
FINTRAC's unique focus on financial transactions and the flow of money offers
a valuable piece of the puzzle to those seeking to better understand the
connections between individuals in the current threat environment. Following the
money reveals vital connections: who knows who and who speaks to whom.
Our partners, CSIS and CSEC, play a major role in issues of national
security. The RCMP and other international partners are also key players when it
comes to the sharing of intelligence related to terrorist activity financing and
money laundering. Canadian law enforcement agencies investigate drugs,
corruption and fraud, along with the various other offences that generate
proceeds of crime. Money laundering is ultimately tied to these profit-motivated
crimes, and investigations of money laundering are seldom conducted in isolation
from these other criminal investigations.
In a strictly legal context, money laundering, terrorist financing and
threats to the security of Canada are three distinct and separate concepts. On
the street, however, things are murkier and much less distinguishable. Terrorist
financing can comprise the laundering of proceeds of crime as terrorist groups
look to fraud and smuggling as ways to finance their operations. And, as I
indicated earlier, organized criminal activities can threaten our national
security by corroding the institutions of government and compromising the
integrity of the Canadian financial system. In such an environment, FINTRAC's
intelligence is used by a variety of agencies to support their work.
This brings me to my second observation, the misconceptions about FINTRAC's
contribution to the anti-money laundering/anti-terrorist financing regime.
As I interact with the business sectors that provide financial transaction
reports to FINTRAC, I am often asked about the real value of the intelligence
that the centre discloses to its partners. Does it lead to arrests and
convictions? If not, what is it good for?
I know that members of this committee have expressed similar concerns with
what is being perceived as a lack of tangible results.
In order to dispel a few misconceptions about the contribution of FINTRAC to
the anti-money laundering/anti- terrorist financing regime, I would like to
start by paraphrasing General Brent Scowcroft, former National Security Advisor
to the first President Bush.
General Scowcroft used to point out that unveiling evidence comes after an
event has occurred. The investigators work back from the event in order to build
a credible account of what happened.
Intelligence, for its part, is the process of trying to make sense out of a
series of unrelated pieces that may or may not lead to an event. Therefore,
intelligence is not evidence.
Once FINTRAC has transferred its financial intelligence to security and
enforcement agencies, it has and should have no influence as to how this
intelligence is used, whether to build the evidence required to lay charges and
convict criminals or for other purposes.
I also want to make it clear that, contrary to conventional wisdom, FINTRAC
has no capacity and no authority to access the bank accounts of Canadians or to
monitor their financial activities. The centre builds its intelligence from the
financial transaction reports provided by reporting entities when and how they
communicate them. It does not and cannot chase the reports in response to
specific investigative needs because FINTRAC is not an investigative agency.
Finally, the mandate of FINTRAC is limited to the disclosure of financial
intelligence strictly pertaining to money laundering and terrorist activity
financing. The centre does not disclose financial intelligence based on its
suspicion of drug dealing, tax evasion or other designated offences under the
Criminal Code or other Canadian legislation.
In the complex web of agencies, legislations, courts and reporting entities
that constitute the anti-money laundering and anti-terrorist financing regime,
FINTRAC's mandate and set of tools must be looked at in conjunction with the
assets and limitations of all the other players.
With this as our operating context, I come to my third observation, the need
for FINTRAC to adapt to an ever- changing environment.
FINTRAC's legislation is the most important tool we possess — and one that
could be strengthened to improve Canada's anti-money laundering and
anti-terrorist financing regime. There may be opportunities to improve the
provision of information with changes to the law that would allow more
intelligence to flow more quickly. If the legislation allowed it, for example,
FINTRAC could contribute strategic intelligence on threats to national security,
not just tactical disclosures.
In order to keep pace with the dynamic environment that CSIS Director Richard
Fadden has described, some countries are expanding the types or amounts of
information that are received, such as reports of wire transfers of amounts less
than $10,000. This, too, could be considered as part of the parliamentary
As an agency that deals in information, FINTRAC has also invested in
information technology to allow us to do our work more effectively. These
systems need to be kept current to ensure that we do not fall behind
sophisticated criminals and terrorists.
As we look to the future, the centre should strengthen its capacity as an
intelligence agency, which I believe will improve the regime as a whole.
To achieve this, we will focus our efforts in five key areas. First, FINTRAC
results are determined by the quality, usefulness and timeliness of the
intelligence it discloses to partners. Consequently, we should look at deepening
and strengthening the relationship we have with them, and even expand this
relationship from one focused on the tactical level to one that would also
include the strategic level.
Second, based on our analysis of the information at our disposal, we must
better define the risk factors we should monitor more closely. The establishment
of risk profiles by sector would facilitate the work of businesses that send us
Third, the parliamentary review could address some of the limitations of the
legislation, particularly as they relate to the information we should receive
and the production and disclosure of intelligence.
Fourth, once we have established risk profiles for both receipt and
disclosure, and agreed on the blueprint for an end-to-end process, we need to
buy the best electronic overlay to ensure a seamless flow of data among the
participants in the Anti-Money Laundering and Anti-Terrorist Financing Regime.
This capability should also allow for the electronic manipulation of data and
the move from a clerical work, such as data entry, to more value-added work such
Fifth, the training provided to FINTRAC employees should respond to the new
reality of our changing work environment.
Honourable senators, as this committee reviews the Proceeds of Crime (Money
Laundering) and Terrorist Financing Act, I would respectfully encourage members
to ask if changes to the law would make FINTRAC a stronger, more effective
intelligence agency, and whether these changes would improve the tools that we
have at our disposal to fulfill our mandate, including what information is
collected, how it is analyzed, and what intelligence is shared, under what
conditions and with whom.
Thank you. I would be pleased to answer your questions in English or French.
The Chair: Thank you for the comprehensive presentation, particularly
in view of the fact that you have not yet been in the position for two months.
I must say that I was particularly drawn to your closing paragraph. In
essence, you ask that the senators be self- reflective in their review of the
act. As you can imagine, senators, particularly on this committee, have a
tendency to think that we ask questions, as opposed to someone asking us
questions. However, you are obviously aware of our study. In fact, one of your
five key focus areas for improvement to the regime centres on our review. You
stated, ``The parliamentary review could address some of the limitations of the
legislation, particularly as they relate to the information we should receive
and the production and disclosure of intelligence.''
I would like to turn the self-reflection you have asked of us back to you and
ask you to amplify. When you say ``the limitations of the legislation,'' what do
you mean and what do you feel we should be recommending to government?
Mr. Cossette: For instance, one element that we are looking at — which
has been advanced by the Finance Department as something which everyone looking
at the act right now should review — is the threshold we are using for
electronic fund transfers. As you know, electronic fund transfers of more than
$10,000 are reported to FINTRAC. Should that threshold, for instance, be
reduced? Other organizations, such as our counterpart in Australia, have a
threshold of $1,000 for electronic fund transfers. Should we look at a threshold
that would be lower than the $10,000 we have now?
The Chair: What are you suggesting?
Mr. Cossette: We are of the view that we should.
The Chair: What do you think it should be lowered to?
Mr. Cossette: I think $1,000. Right now the banks already register any
transfer of funds at the international level. If we were to lower the threshold
to $1,000, it would provide us with more information, mainly on the terrorist
financing side, because then it provides us with much more information which
would allow us to draw a more comprehensive picture.
The Chair: This is very clearly a recommendation — you are being very
specific to us — that you would like us to consider?
Mr. Cossette: Yes.
Senator Stewart Olsen: Is that on the international transfers or all?
Mr. Cossette: All.
Senator Stewart Olsen: All wire transfers?
Mr. Cossette: We do not monitor wire transfers that Canadians send to
one another in Canada, for instance. We are talking about international wire
The Chair: Thank you for that clarification. I will go to my list of
questioners, which is quite lengthy, and start with the deputy chair of the
committee, Senator Hervieux-Payette.
Senator Hervieux-Payette: Welcome, Mr. Cossette, and all the best in
your new position. Your success means that Canadians will be successful in
finding numerous people who launder money.
I would like to discuss the report we received the day before yesterday; it
gives an example of individuals who have used the stock market to make
transactions, deceive citizens, and profit from a network that starts in Canada,
runs outside the country and comes back to Canada. On pages 12, 13 and 14 of the
report, a snapshot of a case appears. I assume Pumped Inc. and the Green family
are made up.
You describe fictional transactions where artificial inflation is used to
send share prices soaring. We all recall Bre-X and even Nortel, where the
Americans intervened before the Canadians and held the company's senior
leadership criminally responsible for significantly inflating share prices.
Shareholders obviously lost a tremendous amount of money.
I remember what happened with BioChem, as may some of my colleagues from
Quebec. Gangsters manipulated the company's securities, causing quite a stir in
I want to discuss the whole issue of using stocks to considerably inflate
prices overnight. Let us consider the UraMin and Areva case. In 2009, a bid of
$425 million was made, and in 2010, the company was sold for $2.5 billion. Areva
had to write off $1.8 billion. It is safe to assume that someone did something
shady. It was done from Canada using European companies. And all of a sudden,
the French government lost $1.8 billion.
Examples of such practices are not hard to find, and in popular sectors, no
less. We experienced the tech bubble, and it can happen in other sectors as
Do you closely monitor these kinds of transactions, cases where share prices
shoot up overnight, to ultimately pinpoint who is responsible for this abusive
speculation affecting our pension funds and our citizens? This is an area where
it is extremely easy to manipulate sums far greater than $1,000 or $10,000. We
are talking about millions. I would like to know what type of monitoring system
you have in place, whether it is for the Montreal, Toronto, Calgary or Vancouver
stock exchanges or for the derivatives market.
Mr. Cossette: The centre's job is not to monitor. The centre stays
abreast of major trends through newspapers, as well as classified and
unclassified sources. Essentially, the centre receives information from all
kinds of financial institutions when they consider a transaction to be suspect.
What that means is, when we are looking at a particular case, we do not go to
the banks to ask them whether they have anything to report or whether any
transactions appear to involve illegal activities. We are an intelligence
agency. We receive the information that financial institutions provide
voluntarily. Clearly, they are subject to obligations and limits, such as the
$10,000 amount. They also report suspicious transactions. So we collect that
information. And depending on the information, we either can or cannot build a
profile of a suspicious activity. Once we determine that a transaction appears
suspicious, we can transfer the information to police. But we do not have the
capacity to monitor. Our mandate is not to identify or monitor anything. The
financial institutions through which money changes hands are responsible for
reporting any suspicious activity to FINTRAC.
Senator Hervieux-Payette: There are two and a half pages on the
subject. Your predecessor wrote that the process was an example of the
``layering'' stage of money laundering, where perpetrators endeavour to conceal
the illegal origin of the funds. That example came from your organization. You
are telling me that if the financial institution does not report the activity,
it can carry on, be happening as we speak, and you do not intervene. In the case
of amounts involving $1,000 or $10,000, you have the information and you address
it. But I am talking about millions of dollars.
Mr. Cossette: Yes.
Senator Hervieux-Payette: You have no way of implementing some sort of
mechanism to see to it that our financial system is in fact worthy of our trust
and does not allow this type of illegal activity to happen regularly? These
transactions affect the very integrity of our entire system.
Mr. Cossette: You are absolutely right. FINTRAC is but one player in
the whole system. There are other players, including the superintendent of
financial institutions and the various securities commissions. A web of players,
so to speak, contribute to the entire regime, and our role is limited.
Whether we are talking about $1,000 or $10,000, we receive reports of
financial transactions that amount to far more than that. In looking at the
financial transaction or series of transactions, the issue is whether a link
with money laundering or terrorist financing exists. Money transfers can be tied
to corruption, drug and other offences. We disclose intelligence to police only
after we have determined that the activity is related to money laundering or
terrorist financing. If police are conducting an investigation, regardless of
the activity — share price manipulation or other — they may ask us whether we
have suspicious information on certain individuals or institutions that might
prove useful. Law enforcement bodies are the ones who intervene in the process.
We are simply an intelligence agency. We give police the information, and police
decide whether that information helps establish the evidence needed to justify
Senator Hervieux-Payette: So you do not do any monitoring.
The Chair: Senator Hervieux-Payette, may I put you down for a second
Senator Hervieux-Payette: I want Mr. Cossette to be very specific. He
says he does not undertake any action unless he has been advised. We are
studying how the system works, who initiates what, and who will do what. What
you are telling me does not explain who is doing what in the system.
The Chair: Thank you. Mr. Cossette, do you confirm that that is the
message you wanted to convey?
Mr. Cossette: No. From our perspective, the process is rather clear.
You end up with a disclosure. People are asking us to provide them intelligence,
and we backtrack. Police forces tell us that it would be of interest to them to
know the following. If we have that information, we provide it, but we are not
an investigative agency and have neither the mandate nor the legal authority to
seek information about people because, according to something we have read in
the paper, their actions seem to be illegal. That is the role of the police, not
Senator Oliver: I would like to follow up on the question put to you
by our chairman at the beginning. Your first recommendation was that
international wire transfers be reduced from $10,000 to $1,000. Also, in your
paper you said that if the legislation allowed it, for example, it could include
FINTRAC contributing strategic intelligence on threats to national security.
Is that the number two recommendation you would like this committee to look
Mr. Cossette: Thirty-five proposals have been submitted by the
Department of Finance that senators and others may look at. The strategic aspect
of the work we do is interesting. We develop an overall picture of a sector. For
instance, we just released a strategic study about the security sector. However,
when we do that, we do not release publicly or to the police the reason we
reached that conclusion. We do not say that we have drawn a picture from certain
suspicious transactions. We are not authorized to do that.
Senator Oliver: Would it be good if you were authorized?
Mr. Cossette: Yes, it would, but we have to be cognizant of the
privacy of Canadians. How far do the government, parliamentarians and Canadians
want FINTRAC to go in its capacity to look at specific individuals? When police
forces do that, they have to go to court to get a warrant. We are under a very
different regime, so the issue is how far Canadians want us to go to find
information, while at the same time protecting their privacy.
Senator Oliver: It is something you would like us to look at?
Mr. Cossette: It is something that is worth looking at.
Senator Oliver: In your report you said that, in the complex web of
agencies, legislators, courts, reporting agencies and money laundering, you are
but one small part of many different groups. Might the concept of embedding or
cohabiting other agencies with you assist you in that you could, as they do in
the United States and elsewhere, have some of these agencies right in your
office so that you could talk to one another and share information? It seems
that there are currently four, five or six different groups or agencies handling
little pieces of the puzzle. Would it not assist FINTRAC if you could have more
people in the same room with you?
Mr. Cossette: I would say yes and no in the sense that, as I said,
there is a continuum from receiving the information that falls under the
regulation obligations, because we need to understand what is going on from a
Senator Oliver: However, there may be time lost in getting that
information to the next agency.
Mr. Cossette: Yes, there might be time lost. We are trying, through
technology and the simplification of processes, to accelerate the transfer of
information. If it were done electronically, in real time, of course it would be
better, however the capacity we have is not only to receive and manipulate the
information, but also to try to make sense out of it.
Last year, 18 million reports were received. Out of the 18 million, you have
to make sense of which ones relate to cases that are already being investigated
by the police forces and which ones are just information that does not seem to
show anything suspicious. Things might be there, just dormant. Six months later,
we receive more information and then we start establishing the relationship.
Above and beyond the strict money — the transactions themselves — our
capacity is about establishing a link between Mr. or Mme. So-and-so and Mr. or
Mme. So-and-so. There is an issue of relationship portrayed through a
transaction. It is not only about the transaction, but also about relationships.
Senator Oliver: Surely, if you could talk to other agencies and groups
of people who are also studying those relationships and they were in the same
room with you, it would help you, would it not?
Mr. Cossette: Yes, and we do work with the RCMP, CSIS and others, on
an ongoing basis. They tell us, ``We are following the following files. If you
ever see something on this, please disclose it to us.''
The first priority of the centre is to better develop our relationships with
partners so that the flow of information is not only faster but also of much
better quality such that we are really providing them with the major indicators
that would lead to evidence, if possible.
Senator Oliver: Is there any recommendation that you would like from
this committee that might help to facilitate that cooperation and interaction —
embedding — with other agencies?
Mr. Cossette: The problem we face is always this balance between
access to information and privacy. You could have a wide open system through
which we would access everything. The question, I think, is for Canadians to
respond to that through Parliament. Are they willing to accept such an intrusive
Senator Ringuette: Mr. Cossette, FINTRAC has 300 employees. For the
last 10 years that it has been in place, it has received, from the taxpayers of
Canada, over $60 million. There is no doubt in my mind that we need to gather
financial intelligence. What is most important to me and, I think, to the
majority of Canadians out there, is what you do with it in regard to obtaining
the objective to do with money laundering.
In your short experience within FINTRAC and your larger experience close to
it, do you see yourself as a financial unit or as an enforcement unit? Which one
would you see as closer to your existence as FINTRAC?
Mr. Cossette: I would argue that we are an intelligence unit.
Senator Ringuette: For what purpose?
Mr. Cossette: For the provision to police forces and security agencies
of financial information, which is one part of the information that they need.
Senator Ringuette: The existence of FINTRAC, essentially and
ultimately, is for enforcement.
Mr. Cossette: It is for the disclosure of information.
Senator Ringuette: The ultimate objective is enforcement, is it not?
If it is not, then one must question that
Mr. Cossette: I am not sure that I understand what is meant here by
``enforcement.'' Enforcement agencies are the police forces in Canada. They have
an enforcement mandate.
Senator Ringuette: It is not your place to gather information for
Mr. Cossette: For enforcement, but also to deter money laundering and
the financing of terrorism.
Senator Ringuette: It is quite a lot of money in the last 10 years.
You might think that it is a misconception about the purpose of FINTRAC and how
it goes about it, but, I reiterate, from the last 10 months of evidence that I
have heard within this committee, I understand the need, nationally and
internationally, to have a financial data collection centre. However, if the end
result, the means and the operation is not with the objective of being part of
an enforcement team, I think that we have more to review than what has been
presented to us.
The Chair: Are you asking Mr. Cossette to respond to the fact that, in
your view, FINTRAC is only a financial data collection centre? Is that what you
would like him to respond to?
Senator Ringuette: That is what Mr. Cossette has reinforced three
times in regard to my question. That is its sole purpose. I think that, in the
minds of taxpayers, it is and should be more. The ultimate purpose of FINTRAC
should be to be part of enforcement with regard to money laundering schemes.
The Chair: Thank you for that comment. Mr. Cossette, would you like to
Mr. Cossette: If you look at the regime itself, from imposing a
certain number of obligations on financial institutions to prosecuting and
charging — if you take the whole process, with the ultimate goal of catching the
bad guy — yes, we may call that enforcement, but we are not an enforcement
agency. The police forces are the enforcement agencies. We are part of that
continuum; we are not the continuum.
The Chair: Thank you very much for that clarification.
Senator L. Smith: To follow up on a couple of issues raised by Senator
Oliver and Senator Ringuette, in your conclusions, you stated:
FINTRAC's results are determined by . . . usefulness, timeliness . . . .
Consequently, we should look at deepening and strengthening the
relationships we have with them —
— these are the enforcement groups, I understand —
— and even expand these relationships from one focused on the tactical
level to one that also includes the strategic level.
I would ask you to expand on that in reference to Senator Oliver's and
Senator Ringuette's questions.
I understand when you say that your job is to develop financial data that can
be used as financial intelligence, but I think that also, when you talk about
going from a tactical level to a relationship that includes the strategic level,
you are taking it to a level which may have some bearing on the ultimate result.
Could you expand on that for me, please? I would like you to speak to how you
can make the relationships with these third parties not necessarily more formal
but more effective. That goes back to Senator Oliver's question. Then I have one
short one after that that I would like to tie in, if that is okay, chair.
Mr. Cossette: When talking about ``tactical,'' we refer strictly to
the information that we communicate to enforcement agencies — the large cash
transactions, the suspicious transactions, the electronic transfer of money. We
basically provide these people with pages and pages of bits of information. That
money came from here and went there. That is tactical.
The enforcement agencies take this information and see if, in fact, that
information may be used as evidence, because to charge you need evidence; you do
not need intelligence, but evidence. They take the information and decide from
their own standpoint if this information is useful in the context of what they
We used to send it one way. We do not do it exclusively one way nowadays. We
sit with the RCMP and the police forces of the major cities in Canada and ask
what their investigation priorities are so, if we see something coming in, we
will not wait for them to ask for it, but will basically provide them with the
information. Once we receive it, we clean it up and organize it in a way that
makes sense. Millions of bits of information do not mean anything unless you
start establishing relationships among these pieces. It has to be a two-way
street, and it is helpful to have the ongoing dialogue.
Moreover, it is also helpful for us when police forces let us know
information in the reports is missing and if we had included this information it
would have been helpful. For instance, if we are looking at a transfer of money
between companies, if you do not know who the shareholders are and if something
illegal is happening, who do you chase?
There may be bits of information that we provide which are not that helpful
and bits of information that they should receive that we are not providing
because the information we receive from the banks did not cover that ground.
Senator L. Smith: Is that on an ad hoc or case-by-case basis, or is
this on a planned basis?
Mr. Cossette: It is on a planned basis if you look at what they are
asking for. They may say they are working on investigation A, B, C, D, so if we
see something about these four, please send them something.
Senator L. Smith: How do you go from tactical to strategic?
Mr. Cossette: Strategic is when we look, for instance, at transactions
that may occur in a specific area. I am from Rouyn-Noranda. If all of a sudden
you see movement of money for no specific reason, why is it that all of a sudden
in that part of the province all these transactions are occurring either in cash
or large transactions? We may go back to them and show them what we see. We have
seen an increase of this or that which allows the enforcement organizations to
look elsewhere, above and beyond what they are doing as their own investigation
priorities. That is what we mean when we say ``strategic.''
We may look at one sector. Do we see something in the banking sector? What
kind of transactions do we see and at what level? Has it changed vis-à-vis last
year, or two or three years ago? That provides enforcement agencies with other
things to look at. They do not have the millions of bits of information that we
have. They do not have the database we have, which is our strength, basically.
We have 12 years' worth of information and we can go back to some of that
information, which is what police forces do not have at their disposal.
Senator L. Smith: There is one point I am trying to understand. If
there was a structure with autonomy to do what you do, which is creating and
developing intelligence, with a more formalized relationship with the third
parties you deal with to develop a stronger strategic level, would that be
helpful? You could look at four or five areas, for instance, money laundering,
terrorist financing, cross-border issues, international, and develop a strategic
approach which follows the legislation the government is trying to outline.
Would that be helpful?
Now you say you do it, but it may be more on an ad hoc case-by-case basis, as
opposed to a planned basis.
Mr. Cossette: You are absolutely right. Right now we look at the data
and determine it is interesting and know it could be of interest to different
partners, domestically or internationally, to have a strategic picture. Since
the enforcement agencies do not know overall what we have in our database, it is
difficult for them to ask us to do something about banking, but they could.
For instance, we released something a couple of weeks ago on the securities
side to provide everyone with an understanding of what is happening in the
security sector. We have issued over the past years — I cannot remember; my
memory is failing me — a certain number of what we call typology studies, which
are about geographically located operations, sectoral-related operations. We do
that on an ongoing basis.
Senator L. Smith: Can we take this to a higher level of sophistication
which may improve your efficiency and, at the ultimate, more convictions?
Mr. Cossette: That is something we need to look at, but, yes, it would
be a good thing.
Senator L. Smith: Do you think that would be a good thing?
Mr. Cossette: On the national security side, I think it would be a
Senator Massicotte: Thank you, Mr. Cossette, for being here this
morning. In response to the previous questions, you have made it clear that
FINTRAC is an intelligence agency. You are not responsible for putting people
behind bars; you are merely a cog in a rather large machine.
I realize that the number of convicted perpetrators is not the most important
factor. However, hundreds of millions of dollars are being spent and private
firms and banks are being asked to produce rather lengthy and expensive reports.
It is important, then, to find a way to measure the results against the cost and
burden of producing them.
You are the expert, so how can we assess a decrease in international fund
transfers between $10,000 and $1,000? How can we gauge whether it is worth the
effort? The answers are vague. Is there a way to do it internationally? In
comparison with the U.S., how much has Canada collected in the past five years?
How many people have been put behind bars, as compared with the U.S.? Are there
any comparisons we can use to give us a better idea of where things stand?
Mr. Cossette: The contribution of an intelligence agency is virtually
impossible to measure in advance, given the amorphous nature of information.
Senator Massicotte: Go back five years, then. We will be patient.
Mr. Cossette: If we look back five years, the challenge lies in
distinguishing offences that fall exclusively under the realm of money
laundering from other types of charges laid against criminals in cases that the
Department of Justice decided to pursue. Did the department opt to pursue a drug
trafficking charge instead of a money-laundering charge, for example?
Prosecutors and police are the ones who decide which charges to pursue. Money
laundering is extremely difficult to prove.
As I said earlier, in Canada this area comprises three distinct offences.
That is unlike other countries, where regardless of the reason, be it drugs,
corruption or something else, as long as the activity results in the use of
dirty money, the organization can provide the information.
Senator Massicotte: I realize that is not your role. But we still have
to be accountable for results. We want to minimize money laundering. Yes, we
want to measure FINTRAC's effort, but we are looking at the big picture and the
results are not very convincing. You said there were no measures. You want
taxpayers to spend hundreds of millions of dollars in the hope that it will make
a difference. But it is hard to have trust in this environment.
Even though the U.S. is 10 times bigger than Canada, my understanding is
that, last year, they collected $2 billion in funds that they froze and took
control of. In Canada, the figure is $20 million. It is true that these are
somewhat random facts whose effectiveness cannot be measured directly.
Given that the RCMP tells us between $5 billion and $15 billion is laundered
every year, and here we are, collecting just $20 million with 4 people
convicted, you do not seem to be doing all that well. And yet you are asking
Canadians to trust you. That is a hard case to make, Mr. Cossette.
Mr. Cossette: Once again, it is necessary to break down the process.
FINTRAC cannot be held accountable for how the RCMP defines its evidence and how
lawyers at the justice department use that evidence to win a case in court.
Senator Massicotte: You say it is not your responsibility and that you
want to do your part. But you also say that the results are not acceptable and
that someone else is to blame. If we look at the whole situation, are we to
understand that you are working towards a shared outcome?
Mr. Cossette: Yes.
Senator Massicotte: And we get the sense that that shared outcome is
not all that satisfactory. I appreciate your answer. You do not decide who goes
to jail. I am simply telling you how the findings we have here look.
Mr. Cossette: Banks are always asking us the same question. Last year,
18,000 reports were made to FINTRAC. And then they say to us, ``You made just
790 disclosures. How is that possible?''
What people may not necessarily realize is that a single disclosure can be
related to hundreds of transactions. So it is not a one-to-one ratio. It will
never be possible to translate the intelligence we receive into a measurable
That is true for all intelligence agencies. Take CSIS, for example. You will
have a very tough time trying to put a number on how many crimes CSIS has
prevented in Canada.
Senator Massicotte: I think this is becoming repetitive, Mr. Chair.
Senator Stewart Olsen: Thank you for coming here today, Mr. Cossette.
I hope that you understand that these questions to you are made with the premise
that we are going to try to help here.
I see this situation as you having a dueling agency within your agency. On
the one hand, you say you are not investigative; on the other hand, you say you
are limited to the disclosure of money to the financial intelligence agencies
information that pertains to money laundering and terrorists activities. You
have to be investigative to sort out those things.
I wonder if you have the right mandate. I am trying to get around my head if
you are hamstrung by your mandate. You have no methodology of follow-up, for
instance. You really do not know how the information that you have collected has
been used. You provide it, but you have no idea how it has been used — at least
according to some of the testimony we received. How, then, do you decide if the
intelligence you are gathering is the correct intelligence? Do you see what I
mean? There is not communication among a lot of agencies, but, in the end, it
kind of comes down to your own mandate and what you are doing with that.
Some of the people we spoke with said that we collect information and we give
it out to those who ask. You are saying that. I see your new goals, your new
focus, going further and probably to the way the modern-day FINTRAC should
operate. How do you feel about your own mandate?
Mr. Cossette: When we are being asked about our results and when we
are being asked to compare the results with the association in the U.S., the
difference is that we disclose as we suspect money laundering and terrorist
financing. If we were to disclose about tax evasions, drug dealings, and what
have you, we would need to speculate as to whether this is drugs or whether it
is something else. Police forces do not speculate; they backtrack and
demonstrate beyond reasonable doubt what happened. Therefore, there is a charge
and, potentially, a conviction.
We get the information at the outset of the process. We do not start like the
police and backtrack. We get the information when we get it. It has no meaning
in itself as we get it.
Senator Stewart Olsen: No; we understand that part. However, we wonder
if the information that you get is appropriate to assist with the prosecutions
as necessary. How would you know that if you do not know the results of any
prosecutions? Do you see what I mean? There is no closing of the loop, which I
think is crucial; that is, has that information you provided resulted in a
conviction or a prosecution? Otherwise, you may be collecting thousands and
millions of documents that are of no use and will not be of any use. I think
that is a concern that we have. Do you see where I am going?
Mr. Cossette: Unfortunately, that is the challenge with intelligence.
Senator Stewart Olsen: That is the challenge of your mandate, I would
Mr. Cossette: Potentially, but it is also the challenge of
intelligence. I used to do intelligence, as well as foreign affairs. If you see
something coming through the wire that says there may be an attack against a
Canadian mission, for instance, but it does not tell you when, or by whom, or
anything else, you start watching what may happen. However, if you see the same
thing five times in two days and you can corroborate it with the Americans, and
with others who received the same information, then you see a pattern.
Senator Stewart Olsen: You are saying that is investigative. At
Foreign Affairs, I am pretty sure that, if you sorted that out and spoke with
RCMP or CSIS, you would have found out that, yes, that resulted in a conviction.
Mr. Cossette: We do survey our partners. We do know from the RCMP if
the information is useful. About 88 per cent of the time, yes, the information
is timely. How they specifically use that information in terms of building their
evidence and then for the prosecutor to take that evidence to court, I have no
control. I am not saying that I am passing the buck to someone else. I am saying
that I have no mandate, no legal authority, to go further than that.
Senator Stewart Olsen: No, and I am not saying that you should
prosecute. I am saying that to collect a bunch of information and hand it out,
how do you figure out if it is the right information you are collecting? Sorry,
I know I am taking up more than my time.
Mr. Cossette: You do not know. You receive information from the
reporting entities. Some of that information does not mean anything; you are
absolutely right. Out of millions reports, which ones show you something and
which do not? It is the aggregation that starts making sense. When the police
forces come to us specifically and say, ``With regard to investigation A, B and
C, do you have something?'' If we do have something that is related, we
transfer the information and continue to monitor the information that is coming
in and then transfer it to them. What we can do, which has no direct impact on
the investigations themselves, is to bring the work of the police force
sometimes beyond their investigation.
I do not know if FINTRAC ever came to show you what a disclosure looks like.
This may be easier for people to understand. There is the financial side of it,
but there is also the communication side of it in terms of them seeing a larger
Senator Moore: Thank you, Mr. Cossette, for being here. I want to
follow along a bit on this line of questioning. I might be able to help you a
Talking about tangible results, we heard that there was only one conviction
in the past number of years. Yet, when I look at page 7 of your report, you
The RCMP receives the most significant number of FINTRAC's case disclosures
of financial intelligence. A review of the RCMP's Integrated Proceeds of
Crime major cases in the 2010 and 2011 calendar years showed that FINTRAC
assisted investigations that resulted in 71 charges and 37 convictions.
These results include 10 money laundering charges (4 convictions), 20
proceeds of crime charges (8 convictions), 9 organized crime charges and
convictions . . .
Someone is keeping track somewhere. That is a lot more than the one
conviction we heard about.
I do not know who is keeping score or how, but you are obviously
communicating with the RCMP to see how you have been able to help them. Can you
explain that to me? I do not understand. We heard before repeatedly that there
was only one conviction and it was a small sum of money. There are no dollars
attached to the convictions on page 7, but there are certainly more convictions.
Mr. Cossette: We have asked Statistics Canada to provide us with
numbers, because they will need to look at the number of cases, the number of
convictions and on what grounds people were convicted. The information we
provide may help to identify or convict on money laundering, but it also helps
to convict on drug dealing, corruption and on other things.
The charge that is being used may have been built on our financial evidence,
even if money laundering is not the reason why the police are going after
someone or the court will convict.
Senator Moore: You call upon Statistics Canada to give you that
information. Someone has to be inputting that information into Statistics Canada
so they can collate it and give it back to you. Who is giving them the
information? The RCMP? What other agencies? I would have thought you would have
been the source; I do not know, maybe I got that backwards. I find it
interesting you would be asking someone else for results of your work.
I want to move to the section on ``Working Relationships Internationally'' on
page 12. You say that overall progression increased in the number of inquiries
from international agencies went up quite markedly, but the number of responses
you issued has gone down. In 2008-09, you responded to 33 per cent of the
inquiries, but this past year was 22 per cent. The number of inquiries has gone
up substantially, but the responses have not. Is there a reason for that?
Mr. Cossette: It depends what is being asked by others and what we are
asking. For instance, if we see things happening in Canada and we think there is
an international connection, we may ask our equivalent in the U.S., Australia,
Germany or wherever, to provide us with information on specific cases. When we
enter into communications with international partners, it is not as if we are
shooting in all directions to get information. We go after something specific.
It changes from year to year, based on the informants.
Senator Moore: On page 17 there is a graph. The sentence before it
states that this year, FINTRAC received 18 million financial transaction
reports, and there is a graph for the past five years labelled Large Cash
Transaction Reports. What is large? We assume that all transactions $10,000 and
more are being reported. What is large?
Mr. Cossette: That is what we call large. It may be $10,000 and more.
Senator Moore: Yes, but this sentence says 18.5 million and the graph
shows 8 million. I do not understand that.
Mr. Cossette: I do not have the page you have in front of you.
Senator Moore: Page 17, sir.
Mr. Cossette: The 18.5 million is divided into electronic fund
transfer, large cash, suspicious transaction, casino disbursement and the number
of requests we receive. The 18.5 is everything from a transactional standpoint
that we have released, disclosed or received from banks.
Senator Moore: The decrease in the number of electronic fund transfer
reports is interesting. Why is that? Do you have an answer? I know have you only
been on the job for two months, but do you have any sense of why the reports
have gone down? Is it fewer large transactions or fewer transactions in total?
Are you getting onto the bad guys? It is a substantial decrease over the last
two or three years.
Mr. Cossette: I do not have an explanation for you today.
Senator Maltais: Thank you, Mr. Chair. Mr. Cossette, congratulations
on your appointment. It is a position that comes with tremendous responsibility.
I do not want to go backwards since we spent 10 months hearing from just
about every financial stakeholder out there. No one engages in money laundering,
as you would expect; no problem. That is fine.
And yet, you are the first person to appear before us with an action plan for
the years ahead. I like that. No one told us what they were going to do. At
least you are saying to us, here is what I am going to do.
You said that, using your analysis of the information at your disposal, you
needed to better define the risk factors that you should monitor more closely.
How are you going to do that?
Mr. Cossette: The current legislation imposes a certain number of
obligations on financial institutions. They report different things, names,
addresses, what have you. We are provided with a profile of the client or the
client and the transactions.
I think the time has come to look at all the information we have collected
for the past 12 years. We need to figure out whether certain items more directly
lead to a finding of money laundering or terrorist financing.
For instance, do our disclosures contain certain pieces of information that
appear to be more useful to law enforcement than others? And if so, why ask for
all kinds of information, when say — I do not know — of 80 pieces of
information, 40 items appear to be more effective?
What I would like to do is to avoid taking a shotgun approach as much as
possible. I would like to have a risk profile that tells us a certain type of
information appears to be a lot more indicative of money laundering, for
instance. It is possible to look at cases where the police have been able to lay
charges and to establish a more direct correlation between the analysis factors
and the outcomes.
Senator Maltais: At the beginning of your brief — You received 18
Mr. Cossette: It was 18.5 million.
Senator Maltais: That is quite a bit. What do you do with all those
reports once you determine that they are not useful? Do you destroy them?
Mr. Cossette: We keep the information we receive for a minimum of 10
years, and we have to destroy it after 15, if the information was not shared
with police. The profile of a criminal operation often takes a few years to
become clear. So it is important that we hold on to that information. Most
criminal trials last years, as you know. And if we were to get rid of
information we did not consider very important initially, we might not be
fulfilling our obligations.
Senator Maltais: According to your fifth recommendation, which I think
is a good one, the training provided to FINTRAC employees should respond to the
new reality of your changing work environment.
Have you thought about sending someone to the Charbonneau commission?
Mr. Cossette: We have a team who is keeping track of the commission's
Senator Maltais: That is the place to learn how to launder money. It
is like taking Money Laundering 101. That is fantastic, good for you, if you
have people on that. The commission has done a good job of explaining how it all
Senator Ringuette: Speaking of the Charbonneau commission, how much
financial information has FINTRAC shared over the years to expose the money
laundering that goes on in the construction industry? Does your information
pertain solely to Quebec or do similar activities go on in Canada? Is that the
type of intelligence you would disclose to police?
Mr. Cossette: That is the type of strategic analysis we share, yes.
For example, you might be looking at a group that likely operates in Quebec, and
our incoming transaction reports may show that all the transactions are done in
Ontario or appear to go through Ontario's banking system. And the police will
decide whether the group's operations appear to have moved from one particular
region to another.
Those are things we work on with them. I could not give you a number, though.
I could not say whether we transferred 33 or 53 reports on this person or that
person to the Sûreté du Québec. That is confidential information. Nevertheless,
clearly, we do pay attention to media reports, whether Canadian or
international, on the big names under scrutiny, and we do check whether we have
anything on them.
Senator Ringuette: Forgive me, but that is being reactive, and your
mandate is to be proactive.
Senator Tkachuk: Welcome, Mr. Cossette. I was intrigued by your
statement that the actual information that you garner is considered intelligence
and not evidence. Is not the very act of money laundering a crime in itself?
Mr. Cossette: Yes.
Senator Tkachuk: The criminals are transacting cash by one means or
another, and you are receiving reports. Is that not evidence?
Mr. Cossette: Not necessarily. A large cash transaction may be a legal
one. It does not mean that it is an illegal one.
Senator Tkachuk: I understand that. I might have gotten this wrong.
You said that the information that you gather is intelligence, not evidence, but
surely sometimes it has to be evidence because you prove that the actual person
in court is laundering money through the fact that you have pieces of paper that
say that he moved money from one place to the other. Would that not be evidence?
Mr. Cossette: It could be evidence.
Senator Tkachuk: That is very important.
Mr. Cossette: However, the police forces will decide how they build
their own evidence. They have to build a case. It may be a piece of evidence.
Senator Tkachuk: I understand that.
Mr. Cossette, you have only been on the job two months. I am trying very
hard, but, if you do not have the information, you can forward it to us. How
many times has the information you gathered been used as evidence?
Mr. Cossette: I do not have that information with me.
Senator Tkachuk: Somehow I think that that would be important to us,
if you could ask the people who have been there before, because that is the crux
of it all. I understand the intelligence part. I do not get the evidence part,
because I think that, in the end, that is why you are doing all of this.
The Chair: Is that something that could be provided to the committee?
Mr. Cossette: We will look at the numbers, Mr. Chair, but it has been
very, very difficult to ascertain these numbers so far.
Senator Tkachuk: It would be important that he would know. Maybe that
is something that he could undertake to do.
The Chair: If you could forward that to the clerk, we would appreciate
Senator Tkachuk: The other item is the question of $1,000, which is
just, to me, way more information to be provided. As far as I can tell, we are
not getting bang for the buck. That is my opinion. I am not sure that having
more pieces of information being transmitted would be helpful, because I think
it would take away time from the serious amount of money being transmitted. You
did mention that something like $1,000 or $2,000 would be helpful in the case of
terrorists. I really do not see it, but perhaps you could explain to me why the
$1,000 level would be helpful to FINTRAC.
Mr. Cossette: What the evidence seems to suggest is that terrorists do
not transfer money or launder money at the same kind of level as organized
crime. People might raise money in Canada and transfer it to wherever in the
world in much smaller amounts. You would not see, for instance, group X take
$100,000 and transfer it. You would you see that, but you also see a lot of
small amounts of money on an ongoing basis.
These small amounts of money we do not pick up. We do not have an idea when
they are occurring or between which parties. Does it go through smaller money
services businesses? The banks already register everything, so, from their
standpoint, it is not a big issue or a big burden.
We would need to reorganize our systems, but it would provide us with a
different picture. If you are asking me, in advance, whether we will find
something out of that picture, I cannot give you a satisfactory answer. I cannot
tell you, ``Yes, I will find group X,'' because we do not know until we see it.
Senator Tkachuk: Okay. I have no more questions.
Senator Greene: I am intrigued by your answer to Senator Moore's
question about the number of prosecutions, et cetera, and the fact that you said
that the information came from Statistics Canada. I am surprised that they
collect and keep that kind of information, so I would like you to comment on
that. If they do, why has it taken so long for that information to reach this
committee? We were told earlier that there was just one. We have been at this
now for eight or nine months, so I am puzzled by this.
Mr. Cossette: Unfortunately, I do not have a good answer for you. We
have asked our partners for that information: the RCMP.
Senator Greene: If Statistics Canada keeps the information, it should
Mr. Cossette: What I do not know is how they will come up with that
information. I have no idea, to be frank, the kind of methodology they will come
up with in terms of providing the numbers we are asking them to provide. We will
see what numbers they provide first and whether it makes sense, but Statistics
Canada has a capacity to look at all kinds of things. They record all kinds of
statistics. Will they come up with a product that will acceptable? That is
another issue, and I have no answer for you today.
The Chair: That concludes round one. We will move to round two of
questions for you now.
I would like to start by referring to page 4 of your opening remarks,
paragraph 6, in which you stated:
The Centre builds its intelligence from the financial transaction reports
provided by reporting entities when and how they communicate them.
My question, Mr. Cossette, is: Do you have concerns regarding when and how
Mr. Cossette: They have an obligation, when they see, for instance, a
suspicious transaction, to communicate it within a certain time frame. I do not
want to mislead you with regard to the time frame, since I am still trying to
figure out how these mechanisms function, but they have an obligation to report
within a specific time frame.
The Chair: So there is a formal specific time?
Mr. Cossette: Yes, they have an obligation under the regulations and
the legislation. Part of our job is to ensure the compliance of the reporting
entities with their obligations, so we do audit them and check if they have done
what they are supposed to do.
We have conducted a series of audits, but that is the issue. When we do
conduct a compliance audit, we are in a position to have a conversation with the
entity and say, ``Listen, how is it that this transaction was not reported? Why
is it that it took so long? This would have been helpful to us. Why did it not
From our standpoint, there is a job of compliance to be done, but not
compliance for the sake of compliance; compliance because the better the
information is, the more useful it is for everyone. However, there is a timeline
within which we are supposed to operate.
The Chair: And you are satisfied with what they are currently, to the
best of your knowledge?
Mr. Cossette: Yes, the timelines are fine, as long as they work within
the timelines. If they work outside the timelines, we have an issue.
The Chair: But that is a compliance issue?
Mr. Cossette: Yes.
Senator Hervieux-Payette: I want to turn to page 28 of FINTRAC's
I see that in 2011-12, you had a salaries budget of $36 million, and in
2012-13, you lost $4.3 million.
Under the last budget, did you have to cut that $32 million even further?
Were you asked to make more staffing cuts?
Mr. Cossette: No. If memory serves, the reduction in the last budget
was $1.3 million. It is a program that is not being renewed, and only a few
positions will be cut. That is all.
Senator Hervieux-Payette: Do you have enough money as far as employee
training goes? Do your experts have the opportunity to better understand the
international context, to learn more about how certain industries work, to stay
on top of the latest computer updates — how to use the equipment and so forth?
Mr. Cossette: We have a highly developed training program, given that
we are a relatively young organization that is being asked to do a number of
things that have never been done. In response to that, we have an internal
training system for the different sectors, be it compliance or disclosures
regarding entities. Staff are trained to understand their job, to use computer
systems and to partner with the other entities. I think our people are
We have various experts. For example, we have someone with expertise in
Italian organized crime who recently went to Rome to upgrade his skills. What is
more, our organization recruits heavily from the private sector, meaning that
many of our staff have experience working in banks or other parts of the
financial system. Some of our employees come to us from Canadian border services
and others from the Canada Revenue Agency. Our hiring structure, then, ensures
we have a blend of skills.
As we look at upgrading our computer systems, for example, and as new
technologies emerge, we do indeed have to stay on top of those developments. So
instead of waiting to buy systems and train people, we try to ensure everyone is
up to speed when the training is done.
Senator Massicotte: In your opening remarks, you stressed the
importance of training and technology. Is your budget for 2012-13 sufficient;
does it meet your requirements as far as information technology is concerned?
Does the budget allow for that?
Mr. Cossette: It is sufficient for the time being. But what we are
wondering about is how the parliamentary review findings and any changes the
government introduces will affect us. We are in the midst of looking at the
technological impact those changes, if approved, could have on us. For the time
being, however, the budget is sufficient.
Senator Hervieux-Payette: A moment ago, you said that your staff has
come to you from various sectors. Do you have people from specific sectors where
manipulation is more likely to occur? My colleague mentioned the Charbonneau
commission. The construction industry seems to be quite adept at using money
laundering. Not as many contractors seem to be arrested as others who are
involved in similar activities.
You have teams of experts, and you have support teams, secretaries and
accounting staff. What is the ratio of employees who conduct inquiries before
disclosing information to the RCMP or other partners, as compared with support
staff? Do you have a sizeable team?
Mr. Cossette: I would say our team of support staff is fairly small in
relation to the size of the organization.
Our staff is active in two areas. The first is compliance, those who liaise
with the financial institutions and other organizations, and we have offices in
Montreal, Toronto and Vancouver. The other area we have people working in is
disclosures. Those are our two biggest teams. Our human resources and financial
management teams are small. Our tech team is fairly robust, given that we use a
lot of technology.
Senator Hervieux-Payette: What do you mean when you say
``communications'' in French?
Mr. Cossette: Disclosures, the reports we share with law enforcement
Senator Hervieux-Payette: So it has nothing to do with media
Mr. Cossette: No.
Senator L. Smith: I have two specific questions. First, what is your
number one priority in your job? Second, if there is one major improvement you
would like to make to FINTRAC, what is it?
The Chair: That sets the ground for quick, snappy answers.
Mr. Cossette: My first priority is to understand my business. I think
I cannot be a good CEO if I do not understand in detail what FINTRAC is all
about. I am currently sitting with analysts doing compliance audits so that I
will know exactly how they are done and doing disclosures to understand exactly
how they are done.
With regard to an improvement, we have legislation, tools, practices and
technology, but they are not as well aligned as I would like them to be. The
conversation we are having with all our staff right now is, if you start at the
end, what is a successful disclosure; what is the top information we could
provide to the enforcement agencies? Start there and backtrack, then eliminate
everything that is not necessary and increase everything that would make a
Senator L. Smith: From your preliminary evaluation, are you seeing
something that you can make better?
Mr. Cossette: Yes, we need to be more specific about what we are
asking for. We are asking for lots of things and, at least at this stage, I am
not convinced that all this information is as important or relevant as we think
it is. As I said before, if we could be more focused we would, first, reduce the
burden on reporting entities and, second, the information could be manipulated
much more easily and provided to enforcement agencies much more quickly.
However, before you change your electronic overlay, you need to know what you
are looking at, why it makes a difference and how you want the continuum to
unfold. Then you need to put in place the technology that allows you to do that.
Unfortunately, too often we buy the technology and then try to fit the rest of
the organization into a technological pattern. I want to see the end result and
then backtrack from there. Everything should be about the best disclosure
Senator L. Smith: I think there are two issues. There is technology
and there are people and knowledge, which goes back to Senator
Hervieux-Payette's question. Do you have a comment on the people perspective?
Mr. Cossette: We have an extremely strong team and a good mix of
people at FINTRAC.
Senator L. Smith: With knowledge of crime and money laundering?
Mr. Cossette: Yes. The senator talked about construction. We need to
look at new fields where it may happen in the future. We need to become more
strategic in determining where it is happening and, if we do not have the
capacity and the knowledge to do that, we need to build that capacity and
Senator L. Smith: Two words that come to mind are ``proactive'' versus
``reactive,'' and many of our questions today are leading to potentially being
proactive versus reactive.
Senator Oliver: I would like to follow on the chair's second set of
questions to you, when he turned to page 4 of your presentation and asked about
paragraph 6. I want to ask about paragraph 7.
When I read your remarks before you came, I marked on paragraph 7 that it was
the key to your presentation. You stated:
. . . the mandate of FINTRAC is limited to the disclosure of financial
intelligence strictly pertaining to money laundering and terrorist activity
financing. The Centre does not disclose financial intelligence based on its
suspicion of drug dealing, tax evasion or other designated (predicate)
Should FINTRAC disclose this type of intelligence? Would disclosure of this
type of intelligence improve the efficiency of Canada's regime as, for example,
drug dealing and money laundering are thought to be linked? Is this something on
which you would like to see a form of recommendation from this Senate committee?
Mr. Cossette: I do not want to be cagey on this, but it is a bit early
for me to determine right now how far the legislation should, in fact, go. We
are helpful to enforcement agencies in all the activities you just mentioned,
such as drug dealing and tax evasion. We do not want, given the expertise we
have, to specify at the outset that this is ``drug dealing.'' That being said,
proceeds of crime comes from a crime so, whatever the crime is, should we be
entitled to release everything that relates to any crime? That is a question I
am not in a position to answer now but it is a question we need to examine.
Senator Oliver: Thank you.
Mr. Cossette: An enforcement agency would have a much better answer
than I would have with regard to this.
Senator Harb: Would you turn your attention to page 5 of your
In the second point you say:
. . . we must better define, based on our analysis of the information at
our disposal, the risk factors we should monitor more closely. The
establishment of risk profiles by sector . . .
I appreciate your frankness. This is an admission of the fact that we are not
properly defining now. Is that true?
Mr. Cossette: I would not say that. I would say we are asking for lots
of information right now, and we are asking for lots of information from
If you look at the banking system versus the insurance sector, versus the
money business sector, do we see different patterns from one sector to another?
If that is the case, should we ask specific sectors to look at specific factors,
instead of imposing more or less the same thing to everyone?
Senator Harb: You are saying that we better define and what we have
now is not good enough. I appreciate that.
Mr. Cossette: What we have now is very broad, because we need it to
Senator Harb: I will take it to your third point of what it is you
want to do. There you want to see if Parliament could address some of the
limitations of the legislation. Could you be specific on exactly the limitations
you want this committee to take into regard when it does its report?
Mr. Cossette: I would say that Senator Oliver's question was exactly
about that. We are looking at money laundering and terrorist financing. Would
parliamentarians want us to look at drugs, tax evasion and other things? What
are the different issues that our centre may look at above and beyond money
laundering and terrorist financing?
We must bear in mind that going further than what we are doing now must also
be looked at in the context of protecting the privacy of Canadians. If we were
an investigating agency we could go further, but we would need warrants or
others things. Right now we do not need that. That is why, to a certain extent,
the legislation is prohibitive. ``You will not release the information unless,''
and then it states the conditions under which you can.
Senator Harb: Your legislation is up for review and you have been in
power now for two months. One would suspect the first thing you would have done
is called on all your other stakeholders because you are part of the chain and
you are not the whole chain. I am surprised that nowhere in your presentation do
you talk about the cooperative approach and the stakeholder approach that I
would personally think you are in the best position to do and to take.
The only thing I see in your fourth point is that you want to have a bigger
database, you want to have more people, and you want to have more equipment, and
so on. That would drive me crazy. This indicates that you want to build a bigger
bureaucracy. Based on the fact that you are asking to remove the limits in terms
of what can be reported from $10,000 to zero, or whatever that is, you will have
a massive amount of data coming into your system. Maybe you do not agree, but in
my estimation this will stray away from the focus on the probability of risk and
doing things based on risk assessment and focusing on the big fish.
Mr. Cossette: In terms of partnerships, I have already met with the
big five banks. I have met with the RCMP. I am going to Montreal next week to
meet with the provincial police, Montreal police and Loto-Québec, so I have
already engaged partners. I was in Toronto last week, I will be in Montreal next
week, and I will be in Vancouver in January. I have met all the deputy ministers
involved in the security portfolio, including CSIS, Justice and the Privy
Council Office. In terms of relationships, that is where I started. As I said, I
need to understand the business and one part of the business is partnering with
the different players. That will continue.
In terms of technology and numbers, I used to run a much larger operation and
larger is not necessarily better. The issue is not to get more technologies, but
to get different technologies. There is now software, for example, called Big
Data which allows you to draw patterns out of millions of bits of information.
Right now a lot of the work we do is still being done manually. Some of the
pictures we draw are done manually, so it takes forever. If a computer could
come up with a pattern, then you can analyze that and decide if the
investigation is worth pursuing. It is not an issue of more technology; it is an
issue of different technology.
Senator Massicotte: What do you think of reduction of international
money transfers from $10,000 to $1,000? Do they support that?
Mr. Cossette: They record that already. To them it is not an issue.
Senator Massicotte: Is there an additional cost?
Mr. Cossette: Not for them, as far as I am aware.
Senator Massicotte: When they come here as witnesses and say they do
not like it, are they not telling us the truth? Are they are totally in favour?
Mr. Cossette: We did not discuss that specific issue. I doubt very
much they will tell you they would like more information.
Senator Massicotte: I presume you are right.
The Chair: Mr. Cossette, when we asked you to appear before this
committee we very much recognized you were new on the job. I must say, from your
opening comments and from your response to our questions, it is very clear to us
that you have hit the road running and we are very appreciate of that.
On behalf of all of the members of the committee I would like to express our
great appreciation to you for a most enlightening presentation. Thank you.
Some Hon. Senators: Hear, hear.
The Chair: I would like to ask the members of the committee to remain
for a brief in camera meeting.