THE STANDING SENATE COMMITTEE ON BANKING, COMMERCE AND THE ECONOMY
EVIDENCE
OTTAWA, Thursday, May 23, 2024
The Standing Senate Committee on Banking, Commerce and the Economy met with videoconference this day at 11:30 a.m. [ET] to examine the subject matter of those elements contained in Divisions 11, 13, 16, 17, 18, 19, 20, 33, 41 and 42 of Part 4, and in Subdivision A of Division 34 of Part 4 of Bill C-69, An Act to implement certain provisions of the budget tabled in Parliament on April 16, 2024.
Senator Tony Loffreda (Deputy Chair) in the chair.
The Deputy Chair: Hello everyone, and welcome to this meeting of the Standing Senate Committee on Banking, Commerce and the Economy. My name is Tony Loffreda, and I’m the deputy chair of this committee.
Before we begin, I would ask all our senators and other in-person participants to consult the cards on the table for guidelines to prevent audio feedback incidents. Please take note of the following preventative measures in place to protect the health and safety of all participants, including the interpreters. If possible, ensure that you are seated in a manner that increases the distance between microphones. Only use a black approved earpiece. The former grey earpiece must no longer be used. Keep your earpiece away from all microphones at all times. When you are not using your earpiece, place it face down on the sticker on the table for this purpose. Thank you all for your cooperation.
I invite committee members participating in today’s meeting to introduce themselves.
[Translation]
Senator Bellemare: Diane Bellemare from Quebec.
Senator Forest: Éric Forest from the Gulf division of Quebec.
Senator Ringuette: Pierrette Ringuette from New Brunswick.
[English]
Senator Yussuff: Hassan Yussuff, Ontario.
Senator Varone: Toni Varone, Ontario.
The Deputy Chair: Today, we will continue our examination of the subject matter of those elements contained in Divisions 11, 13, 16, 17, 18, 19, 20, 33, 41 and 42 of Part 4, and in Subdivision A of Division 34 of Part 4 of Bill C-69, An Act to implement certain provisions of the budget tabled in Parliament on April 16, 2024.
Before introducing the first witnesses who will be appearing before us, I’d like to give a brief overview of the format of our meeting today. We will have four panels of 30 minutes each, which will be on different divisions. Each witness will have three minutes for their opening statements, and then we’ll move to questions from senators on that specific division.
For our first panel, we will examine Division 20 of Part 4. This division would amend the Canada Business Corporations Act to make changes to the beneficial ownership registry of corporations which were introduced in 2022 in relation to penalties associated with the registry requirements.
Representing Publish What You Pay-Canada, we have the pleasure of welcoming virtually Sasha Caldera, Campaign Manager, Beneficial Ownership Transparency, and representing the Canadian Federation of Independent Business, also virtually, we have Dan Kelly, President and Chief Executive Officer. Welcome, and thank you for joining us today. We will now begin with your opening statements.
Sasha Caldera, Campaign Manager, Beneficial Ownership Transparency, Publish What You Pay-Canada: Mr. Chair and fellow committee members, thank you for inviting me to speak today.
Publish What You Pay-Canada is part of the global Publish What You Pay movement of civil society organizations working to make oil, gas and mineral governance open, accountable and responsive to all people. For the past seven years, I’ve been leading a coalition of three civil society organizations to advocate for a public beneficial ownership registry. Our partners are Transparency International Canada and Canadians for Tax Fairness. We were successful, as Canada launched a publicly accessible and searchable beneficial ownership registry that is free of cost as of January 2024. Today, I’m pleased to share my thoughts concerning Bill C-69.
The amendments in Part 4, Division 20, feature penalties that can deter criminals who desire to take advantage of corporations governed under the Canada Business Corporations Act, or CBCA. Stronger penalties work to bolster the primary objective of Canada’s beneficial ownership registry, which is to deter the proceeds of crime from entering Canada’s economy through federal corporations. As our group has been advocating for strong and harmonized penalties since the introduction of the original legislation, we are pleased to see these amendments today.
It is important to take stock of the problem we’re trying to address. In March 2023, Finance Canada published a report called Updated Assessment of Inherent Risks of Money Laundering and Terrorist Financing in Canada. The report notes that Canadian corporations possess a very high vulnerability to money laundering. There may be more than 2000 organized crime groups operating in Canada, and transnational organized crime groups regularly use professional services to launder money. The report goes further, stating:
The vulnerability relates to the ability of these entities to be used to conceal beneficial ownership, therefore facilitating the disguise and conversion of illicit proceeds.
Taking stock of the vulnerability of Canadian corporations, it’s our opinion that criminals will view weaker penalties as a cost of doing business that their organizations can easily absorb. It’s also our recognition that the proposed hybrid offences in section 21.4(5) of the CBCA are intended to target sophisticated criminals with high net worths. These amendments pertain to those who are knowingly falsifying information in the registry, and this is a tactic exclusively used by organized crime groups to avoid detection. With the amendments in Bill C-69, Canada’s public registry will feature some of the strongest penalties among Five Eyes countries, all of whom are deploying these tools as part of national security strategies to combat transnational organized crime, terrorist financing and corrupt foreign officials who seek to hide dirty money in liberal democracies.
We are pleased to hear that Ministers Champagne and Freeland have reached out to provinces and territories to create a centralized pan-Canadian registry. As British Columbia and Quebec have already committed to or implemented their own registries, a pan-Canadian framework is needed so there are no gaps across the country. To bring provinces on board, we recommend that Minister Freeland reach an agreement with provinces and territories that allows for centralized data collection. Provincially registered companies may choose to send corporate beneficial ownership information directly into this pan-Canadian registry, or provinces may choose to use their own beneficial ownership registries to collect information and subsequently send it to the central registry. It’s worth noting that provinces would need to pass legislation in their own business acts, yet a similar agreement was reached by finance ministers in 2017.
In conclusion, the amendments in Bill C-69 make Canada’s beneficial ownership registry stronger, and this is good for our economy and public safety. I’m proud to see Canada take this decisive step today. Thank you so much for your time, and I’m happy to take your questions.
The Deputy Chair: Thank you, Mr. Caldera.
Dan Kelly, President and Chief Executive Officer, Canadian Federation of Independent Business: Thank you so much, senators, it’s good to be with you again.
We at the Canadian Federation of Independent Business, or CFIB, have some concerns about this particular provision. We have lots of comments about the budget implementation act more broadly, particularly the capital gains changes and also the small business rebate for the carbon tax. However, on this specific subject matter today, we do worry about the increase in these penalties.
I get that government has a difficult job in trying to put measures in place that can root out organized crime and money laundering. These are, of course, notable objectives, and we understand that governments need to take them seriously and try to take steps to address them, but typically, what governments do is pass a whole bunch of rules, regulations, fines and new regulatory requirements for mainstream business owners with a lot of compliance work and some concerns from a privacy perspective that actually don’t actually lead to any noticeable change in the stated objectives itself.
The size of these penalties in the budget implementation act is quite worrisome from a small business perspective, but we actually have serious concerns about the beneficial ownership registry itself — not concerns about the requirements to ensure that governments and law enforcement agencies have enough information to do their jobs, but concerns about the fact that this is now being made public without necessarily knowing all the details that businesses are going to be required to provide.
Many small business owners are quite worried about having their information available to the general public, like their name, place of residence and date of birth. You can imagine that you own a business or you own shares of a business, and you have to flag that with the public. We worry that it is going to set up business owners to be victims of crime themselves as those that are seeking to create fraud and dislocation actually target people and have lots of information now about the SMEs and their ownerships, including where they live and other things like that.
We worry, of course, about this becoming a potential competitive disadvantage. We do think the requirements on businesses to ensure that they provide accurate and up-to-date information is yet another additional pile-on to the compliance burden that affects small- and medium-sized business in a significant way.
We urge caution about the size of the penalties spoken to in this act but have concerns about the whole concept of this public registry as it’s known right now.
The Deputy Chair: I’ll now open the floor to questions from our senators.
Senator Yussuff: Thank you, witnesses, for being here and taking the time to participate.
Mr. Caldera, you’ve been before the committee, and it’s good to see you again. We were dealing with the original legislation that put into force the beneficial ownership registry. Given the experience that you have observed across the country and given that a large part of this collective effort lies in the provincial jurisdiction and that the penalties that are being added to complement the legislation that is already in place, is there consistency and similarity at the provincial level with what you’re seeing at the federal level that has been tabled in this bill?
Mr. Caldera: Thank you so much for your question, senator.
As far as I understand, these penalties and the size of these penalties are unique to the federal legislation. Right now, provinces happen to have their own penalty scheme for beneficial ownership legislation. So far, beneficial ownership legislation is quite nascent in Canada, and I believe the intent of the federal government is to create a North Star and to provide a direction for Canada.
I completely understand the concerns for privacy and compliance on behalf of small businesses across the country. The goal for beneficial ownership legislation needs to be step by step, and we want to ensure that businesses are compliant with the least amount of burden as possible. That’s why we were advocating for this registry to be free, publicly accessible and searchable so that small and medium enterprises can access the registry and have the benefit of carrying out due diligence on other entities for the purpose of suppliers and to ensure that they won’t be targeted for fraudulent purposes.
Senator Yussuff: Mr. Kelly, thank you for participating. It is good to see you.
Mr. Kelly: Nice to see you again, senator.
Senator Yussuff: In regard to the point that you made, you do recognize that we’ve been flagged as a country that is a laggard in regard to dealing with money laundering in this country, and that’s a detriment to investment in this country. Don’t you think it would be absolutely advisable that the government heed some of the concerns you’re making, but equally, we need to have a registry in this country and have it consistent with the provinces joining on so we can send a message internationally that, hey, Canada is no longer going to be a haven for criminals who want to use our country to launder money?
Mr. Kelly: Thank you, senator.
Look, we certainly have no time or truck or trade for those seeking to use Canada as a destination for money laundering or illicit activities. Governments absolutely do need to take some steps. We’re not sure that this is the step that is going to actually lead to any benefit.
Governments have a difficult time dealing with problems and problematic businesses. Typically, the approach that it’s taking, whether it’s the underground economy or money laundering, is you put more rules on legitimate businesses, more paperwork requirements and more steps in place to be seen to be doing something that actually doesn’t lead to noticeable change. That’s our worry about this.
Again, we have no objection to law enforcement officials or others having the information they need, and if businesses need to step up to provide that for those parties, that’s one thing. But in the step of making this a public directory, we’re not seeing any added value to the business community from that but worries from a privacy perspective, especially if this is then duplicated at the provincial level. We would advocate to provinces not to take the step of the federal government on this front.
Senator Varone: Thank you for being here and giving us your thoughts.
My concern with this legislation is that organized crime wouldn’t be that organized if the heads of the organizations put their names forward as the ownership entity pursuant to the federal laws. I think it’s fool’s gold at this point, because they’re the ones that you want to go after in terms of organized crime. They’re not going to appear in the beneficial ownership registry.
Mr. Kelly: Right.
Senator Varone: That doesn’t make any sense to me whatsoever.
My real concern here is the unintended consequences of a public registry where piercing the corporate veil becomes that much easier. The proliferation of lawsuits will be humongous. The courts won’t be able to handle it because of all the parties you’ll bring into these frivolous and vexatious lawsuits. I’m concerned about the unintended consequences, and I’d like to hear from you, Sasha, about what your thoughts are, because if you’re really chasing organized crime, you’re not going to find them in the registry.
Mr. Caldera: Thank you for your thoughts, senator.
There are about 149 beneficial ownership registries that have been committed to worldwide. Beneficial ownership registries, particularly publicly accessible registries, have been rolled out across all of our European partners, Latin America, Southeast Asia and African countries, especially where that capital flight is quite pronounced due to corrupt foreign officials. It’s also recommended as a public safety measure by the International Monetary Fund and the World Bank. Of course, Canada gets evaluated on its beneficial ownership regime every five years, and we’re up for such an evaluation next year in 2025 by the Financial Action Task Force.
We’re quite confident in the nature of this registry because it takes a Charter-compliant approach to privacy. The information of the beneficiaries that would be available to the public is the name, nature and extent of their ownership and the name of their corporation. Personally identifiable information, such as their date of birth, won’t be available. Many businesses happen to have an address for service. That will be available, but that’s no different than what’s available already on the federal registry, so we see this as a reasonable step.
In terms of behaviour change, when the United Kingdom rolled out their public registry, they noticed an immediate shift in suspicious entities that have been notoriously used to launder money. For instance, in 2017, with Scottish limited partnerships, which were used particularly by Eastern European and Russian transnational organized crime, the level of incorporations vanished almost overnight, and this type of incorporation has been well documented.
While I would say that the impact and behaviour change of beneficial ownership registries, particularly public registries, are still in their infancy, it is a standard that is being recommended by all of our international partners, including multilateral organizations.
Senator Varone: How does a public registry mitigate those that have fled? You’re saying that, in Scotland, these types of organized crime just stopped incorporating. If it’s available only to law enforcement, wouldn’t it have the same effect? Why does it need to be public?
Mr. Caldera: That’s a terrific question, senator.
The difference is that when you have a variety of countries that happen to have public registries, you create a deterrence effect. This information is certainly helpful to law enforcement for the purposes of investigations, but we know that sophisticated criminals are the ones who will take a chance. If they knew that their information was going to be in a public registry, they would think twice about incorporating in Canada. I don’t want to understate the impact that has on Canada’s capital markets, fraud, human trafficking, drug trafficking and also the outsized effect on Canada’s real estate market. The idea is that when you happen to have all G20 countries with beneficial ownership registries, those large, sophisticated, transnational criminal organizations will no longer have a viable place to do business.
Senator Varone: I have a lot of follow-ups, but I’ll wait.
Senator Ringuette: Mr. Caldera, who will supervise this registry to make sure that the facts that are public are real? Maybe I should also say at the same time that the sophisticated people that engage in money laundering always seem to be three steps ahead of us. Who is going to supervise that the facts that are published are accurate? I believe that if all other countries are doing so, it will create a certain barrier, but it’s not the ultimate barrier to money laundering.
Mr. Caldera: Thank you very much for your question, Senator Ringuette.
Absolutely, I think you hit the nail on the hammer quite well. A beneficial ownership registry is a tool within a tool kit, and to answer your question, we have to look at Canada’s anti-money laundering regime more broadly. What the registry would do is create a deterrent effect and also assist law enforcement and competent authorities when they are carrying out investigations.
In terms of who will be monitoring this information, you have the teams at Corporations Canada, at Financial Transactions and Reports Analysis Centre of Canada, or FINTRAC, and at the Canada Revenue Agency, or CRA, that can actively consult the registry and look at information for the purposes of investigation or forensics. With a public registry, you have journalists and civil society groups such as ours that can scrutinize data. We can also flag any long-term trends to competent authorities.
The other value that it has is for all the reporting entities in Canada that happen to have beneficial ownership reporting requirements, many of which were legislated in 2018. They can consult the registry for free to use it for their due diligence purposes, and that’s going to be a huge benefit because they happen to have reporting requirements.
Finally, there’s an international component. Any government — particularly competent authorities or law enforcement or civil society organizations who know and happen to have specific, local knowledge that there is some type of nefarious capital flight occurring — can consult the registry and carry out searches and alert competent authorities. That’s the goal of these registries. If every country happens to create a registry, it creates better information and a global deterrence effect.
It’s not a silver bullet. With behaviour change and money laundering, you have to have a variety of different tools — from deterrence to enforcement and then prosecution.
[Translation]
Senator Forest: Thank you for being with us. My first question is for Mr. Kelly. Since you represent the Canadian Federation of Independent Business, what is the biggest drawback for you? Is it this new load of “paper burden” or the fact that the registry is public?
[English]
Mr. Kelly: The decision to make the registry public has already been made, so that die has been cast. Certainly, we would welcome if it went back the other way. The penalties alone do worry us. Am I worried that governments are going to say that you’ve made some administrative error and slap you with up to a million dollar penalty? Probably not.
I suspect that governments have difficulty enforcing virtually every rule under the sun. I suspect — to Senator Ringuette’s question — that nobody is actually going to be looking to ensure that the information is accurate in the vast majority of cases, so I suspect that business owners could put that Daffy Duck owns the business in the registry, and the chances of that being caught would be very low.
That also speaks to the fact that I’m not sure there’s going to be a significant value added to civil society or other groups from a registry like this. I do worry that if the penalties are more strictly applied, it could be quite devastating to a small business, given the size that is issued by government. Is it at the top of my list of worries that the government is going to apply this inappropriately? No.
Our worry is really this: Governments like to be seen to be doing something about serious problems. I take no issue that this is a serious problem with respect to money laundering and organized crime. My belief that this is going to be an important tool in the tool kit that will lead to any particular benefit, beyond the fact that law enforcement and others already have access to this information, is that I suspect it’s going to be rather minor. Is that worth the trade-off of the additional information and risks to small businesses? Our view is that it really isn’t.
[Translation]
Senator Forest: Mr. Caldera, in light of the expertise you’ve developed over the years, do you feel that, when we look at best practices in the fight against money laundering, these measures are effective and robust enough to achieve their objectives?
[English]
Mr. Caldera: Thank you very much for your question.
Yes, I think the registry is on a great track for long-term development and also long-term compliance for small businesses. Corporations Canada has set up some very helpful resources for small businesses so that they are compliant. There’s an assistance tool along with a standardized record-keeping form which small businesses can fill out to disclose their beneficial ownership information.
Corporations in Canada at the federal level were already legislated back in 2018 to hold an internal record of their beneficial ownership information, and this legislation — or, at least, the original legislation — really just required that this information be sent to a registrar and that certain fields would be made publicly available.
In terms of effectiveness overall, there are long-term changes which need to happen in Canada, including provincial coordination on beneficial ownership legislation, and these are discussions that are happening right now amongst finance ministers. That’s going to take some time.
The next step — and this is probably a longer-term objective — is ensuring that the information is accurate. Many G7 countries — particularly with the U.K. being, probably, the frontrunner — have already introduced legislation that requires automatic verification of beneficial ownership information as it is submitted. The legislation, as it stands, does not include such a measure; however, in the future, this is something that could be expected, given advancements in artificial intelligence, or AI, and also once there’s a good understanding amongst businesses of the compliance procedures.
I think we need to go step by step and build up confidence in Canada. I think Canada is on the right track. We have been asked multiple times by our international partners to create such a registry given the outsized risk that money laundering and fraud pose to the economy.
Senator Varone: I’m going to ask this question a different way because I didn’t get the answer the first time around. My issue is not with the criminality. In fact, I support the initiative as it relates to organized crime and mitigating criminality in Canada. But what about the unintended consequences of civil lawsuits, meaning that a public registry will become available to all the ambulance chasers who are now going to be suing beneficial owners and clogging up the courts? How do you prevent that? How do you maintain privacy for law-abiding citizens?
The Deputy Chair: I’ll take a question from Senator Yussuff, and then you can answer them together to save some time.
Senator Yussuff: Very quickly, we’re not talking about the legislation already in place. These are new remedies to act as a deterrent. Many corporations know what their legal responsibilities are, and they comply. We do have a problem in this country. It has been noted and acknowledged that we have many criminals who are using our country to do things they should not be doing in the first place. There has to be a deterrent in some way. I know we’d like to have the ultimate solution as to what that is. However, to be fair, the government is putting some penalties in place to send a message clearly. We want to ensure that criminals are not using our country to harbour money laundering, and we want to ensure that Canada’s reputation will be held to the highest standard. Wouldn’t that be a fair way to look at this? I do understand your point in regard to where you’re coming from, but for the most part, most corporations do comply with the law, and they recognize and want Canada to be seen as a place for foreign investment and a place to do business and have a high reputation around the world that should be respected.
Mr. Caldera: Thank you for your questions.
I want to express that privacy is an important right in Canada. It’s something that we took very seriously in 2019. We carried out our own thorough analysis as we provided recommendations to Canada. We encouraged the Canadian government to carry out their own privacy compliance and ensure that this registry is consistent with privacy laws in Canada. The information that is going to be public is already the same information that exists in Canada’s existing business registries. There is no material change. We are not asking for any personally identifiable information.
With respect to the volume of lawsuits that could clog up the system, my hope is that Canadian courts would dismiss any spurious or frivolous lawsuits and that we have the court system clear for what actually matters to Canadians and for public safety.
Mr. Kelly: Just quickly to Senator Yussuff, on my list of the top 500 worries on the part of small business owners, is this on it? Probably not. But the point I guess I’m making through my presentation is simply that the directory and the public nature of the directory seem to be another attempt by government to put paper exercises in place with questionable end value. We have a problem with some underused housing, so let’s put into place rules that require everybody to register, including corporations, and then the government realizes, “Oh, wait a minute, that is not leading to any value.” Then they have to scale it back. It feels like that’s where we’re at with this.
Throwing big penalties at criminals — I’m not going to argue against that, but will criminals actually use the ownership registry properly and then subject themselves to these penalties and put themselves at risk? I have questions as to whether that is actually going to happen.
The Deputy Chair: Before we move on to the second panel, Sasha, I have one question I would like to ask. Why are there so many criminal organizations operating in Canada? What measures could be taken to reduce that number? To what extent would these measures bring that number down? A short and concise answer would be appreciated.
Mr. Caldera: Thank you for that question, senator.
Our theory, which is also based on perspectives from experts including law enforcement, both domestic and our partners in the United States, is that Canada has had an exposed back door to its economy for decades. As I mentioned earlier in my opening statement, the most vulnerable aspect of Canada’s economy to money laundering happens to be corporations. Organized crime groups have taken advantage of this, particularly transnational organized crime groups. They have been using Canadian corporations to launder money.
This beneficial ownership registry is part of a global strategy to deter these actors. We don’t want them to do business in the country. It’s our hope that these outsized penalties will prevent them and make them think twice, because if you have a $5,000 penalty or a penalty on the individual of significant control to be up to $100,000, that’s just a cost of doing business for these folks. The intent is to create a deterrence effect and to target these individuals, knowing that the vast majority of small businesses in Canada will be compliant and won’t be subject to a $100,000 penalty for a small clerical error. That’s what a robust compliance regime would look like in practice.
The Deputy Chair: Thank you.
This brings us to the end of the time we have for our first panel. Mr. Caldera and Mr. Kelly, thank you for appearing before us today.
We will now move to Division 33 of Part 4. This division would amend the Criminal Code to broaden the criminal interest rate offence, which was reduced through legislation in 2023 from the equivalent of 48% annual percentage rate, or APR, to 35% APR to prohibit certain advertising and to remove the requirement of Attorney General consent to prosecute illegal and predatory lenders.
Representing the Canadian Credit Union Association, we have the pleasure of welcoming, in person, Victoria Mainprize, Director, Legal, Policy and Compliance and Assistant General Counsel. Thank you, Victoria.
Victoria Mainprize, Director, Legal, Policy and Compliance and Assistant General Counsel, Canadian Credit Union Association: Thank you, Mr. Chair and committee members, for inviting me to speak today.
First, a little bit about the Canadian Credit Union Association: We’re the national trade association for Canada’s credit unions and caisses populaires outside of Quebec and excluding the Desjardins Group. Our 187 credit unions and caisses populaires are leaders in small business lending and hold $308 billion in assets, serving over 600 million members. With 1,634 credit union locations, we are also the only financial institution with a physical presence in over 350 Canadian communities. Credit unions and the five regional centrals that support them employ over 30,000 Canadians and provide full-service financial solutions.
All credit unions are cooperative financial institutions regulated either provincially or federally, and all are 100% owned and controlled by their member-owners, the people who bank with them. Canada’s credit unions exist to serve their member-owners and have ranked first among all financial institutions in overall customer service excellence for 17 years in a row. As cooperatives, we are guided by the principle of concern for our community, which means we exist to improve our members’ economic and social well-being. As such, we are pleased to appear today to comment on Bill C-69, Part 4, Division 33, Criminal Code (Criminal Interest Rate).
As a champion for accessible and affordable credit products, the Canadian credit union sector aims to help Canadians improve their financial position with fair, fast and easy-to-understand lending options. To achieve this, we emphasize clear communication and plain-language descriptions of our products and services. We therefore fully support the proposed changes to the Criminal Code that will enhance consumer protection in this area.
We believe that the proposed amendments to expand the potential offences by adding prohibitions against offering to enter into an agreement or arrangement to receive interest at a criminal rate or advertising an offer to enter into an agreement or arrangement that provides for the receipt of interest at a criminal rate are a step in the right direction. These proposed changes will better protect Canadians, especially vulnerable Canadians, from high-cost debt and predatory lending and ensure that they have access to fairer and better financial products and loan interest rates that support their varying needs.
In addition to the changes recommended in Bill C-69, we further recommend that the government work with all relevant stakeholders to ensure that deceptive and misleading advertisements in financial services are considered criminal; to foster closer cooperation and coordination among different levels of government spanning federal, provincial, territorial and municipal authorities, including sharing information and best practices; that we adopt a broader strategy that involves all financial institutions including credit unions and others to actively promote and support access to low-cost, small-value credit; and that we elevate consumer awareness and education regarding rights and responsibilities when borrowing, equipping consumers to recognize excessive interest rates and unethical lending practices and letting them know how to report complaints or concerns about lenders charging interest rates beyond the legal limits.
Although not directly related to Division 33 of Part 4 of Bill C-69, if I may, I also want to take this opportunity to make some brief comments regarding Division 16 (Consumer-Driven Banking Framework) and Division 42 (Legislation Related to Financial Institutions (Sunset Provisions)).
Regarding the former, our sector was pleased with the announcement of the new consumer-driven banking act and FCAC’s role in supervising participating entities and the technical standards body in order to ensure the safety and soundness of consumer-driven banking. We welcome further developments of the framework and the opportunities for credit unions to participate. That said, as the majority of our members are provincially regulated, we do have concerns about potential scope creep and how a federal regulator will operate with provincially regulated credit unions if enforcement is taken, and how the provincial regulators and FCAC will coordinate and collaborate.
Regarding the Legislation Related to Financial Institutions (Sunset Provisions), we were somewhat disappointed to see the further extension of the sunset provision, given that the related review of financial institution legislation was originally set for 2023, then 2025 and now 2026, eight years after the last review and following a federal election. We are, however, hopeful that this indicates an intention to conduct a more comprehensive review of the federal financial institutions acts, especially as the last time many of the financial institutions acts were substantially overhauled was in 1992.
Thank you very much.
The Deputy Chair: Thank you. We will open the floor for questions.
Senator Ringuette: Thank you very much for your presentation.
I have a question related to this, because I have always been interested in criminal interest rates. Actually, I have a bill in front of the Senate. One of your members has undergone a pilot in B.C. to try to — I don’t know if the word is “imitate” or “deter” the objective of payday loans and predatory lending in that area. Can you tell us what the criminal interest rate is that your partner or an associate member is currently charging in B.C.?
Ms. Mainprize: That’s an excellent question, senator.
I don’t know offhand what rate they are charging. We know that Vancity has implemented another program, and many of our credit unions are working with Vancity and with others to make sure that products are being offered at a low rate and that we have many no-interest and low-interest accounts available for our members and that, when we’re lending, we’re doing so at a reasonable rate. I don’t, however, know offhand what the Vancity rates are.
Senator Ringuette: In regard to payday loans, it was in 2005 that the Senate agreed to carve out a portion of the criminal interest rate for provinces that wanted to regulate payday loans, which is a specific financial product, $1,200, 60 days. My recent research indicates that the lowest interest rate for payday loans right now is in Newfoundland. It is the equivalent of 375%. Do you agree with the fact that you’re now subject to 35%? I would say most of them are U.S.-owned, but these entities within Canada are still allowed to charge 375%. I want your comments on that.
Ms. Mainprize: I believe that our sector has been very clear, senator, that we have serious concerns about payday lending. That said, the payday lending business services an aspect of Canadian society that is not served by other lenders, and the reasons that people use payday lenders are varied. Yes, we have concerns that many people are using them and are subject to these rates. It’s obviously something that we in our sector avoid and try to offer alternatives, and reasonable alternatives, to payday lenders wherever possible.
Senator Ringuette: Don’t you find that in regard to legislation concerning the criminal rate that it’s kind of unfair?
Ms. Mainprize: It is absolutely unfair. Unregulated industries do cause problems for the regulated entities. However, while it may be unfair, we’re happy to be ourselves subject to a criminal interest rate and show as part of that our commitment to Canadians.
Senator Ringuette: Thank you.
Senator Varone: Thank you for being here.
My question is rather specific. I want to deal with the standard charge terms. First of all, all my experience with credit unions has been nothing but favourable. I love the space they occupy, and they do good work for people in Canada, but I want to get to the standard charge terms. As general counsel for the overarching association across Canada, do you have oversight over the individual credit unions and their standard charge terms for their mortgages, or does each credit union have the ability to just create their own without any oversight?
Ms. Mainprize: We have no oversight over the operations of our members. We are solely a trade association. In our capacity, we provide awareness, education and advocacy for our members. We do not in any way set rules for how they operate or what charges they may use. Those are all set by regulation.
Senator Varone: Okay. When they fall off the beaten path, what do you do with that member organization?
Ms. Mainprize: Again, we don’t do anything specifically. We look to our regulators to regulate appropriately when something happens where a credit union falls off the rails. That’s not likely to happen, but when it does, we will support, obviously, the member in question and our other members, but most of that is dealt with by the regulators.
Senator Varone: Thank you.
Ms. Mainprize: Thank you, senator.
Senator Martin: I just have one question related to consultations. Many of your members are provincially regulated, but these changes do impact your institution. In terms of the changes in Budget 2024, were you adequately consulted, as with some of the changes presented in Budget 2023? You were consulted on those. Is there adequate consultation with your organization? You are very important institutions for our nation.
Ms. Mainprize: That’s a wonderful question, senator. Thank you.
We can say that in this case, yes, we were. That isn’t always the case and, historically, hasn’t been the case. We have noticed and very much appreciate that, increasingly, our sector is being brought into consultations and is being included in discussions as legislation is being contemplated. Thank you very much for asking that.
Senator Martin: Thank you.
[Translation]
Senator Bellemare: Welcome, Ms. Mainprize. My question concerns Division 16. You mentioned that you were concerned about certain aspects of this bill. Could you talk about why you’re concerned about Division 16 of the bill, and I’d like to know, in particular, that since this division would make it easier to establish the activities of an open banking system, do your concerns relate to the open banking system per se or to federal-provincial relations?
[English]
Ms. Mainprize: Our concerns are really that there be collaboration and discussion between the federal regulators and provincial regulators — in this case especially — when it comes to the governance structure and how consumer protection will be dealt with within the consumer-driven finance banking framework. What we have seen is that during the initial working groups that were dealing with accreditation, liability, privacy and security, the provinces and the provincial regulators were included. We haven’t seen as much inclusion in this next step, and we want to ensure that there is inclusion, as has been noted. The majority of our members are provincially regulated, and we need to ensure that the regulatory environment for them remains reasonable and proportionate and is fair for them, especially given the differences between federal regulation and provincial regulation. Our primary concern is making sure that there continues to be consultation, dialogue and cooperation at both levels of government for this.
[Translation]
Senator Bellemare: Do you think this section should be part of the government’s omnibus bill, or should it be a stand-alone bill, to ensure that consultation processes are respected?
[English]
Ms. Mainprize: That is an excellent question, senator. Thank you.
From our perspective, our main concern is speed and that this open banking framework come into effect as soon as possible. If that can happen while this is moved out of an omnibus bill and moved into separate legislation, then absolutely, we would support that. However, given the delays that have existed so far in the implementation of the open banking framework, we were pleased to see that Division 16 was included in this omnibus bill.
[Translation]
Senator Forest: Thank you for being with us, Ms. Mainprize. To follow up on our colleague Senator Bellemare’s question, you said that the open banking system, despite jurisdictional problems, should be completed quickly. Did I understand correctly?
[English]
Ms. Mainprize: I was not saying that we would like legislation that is not good legislation to come in quickly. What we’re saying is that we’re very supportive of the act coming into play, and we were supportive of the announcement of the Financial Consumer Agency of Canada, or FCAC, and its expanded role.
As is the case in so many situations, the devil will be in the details. We hope that, through the next range of consultations, those details will, in fact, fall into play in a way that is useful and effective for the entire sector. However, we do urge that, in this next stage of consultations, there be meaningful consultation and meaningful discussion with the provincial regulators to ensure there is a good balance and that there is cooperation between the two levels of regulation and the two levels of government. Otherwise, it puts an undue burden on provincially regulated credit unions trying to balance both structures.
[Translation]
Senator Forest: Do you think the open banking system will allow financial institutions to reduce their operating costs and lower banking fees for consumers?
[English]
Ms. Mainprize: That’s a very difficult question for me to answer. I think it’s possible. I think there are many interesting business use cases that open banking can support. Potentially, if access to customer information is more accessible, it absolutely does have the potential to lead to more innovation and to lower-cost services.
Senator Forest: Thank you.
Senator Yussuff: Thank you, Ms. Mainprize, for being here.
I’m still wrestling with the fact that a new criminal interest rate is at 35%. Most people would say that’s still criminal, and I understand. I don’t know what the government consultation process was with the credit union. I’m a member of a credit union. I have been so for most of my adult life. I enjoyed it enormously. I appreciate the fact that I can travel from place to place and find a credit union and withdraw my money and it doesn’t cost me $3.50 or whatever the bank charges at the end of the day. Still, in the context of the reduction of the criminal interest rate, I think some of us would argue this is still not adequate, given the reality of the Bank of Canada lending money to financial institutions and what they end up charging.
I guess I’m just asking you an objective question. Do you find 35% not to be an exorbitant amount to still be listed as way too high for Canadians? I have a problem with this. I think it’s an observation from my perspective. The government should be doing much better. I think that if you ask Canadians, they will argue the same thing.
Ms. Mainprize: I think you are correct in many ways about the impact of the current criminal interest rate and previous criminal interest rates on Canadians. Balanced again that is the cost of financial institutions operating and doing business and the cost that it takes for them to make a loan, service that loan and service their members or customers. I would argue that as long as that balance is a reasonable and fair one that allows smaller financial institutions to exist — such as credit unions that really, genuinely help their communities and members — it is a very important thing, because in addition to that criminal interest rate, there are also lower rates. There are also lower products and services that financial institutions are able to offer. If we reduce their ability to charge customers and members in too extreme a way, we limit their ability to actually operate.
Senator Yussuff: Would any one of your credit union members across the country be charging 35% interest rate?
Ms. Mainprize: Again, that’s a very good question, and I don’t have the answer. I don’t believe any of them are charging 35%.
Senator Yussuff: I’m trying to make a point.
Ms. Mainprize: Yes.
Senator Yussuff: My colleague asked you about open banking. I think there’s a degree of frustration from many who advocate for open banking that this is taking far too long and we’re being far too cautious. I appreciate that we have to set up the right mechanism to ensure privacy protection and a regulatory framework that would be up to the standard. We have very sound financial institutions in our country because we regulate them appropriately. Objectively, do you think we’re moving fast enough on open banking in this country, given the frustration that consumer groups have been advocating for so long?
Ms. Mainprize: Senator, thank you for that question.
You’re absolutely right that there has to be a balance between the speed at which we implement the framework and the quality of the framework itself. I think things have not moved as quickly as we and the rest of industry would have liked, but we’re now finally starting to see that movement. We feel that with the consultations that have happened in the working groups over the last couple of years, the movement is in the right direction both in terms of speed and quality.
The Deputy Chair: Before moving on to the next panel, I would like to ask a question about open banking. You said you would like to have the policy or framework in place as quickly as possible. We talked about reduced costs and reduced efficiencies for the consumer. The consumer is always first, obviously. Everywhere, the client is first.
Why would your association or co-ops be in such a hurry to implement it? Would open banking not reduce margins in the banking sector? Also, when Senator Martin asked the question on stakeholder consultation, you expressed satisfaction with the fact that the government did consult with you. It’s not always the case, but they did consult with you. Can you answer this concisely? Government has been contemplating open banking for six plus years. You did express serious concerns in your three-minute opening statement, although you took six minutes and I gave it to you because it was important. Why were the provincial regulators not consulted over six years? Or why is the government not aware of those concerns at this point in time? We’ve heard similar concerns from other provinces — not just Quebec — with respect to the co-ops, and the caisse Desjardins, who want to be invited. You’re representing a large number of co-op lenders, and I think it’s an important question and would like to hear that answer.
Ms. Mainprize: Our understanding was that the provincial regulators were included in the four working groups and have been consulted throughout the last round of consultations. We haven’t heard how they will be integrated and consulted in relation to this next level and, in particular, in relation to the recent announcement about the expanded mandate and role of the FCAC and how that will impact provincially regulated credit unions and federally regulated institutions, so ensuring that balance is our primary concern at this stage.
The Deputy Chair: Why the hurry? Will it not reduce margins in the industry?
Ms. Mainprize: The hurry from our perspective is twofold. The first is, whenever any framework — and in this case, the open banking or consumer-driven finance framework — is implemented, there’s a lot of questioning and movement behind the scenes to position oneself or prepare oneself for what is undoubtedly or inevitably going to come into play. We’ve seen a lot of that over the last few years, and our members are finding it difficult to know how much they should move ahead and how much they should prepare when there have been a number of delays. For that reason, a quick pace or a fast movement of implementation would be beneficial to make sure the framework is in place. We don’t anticipate that all of our members will become participants in the framework immediately, but we want to make sure that those who want to have the ability to participate, and for many of them, there’s a strong business case that they can continue to service and better service their members with open banking.
The Deputy Chair: Thank you.
This brings us to the end of time for our second panel. Ms. Mainprize, thank you for our appearance. Don’t go too far, as you’ll be appearing on our last panel.
We will now move to Subdivision A of Division 34 of Part 4. Subdivision A of Division 34 would amend the proceeds of crime, money laundering and terrorist financing to, among other things, permit certain types of information sharing and extend application of the act to cheque cashing businesses.
Representing the Royal Canadian Mounted Police, we have the pleasure of welcoming, in person, Chief Superintendent Denis Beaudoin, Federal Policing; and Chief Superintendent Richard Burchill, Federal Policing. Representing the Office of the Privacy Commissioner of Canada, we’re pleased to welcome Philippe Dufresne, Privacy Commissioner of Canada.
Welcome, and thank you for joining us today. We will now begin with your opening statements.
Chief Superintendent Richard Burchill, Federal Policing, Royal Canadian Mounted Police: It’s a pleasure to appear before this committee as part of the review of Bill C-69. I’m Chief Superintendent Richard Burchill, Director General of the financial crime program within the federal policing criminal operations branch of the RCMP. I’m joined here today by my colleague Chief Superintendent Denis Beaudoin, Director General of Federal Policing, National Security.
As many of you already know, the RCMP’s federal policing program protects Canada, its people and its interests against the greatest domestic and international criminal threats, including risks to national security, transnational serious organized crime, financial crime and cybercrime. Specifically, the RCMP’s federal policing financial crime program investigates reports of money laundering, serious fraud, market manipulation, corruption and sanctions evasion. We also undertake enforcement activities for Canada’s sanctions regime. Within our national security program, our integrated national security enforcement teams investigate terrorist financing.
Throughout the course of an investigation, the RCMP may work with many partners, including the Public Prosecution Service of Canada, Canada Revenue Agency, the Financial Transactions and Reports Analysis Centre of Canada, or FINTRAC, Canada Border Services Agency, the various police of jurisdiction across Canada and/or international law enforcement agencies to pursue investigations.
Following investigations, the RCMP may refer cases to the Public Prosecution Service of Canada for prosecution, to the Canada Revenue Agency for the purpose of investigating tax fraud, or to civil forfeiture offices to potentially seize or forfeit assets under their own authorities.
Mr. Chair, I’ll touch on a few key points that will be relevant to our appearance here today.
Money laundering and terrorist financing have a significant impact on the integrity and reputation of a country’s economy and the safety and security of its citizens. The importance of addressing money laundering in Canada has been specifically highlighted throughout the Cullen Commission of Inquiry into Money Laundering in British Columbia, and internationally, with the Financial Action Task Force.
As Canada’s national police force, the RCMP is at the forefront of efforts to disrupt the illicit flow of proceeds of crime and terrorist financing throughout Canada. To this end, the RCMP has prioritized investigations to have proceeds of crime and terrorist financing components. In 2019, the Government of Canada provided the RCMP with an investment of $19.8 million over five years to implement the development of Integrated Money Laundering Investigative Teams, otherwise referred to as IMLITs. These IMLITs are made up of RCMP investigators, the Canada Revenue Agency, the Forensic Accounting Management Group and the Public Prosecution Service of Canada, amongst police of jurisdiction partners, in some instances. It’s built on an interagency model to bring together expertise to tackle complex financial crimes, especially with respect to the investigation of professional money launderers.
The RCMP recognizes there are still challenges in tackling money laundering and terrorist financing. One of the issues is how we measure success and how statistics are used to measure our success. For example, when we do joint investigations with international partners involving seizures and disruption, that is not always captured in the reporting for the RCMP. We are looking at innovative ways to track and communicate these successes and that information.
Financial crime and terrorist financing investigations are time- and resource-intensive. They sometimes take years and require expertise such as skilled investigators, expert witnesses and prosecutors to build and present evidence that follows a complex trail of financial records, usually designated to conceal criminal transactions. However, the RCMP continues to work closely with anti-money laundering and anti-terrorism financing partners to lend expertise to the effort to modernize and strengthen the effectiveness of our regime while also continuing to address the threat landscape as it evolves in emerging threat areas. We’re pleased to see proposals that will assist enforcement and intelligence agencies in tackling these complex crimes.
Another item I want to touch on briefly, Mr. Chair, is the RCMP’s role in sanctions. The RCMP has general responsibilities within the Canadian sanctions regime for enforcing the Special Economic Measures Act, the Freezing Assets of Corrupt Foreign Officials Act and the United Nations Act. The RCMP undertakes a number of activities to support the Minister of Foreign Affairs in this work, which include the receipt of information in accordance with the regulations, providing assistance to the minister and conducting criminal investigations when necessary. The Government of Canada recently invested in its sanctions regime, which included resources for the RCMP to build capacity and increase its investigations into sanctions evasion. As you’re aware, economic sanctions are used as a tool in foreign policy by many countries, and we have seen an increasing use of sanctions in the past several years globally. The RCMP will continue to work collaboratively with its domestic and international partners in order to increase its capacity in this space and fulfill its role enforcing sanctions.
Mr. Chair, to conclude, the RCMP is supportive of amendments that would improve upon existing tools that can be applied to take further action against financial crime and terrorist financing. The RCMP remains committed to working with partners to support the implementation of the proposed amendments to serve Canadians in protecting Canada’s economic integrity and national security. I thank the committee again for the opportunity for us to be here and speak with you today, and I welcome the chance to answer questions that you may have.
[Translation]
Philippe Dufresne, Privacy Commissioner of Canada, Office of the Privacy Commissioner of Canada: Thank you, Mr. Chair and members of the committee, for the opportunity to appear as part of your pre-study on Bill C-69.
This bill includes new information-sharing provisions for reporting entities under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, or PCMLTFA, the inclusion of a safe-harbour protection, as well as consequential amendments to Canada’s federal private-sector privacy law.
[English]
As Privacy Commissioner of Canada, I oversee compliance with both the Privacy Act, which applies to federal institutions’ collection, use, disclosure, retention or disposal of personal information, and the Personal Information Protection and Electronic Documents Act, or PIPEDA, which is Canada’s federal private sector privacy law.
[Translation]
In the context of Canada’s Anti-Money Laundering/Anti-Terrorist Financing Regime, pursuant to section 72(2) of the PCMLTFA, my office is also required to review the measures taken by the Financial Transactions and Reports Analysis Centre of Canada, or FINTRAC, to protect information that it receives or collects under this act every two years.
[English]
I support the measures that are proposed in Bill C-69, which would help to facilitate the effective exchange of information to address the crucial public interest of combatting money laundering and terrorist financing.
As I’ve said on a number of occasions, privacy supports the public interest, and Canadians should not have to choose between good public policy and good privacy. They can have both, and they deserve to have both.
[Translation]
In doing so, it is important to ensure that when privacy impactful measures are put in place in the public interest, that there are accompanying measures to ensure that privacy is protected and that it is seen to be protected, as doing so will generate trust, which will in turn support the public interest.
[English]
Bill C-69 would introduce amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, or PCMLTFA, which would allow reporting entities under the act — such as financial organizations — to disclose personal information to another organization without an individual’s knowledge or consent if the disclosure is reasonable for the purpose of detecting or deterring money laundering, terrorist activity financing or sanctions evasion, if making the disclosure with knowledge or consent would compromise the ability to detect those crimes and if the disclosure is made in accordance with the regulations. The bill would also allow the recipient organization to collect and use the information disclosed to them pursuant to this provision.
[Translation]
Bill C-69 would further provide that the Governor-in-Council may adopt regulations respecting those disclosures, collections and uses, including the establishment of codes of practice by organizations and respecting the role of my office and FINTRAC in relation to those codes.
While the bill explicitly contemplates that a role for my office and for FINTRAC may be set out in regulation, the specific nature of this role is not defined in the bill, and therefore will not be known and confirmed until the regulations are adopted.
[English]
For instance, there is an important difference between an approval role and a merely consultative one, and in my view, there should be a requirement for prior approval of the codes by my office, as this would support Canadians’ trust that their privacy is being considered at the front end of this process. For this reason, it will be essential that my office be consulted in the development of these regulations and that the regulations include a strong and visible approval role for my office with respect to the development of codes of practice.
With that, I would be pleased to answer your questions.
[Translation]
The Deputy Chair: Thank you. I’ll now open the floor to senators who wish to ask questions about Subdivision A of Division 34.
Senator Bellemare: I’d like to know what costs are associated with these legislative changes. Is there also an implied increase in human resources? Can you comment on that?
[English]
Mr. Burchill: Yes. As far as costs associated to these legislative changes, I don’t know for the government, writ large, what those costs would be. I know what we’ve received in funding for the legislative changes that pertain to sanctions, and that is roughly $5.771 million over five years to assist with building capacity in sanctions.
Now, as far as resources to do that work, I would say that there are a number of efforts over the past year and a half under way within our financial crime program to boost efforts and build capacity within the sanctions regime. Some of that is building investigative resources when we have the ability to staff positions, but a lot of that is using existing resources to focus their efforts on sanctions evasion criminal investigations and working with our partners, particularly Global Affairs Canada, or GAC, doing information sessions jointly with them across the country to partner agencies and investigative units to explain the differences and the nuances around sanctions investigations, how we support GAC in their enforcement of the Special Economic Measures Act, or SEMA, and how we work in regard to a criminal investigation where sanctions evasion is concerned. In addition to that, we’ve partnered with the Public Prosecution Service of Canada to also provide those info sessions on criminal investigations to investigative units. I think our approach is more than just an RCMP approach. We’re trying to use that funding and our resources to build capacity in that area so that, after that five-year period, we have a substantive contribution to the anti-money laundering and anti-terrorist financing, or AML/ATF, in the sanctions area. I hope that answers your question.
[Translation]
Senator Bellemare: Yes, thank you, that answers my questions. I’d now like to ask Mr. Dufresne a question.
You raised the issue of regulation, and that’s something we talk about regularly. We pass laws with regulations that can completely change the first impression we have. Do you have any solutions for us? What can be done to prevent the regulations from being too invasive or from reversing the objectives?
Mr. Dufresne: That’s one of the reasons why I mentioned the importance of my expectations with regard to these regulations. What you can do when you have witnesses is ask them what the government’s intentions are with respect to these regulations. My understanding is that the intent is an approving role, and I expect it to be an approving role. First of all, I think that’s what’s going to create and strengthen public interest and trust.
I said at the outset that I support these anti-money laundering objectives; it’s extremely important. Furthermore, when we protect the privacy of Canadians by doing so, we strengthen confidence in the system, and everyone benefits.
Senator Bellemare: Thank you.
[English]
Senator Ringuette: I guess this is a further step from the interagency capability that you’re doing? You’re nodding. Is that a “yes”?
Mr. Burchill: Sorry, I was waiting. I’m listening intently.
Senator Ringuette: I’m sorry. Is this a further step in that you’ve started the interagency investigation into possible sanctions, and the information that you require and need to exchange within is currently an issue so you need this piece of legislation to move forward?
Mr. Burchill: Well, I would say that we didn’t start because of needing interagency cooperation. I think we’ve always operated in an interagency sort of methodology, but where sanctions are concerned, the last couple of years has been an increased requirement for us as the national police force to engage and support Global Affairs Canada. In addition to that, because of geopolitical circumstances, there are many more criminal sanctions evasions prevalent.
When we’re doing criminal investigations, we want to ensure that we’re abiding by privacy legislation and by Charter of Rights arguments that may appear in court if we have a misstep. To that end, we have things like the sanctions and border enforcement working group at the DG level with all government departments to ensure we’re all working in the same way but fulfilling our own mandates and sharing information where and when appropriate and conducting investigations the best way we can, using our partners but in a legislatively compliant way. Does that help?
Senator Ringuette: Yes.
Please correct me if I’m wrong, but a number of years ago I was quite surprised in a committee meeting to discover that FINTRAC, over a span of five years, only had three prosecutions, never mind finding a verdict of guilty at the end of these three prosecutions. I think one of the problems was that the policing agencies such as yours have to go and seek or pull out information from FINTRAC. They have technicians to analyze this stuff, but they don’t seem to be proactive in regard to forwarding potential situations to policing. Is that still the issue?
Mr. Burchill: I’ll commit to answer for myself, but I will also defer to my colleague to assist because he has experience in those criminal investigations as well.
I would say at the front end that I’m not sure where they were a few years ago, but currently, within at least the last couple years, I’ve seen tremendous efforts between ourselves, FINTRAC and the private sector to enhance the processes that traditionally cause delays in investigation, waiting for those proactive disclosures that may not be relevant information or too much information to take on at the time. Things are much better with current efforts — to answer your question — and we’re always looking for ways to enhance that, and FINTRAC has been a good partner in my experience in that regard. I would defer to my colleague also to add anything.
Chief Superintendent Denis Beaudoin, Federal Policing, Royal Canadian Mounted Police: FINTRAC has gone a long way to improve their services. They provide a lot of meaningful information to the RCMP that is used in criminal investigations.
I think one of the shortfalls in the current system is that the banks provide information to FINTRAC, who accesses this information and then decides what is provided to the police services. We’re reliant — when I say “we,” not the RCMP, but the system — on the banks to do their work and do their work on the right people to feed to FINTRAC so that we receive it. Sometimes we may receive information that is either not useful for us, is not in line with our priorities and may not be actioned for some time. Contrary to other countries, we don’t have the capacity to share information — we do, but with the banking system, we don’t have capacity to share information from a public to private realm on personal information. I don’t know if that —
Senator Ringuette: Interesting. Thank you.
Senator Varone: Thank you for being here.
My first question goes to Chief Superintendent Burchill. Does this legislation complete your tool box, or does it leave it wanting in terms of tools that will help you in catching the terrorists and criminals?
The follow-up question to that is for Mr. Dufresne. Why do terrorists and organized crime deserve the same privacy rights as law-abiding Canadians? And why is that an issue?
Mr. Burchill: I guess I would say that the RCMP is always very supportive of any legislative changes that help us do our work better. With the evolution of crime, particularly in the area of money laundering, with virtual assets, there will always be a requirement to evolve the legislation as well. It’s difficult to say whether it’s enough, and I don’t know that we ever know exactly what that answer is, but it’s certainly always very appreciated and we are receptive of any tools that we are able to obtain through legislation that help us do these criminal investigations.
Mr. Dufresne: To the second part of your question, I would say that privacy is a fundamental right similar to Charter rights in that they apply to all Canadians. They provide freedoms and rights but, at the same time, they don’t stand in the way of allowing law enforcement authorities to do their important work. We need to reach that balance between the public interest and a protection of fundamental rights, and that’s what courts will do. That’s what this proposal is attempting to do by increasing ability to share between private to private but nonetheless making sure there’s a role for the regulator and a role to ensure it’s done in a privacy-protected way.
To the Chief Superintendent’s point earlier about sometimes information not being relevant enough or receiving too much information, having good privacy discipline would also help to ensure you’re getting less irrelevant or broader information and that it’s more focused.
[Translation]
Senator Forest: Thank you for being here. I’d like to hear what you have to say about the cryptocurrency phenomenon. It’s well known that cryptocurrency is popular with those who want to engage in illicit activities, given that exchanges are anonymous and controls are only in place when our cryptocurrency is converted into tangible goods, money or the purchase of goods. Are the elements in Bill C-69 aimed at strengthening the fight against money laundering, terrorist financing and abuses related to the cryptocurrency phenomenon?
[English]
Mr. Burchill: For the first part, yes, the use of crypto-currency is certainly much more prevalent in all of our major criminal investigations. To that end, we’ve had to develop and continue to develop capabilities to assist with gathering that evidence. There are legislative changes to assist us in being able to now seize virtual assets in a way that didn’t exist before, and that’s certainly helpful to investigations for evidence collection.
Senator Forest: Thank you.
[Translation]
Senator Massicotte: Thank you to the three of you for being with us this afternoon. I must admit that I personally am very concerned that there are some major gaps.
There’s a major challenge, but I’m far from convinced that we’re going to get there in a positive way.
I understand that there’s a lot of fraud, even in Asia, and Hong Kong in particular, but we know that only three or four people in the RCMP are responsible for following up. We’re often told that it’s not even worth worrying about $1 million or $2 million that was stolen, that it represents far too much effort and far too much volume. So nothing happens, and the banks are frustrated, but they don’t talk about it too much so as not to scare clients.
Recently, with the TD Bank — in Canada, we hesitate and impose a small fine — the United States was quicker; they analyzed the problem and encouraged us to impose larger fines. We’re really being “little boys.” We have major problems and we’re being polite. Mr. Dufresne, am I getting discouraged for reasons that aren’t valid, or is that a fairly accurate picture of reality?
Mr. Dufresne: As Privacy Commissioner of Canada, I’m not going to comment on the success of police investigations or FINTRAC. However, by protecting privacy and having a regime that ensures a better exchange of information within a framework, the goal is to facilitate all of that, and that’s one way to protect privacy.
[English]
Senator Massicotte: From what I can see, there is a big volume of fraud and manipulation. FINTRAC has been around a long time, yet we don’t seem to get a handle on it. We don’t want to scare Canadians, but I don’t get a sense that we have control of this thing. It’s huge. I look at all three of you, and you’re very earnest and serious, but look at all these young people who know technology. They are way ahead of us, and they are stealing a lot of money, I suspect. Maybe I’m wrong. Tell me I’m wrong.
Mr. Burchill: I wouldn’t tell you you’re wrong. From a policing perspective, I would say that a great volume of financial crime and fraud is happening. Of course it is, but from my experience of working with international law enforcement and Five Eyes partners and working domestically with our partners, there is a lot of effort towards trying to get on top of these problems and trying to tackle them. We work within a legislative context, and we have to do certain things. We have certain laws and a Charter of Rights that are important to this country and Canadians. Working within the legislative context that we have, I feel confident from a financial crime perspective and a Canadian perspective that we’re working diligently with international and domestic partners to try to tackle it. I wouldn’t say that we’re not on top of it and it’s just overwhelming. I would say that we’re aware of it. We are on top of what the issue is, but having tangible, visible results for Canadians and yourselves is not always prevalent.
Senator Massicotte: I hope you’re right. I’m not sure you are, though. Having said that, I’ll pass.
Senator Martin: I have one supplementary and a question related to another session. Since you’re here, I thought you might be able to answer. Senator Varone was asking about whether your toolbox is complete. Will these measures help address the issue that we’re facing now? It’s very complex. The problem will continue to grow. In terms of these measures, is there a consultation process that is ongoing with you? As you need more tools, is this something that will be looked at very carefully?
Mr. Burchill: I’ll give a preliminary response and then defer to my colleague to speak to some of the legislative changes here that help us. If you ask police officers, not just RCMP but police officers writ large, if they need more abilities within legislation, there will always be suggestions about things they want done. In relation to the current changes, I would say that we’re in the conversation, and I think we’re being consulted on where we need to focus our efforts as far as what we’re doing legislatively to try to assist with terrorist financing and money laundering in Canada. I will defer to my colleague to speak more in depth.
Mr. Beaudoin: We are very much engaged. Two of the proposals before you — the keep account open and the production order with several dates — have come from the RCMP because of problems that we’re facing in our investigations. In dealing with Justice, we voice our problems and try to identify solution. Of course, Justice has the pen on it and considers all legislation that is needed.
To return to your question, is that the end of the tool kit? Of course not. As my colleague mentioned, things change. Fraud may not have been as prevalent a few years ago, and now with technology, it’s very much at the forefront. We will need tools in the future to tackle it, certainly, but at least a dialogue is there and Justice has been very helpful and listening to our concerns, and we certainly welcome these two amendments.
Senator Martin: It’s frustrating from a Canadian standpoint — somebody outside of the law — to see what is going on and the criminal activity. We want you to have the tools to fight the crime.
This next question is related to the previous criminal rate of interest. The government noted that they were urged to advance this amendment from Division 33 in order to reduce barriers to enforcement of the criminal rate. Will these measures indeed reduce the barriers to enforcement of the criminal rate from your standpoint?
Mr. Beaudoin: I want to highlight that my colleague and I represent federal policing. We were consulted during the development, but barrier programs don’t use the criminal interest rate very much. It’s a police jurisdiction tool, so we may be ill-placed to provide an opinion on this.
Senator Martin: Thank you.
Mr. Beaudoin: It’s kind of rare for federal policing to use that Criminal Code.
The Deputy Chair: This brings us to the end of time we have for this panel. I thank the witnesses for appearing before us today.
For our final panel today, we will continue with Subdivision A of Division 34 of Part 4. Representing the Canadian Credit Union Association, we have the pleasure of again hearing from Victoria Mainprize, Director, Legal, Policy and Compliance and Assistant General Counsel. We also have representatives from the Canadian Bankers Association: Lorraine Krugel, Vice President, Privacy and Data; and Hartland Elcock, Senior Legal Counsel. Finally, representing the Canadian Gaming Association, we have Paul Burns, President and Chief Executive Officer; and Derek Ramm, Global Head of Advisory Services, Kinectify Advisors.
Ms. Mainprize: Thank you very much, Mr. Chair and committee members, for inviting me to speak again today. In the interest of time, I will forego the summary of the Canadian Credit Union Association and our sector that I provided earlier.
Our sector firmly supports efforts to strengthen the PCMLTFA and to combat the laundering of proceeds of crime and the financing of terrorist activities. We support the amendments proposed in Part 4, Subdivision A of Division 34. However, it will be vital to ensure that small businesses and smaller financial institutions are supported and not unduly burdened by their implementation and operation.
In other words, the framework must strike a proportionate balance between capturing illicit activity and the costs of requirements placed on reporting entities. For example, while we recognize the potential for money laundering by businesses engaged in transporting currency, money orders, traveller’s cheques and similar negotiable instruments, and we support the inclusion of such businesses set out in clauses 340 and 348, we note that clear definitions and guidelines will be essential to ensure adequate coverage without undue burden on small businesses.
We’re similarly supportive of the enhanced information sharing measures for detecting and deterring financial crimes set out in clauses 341, 344, 349 and 350, although we again have some concerns about potential operational impacts on smaller financial institutions. Clear guidelines will be needed to set out the scope and the limitations of information sharing.
Regarding expanded FINTRAC disclosures, we support the increased effectiveness of FINTRAC with an emphasis on safeguarding member privacy and ensuring the disclosures are strictly controlled and justified.
We also generally support publicizing violations. However, it will be vital to ensure that such disclosures are fair, accurate and contextual. We suggest that there needs to be a robust process to challenge or appeal erroneous or misleading disclosures.
With respect to the proposed amendments to PIPEDA, our sector is supportive of measures that balance the need for increased information sharing to combat financial crimes with robust protections for personal information to maintain member trust and privacy.
I would also like to raise a few additional points with respect to transactional provisions, privacy and data security and government support and assistance.
Regarding transactional provisions, we strongly recommend that there be a phased or delayed implementation timeline to give reporting entities time to adapt to the amendments. This helps prevent service disruptions and ensures an efficient transition to a new regulatory framework.
Regarding privacy and data security, we note the importance of maintaining high standards for data protection and member privacy. We request detailed guidance on handling sensitive information, especially in the context of information sharing and public disclosures.
Finally, regarding government support and assistance, we emphasize the need for government support in providing training programs to help reporting entity staff understand and comply with the new regulations.
Thank you very much, senators.
The Deputy Chair: Thank you.
Hartland Elcock, Senior Legal Counsel, Canadian Bankers Association: Good afternoon. I would like to thank the committee for the opportunity to speak to Part 4, Division 34 of Bill C-69.
The CBA is the voice of more than 60 banks operating in Canada, employing more than 280,000 Canadians and helping to drive Canada’s economic growth and prosperity.
Our members take the fight against money laundering seriously. As some of the most active reporting entities under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, they devote significant resources to their anti-money laundering and anti-terrorist financing programs, internal controls and employee training. Much of this investment focuses on continuous improvements to address the shifting landscape of compliance requirements and the evolving nature of money laundering and terrorist financing risks. Their goal is to effectively deter, detect and report activity and mitigate AML and ATF risks.
As major stakeholders within the regime, our members’ participation moves beyond mere compliance. They actively collaborate with FINTRAC on public-private partnerships to improve the overall efficiency and effectiveness within the regime. This helps to generate intelligence of practical value to law enforcement’s investigations. An example of a PPP that might interest the committee is Project PROTECT, where our members worked with FINTRAC to tackle illicit proceeds from human trafficking.
The CBA and its members also consistently support the Government of Canada’s efforts to enhance the regime. For example, we are active participants with the Advisory Committee on Money Laundering and Terrorist Financing. We have also been vocal advocates supporting provisions that allow for investigations and prosecutions of money laundering offences, including calls for a comprehensive beneficial ownership registry and increased information sharing for AML and ATF purposes.
To this end, we welcome the private-to-private information sharing framework proposed in Bill C-69. As long-time supporters of the need for improved information sharing, these changes represent a significant step forward for the regime. We have appreciated the Government of Canada’s consultative approach to the framework and its development. In alignment with Financial Action Task Force, or FATF, guidance and in agreement with British Columbia’s Cullen Commission, it is essential that public and private sector entities have the requisite authorities and protections under Canadian law to facilitate information sharing for the purposes of detecting and deterring money laundering, terrorist financing and sanctions evasion. In particular, providing a framework to improve and structure the flow of information between key private sector stakeholders will allow for more targeted disruption of illicit activities and assist law enforcement’s investigations. Ultimately, this will protect Canadians and the integrity of the financial system. We also believe that this private-to-private information sharing could increase privacy protections for Canadians by reducing unnecessary reporting to the government on low-risk transactions.
Thank you again for the opportunity to appear today before the committee, and we look forward to your questions.
The Deputy Chair: Thank you, Mr. Elcock.
Paul Burns, President and Chief Executive Officer, Canadian Gaming Association: I’m president of the Canadian Gaming Association, which is a national trade association representing private sector operators and suppliers to Canada’s land-based casino, online gaming and sports casino business. Thank you for affording us to the opportunity to present to the committee today.
I’m joined by Derek Ramm, Global Head of Advisory Services for Kinectify Advisors, a risk-management company that focuses on anti-money laundering compliance in the gaming industry. Derek is a key member of the Canadian Gaming Association’s AML working group that has been actively participating in the consultation being conducted by Finance Canada as part of the upcoming parliamentary review of the PCMLFT Act.
We are here today in support of the amendment under Division 34, specifically proposed section 11.01 which will afford AML reporting entities a greater ability to share information between each other, as we believe this is a necessary and effective tool in the continued fight about combatting money laundering.
I will now pass over to Mr. Ramm who will speak to the issue more specifically.
Derek Ramm, Global Head of Advisory Services, Kinectify Advisors, Canadian Gaming Association: Thank you, Paul, and thank you, honourable senators, for the opportunity to speak in support of the amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act that will permit information sharing among stakeholders.
It goes without saying that money laundering continues to challenge governments, law enforcement, regulatory agencies and private businesses around the world. We have seen firsthand here in Canada that criminals don’t limit their activities to one sector of the economy and will use any avenue they can to wash their ill-gotten gains, whether it be banks, real estate, money services, businesses or casinos. The ability for entities to share information on suspected money laundering or terrorism financing activity is a critical tool in detecting and disrupting this criminal activity. I would note that many countries have already implemented similar information-sharing provisions with the appropriate privacy safeguards.
Given the unique framework for legalized gaming in Canada, we want to raise the matter of interpretation on whether agents of reporting entities would also be covered by the proposed information-sharing provisions. What I mean by that is that while provincially owned lottery and gaming corporations are currently considered the reporting entity under the proceeds of crime legislation, most provinces have a model where they have contracted the day-to-day operations of casinos and online gaming sites to private-sector companies. As agents of these Crown corporations, it is our hope that this amendment would also allow them to share information about suspected money laundering or terrorist financing activities.
I spent the past two decades of my career fighting financial crime, including working at agencies like FINTRAC and the Alcohol and Gaming Commission of Ontario. I can say firsthand that the information-sharing provisions contained within Bill C-69 are an important step in combatting financial crime. These measures have long been advocated for by anti-money laundering professionals throughout Canada.
Again, thank you honourable senators for the opportunity to speak today in support of this amendment.
The Deputy Chair: Thank you to all our witnesses.
[Translation]
Senator Forest: When a bank suspects that an account is being used for criminal purposes of any kind, it reports it and closes the account. Is the decision-making rule uniform among your members, or does each bank have its own rules?
[English]
Mr. Elcock: Thank you very much. That is an excellent question.
Each institution will have its own risk-tolerance framework, obviously, and under the PCMLTFA are required to have that risk-tolerance framework. They will each make their own decisions on when to de-risk a client based on money laundering concerns, but also a range of other issues as well. Money laundering is one element, or anti-money laundering activities would be one consideration.
Senator Forest: Thank you.
Senator Yussuff: Thank you witnesses for being here.
My question is in regard to the changes. Clearly, Mr. Elcock, you indicated in your presentation that you were consulted in regard to these proposed changes. There are two parts to my question. Obviously, Canadian financial institutions are subjected to Canadian law in their operation, but there are international implications. If you’re seen to be a money-laundering institution, you could also pay a high penalty in other jurisdictions outside of the country. Will these proposed changes bring the banks consistent with other countries’ regulation as to how you govern yourselves so you’re not penalized in a way that will bar you from having the U.S. markets or European markets, given their strict adherence to terrorism financing and ensuring the banks are monitoring consistently to ensure they comply with regulations and to ensure their institutions are above board?
Mr. Elcock: It’s an excellent question.
Certainly, the regime overall does align Canada with best practices in other jurisdictions. The U.K. is moving in this direction, as is the U.S. as well. Also FATF, Financial Action Task Force recognizes the value of private-to-private information sharing in the fight against money laundering, which is constantly evolving. Yes, it will certainly assist our members in ensuring that the regime can combat money laundering within Canada.
Senator Yussuff: I may digress for a minute. As you know, the TD Bank has been in the news quite a bit. They have a number of challenges. FINTRAC and others in Canada are talking about adherence and how well they are doing. Given that terrorism legislation has been on the books for quite some time, and tracking and facilitating good practices, how is this still happening in a Canadian institution?
Mr. Elcock: I don’t have a line of sight on our members’ regulatory interactions. I do know our members invest significantly in anti-money laundering and anti-terrorist financing activity in their regimes, policies and procedures and their training. This whole regime is overseen by senior executives. One of the purposes of this oversight and this level of investment is to constantly evolve, so they are evolving to new threats and regulation and regulatory findings. What is important is that we see that the regime itself is also evolving. New powers are being granted to ensure that banks and other reporting entities can continue to improve their fight against money laundering and support the regime.
Senator Yussuff: Thank you.
Senator Varone: Thank you for being here.
One of our family businesses is a cash business. It’s been in business for 50 years. One of the words that I learned early on making deposits where you’re sitting in front of the teller is called “override.” It’s when they reach out, and the teller needs an override for the amount of money that you’re depositing. When I read through the legislation, as much as there are all the tools in this toolbox to prevent you or to track, there is still a human element. The case that you cited and Senator Massicotte cited involved the human element within the bank and the overrides that took place when large sums of money were being deposited. How do your member organizations deal with that human element? You have financial tools, but it’s always a human element that overrides the mischief.
Mr. Elcock: It’s a great question.
I don’t have full sight of each of our members’ individual training practices and programs, but they do have extensive training practices and programs. That is an important element. Beyond money laundering, they also have their own corporate security teams to ensure that their operations are secure and not being subject to money laundering.
[Translation]
Senator Bellemare: Do you have any concerns about the upcoming regulations? If so, which ones?
[English]
Mr. Elcock: Thank you very much.
We look forward to consulting with the government on the regulations, obviously. This information-sharing regime, the structure, is there within the act, but the devil will be in the details. We have seen great consultation with the government to date. We look forward to participating in the development of regulations to ensure that they reflect a strong regime.
The Deputy Chair: I have a final question for the Canadian Gaming Association. To what extent are you concerned with money laundering or terrorist financing threats? Will these measures bring us closer to correcting those concerns? If not, do we need much more? Mr. Burns?
Mr. Burns: I’ll let my colleague, Mr. Ramm, answer that.
Mr. Ramm: The issue of money laundering in casinos has received a lot of attention not just in Canada but globally in other countries. I think the simple reality is that whenever you’ve got money moving around, whether it’s in casinos, banks or real estate transactions, there’s unfortunately always going to be a criminal element that will try to take advantage of that. Therefore, it’s important that both government policy and the businesses that are subject to that regulation are on top of these trends and what is going on and are trying to detect and disrupt this type of activity. My own firsthand experience is that the casinos are definitely concerned about issues like money laundering and are trying to prevent it, detect it and report it accordingly.
The Deputy Chair: Thank you.
This brings us to the end of our meeting. Thank you to all our witnesses for being with us today, and we truly appreciate your commitment, professionalism and availability. I thank all the senators and all the staff and interpreters and the whole team behind us.
(The committee adjourned.)