THE STANDING SENATE COMMITTEE ON BANKING, COMMERCE AND THE ECONOMY
EVIDENCE
OTTAWA, Tuesday, December 9, 2025
The Standing Senate Committee on Banking, Commerce and the Economy met with videoconference this day at 2:32 PM [ET] to study the subject matter of those elements contained in Divisions 4, 9, 10, 11, 12, 13, 14, 15, 16, 17, 22, 23, 37, 39, 43 and 45 of Part 5 of Bill C-15, An Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025.
Senator Clément Gignac (Chair) in the chair.
[Translation]
The Chair: Honourable senators, welcome. My name is Clément Gignac, I am a senator from Quebec and chair of the Standing Senate Committee on Banking, Commerce and the Economy. I want to welcome my colleagues and everyone watching us online at sencanada.ca.
Before proceeding, I would ask my fellow committee members to introduce themselves.
[English]
Senator Varone: Toni Varone, Ontario.
Senator Fridhandler: Daryl Fridhandler, Alberta.
Senator Yussuff: Hassan Yussuff, Ontario.
Senator McBean: Marnie McBean, Ontario.
Senator C. Deacon: Colin Deacon, Nova Scotia.
Senator Wallin: Pamela Wallin, Saskatchewan.
[Translation]
The Chair: We are continuing the prestudy of Bill C-15, currently at second reading in the House of Commons. We received an order of reference authorizing this committee to examine and report on the subject matter of those elements contained in Divisions 4, 9 to 17, 22, 23, 37, 39, 43 and 45 of Part 5 of Bill C-15, An Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025.
I would like to welcome our first witness, who is joining us by video conference. Welcome to Ms. Winnie Sanjoto, Senior Vice‑President, Corporate Finance Division, Ontario Securities Commission, who represents the Canadian Securities Administrators.
Ms. Sanjoto, I understand you have opening statements to give.
[English]
Ms. Sanjoto, I welcome you.
Winnie Sanjoto, Senior Vice-President, Corporate Finance Division, Ontario Securities Commission, Canadian Securities Administrators: Good afternoon, Mr. Chair, deputy chair and honourable senators. My name is Winnie Sanjoto. I am Senior Vice-President of the Corporate Finance Division at the Ontario Securities Commission, which is a member organization of the Canadian Securities Administrators. Thank you for the opportunity to speak on Division 45 of Part 5 of Bill C-15, the draft Stablecoin Act and related amendments to the Retail Payments Activities Act.
The CSA is the umbrella organization of Canada’s provincial and territorial securities regulators. The CSA’s objective is to improve, coordinate and harmonize regulation of the Canadian capital markets. It has undertaken various initiatives to create space for digital assets as legitimate investments in the Canadian capital markets, including consideration of the regulatory framework for value-referenced crypto-assets, commonly known as stablecoins.
I have three main points.
First, we welcome the introduction of the draft legislation. As noted in the CSA’s Business Plan, we support a hybrid regulatory framework for stablecoins.
Second, we recommend establishment of a formal committee with representatives from the relevant federal and provincial regulators to consider the development of regulations and guidance relating to stablecoins. This would mitigate the risk of duplicative or contradictory requirements and unnecessary regulatory burden for market participants. It would also support clarity to the market that will encourage development and innovation in Canadian stablecoins and related services.
Finally, we support consideration of amendments to the Bankruptcy and Insolvency Act to eliminate any ambiguity about the priority of a stablecoin holder’s claim against the reserve and other assets of the issuer in the event the reserve assets are insufficient to cover the claims of all holders.
Thank you, and I would be pleased to answer any questions.
The Chair: Thank you for your opening remarks. Colleagues, since we have about 30 minutes, I propose a first round of three minutes each.
Senator Fridhandler: Thank you for your opening remarks. You certainly highlighted a couple of areas that I have concerns about as well.
Could you explain the hybrid elements? The act anoints the Bank of Canada to at least manage the stablecoins per se. From a securities regulatory authority, where do you see your turf to be?
Ms. Sanjoto: Thank you for that question.
The CSA’s role is to oversee activities related to securities and derivatives, and in that regard to protect investors and maintain market integrity. In Canada, at this time, fiat-backed stablecoins are primarily used to trade crypto-assets, or what people call crypto-currencies, and primarily on crypto-trading platforms, which are often colloquially known as crypto-exchanges. The CSA has taken the view for some time that crypto trading platforms are required to be registered because they are in the business of trading securities and should be subject to appropriate terms and conditions in conducting this business. The Canadian securities regulators were leaders in taking this approach, and I think many observers have commented that this was a major reason why Canadian investors were much less exposed to, for example, to the failure of FTX, which was a major crypto exchange in 2022, for example.
With regard to stablecoins in particular, the CSA takes the view that stablecoins that are pegged to a fiat currency and backed by reserve assets are generally securities and/or derivatives, and we’ve issued public communications to that effect. To support investor protection, the CSA has also set out expectations for crypto trading platforms that seek to offer these types of products to their customers as to the kinds of features these stablecoins should have, including disclosure, a monthly assurance report on the reserves and audited financial statements.
That is, to date, where the Canadian Securities Administrators have conducted oversight, let’s put it that way, over stablecoins, but we fully recognize that the securities law framework is not going to fully address the risks associated with stablecoins. It’s not intended to facilitate them being used for payments in the broader economy, which is why, from our perspective, the draft legislation is a positive step forward. We do support a hybrid approach that recognizes that stablecoins need a mix of regulators, working collaboratively, to develop a comprehensive framework that balances both consumer and investor protection as well as innovation.
Senator Fridhandler: I’m reluctant to support a hybrid regulatory regime. When I read through the act, at least, most of the responsibility falls with the Bank of Canada, and I think multiple regulators is just a recipe for disaster. What happened in the past is in the past, and this sets a new framework on which we should focus going forward.
You are quite right to address the creditor issues here. The act proposes to attempt to isolate the reserve currency that is backing the stablecoin, and the Bankruptcy Act might do something in the case of bankruptcy, but all insolvencies aren’t bankruptcies. There is a major space here for provincial law as well. I see a gap, and I have concerns about insolvencies of issuers of stablecoin that need to be seriously looked at more than they are in the legislation. You highlighted it. Can you comment on that in the 30 seconds we have left for my portion?
Ms. Sanjoto: Your point on the importance of having the provincial insolvency frameworks present, from our perspective, highlights the importance of having provincial and federal regulators working together. Our submission specifically recommends that a committee is formed to work out or to identify some of the potential regulatory gaps in the legislation and how it interfaces with other regulatory regimes.
On the bankruptcy point, a well-structured stablecoin and the legislation does have certain structural features that should protect creditors and, more importantly, the holders of the stablecoins. That being said, we do think there is value in considering whether the federal insolvency legislation in particular can be tightened to really make it clear and unambiguous that the holders of the stablecoins have priority to access the assets.
The Chair: Thank you. Sorry, but I have to interrupt you.
Senator C. Deacon: It’s nice to see you again, Ms. Sanjoto.
I’m focused on the same issue as Senator Fridhandler. We have tried a mix of regulators working collaboratively for 158 years in Canada, and it hasn’t enabled us to succeed. The shift to U.S. dollar-backed stablecoins — they own 99.9% of the market, and that presents a risk to Canada in terms of funding debt in future and other elements — has me concerned that we need to have something more than a mix of regulators that we hope will work collaboratively because I believe we will have both payment rail and asset investors looking to this market. Do you have any suggestions about what the federal government could be doing to start to push for that national cooperation to be a bit more than the hope of working collaboratively that we’ve had?
Ms. Sanjoto: Your question does touch on a very important issue of monetary sovereignty, and that is not within the remit of the Canadian Securities Administrators so I will not comment specifically on that point.
I would emphasize that the record of the CSA to date demonstrates that it is possible for a group of different regulatory bodies, all securities regulators in this case, to work collaboratively and introduce a very robust, harmonized regulatory framework for key activities that engage investor protection and market conduct and integrity. I would suggest that it is too premature to conclude that a hybrid framework would not be successful. I do think there is tremendous appetite, certainly on the CSA’s part, to participate in a collaborative effort and to treat it with a great deal of priority and urgency.
Senator C. Deacon: So there is the hope of some more interprovincial collaboration with the promise of dealing with internal trade barriers, on which we still hope to see more action, obviously, but would you recommend that the federal government do anything to make sure that, federally, there is as much encouragement as possible and efforts to enable that collaboration to be a bit more than a collaboration but something that’s entrenched into the future? Is there anything that you would be suggesting or that is being discussed that you’re able to speak about in this committee?
Ms. Sanjoto: Again, it’s a bit premature for a conclusory statement as to what that solution would be. I think the CSA would say that there is a real opportunity here to work to actually identify a comprehensive regime that balances innovation, protects investors and consumers and aligns with international developments. That work can and should be done, and we are supporting the creation of a formal committee with appropriate representation from the provinces and the federal regulators and bodies to work precisely on that issue in an expedited way.
Senator Loffreda: Thank you for being here.
Maybe you can elaborate. Do you believe the amendments in Division 45 do improve market transparency and systemic risk monitoring? What additional regulatory modernization would you feel is still required in the near term? You did mention it, but the concern would be around regulators. Do they have enough authority to properly oversee the stablecoins, especially around reserve backing, redemption rights and market integrity risks? If not, maybe elaborate on what key safeguards are still missing. Or maybe it is still too early to identify those.
Ms. Sanjoto: Thank you for the question.
Certainly, the priority or the first step that I think should be taken and that the CSA believes should be taken is to start identifying, as part of a committee of regulators, potential gaps. The gap you’ve flagged is whether, in the Canadian context, perhaps more direct oversight is needed. I’m going to infer that you’re suggesting some kind of direct prudential oversight. That’s a really important question, and, again, it is probably a bit premature to make a definitive statement on that, but certainly it is something that can be discussed by a committee that’s tasked to look at this.
Senator Loffreda: Yes. That’s where I was going. I’m glad you agree on that. Have there been any discussions around that, based on your knowledge? Would it happen in the near term?
Ms. Sanjoto: I can’t really speak to that specific point. As I said, the CSA’s focus is really on the regulation and oversight of capital markets activities and securities and derivatives. That being said, we do talk regularly with our federal counterparts, including the Bank of Canada and OSFI. Certainly, that topic could be fleshed out further.
Senator Loffreda: Thank you.
Senator Yussuff: Thank you for joining us and providing your perspective.
The most important point, or maybe two, is that, obviously, we now have legislation and, hopefully in the near future we’ll have regulations to deal with the stablecoin market in this country. Most of us on this committee would likely conclude that the biggest gap here is what the regulatory regime will provide so at least we can understand, across the country, what prospective investors can expect.
In the context of what is missing here in regard to the regulatory regime, what would you suggest is the most important aspect for us to get this right and avoid duplication across jurisdictions?
If someone wants to invest in stablecoin, there would be a desire to have the same degree of protection, regardless of the jurisdiction or part of the country they might be living in or participating from.
Ms. Sanjoto: The CSA’s purpose is to support harmonization and coordination across Canada with respect to regulation of capital markets. The CSA has focused, in regard to stablecoins, on setting expectations that when retail investors access these instruments through a registered crypto-trading platform, that they do get certain basic consistent information about the stablecoin product and that the stablecoin product adheres to certain investor protection structures. That’s been set out in guidance that the CSA has issued.
There are many different aspects to protecting investors and consumers, and the securities regulators are one piece of the puzzle, but the draft legislation also includes other aspects that are valuable and does include some disclosure concepts that it’s not money and some clarity around the limitations of what exactly a stablecoin is.
There are definitely opportunities for the CSA to work collaboratively with the regulators, our federal colleagues, as well as other provincial colleagues to really hone in on areas where we can further refine and build on the existing protections that exist within the work that we’ve done as securities regulators as well as the concepts in the draft legislation.
The Chair: Thank you.
Senator Wallin: There are securities regulators in each of the provinces and territories, but there is actually no national securities regulator; is that correct?
Ms. Sanjoto: That’s correct.
Senator Wallin: We have obvious differences in terms of size and funding and ability to regulate, but it is their jurisdiction in those provinces and territories to oversee the activities, stablecoin investors or promoters or presenters. How would that work, in your mind, at this point?
Ms. Sanjoto: The CSA is the body that brings together all the provincial and territorial securities regulators, and the CSA’s mandate is to support harmonized, coordinated oversight of the capital markets.
Senator Wallin: But it’s not a regulator. That’s sort of the point I’m getting at. It’s an association that represents all of the other regulators.
Ms. Sanjoto: You’re absolutely right that individual provincial or territorial regulators would be the direct bodies that oversee activities, but I would emphasize that the CSA as a body has been very successful in coordinating efforts across Canada. One example I could point to is that the CSA participated in a coordinated enforcement action called Operation Avalanche earlier this year where CSA members partnered with law enforcement and crypto-platforms and blockchain analysts to identify and warn crypto-investors who were potentially at risk of losing their funds through fraud. This was an example of domestic interprovincial cooperation, federal cooperation and international cooperation. Notwithstanding that securities regulation is administered by individual securities bodies in specific provinces, the level of cooperation is very deep.
Senator Wallin: Everyone has already expressed their concern about the regulation around this and how it would work. What you’re looking for is some kind of assurance, and we don’t have a federal regulator. Do you think that would be the answer as opposed to the other 13? These people have autonomous rules and regulations for how they manage this in their particular regions. You can have all sorts of cooperation, but they are the authority provincially and territorially.
Ms. Sanjoto: That’s correct. The CSA has a very strong process for developing harmonized legislation. Securities legislation, notwithstanding that it is a provincial matter, is substantially harmonized across Canada. The requirements themselves are consistent, and the enforcement, while the responsibility of individual provincial regulators, is highly coordinated.
A committee comprised of all the various regulators whose oversight touches on stablecoins will add a lot of value because it will be coordinated, and it will study how we can get to the point where there is no fragmentation, where there is clarity and where there is a consistent and comprehensive regime for both investor and consumer protection and supporting —
Senator Wallin: So there could be coordination but there might not be actual enforcement ability.
Ms. Sanjoto: The question of enforcement is fact specific, but certainly the Canadian Securities Administrator’s members have the ability to take enforcement action, and they have done so in respect of bad conduct in the crypto-sector.
The Chair: Thank you.
Colleagues, we have only three minutes left, and two senators have questions in the second round, as well as myself. I would propose going for an additional five minutes, so eight minutes in total, if Ms. Sanjoto is available.
Ms. Sanjoto: Yes, I would be happy to. Thank you.
The Chair: In your opening remarks, you mentioned that this is a security, but is it the same situation in other countries? Some people mentioned that stablecoin, which is designed to peg to fiat currency, is in fact a currency. Is it really a security? Is this a debate? Do other countries agree with defining stablecoin as a security, not a currency?
Ms. Sanjoto: That is a great question. The question of whether a stablecoin is a security really depends on the specific legal framework in a country, and it also depends on the various regulatory regimes and institutions that address the kinds of entities that are involved in the issuance and trading of stablecoins.
The CSA has analyzed the application of securities law in Canada to fiat-backed stablecoins that are backed by a reserve of assets and has stated on numerous occasions for some time that these instruments are securities and/or derivatives. That is not necessarily the case in other countries, but again, that is a function of different countries having different laws and regulatory frameworks.
The Chair: Thank you. All these things are related to jurisdiction. Whether it is a security or a currency is a different debate in Canada depending on the definition, and other countries recognize it more as a currency.
Senator Varone: If history has taught us anything, it is that when governments make mistakes, they make big ones. When I go back to the 1980s and junk bonds and terms of the manner in which they were dealt with, it pretty much brought down an economy. It repeated itself with mortgage-backed securities.
In terms of stablecoin, outside of this regulatory regime being proposed, is there room for a third party? I’m looking for something like a Dominion Bond Rating Service that can rate the asset independently of what the government is rating them at in order to protect consumers or at least give them more information as to what it is that is in front of them in terms of opportunities to purchase.
Ms. Sanjoto: That is a very important question.
The response is that both the draft legislation as well as the approaches that the CSA has taken emphasize that fiat-backed stablecoins that have a reserve of assets that end up in the hands of ordinary Canadians should be backed by reserves that are appropriate. By that, I mean definitely not junk bonds and definitely not highly speculative mortgage-backed securities.
I would sort of reiterate something I said earlier, which is that a well-structured stablecoin, as contemplated by both the draft legislation and the policy statements that the CSA has issued, should have appropriate reserves to satisfy creditors. That being said, if there were other types of stablecoins that the market were to develop, there could potentially be some third party that would assess the quality of the assets. That could certainly be something that might develop, should the market demand it.
Senator C. Deacon: Thanks very much for your testimony and being with us.
Are there any areas where the CSA’s harmonized legislation is in conflict in any way with the proposed federal legislation? Are there areas we need to be concerned about that might hold up efforts to strengthen provincial harmonization?
Ms. Sanjoto: Stablecoins are not an easy or simple instrument. They do have complexities, and they do raise questions around what areas, perhaps, should be appropriately regulated by securities regulators and what elements are more appropriately regulated by, let’s say, a retail payment framework or what elements, for example — if they are issued by a financial institution — should be regulated by OSFI as a prudential regulator. That is why I do think that, and the CSA position does support, hashing out all these very complex issues through a committee where there is a full and considered review of all these questions. It is a complex instrument, and the answers, unfortunately, are not that simple.
Senator C. Deacon: I take from that, Ms. Sanjoto, that we need to have an agile approach to this legislation and be prepared to iterate over a few years. Hopefully, that working group would get going pretty fast.
Ms. Sanjoto: Yes, and I think the draft legislation leaves quite a lot to the regulations and the drafting of regulations. There is some real value to be had in having a committee working expeditiously, comprised of all the regulators whose oversight touches on stablecoins.
Senator Fridhandler: There are two things I want to address.
Through your remarks, you suggested there are gaps. It might be a bit early and this could be addressed later, but to the extent there are matters within the framework of the legislation, there isn’t time. This legislation will go forward. If you have issues with the legislation that don’t defer to the regulations, I would appreciate it if you would submit to the committee in writing those materials so that we’re apprised of them.
Second, on the question of securities, this is a big constitutional standoff, potentially, but I don’t know where the federal government is. Clause 3 of the bill says that the distribution of stablecoins isn’t trading in securities. Clause 10 of the bill says that the application of the act pertains to “interprovincial and international applications.” The feds can’t step on the toes of the provincial regulators if they want to regulate and say something different. Ultimately, I think the constitutional matter — because this is more than just a provincial matter, the trading and distribution of stablecoin — it would probably fall to the feds. I agree with you on the committee. I’m sure the Bank of Canada would see significant value to the CSA’s and their members’ input, but I ultimately defer to the Bank of Canada at the end of the day. I don’t know if you want to say what the role is of the regulators, based on what I just said.
Ms. Sanjoto: No, I think everything you said raises important questions, and I think the CSA is trying to work together with the feds to come up with a regime that does not cause an unnecessary regulatory burden on companies that want to innovate and build a better payment system but, at the same time, it is a regime that also protects investors and consumers.
The Chair: Thank you to our witness. It was very informative.
[Translation]
Welcome to our second panel of witnesses. We are continuing our prestudy of Bill C-15.
We now have three witnesses to discuss Division 16: Ms. Tahira Dawood, Staff Lawyer, and Mr. Joshua Fichman-Goldberg, Public Interest Articling Fellow, from the Public Interest Advocacy Centre, as well as Mr. Alexandre Plourde, Lawyer and Analyst from Option consommateurs.
Since you are all appearing by video conference, I remind you that if you have technical difficulties, especially with interpretation, you must flag the problem so that we may suspend the meeting.
I now give the floor to our guests from the Public Interest Advocacy Centre, who will then be followed by Mr. Plourde.
The floor is yours, Mr. Dawood.
[English]
Tahira Dawood, Staff Lawyer, Public Interest Advocacy Centre: Honourable chair and senators, thank you for inviting the Public Interest Advocacy Centre, PIAC, to appear before the committee. I’m joined today by Mr. Joshua Fichman-Goldberg, PIAC’s Public Interest Articling Fellow.
We advocate for consumers, particularly lower-income and vulnerable consumers. PIAC’s comments today relate to consumer-targeted fraud that is covered in Bill C-15, Division 16. We are pleased to see Division 16; it is an important first step. However, there are gaps that need attention. These include no guaranteed minimum consumer safeguards, no specific requirement to reimburse victims of fraud, lack of clarity on consumer engagement, risk of non-uniform and inadequate personnel training, lack of consumer transparency and awareness measures and lack of clarity regarding enforcement.
Joshua Fichman-Goldberg, Public Interest Articling Fellow, Public Interest Advocacy Centre: PIAC makes the following recommendations: Standardized protections for consumers to ensure equitable treatment without discrimination. Financial institutions should be required to report biannually to ensure transparency. Reports should be publicly available and disclose the names of banks and rates of fraud. Canada must commit to a uniform zero-liability framework for all consumer-targeted fraud regardless of payment method or type of fraud committed. Clear enforcement measures, including the use of administrative monetary penalties in the event of non‑compliance.
These amendments are steps in the right direction, though more robust protections are necessary to ensure long-term consumer trust. Canadians deserve to feel safe and to know they will be protected when fraud occurs.
Thank you, and we look forward to your questions.
[Translation]
Mr. Alexandre Plourde, Lawyer and Analyst, Option consommateurs: First of all, I want to sincerely thank the committee for giving us the opportunity to come before you today.
My name is Alexandre Plourde. I am a lawyer and analyst at Option consommateurs, a nonprofit organization whose mission is to help consumers and defend their rights.
Today, I want to draw your attention to the shortcomings in the new fraud provisions for consumers outlined in Bill C-15.
As you are no doubt aware, fraud is currently wreaking havoc in Canada. Year after year, statistics show that fraud is reaching new heights in the country.
As a consumer association, we are on the front lines and see the extent of fraud among the Canadian public. We are getting more and more reports from consumers victimized by sophisticated scams, such as fake representative fraud or online investment fraud.
Victims of these scams are usually careful and diligent citizens, but they’ve been manipulated by criminals using very convincing and credible schemes.
However, even if anyone could fall into a trap laid by a fraudster, banks often hold consumers responsible for the losses suffered.
Currently, the law makes it easy for banks to avoid all liability in fraud cases. As a result, we often see consumers who have lost tens, if not thousands, of dollars in scams, and they find themselves without recourse against their bank.
Unfortunately, nothing in Bill C-15 addresses this problem.
Even if the new fraud provisions found in this bill were to pass, banks would still be able to easily shift the burden onto victims.
For Bill C-15 to have a real impact for consumers, we think it is absolutely essential to add a section requiring banks to reimburse clients who are victims of bank fraud, unless, of course, they were grossly negligent. This provision could be modelled on what other jurisdictions have done, specifically the United Kingdom or, more recently, Quebec.
An approach based on greater bank responsibility would not only help thousands of Canadian fraud victims recover their money, it would also create a real incentive for banks to implement adequate preventative measures.
Considering the very significant financial and psychological impact of fraud, we think that urgent and decisive action is needed to offer Canadians real solutions.
Thank you for listening. I will be happy to answer your questions.
The Chair: Thank you, Mr. Plourde.
Dear colleagues, we scheduled 30 minutes, and I think everyone will want to speak. If possible, each speaker should limit themselves to two minutes. Thank you.
Senator Henkel: Welcome and thank you for being here. Did the government consult you while drafting Bill C-15, in whole or in part?
Mr. Plourde: I can offer an answer. We were consulted, but not necessarily on drafting Bill C-15. However, the Department of Finance held all kinds of preliminary consultations, namely on fraud.
Indeed, last summer or a year or two ago, the Department of Finance held a consultation, and we had the opportunity to talk with them at different stages. Of course, our long-standing recommendation is to increase fraud oversight and hold banks accountable; we’ve been saying it for some time. We were disappointed to see the new division in the bill, which is not in line with what we asked for. We think the assessment that should have happened, could have happened. The need for action is urgent. We know that fraud is constantly on the rise, so the time has come to legislate, not to keep thinking about it.
Senator Henkel: I’d like to talk about the real effectiveness of the Ombudsman for Banking Services and Investments, or OBSI. Articles from Radio-Canada show that the vast majority of complaints handled by the Ombudsman for Banking Services and Investments does not lead to any reimbursement. OBSI must apply banking conventions drafted by the banks themselves, rather than independent consumer protection standards.
Do you think OBSI’s current mission really allows it to protect consumers effectively? Would you recommend redefining or expanding its mandate?
Mr. Plourde: I don’t want to throw stones at OBSI. I think it’s an organization that is seriously committed to consumers. I don’t think OBSI’s problem is its mandate or structure. There’s always room for improvement, but the issue is that the legislation this organization applies doesn’t have enough teeth.
In the current context, no law requires banks to reimburse consumers, except in a few exceptional cases involving unauthorized credit card transactions.
Therefore, there is a serious legal vacuum, and that is what OBSI currently applies in many cases, unfortunately. A whole complaint process exists under the Bank Act. However, even though I, as a consumer, can go to different levels of the bank to file a complaint if I’m dissatisfied, and even turn to OBSI as a last resort, I will lose in the end. The laws that are supposed to protect me are not up to par, unfortunately.
Senator Henkel: Thank you.
[English]
Senator Varone: Apart from just putting the onus on the banks to reimburse their clients, do you have any tangible fixes for frauds, whether it be some kind of encryption on cheques or some kind of other methodology that needs to be adopted or needs to be examined. I’m not hearing solutions with respect to the fraud itself, just the element of making the banks responsible to their clients. Where do you sit on that?
[Translation]
Mr. Plourde: If I may answer this question as well, I’ll let my Public Interest Advocacy Centre colleagues expand on it.
Our view is that by increasing banks’ accountability, they themselves will implement those specific consumer protection measures. It would be an incentive for them to do so.
I can give you specific examples of interesting measures that could be implemented. In our view, it would incentivize banks to develop these types of measures, because it would give them more responsibility.
We see consumers with completely abnormal transactions appearing in their accounts. For example, amounts up to several thousand dollars, when these people normally engage in modest transactions. It could also be transactions that happen overnight or very large consecutive transactions. Often, the bank does not detect those transactions in any way or try to block them. Once consumers realize they’ve been defrauded, banks make no attempt whatsoever to recover the money. Banks could deploy specific measures, such as blocking, detecting and recovering funds.
Our point is that by developing incentives, by forcing banks to reimburse consumers, they themselves will develop the framework with appropriate measures.
[English]
Senator Loffreda: Thank you, Tahira, for being here.
From a public interest perspective, does Division 16 meaningfully strengthen consumer rights, or does it fall short in areas such as fee clarity, consent and accessible redress mechanism? Is the language sufficiently precise to prevent misleading or confusing disclosures for consumers?
Ms. Dawood: I’ll take this quickly. The language in Bill C-15 itself is not very clear. It provides for vague recommendations in terms of the banks are required to establish policies and adhere to them, but what are those policies? It’s not clear as to what those policies are. There are no minimum safeguards that have been provided in the legislation itself. It is not clear if the regulations would provide these minimum safeguards or standardized protections. Our concern is that if we have non‑uniform protections, if the policies are coming from the banks, what if one policy at a bank is different from the policy of another bank? What happens is the consumers of the banks are having different protections, maybe inadequate protections from one bank to another.
The language itself is not consumer-centric. It’s not consumer-friendly. A lot of language is about the criteria set by the bank. It’s not clear. Are the consumers going to be told about these policies? What are these policies? Are they going to be publicly available? Would consumers know these are the policies based on which the banks have come to a decision that the transaction cannot go forward?
As of now, the language of the Bill C-15 is not very consumer-friendly. There needs to be minimum safeguards included in the law itself; otherwise, these should be included in the regulations. Consumer groups should be an important part of it, even if we have not been a very active part of consultations that took place before with the Department of Finance. Going forward, an active effort should be made to involve consumer groups in these consultations and consultations going forward for regulations. Thank you.
Senator C. Deacon: Thank you for being with us today, witnesses. We wanted to have your expertise.
One of the things I’m wondering about, is there anybody who is wanting to slow down these efforts to prevent fraud and put the banks in a position where they are better protectors in this era of modern-day bank robbery where their customers are responsible for the losses, not them? Is there any group trying to slow this down? We certainly got that feeling from the banker’s association that the banks aren’t overly happy with what is being proposed, but are you aware of any group?
Ms. Dawood: We are not aware of any group per se, but our experience so far has been in different regulated industries. Industry associations and groups have often lobbied against protections and measures that would help consumers, and we are fearing that this instance might be one where banks or other industry associations might put up roadblocks.
Senator C. Deacon: I’ll build on that to say, is there any evidence today that the banks don’t already track the instance of fraud in their institution? Shouldn’t they be able to report that on a much more regular basis than annually and be transparent about that? Today, is there any evidence that they aren’t already tracking it? I would be amazed that they don’t, but do you know of any evidence?
Ms. Dawood: We are not aware of any publicly available resource that is specific to banking data. We have some data from CAFC. There are some surveys done by FCAC as well, and CAFC and all these different regulatory bodies provide data that is publicly available. But do we have data which is very specific to banking fraud as compared to other countries? No, we don’t. Do we need this data? Yes, we need this data. We need this data. That’s a very important part of a regime going forward. If you have all this data which is not available to the public, then how is there consumer transparency? How is there consumer awareness? How do we move towards a better regime if everything is happening behind closed doors?
[Translation]
Senator Dalphond: I agree with you that consumers should be given as much information as possible and bankers should be forced to do their utmost to prevent fraud. I asked bankers if they would agree to summarize the annual report they table with the commissioner and identify every institution, with the percentage of their clients who were victimized. Do you think this might be a beneficial measure that would encourage bankers to be more competitive and implement stronger security measures?
Mr. Plourde: I think the answer is already in your question, Senator Dalphond. I do indeed think it would be interesting to have those kinds of measures. While reading the bill, we were surprised to see that data would be anonymized not only for consumers, but for banks as well.
Senator Dalphond: For Visa card users, provincial fraud protection measures place responsibility on the provider’s shoulders. Do you know if banks have the same type of fraud detection practices for Visa cards as they do for other credit cards?
Mr. Plourde: I’m not familiar with banks’ internal policies. However, as you said, the Bank Act and consumer protection legislation in Quebec and other provinces provide protection against unauthorized credit card transactions. I can tell you that at Option consommateurs, we see far fewer cases of credit card fraud compared to every other type of bank account fraud, such as Interac transfers, online transfers or consumer credit line withdrawals. On the ground, we do see cases of credit card fraud with victims unable to get reimbursed, but that’s much less frequent. Our empirical experience is not necessarily based on statistics, but we do see a difference between fraud by credit card and other payment methods.
Senator Dalphond: Thank you.
[English]
Senator Fridhandler: Thank you for joining us today.
I thought you were being extremely kind to suggest that the reports on fraud should just be biannual. I do not see that overly effective any more than the annual. I would like to see it monthly with any material changes having to be reported from report to report. Can you comment on why you were so easygoing on that?
Mr. Fichman-Goldberg: I guess I’ll just say that I should clarify that biannual we see as potentially a minimum. Moving forward, in terms of assessing feasibility of reporting, we would agree that it would be feasible for banks to be reporting more than annually. I guess we had started with biannually as a jumping-off point but, moving forward, certainly it could and should be more frequent. More transparency is better.
Senator Fridhandler: Thanks.
On the enforcement side of things, most of the people defrauded can ill afford paying money to lawyers and others to enforce, so why not consider a system — I would appreciate your thoughts — with a reverse onus on the banks to prove that they shouldn’t be responsible? A tribunal like an ombudsman or something similar to that can make decisions where there is a dispute with the banks. There may be constitutional issues here. I don’t know if you have given any thought to anything like that.
[Translation]
Mr. Plourde: At Option consommateurs, the accountability regime we are calling for is exactly that. In other words, the burden of proof must fall on the bank, who must then prove the consumer was negligent or failed to meet their obligations, as the case may be. Recourse at the federal level already allows consumers to file complaints against their banks and, ultimately, go before the ombudsman.
[English]
Ms. Dawood: I would quickly like to add to that, that we do have OBSI, which is available to consumers to complain to. I don’t think a lot of consumers know about it. Even if they do, banks should be required to make an effort to make consumers be aware of OBSI. This is the recourse mechanism that is available to consumers, rather than them having to go to lawyers. I think their first stop should be OBSI, rather than lawyers.
The Chair: Thank you.
Before continuing, colleagues, I would just bring to your attention that we will have a vote in 55 minutes from now. At some point, that will affect the second panel.
Senator Wallin: I’m going to combine two areas of our questioning. We have just had a conversation about stablecoin and the regulation of that. What do your organizations feel about the use of that eventually? Is that a safer situation? Do you think there will be less fraud? Are you developing policy around that issue?
Ms. Dawood: Is the question regarding what our thoughts are on stablecoin and fraud prevention?
Senator Wallin: Yes. Are you developing policies on that now?
Ms. Dawood: PIAC has had a report on this a long time ago. It wasn’t specific to stablecoins. We did a report on crypto-currencies that identified the risk for consumers, but at this stage, I don’t think we have necessarily reviewed stablecoins in the context of fraud. Going forward, of course, we would like to review this, and going forward, it’s possible that stablecoins and crypto-currency are going to be more rampant in society. That is something that we would be looking forward to reviewing, yes.
Senator Wallin: Did you have concerns in your earlier look at this?
Ms. Dawood: Yes. The concerns are the same: a lack of consumer awareness. Consumers do not know what the risks are when they are using crypto-currencies, and, at the same time, there is a lack of consumer awareness in general and a lack of initiative from regulators in order to provide standard protections to consumers. That’s our understanding from our previous report, but that was from a while ago, so I think we would need to do a more updated version of that to provide a more relevant response.
Senator Wallin: Thank you very much.
Senator Yussuff: Thank you to the witnesses for taking the time to be here.
Given the history that we’ve been witnessing, those who have been victims of fraud have been begging the federal government to act in a way that could alleviate their worries and their concerns. I know this may seem like quite a good move in the right direction, but given the challenges we face, is this a meek response to the challenges faced by consumers in terms of consumer fraud?
[Translation]
Mr. Plourde: Indeed, we would have liked governments to go much further. In Division 16, the elephant in the room is the lack of a provision limiting consumer liability for fraud. When consumers fall for scams, even if they’re entirely diligent and not negligent, banks hold them responsible, and the law allows them to do so. Unfortunately, no solutions to the problem are being put forward right now. Banks will always be able to keep shirking their responsibility and pass the buck for losses suffered by consumers.
The people who call us are in dire straits. They’ve suffered significant financial losses and lose money they don’t have because fraudsters are dipping into their lines of credit. People experience very serious psychological impacts; they are isolated, ashamed and regretful, and feel a sense of injustice. I’ve seen lives ruined by fraud; people forced to sell their homes, who lost their entire retirement savings, are now retired and have no money left. We see tragic situations, and unfortunately, the government’s response is too weak. It’s not fixing the problem and helping these people get their money back. As a result, banks can keep telling people going through this: “You’re responsible. You made the transactions, you were scammed. Too bad for you.”
[English]
Senator McBean: It was quite clear when you said what is not in it, what you feel is not there to protect Canadians, but are there any specific provisions in Division 16 that you believe could improve transparency, accountability or dispute resolution mechanisms for consumers? I’ll start with Ms. Dawood.
Ms. Dawood: Yes. All in all, requiring the banks to have policies in place that prevent fraud and identify fraud. Right now the media stories, in general, indicate that banks have not been that active in identifying fraud, preventing fraud and warning consumers about it. Yes, it is a step in the right direction, like we mentioned in our earlier remarks, but is it enough on its own? Unlikely, unless there is clarity as to what these policies are. Also, standardize these protections. If you don’t have standardized protections and minimum safeguards, we don’t know. We might be at the status quo. Consumers might not even have access to these internal bank policies. Unless these policies are clear, published and easily available to consumers, that’s the gap. It’s a step in the right direction, but on its own, it’s not sufficient.
Senator McBean: Mr. Plourde, do you have anything to add?
[Translation]
Mr. Plourde: I agree with Ms. Dawood; it’s a step in the right direction, but these measures are nonetheless very timid. The new requirement for consent to activate or deactivate account features, as well as changes for fund limit transfers, may be useful to a certain extent, but this remains rather limited.
Here’s an example: We recently saw cases of fraud affecting a financial institution in Canada. A wave of fraud hit this bank because it unilaterally increased the fund transfer limit from $2,500 to $10,000 a day. This attracted fraudsters to it. Consumers had not changed their maximum daily limit themselves. It may have had a certain utility for this type of transaction, but if we look at the situation as a whole, something fundamental is missing, and that is bank accountability, unfortunately.
The Chair: Thank you, Mr. Plourde. We’ll now go to the second round of questions.
[English]
Senator Loffreda: Tahira, given the vagueness you identified, would regulatory guidance alone be enough to protect consumers, or do you feel we need stronger statutory requirements in the bill itself?
Ms. Dawood: It would have been ideal if the bill itself had statutory standards and minimum safeguards. At least the language could have stated that minimum standards have to be included, and those minimum standards could have been sketched out in the regulations. Ideally, the law should have provided these minimum safeguards, and, if not, at least the regulations should provide for mandatory safeguards that should be implemented by all banks. At the same time, it is important to also consider what the specific safeguards will be, and that’s something that will eventually have to happen at the regulation part.
Senator Loffreda: Thank you.
[Translation]
Senator Henkel: My question is for both of you. How can we prevent the proposed framework from creating a system where consumers have to prove their innocence, when banks have far superior technological means? In the public interest, should we go so far as to reverse the burden of proof in fraud cases, as is already the case in the U.K., for example?
Mr. Plourde: Absolutely; what’s being proposed is a system similar to the one in the U.K., where any fraud that goes through the instant payment system must be reimbursed. Regardless of the circumstances of the fraud, it must be automatically reimbursed at the bank’s expense. There are very limited exceptions, such as if the consumer has been grossly negligent in relation to the fraud, but it’s a very high level of negligence that closes the door to reimbursement. It’s a system of this kind where the burden of proof is reversed, because it’s up to the bank to show that the consumer has been negligent. That is what we are asking to be incorporated in Canada.
This has been done in Quebec; we have a similar system based on reversing the burden of proof on the financial institution. I mention this because we are talking about the U.K.’s system. Just recently, the payments systems regulator in the U.K. published a review, one year after the provisions came into force. The report is very positive for consumers and for reducing fraud, and what we’re hearing from the regulator in the U.K. is that there has been a 15% decrease in claims since the new standards came into effect. Why? Because it has encouraged financial institutions to be more diligent and vigilant and to better monitor what is happening in the payment system.
The Chair: Thank you for mentioning the United Kingdom, Senator Henkel. I would like to ask Mr. Plourde and the other witnesses, such as Ms. Dawood, a question.
[English]
If you can share with us what you have specifically proposed to the finance minister, it would be useful for the committee, because I got the sentiment around the table that people found that Bill C-15 does not go far enough. It would be appreciated if we could have some written comments that you have proposed to the finance minister.
It was very informative. Thank you for your time.
[Translation]
Welcome to our guest joining us by video conference and representing the Canadian Credit Union Association, Victoria Mainprize, Vice-President, Policy and General Counsel.
I understand that you may have short opening statements. Following your remarks, we will have the senators ask questions.
The floor is yours.
[English]
Victoria Mainprize, Vice President, Policy & General Counsel, Canadian Credit Union Association: Mr. Chair, Mr. Deputy Chair and committee members, thank you for inviting me to speak today on Division 17 of Part 5 of Bill C-15, Supporting Federal Credit Union Growth.
The Canadian Credit Union Association, or CCUA, is the national trade association for Canada’s 169 credit unions and caisses populaires, excluding the Desjardins Group, which collectively hold over $315 billion in assets, offer community-based banking alternatives and suitable financial products and services to more than 6.1 million Canadians, and employ over 30,000 people across the country.
Unlike banks, which create profits for shareholders, credit unions create profits for people. They are 100% Canadian-owned and exist to enhance their members’ economic and social well‑being. The profits they generate are distributed back to their members and the communities they serve.
In Canada’s highly concentrated financial sector, credit unions play a crucial role in maintaining a strong middle tier, which is essential for financial sector stability and competition. Although most credit unions are provincially regulated and operate only within their provincial borders, three of our members are federal credit unions which can operate nationally, and more credit unions are looking to join the federal sphere.
While all Canadian financial institutions face increasing regulatory and technological demands, small- and mid-sized financial institutions such as credit unions are particularly impacted. As a result, many credit unions are seeking opportunities to expand to better serve their members and the communities they support.
To support the growth and competitiveness of federal credit unions and to enable provincial credit unions that wish to become federal to do so, CCUA and its members have, for several years, been advocating for legislative changes that would support federal credit union growth and ease provincial credit union entry into the federal framework, including many of the changes proposed in Division 17 of Bill C-15.
We were, therefore, delighted to see the proposed transitional provisions that will help ease the entry of provincial credit unions into the federal regime, as well as the provisions that will facilitate combinations between federal credit unions and provincial credit unions. While there is still more that can be done to help facilitate the growth and competitiveness of credit unions, these steps were significant, and we were delighted to see their inclusion in Bill C-15.
Thank you very much, and I’m delighted to answer any questions you might have.
The Chair: Thank you, Ms. Mainprize.
Colleagues, we are a little bit behind schedule, so we could limit it to two minutes each and go to a second round if necessary.
Senator Varone: Thank you, and welcome.
My question is: Why would a successful provincial credit union want to become federal in scope when they’re pretty much community-based?
Ms. Mainprize: That’s an excellent question, senator.
The main reason is to be able to serve a larger community. It depends on how you define community. Right now, provincial credit unions, being provincially based, can only operate within their provincial borders, but many of their members are mobile and they’ll move across those borders. Some of the businesses they serve want to serve customers across provincial boundaries. Going federal allows a credit union to be able to serve their members wherever those members move and to continue to support those communities however you define community.
Senator Varone: Is there a cost to borrowing that gets lowered by being part of a national framework?
Ms. Mainprize: One of the things that happens when a credit union gets larger, whether it expands provincially or federally, is that its general costs go down and its efficiencies go up. What happens there is that they’re able to provide lower loan rates as well as better products and services, and they’re able to innovate more. Overall, it’s actually better for customers for credit unions, in many cases, to be able to grow. Not all credit unions want to do this. Some are very based in geographic communities and don’t feel the need to grow, but many of our members do want to be able to grow, in particular, as mentioned, to deal with some of the regulatory and technology burdens, and we’re here to help those members to self-determine how they want to meet their strategies.
Senator Varone: Thank you.
Senator C. Deacon: I’m really glad you’re here, and I’m glad you’re pleased with the proposed amendments. I was surprised, though. I didn’t think they went very far because if you look at the last conversion, Innovation Federal Credit Union, it took seven or eight years. I asked witnesses from Finance Canada what they thought the process will be now after this is implemented. They couldn’t give me an answer. I would certainly hope to see that at least cut in half, because if you’re already serving the public in a province, I can’t imagine there needs to be that long a process. What are your thoughts?
Ms. Mainprize: Thank you, senator. That’s another excellent question.
One of the things that we did notice, and you alluded to it with Innovation, and what we’ve seen with First West Credit Union in particular, which has been trying to go through the federal continuance process for many years, is that the process can take a very long time and that it’s a complex and fairly arduous process. These amendments are very helpful in two ways.
One, they shorten the process for a credit union that is looking to do the continuance and amalgamation, so the dual application process that allows them to continue federally through essentially an expedited process, so they can immediately amalgamate with an existing federal credit union. That is an expedited and faster way of getting in the federal framework. Innovation is looking to do this with ABCU Credit Union, and Coast Capital Savings is looking to do this with Sunshine Coast Credit Union and Prospera Credit Union.
The other change that we were enormously pleased to see was the asset purchase transaction, which will allow a larger federal credit union to essentially purchase the assets and liabilities of a smaller provincial credit union in exchange for cash or for members’ shares of the federal credit union. What that will also do is expedite the process to allow the members and the provincial credit union to essentially through that existing federal credit union join the federal sphere.
Both of these processes will shorten what we’ve already been seeing.
Senator C. Deacon: It doesn’t actually shorten the process of becoming a federal credit union; it shortens the process for a federal credit union to take over or merge with a smaller provincial credit union.
Ms. Mainprize: Absolutely. It doesn’t change the process or the timelines for a stand-alone provincial credit union to go federal on its own.
Senator C. Deacon: As somebody who believes in competition, I would love to see the federal government, who said they’re going to be hawkish on competition, balance it out so that there’s easier access for others and they don’t have to merge with a federal credit union to make use of this. Thank you.
Ms. Mainprize: Thank you, senator. We share those views.
Senator Yussuff: Thank you for being with us.
When Superintendent Routledge from the Office of the Superintendent of Financial Institutions, or OSFI, was here, he said that the process for credit unions to become federal was lengthy and complex. Those are his words, not mine. Given what you’ve seen in the legislation, does this make it less complex and lengthy? My follow-up question is: Do we need more clarity on the regulatory side to accomplish the changes that the government has proposed in the legislation?
Ms. Mainprize: Thank you, senator.
Yes, we do. One of the things that is causing the process to be lengthy and complex for a provincial credit union to continue federally on its own is the complexity of it and the lack of charity. One of the things we have been speaking with OSFI about and advocating for is more clarity in terms of what OSFI is looking for, what those requirements are and what the expected timelines would be. Essentially, to update OSFI’s guide on continuance.
The current process should shorten that simply because the dual application process, or at least the continuance followed by the immediate amalgamation, tends to be a slightly more expedited process because OSFI recognizes that the credit union that is continuing in order to amalgamate with a federal credit union is not going to be a stand-alone federal credit union. That in and of itself is a faster process. The asset purchase transaction would be an even more expedited process.
What I would add is that while many of the proposed amendments are essentially drafted to help ensure that there is a more expedient approval process by the minister, the receipt of an application that’s issued by the superintendent could still take months to obtain. We don’t see anything in the legislation that would actually set a timeline or any specific process that the superintendent needs to follow. In that sense, we would be delighted to see things go a little further.
Senator Loffreda: Thank you for being here, Victoria.
How will Division 17 impact capital requirements or liquidity expectations for credit unions? Are these changes appropriate for their cooperative business model? Taking it a step further, what risks or operational challenges do you foresee for smaller credit unions under the revised framework, and can they be mitigated?
Ms. Mainprize: Thank you, senator.
The proposed changes don’t directly address capital or liquidity requirements, but what we have been advocating for and continue to advocate for is greater proportionality in OSFI’s requirements with respect to federal credit unions, not only recognizing that they’re cooperatively owned and have different access to capital, but the fact that they’re domestically based. As a result of that, they pose a lower risk.
We were very interested and continue to be very interested to see the approach in the United Kingdom of the Prudential Regulation Authority, the PRA, specifically their strong and simple capital regime where they recognize that financial institutions, whether they’re credit unions or not, that operate under a certain asset size and operate domestically are subject to different capital requirements. They’re very clear: not weaker capital requirements but simpler capital requirements and simpler documentation requirements.
Senator Loffreda: Thank you.
[Translation]
Senator Henkel: Good afternoon, Ms. Mainprize. My question has to do with competition with an open banking system.
Large traditional banks have considerable resources to integrate the technical standards of an open banking system. Cooperatives, which are often smaller, will have to comply with exactly the same obligations. The government says that competition will be strengthened. Do you share this view of the situation, or are you concerned that this framework, as it stands, will instead reproduce asymmetries between the players?
[English]
Ms. Mainprize: Thank you, senator.
We’ve been enormously pleased with the consultation process with the Department of Finance with respect to open banking, and we were delighted to see in Bill C-15 some movement to move open banking forward. We do think that it will help improve competition in the financial sector. One of the things we were particularly pleased to see and continue to be pleased to see is the recognition that not all credit unions may want to participate in open banking immediately so that there is not the same requirement that there is for banks. We were also enormously pleased to see some recognition given to provincial regulators and the role that they perform in regulating financial institutions and credit unions under their purview.
Senator Dalphond: Welcome to the Senate.
You said that there are three credit unions that are now federally regulated. What percentage of the credit union financial sector is federally regulated? Those three credit unions represent what, 5% of the market that is more or less in the credit unions’ hands, or 50%?
Ms. Mainprize: That is an excellent question, senator, and I’m not able to answer it immediately. The three are obviously among the larger credit unions of our membership, but it is only three of 169. I can get you the specific percentage in terms of members.
Senator Dalphond: Thank you. I appreciate that.
Isn’t there a danger to limit the competitiveness of the system? I remember when I was assisting the credit union in Quebec, we reformed the provincially regulated framework to make sure that they could sell, for example, insurance products. The banks could not do that. Then the federal Bank Act was amended to authorize that. Having two frameworks, provincial and federal, sometimes creates competition and also eagerness to be at the advantage of the other one. Isn’t there a danger that we lose this if we all move to federally regulated and you become more or less like the banks?
Ms. Mainprize: That is an excellent question.
I can say with absolute certainty that not all of our members want to go federal. A certain number do want to go federal, and that’s specifically to be able to execute their strategy, continue to serve the members that they have and increase their membership to support the members, as I mentioned, who might be more mobile. However, there are many credit unions that remain and wish to remain very strongly rooted within a small geographic community. Many of those are agricultural lenders or specific to a geographic region. Those credit unions are not looking to go federal. I think that continues to create an interesting and nice diversity in Canada and within the credit union sector.
Those credit unions that do go federal and that have gone federal have not lost their unique credit union characteristics. They continue to be very focused on their members. Credit unions, overall, for 20 years running, have, year after year, won the Ipsos Financial Service Excellence Awards for customer service. This really highlights how focused credit unions are on their members, serving their members and supporting their communities. Whether they’re regulated federally by OSFI or not, they will not lose that unique aspect of the way they operate.
Senator Dalphond: Thank you.
Senator McBean: I think you might be repeating yourself a little bit here, but I’m continuing on from where Senator Varone and Senator Dalphond left off. You had said the 169 credit unions maintain a strong middle tier in Canada. The plan here is that it becomes much easier for credit unions to be buying each other to grow. Then you wonder if the big credit unions start gobbling up the smaller credit unions. I wonder if the proposed changes support or hinder the ability of credit unions to continue serving local communities, particularly the rural and the underserved areas, given their cooperative structure. If they start getting bigger, I just worry. You said they have maintained their customer service, but if all of them start shifting to be larger, even the ones that you say don’t want to become federal, if they’re getting purchased in the efforts of somebody else’s growth, do you see a concern here?
Ms. Mainprize: That’s another excellent question.
What I would say is that because credit unions are member owned, no purchase, amalgamation or combination can happen without the support of the membership. This is still true under the proposed asset transaction. In other words, if a federal credit union wished to purchase the assets of a provincial credit union, the provincial credit union’s members and any shareholders would need to support and approve that transaction.
Really, the credit unions that are participating in these combinations wish to do so and their members wish to do so. We know very much that there are a number of credit unions and their members who don’t wish to do so, and so they will continue to operate the way they are now. There are other credit unions who wish to grow but wish to continue to operate provincially. They may look for combination partners that are close to them or operate within a similar community, and, again, not looking to become mini banks but looking to become large enough that they can match the technology requirements and continue to meet the increasing regulatory requirements that are hitting all financial institutions.
What we’re very pleased about here is that those credit unions — and it is certainly not all of our membership — those credit unions who wish to be able to go federal can do so.
Senator McBean: Thank you very much.
Ms. Mainprize: Thank you.
The Chair: Thank you, colleagues.
[Translation]
That concludes the participation of our third panel this afternoon.
[English]
Thank you to our witness. We appreciate it very much. If you have anything written you want to share, it is up to you.
Senators, continuing with our fourth and last panel, we welcome officials from three departments. We have people from the Department of Finance, from Innovation, Science and Economic Development Canada, and from the Financial Transactions and Reports Analysis Centre of Canada, also known as FINTRAC. I wish to welcome all our witnesses.
We have a vote at 5:34 p.m., so I propose that we conclude by, at the latest, 5:20, 5:25 p.m. That gives us one hour and 15 minutes, basically. We’ll try to be as efficient as we can. I would like to let the witnesses know that since that timeline provides us only 10 minutes after the vote, we will adjourn for the day. We will not be back.
Since we studied Divisions 10 to 17 last time, I propose to go directly to Divisions 22, 23, 37, 39, 45, 43, and if we have time, we will go back to Division 10 and Division 15 because we have not analyzed the first divisions I mentioned.
I propose starting with Division 22. I will invite Mr. McDonald to come forward. It will be about the Canada Development Investment Corporation act. I don’t know if you have any opening remarks or if we can go directly to questions from senators. It’s up to you. Welcome.
Riley McDonald, Senior Advisor, Asset Management, Department of Finance Canada: Good afternoon, chair and members of the committee. My name is Riley McDonald. I’m a senior advisor at the Department of Finance. I’m here today to discuss Division 22 of Part 5 of Bill C-15.
Division 22 proposes to introduce enabling legislation for the Canada Development Investment Corporation, or CDEV for short. CDEV is an enterprise Crown corporation that reports to Parliament through the Minister of Finance. CDEV provides commercial and financial advice to the government, manages assets on behalf of the government and acts as the agent of divesture for federal assets. CDEV was incorporated in 1982 under the Canada Business Corporations Act.
The purpose of this division would be to continue CDEV under its own act. This would align CDEV with similar enterprise Crown corporations, for example, Export Development Canada or the Business Development Bank of Canada, which have their own enabling statutes.
As a result, this legislation would allow CDEV to operate with greater efficiency while providing greater transparency to parliamentarians and Canadians. The legislation would continue CDEV’s existing mandate, operations and governance structure as set out under its articles of incorporation and bylaws and under Part 10 of the Financial Administration Act.
Division 22 would provide CDEV with certain new capabilities intended to allow the corporation to more effectively deliver on its commercial mandate. These include, among others, establishing a funding mechanism for CDEV and exempting CDEV from particular provisions of Part 10 which require Governor-in-Council approval, for example, acquisition of shares and incorporation of subsidiaries, while retaining the appropriate mechanisms of government oversight.
Thank you for this opportunity to address the committee. I would be pleased to address any questions you have regarding Division 22.
The Chair: We received management from CDEV last week, and we had an opportunity to ask a lot of questions. I propose we have a limit of 10 to 15 minutes maximum specifically for this panel.
Senator Loffreda: Thank you, Mr. McDonald, for being here.
You did mention that Division 22 expands CDEV’s authorities and reporting expectations, and the recurring concern is the lack of disaggregated financial information about major projects and subsidiaries. Division 22 grants CDEV additional flexibility, but Canadians still have limited visibility into its project-level performance. How will CDEV ensure greater transparency through disaggregated financials, clear risk summaries and project-specific updates, which are important to see how the project is going so that we, not only Canadians but we parliamentarians, can properly assess the financial exposure and governance risks associated with this expanded mandate?
Mr. McDonald: Thank you for the question, senator.
With respect to this legislation, as I mentioned in my opening remarks, this isn’t intended to change the operations of CDEV, but in providing greater clarity, one specific way this provides greater clarity is to enshrine within the legislation what CDEV’s mandate is. With respect to your question on performance and effective oversight of the actions CDEV undertakes and disaggregated data, CDEV does produce a variety of robust reports, including its corporate plan, which must be approved on an annual basis and tabled in front of Parliament, its interim reporting each quarter, as well as its annual report. These speak to CDEV’s work at an aggregated level. Certain of its subsidiaries, such as, for instance, the Canada Indigenous Loan Guarantee Corporation and Canada Enterprise Emergency Funding Corporation will also produce separate reporting. So there is a robust degree of reporting already in place. This is intended not to make any changes to those reporting requirements.
Senator Fridhandler: We have moved from the CBCA, a traditional corporate statute, to maybe a traditional federal Crown corp statute. I haven’t done a comparison of one to the others. But one of the things we find in the CBCA and its provincial equivalents is the ability to have unanimous shareholders’ agreements where even with a sole shareholder, they can put an agreement in place to strip away certain powers and authorities from the board of directors. I’m interested to understand that relationship of retained authorities and powers of the shareholder, Canada, vis-à-vis this corporation.
Mr. McDonald: You’re correct that this act would move CDEV out of the CBCA. However, CDEV would continue to operate under the governance framework set out in Part 10 of the Financial Administration Act. The existing provisions within Part 10 of the FAA that govern how Crown corporations operate, whether it pertains to, for example, the annual approval of corporate plans, the appointment of auditors by the Governor‑in‑Council, the special examinations done every 10 years, et cetera, these would all remain in place. Those frameworks that have been set through the FAA would not be changed unless otherwise specified, which I did allude to in my remarks. If you would like — I recognize we don’t have a lot of time — I could go into more detail on this.
Senator Wallin: I just want to follow up on how this changes the funding. You, for example, hold the ownership of Trans Mountain, right? Is that part of your bailiwick?
Mr. McDonald: CDEV fully owns Trans Mountain.
Senator Wallin: Right, okay. So this changes the way you would be capitalized and just leaves it for government to decide, or actually more specifically the Minister of Finance, so that does not have to go through any other process under this new structure?
Mr. McDonald: Thank you for the question, senator.
What I would say to that is that this does establish a funding mechanism that doesn’t exist for CDEV. However, there is no funding associated with this act. What this would enable the government to do is to provide funding either via loans to the corporation or purchase of shares in the corporation. However, with respect to processes, this would still need to go through government processes of approvals of new funding. It would require CDEV to either submit a new corporate plan or to amend its existing corporate plan for the approval of the Treasury Board and for tabling within Parliament, and any funding associated with CDEV would be included in the main or supplementary estimates for the awareness of Parliament.
Senator Wallin: That is sometimes pretty hard to find. Okay. Thank you.
Senator Dalphond: If I understand correctly, the mandate and activities remain the same. The mission remains the same. However, it leaves the CDEV to become a Crown corporation, and one of the main differences will be that the directors are appointed at the pleasure of the government instead of being for fixed terms under the CBCA and could be removed under the CBCA only by shareholders following a certain specific process, a special assembly of shareholders, which would be the government, but they have an opportunity for the director to explain why he or she should not be removed from office. Is that the main change? It would be easier for the government to appoint people and to keep them at goodwill, or at its pleasure?
Mr. McDonald: Thank you for the question, senator.
As it currently operates, the Minister of Finance already appoints directors to the corporation. The chair and the CEO are appointed through a Governor-in-Council process. This does not change the appointments process at all. The language around the directors, chair, CEO, serving at pleasure is to align it with how this works for other Crown corporations such as the Canada Infrastructure Bank, Export Development Canada, et cetera. This is, again, to bring it into alignment where possible with existing practices for Crown corporations.
Senator Dalphond: Thank you.
Senator McBean: In your testimony, you said that this will bring in different exemptions and efficiencies for CDEV. Sometimes those things come at the expense of transparency. What transparency mechanisms will govern investment decisions to prevent conflicts of interest and other problems?
Mr. McDonald: Thank you for the question, senator.
To perhaps expand on the points that I had raised in my opening remarks on exemptions to certain parts of the Financial Administration Act, particularly those pertaining to section 91 of the Financial Administration Act that relate to receiving Governor-in-Council approval for things such as — there are many things, but acquisition of shares in a company, incorporation of a subsidiary under CDEV. What this means in effect, as I alluded to earlier, is any new business activity CDEV intends to undertake will still require the approval of its corporate plan and the tabling of that corporate plan in front of Parliament. CDEV wouldn’t be able to undertake these actions without adequate check-ins with the government.
What this does is it just means that the order-in-council, as issued by the GIC, would not necessarily need to follow from this. That’s what I meant when I said the appropriate mechanisms of government oversight would remain in place even if we’re streamlining a certain aspect of how this is implemented. Because these corporate documents are tabled in Parliament or are posted online in the case of their interim financial statements, there is still transparency and accountability to both Parliament and to Canadians.
Senator Varone: Under Mandate and Activities under proposed section 10(2), it says:
In carrying out its mandate, the Corporation must conduct all of its activities in the best interests of Canada and must do so in a commercial manner.
Are you restricted to Canadian soil in terms of your activities?
Mr. McDonald: Thank you for the question, senator.
That’s a good question, and if I may return very briefly to something that Senator Dalphond raised in terms of the mandate and operations being the same, the spirit of them is the same as their articles of incorporation from the 1980s. However, some of the language was a little bit outdated. These clauses had updated the language while retaining the spirit. One of the things that we had noticed is the previous language had maybe indicated that there was a reading that one could make that this only pertained to companies or entities within the geographical boundaries of Canada. The language here, as we understand it, would allow CDEV to support economic interests of Canada even if it is outside of the borders of Canada itself.
Senator Varone: Okay.
The Chair: Thank you. We were very efficient. Thank you for your witness testimony.
We will now hear from ISED, who is involved in Division 23 forward. I think that is Mr. Simard and Mr. Chhabra. Please, if you can come forward, we’ll talk about Division 23, which is an amendment to the Personal Information Protection and Electronic Documents Act.
[Translation]
Samir Chhabra, Director General, Marketplace Framework Policy Branch, Innovation, Science and Economic Development Canada: Good afternoon. My name is Samir Chhabra, and I am the Director General of the Marketplace Framework Policy Branch at Innovation, Science and Economic Development Canada. I’m here today to present Divisions 23, 39 and 43 of Bill C-15, which respectively amend the laws on privacy, commercial law and competition.
[English]
Division 23 would amend PIPEDA to provide a new right to data mobility, allowing consumers to direct the transfer of their personal information from one organization to another — for example, a competitor organization or another organization that provides a similar service — so long as they are subject to a data mobility framework. The consumer-driven banking framework introduced in the Consumer-Driven Banking Act in Division 9 of Part 5 of the Budget 2025 Implementation Act is one such data mobility framework.
I can also speak to Divisions 39 and 43 now if you wish, Mr. Chair.
The Chair: Yes, please.
Mr. Chhabra: Division 39 contains proposed amendments to the three general-purpose federal corporate statutes, namely the Canada Business Corporations Act, the Canada Cooperatives Act and the Canada Not-for-profit Corporations Act. These amendments will ensure that federal corporations that are listed as terrorist entities under the Criminal Code can be dissolved quickly after their designation, protecting the integrity of our incorporation frameworks.
Division 43 contains proposed amendments to specific anti‑greenwashing provisions that were added to the Competition Act in 2024 and require businesses making a representation about the environmental benefits of its products or activities to be able to prove they sought out credible evidence before making that claim. The objective of the proposed amendments is to remove key irritants to compliance that have been identified by stakeholders while maintaining the overall obligation to promote truthful advertising with respect to environmental claims passed by Parliament last year.
[Translation]
Thank you. I will be pleased to answer any questions you may have on these divisions of the bill.
[English]
The Chair: Thank you.
Colleagues, since we are dealing with three divisions, and we have other divisions as well, but we adjourn at 20 past 5, I propose 20 minutes for this section. Please identify which division you are referring to.
Senator C. Deacon: Thanks for coming to see us today.
I want to speak about the PIPEDA changes and what effort was made to have conversations with other potential departments other than Finance where data portability and data mobility could be a useful benefit for Canadians, and to make sure that the changes proposed in this legislation are going to be effective in enabling that as quickly as possible. It’s something Canadians are missing out on.
Mr. Chhabra: Thank you very much for the question, senator.
In fact, your comments are one of the main reasons why we’re moving forward with this provision at this time. It’s not just to enable the consumer-driven banking framework, while an important element of this is to be well timed and aligned with the work colleagues at Finance are doing to introduce CDB, but also to set a broader frame for this work, not to just make it bespoke to banking but to also to set a broader frame that allows the Privacy Commissioner to set rules of interoperability about how this is going to function such that it’s available broadly across the economy and allows for other organizations or other sectors, indeed, other federal and provincial departments, to raise issues and highlight where the adoption of a data mobility framework might be helpful and beneficial to promote competition to enable innovation. By setting it at the level of PIPEDA and setting it as being responsibility across the broad marketplace that way, we’re actually enabling a number of different data mobility frameworks to appear over time.
Senator C. Deacon: I’m glad to hear that. Federally, there is telecom, no question, and there is finance versus just consumer banking data and insurance data. There are so many different areas where I think this could benefit. Could you speak a bit to which departments are moving along in this regard? Where are you seeing action beyond the efforts in consumer-driven banking?
Mr. Chhabra: Thank you for the question, senator.
It’s important to note that the federal government regulates a few specific key industries. You highlighted a couple of them in your commentary. The availability of a data mobility framework, if this division passes, will be broadly available across the economy, meaning it doesn’t have to be initiated by the government or a federal department. It doesn’t have to be subject to an existing regulatory system or scenario. It actually enables a broad range of actors to come forward and identify opportunities to build a data mobility framework for a given sector. That could happen at the federal level in federally regulated industries, or it could happen much more broadly than that. At the time, at this moment, it’s the Department of Finance that has brought forward consumer-driven banking, and that’s why we timed the amendment to coincide with that. It actually enables far beyond just the federal government to consider actions to take forward data mobility.
Senator C. Deacon: I did not perceive that when I read it, so thank you for that clarity. That’s really important. Thank you.
Senator Loffreda: Samir, thank you for that, and thank you to all our panellists for being here.
Division 23 establishes a data mobility framework intended to give consumers secure control over their financial data. A key concern is whether the framework provides sufficient protection and clarity for consumers. My question is: How will Division 23 ensure strong consumer protection through clear liability rules, standard disclosures and real-time redress mechanisms — in other words, so that Canadians are not left bearing losses if their data is misused or an authorized transfer goes wrong? Those are key issues we see more and more of today. I would like you to elaborate on those concerns and elements.
Mr. Chhabra: Thank you very much for the question. It’s an important one.
I’ll start by pointing out that PIPEDA, the Personal Information Protection Electronic Documents Act, governs the collection, use and disclosure of personal information across the Canadian marketplace today. It will it continue to do so.
This amendment is very specific and targeted and enables data mobility. In other words, it allows an individual to reach out to a company with whom they do business and ask for a transfer of that information in a secure and interoperable fashion between themselves, between the data holder and the company, and another competitive provider.
That’s different than what we have seen in terms of data portability in some other jurisdictions around the world where there have been some challenges where the data is sent to the customer, and it’s up to the customer to then provide that back to the new provider with whom they want to do business. That can lead to a lot of interoperability challenges. It can lead to a lot of security and privacy challenges because individuals often don’t have access to the same kinds of tools, such as encryption, to keep the data safe. That’s why the proposal, in this context, is actually to enable a data mobility framework that allows a customer to reach out to a business and ask for their data to be securely transferred to another competing business in the same sphere.
There is a regulatory element to this work that will follow and that will stipulate in more detail interoperability requirements and the data holding security requirements, so that piece is still to come.
Senator Varone: I’m going to just dive into that one. Data interoperability is the cornerstone to competition. Whether it be a car loan, a mortgage, a credit card, all financial institutions are reliant on your credit score, so you pull the bureau. But up until this legislation, they are very protective of that bureau meaning they have to pull it themselves. Every time a bureau is pulled, that consumer has an impingement on his credit. The more competition, the more impingements. Does this interoperability allow the consumer to pull the credit score and use that and be accepted by the financial institutions as his credit score?
Mr. Chhabra: Thank you for the question, senator.
That is the kind of detail that would have to be developed through the context of the data mobility framework itself. What we are doing here is setting up the broad rules of the road to ensure that the data is protected, that it’s managed securely and that there are no additional risks to privacy because of the establishment of a data mobility framework, and it is meant to establish it in such a way that it allows for competition and eases consumer switching between organizations.
The specific question you’re raising about how the credit bureau works today and how that impacts credit scores would have to be thought through in the context of how Finance establishes the consumer-driven banking framework and what modalities and considerations need to be taken there to actually fully enable smooth switching. I agree it’s an important question, but I’m not sure it relates to the protection of personal information.
Senator Fridhandler: I have two quick questions.
The first is on Division 23 and data sovereignty. I speculate that most consumers don’t understand the risks when data is moved outside the country and the ability for the legislation to offer protection because it’s out of the jurisdiction of Canadian enforcement.
My second question is on the greenwashing and the maintenance still of the reverse onus and why the legislation, generally speaking, on misleading advertising doesn’t cover it and why we need specific provisions to be maintained.
Mr. Chhabra: Thank you very much for both questions, senator. I will invite my colleague Runa Angus to take the first one.
Runa Angus, Senior Director, Marketplace Framework Policy Branch, Innovation, Science and Economic Development Canada: Thank you very much for the question. I will take the question on data sovereignty.
Obviously, this data mobility framework will be part of PIPEDA. PIPEDA already applies wherever there is a real and substantial connection to Canada. Pretty much if any organization is advertising products and services to Canadians, PIPEDA generally applies. Obviously, there can be enforcement challenges when the organization and all its assets, employees, et cetera, are abroad, but the Privacy Commissioner does have extensive ability to collaborate with foreign jurisdictions — for example, most recently, 23andMe. The Privacy Commissioner collaborated with the ICO, which is the data enforcement authority in the U.K.
All that to say that PIPEDA does actually have a wide net, protects data sovereignty and allows for interjurisdictional investigations, and now the data mobility regime will be clearly under the Privacy Commissioner’s oversight.
Martin Simard, Senior Director, Marketplace Framework Policy Branch, Innovation, Science and Economic Development Canada: On the greenwashing, you are correct. The provision is not removed entirely. It is right sized, so to speak. It is targeted amendments to try to get the balance right.
There have been long-standing provisions in the Competition Act on misleading advertising. It has always been not permitted to lie about or make claims that mislead consumers. But when we did the comprehensive Competition Act reforms and we did large public consultations, greenwashing really is the thing that popped up as a key consumer concern in terms of the evolution of the marketplace. Then Parliament, when it looked at the proposal, also shared that there had been a proliferation of misleading claims about environmental benefits, and it was felt that there was a need to strengthen a little that subset of claims.
They are particular because often the consumer cannot verify them. If I say my product has been produced in a carbon-neutral way, it is not something that the consumer can really verify, because it’s intangible, so to speak. There were precedents in the act for this as well in terms of performance claims.
The solution that has been selected was to ask companies to document properly and adequately their claim before making it. That’s what is meant by the reversal, just an obligation to keep records of the evidence behind the claim before making it. Then the moment you’ve done that, then the reverse is back on, for example, the Competition Commissioner to say that this extension is not adequate or that the claim is misleading.
The Chair: Thank you. I have to interrupt you.
[Translation]
Senator Dalphond: I’ll move on to Division 39. The act states that a corporation may be dissolved in certain circumstances, based on easily verifiable facts: there are no directors, no annual report, no activities, and no one can dispute these criteria. The criterion we’re adding is somewhat more subjective. The Minister of Public Safety notifies the director that the company is listed in the criminal identity registry. There is an assessment of security information, for example, so it’s more complicated. Am I to understand that the corporation will be notified and that it could challenge the minister’s notice?
Mr. Simard: That’s why it was included in the same list of clauses. Under the Criminal Code, when the Governor-in-Council identifies an organization as terrorist, that entity is added to the list. That is what the new criterion applies to. The Department of Public Safety was added for interpretive reasons, to ensure that there were no issues. A description is included in the list, but the name may differ or the association may decide to change its name or register under another name. This is to clarify that the entity that will determine —
Senator Dalphond: Dissolution results in assets that will have no owner, so if this corporation were fully legal the week before being added to the list, it may own a building that was used for cultural purposes, so would the building become federal Crown property?
Mr. Simard: Having said that, it’s really seen as a complement to the system that exists under the Criminal Code. Under the Criminal Code, if an entity feels that it has been wrongly included on the list, it can appeal to the minister; there is a process in place. In corporate law, there’s already a process for reinstating entities. In the case of an entity that has been wrongly added to the list, it can initiate the appeal process under the Criminal Code, and then it can be removed from the list of terrorist entities. It can then apply to the director to be reinstated, and it will regain its property. This is seen as a complement to the process that exists under the Criminal Code.
The Chair: Thank you.
[English]
Senator Yussuff: I want to come back to Division 23. I think this is all a good development in the context of open banking, but when the Privacy Commissioner was here, I asked about this. Quite frequently, we’re hearing of breaches of personal information by those who are responsible for protecting this in the first place, and yet, the commission doesn’t have any authority to issue fines for these breaches. That’s the regulation. Why isn’t the government providing more stringent fine requirements for those who breach their responsibility as a way to protect the consumer and give us confidence that they know that, hey, if you do this, there is a consequence to this, because consumers are going to rely on whom to protect them? We’re seeing this frequently with large institutions constantly breaching their responsibility of protecting the privacy of those who provide them with the information, and yet, very little is done. It has to go to a class action lawsuit to remedy the situation.
Mr. Chhabra: Thank you very much, senator, for your question.
Of course, broad reform of PIPEDA, including to empower the Privacy Commissioner with additional enforcement powers, including order making and the ability to issue administrative monetary penalties or to operate as part of a system that would contemplate administrative and monetary penalties, was a feature of two recent Parliaments under Bill C-11 and Bill C-27. Both of those bills died on the Order Paper at the time of prorogation of those Parliaments. The current government has highlighted an interest and an intent to bringing forward a new version of a bill that would seek to overhaul and modernize the PIPEDA framework, including contemplating appropriate enforcement tools, et cetera. That is a piece of work that the Minister of Artificial Intelligence and Digital Innovation, Mr. Solomon, has highlighted as a priority action that he’s working to undertake and considering as part of an overall action plan to increase trust in artificial intelligence and digital technologies.
Senator Wallin: Just a quick follow-up, Mr. Simard, on something you said, because our whole discussion here is about the importance of data, we do have laws on the books for false advertising that already exist. The greenwashing bill was something that represented government policy, and that’s why it was reflected there. You said the justification came from consumer complaints that kept popping up and concerns that kept popping up. What kind of data do you actually use to make these changes?
Mr. Chhabra: Thank you very much for the question, senator.
I think my colleague was reflecting on a significant piece of consultation work that the department undertook on the Competition Act reforms where we received, I think, more than a thousand pieces of submissions and feedback from Canadians, conducted a number of round tables and engagements across Canada, and the issue about greenwashing and the concerns about the Competition Bureau having adequate tools to take action against greenwashing were raised consistently in that consultation.
There were elements that were proposed by the government as part of Bill C-59 that were then modified in Parliament as well, so the proposal that ultimately was adopted by the House, by Parliament, and received Royal Assent, was both an amalgamation of proposals that the government put forward as well as amendments that had been carried in the House.
The Chair: Colleagues, that concludes our analysis for Divisions 23, 39 and 43. Thank you, official from ISED, for coming today.
I will invite the people involved in Division 37 to come forward, so we are talking about the Finance Department and FINTRAC. I propose to limit discussion to 15 to 20 minutes maximum for this division in order to save time for the stablecoins and other divisions. I don’t know if you have any opening remarks regarding Division 37, but you have the floor.
Erin Hunt, Director General, Financial Crimes and Security Division, Department of Finance Canada: My name is Erin Hunt. I am the Director General, Financial Crimes and Security at the Department of Finance, and I’m here with my colleagues from the Department of Finance and FINTRAC to speak to you today about Division 37.
The pace of legislative and regulatory reforms to combat money laundering and terrorist financing in recent years has created opportunities to clarify certain provisions to ensure that they function as intended. This division proposes technical amendments to clarify four specific issues.
First, this division proposes to amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and Schedule II of the Access to Information Act to ensure the confidentiality of reports of discrepancy and beneficial ownership information received under paragraph 73(1)(c) of the PCMLTFA. Regulations enforced since October 2025 establish a risk-based requirement for reporting material discrepancies and beneficial ownership information to Corporations Canada. This amendment will help clarify that the information contained in these discrepancy reports should not be made public to avoid tipping off criminals about actual or potential criminal investigations.
Second, this division proposes to modify the PCMLTFA to clarify that all regulations made under the act are the responsibility of the Minister of Finance. This amendment addresses possible confusion arising from amendments to combat trade-based money laundering that were brought into force in April 2025, given the Canada Border Services Agency’s role in implementing some of these provisions.
[Translation]
Third, this provision proposes to amend the regulations made under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to ensure business relationship requirements apply to for mortgage brokers, administrators and lenders.
This amendment is necessary to correct an inconsistency in this provision that was created when it was amended to include title insurers, an amendment that came into effect in October of this year.
Finally, this section also proposes to amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to clarify that certain provisions apply to all financial donations.
[English]
I am pleased to answer any questions.
The Chair: Thank you, Ms. Hunt.
Senator C. Deacon: I’m really pleased that we saw private‑to‑private data sharing go through a few years ago. I think it was the feds, but I can’t remember. My concern is that we still have so much more to do, and I’d like to know what suggestions you got from our major banks in particular on ways that we could be doing a much better job in tracking money laundering and terrorist financing. What are they coming forward with? They’re the ones who are most involved and engaged and have seen most of the effects and activity. What are they bringing forward to you?
Ms. Hunt: That’s an excellent question, senator, and I can agree with you very clearly that we are very actively engaged with our banking sector as they are some of the most important entities in Canada’s regime to report under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
One of the initiatives that the government has brought forward with the collaboration of the banks recently was the Integrated Money Laundering Intelligence Partnership, and one of the issues that they have provided to us that is really important to them is a clarification that is brought forward under Bill C-2, which the government has also indicated under the budget as something that’s very important to be able to support information sharing under that new partnership, which is between Canada’s largest banks and the RCMP, supported by the Department of Finance and the Department of Public Safety. We see this as a way for the banks and the RCMP to share more information on specific cases to be able to help advance money laundering and terrorist financing investigations in a more active way, and we think that’s a really important provision that hopefully will be able to move forward in the near future.
Senator C. Deacon: What alternatives are you looking for to replace suspicious activity reports, which I think can be argued as increasing the pile of hay that you are now looking for a needle in and is not the most effective way. Are you looking at algorithmic solutions in the banks? When are we going to start to see something where we can be not at risk of being judged internationally as being as bad as evidence suggests we are?
Ms. Hunt: Thank you for the question, senator.
I think Canada has a strong regulatory regime and one that continues to evolve, and I think what we’ve learned is that the criminals continue to find ways to find the loopholes in the system. We continue to make changes to the system to try to make sure that it is as effective and efficient as possible.
Suspicious transaction reports are a really important foundational pillar to Canada’s regime but are not the only reports that our reporting entities submit. They provide a lot of really important information about what elements are raising suspicion within their vast knowledge resources, and this information is really foundational to support investigations.
We continue to engage with the banks to see if there are ways that we can streamline, improve and strengthen the reporting process from a policy perspective but also with our colleagues at FINTRAC, who can look at it from very practical perspectives, because sometimes those operational collaborations can help streamline how the reports are submitted and the speed at which those reports are submitted. Those are the types of ongoing engagements that we find are really critical to have with our largest reporting entities to ensure that they’re able to support the regime as effectively and efficiently as possible.
Senator Loffreda: Thank you, Erin, for your detailed comments and for being here, and thank you to all our panellists.
I will continue on that. You spoke on the intent, and the intent is obviously there. We have to improve and we have to get better, but my question is whether Division 37 specifically will materially improve the quality and usefulness of disclosures to FINTRAC and whether new obligations will reduce existing gaps in reporting by high-risk sectors. Perhaps give me an example of a high-risk sector and how Division 37 will improve the gap there and if anything more could be done.
Ms. Hunt: Thank you for the question.
Maybe I’ll take it in several different parts. These technical amendments don’t specifically focus on the reporting element. They’re clarifying certain elements in the regime but are really important foundational pieces throughout the regime.
The first one is to support a new discrepancy reporting framework that we are establishing to support our new beneficial ownership framework at the federal level, which is a really important tool to be able to identify the beneficial owners of Canada’s corporations. FINTRAC’s research has identified that corporations are abused in some 70% of money-laundering cases in Canada, so that’s a really foundational piece.
The second is to clarify where regulations are coming from and who is responsible for regulations. This is just to ensure that there is no confusion with the way that the regulations are written.
The third one is to ensure that the administrators, mortgage lenders and mortgage brokers are clearly identified in part of the regulations. They already have obligations under the act, but there was an area where one of the regulations came into force after another one and there was a bit of wording changes that we needed to clarify. Those entities are a very important addition to Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime given the risks that we have seen within Canada’s real estate sector, so we’ve made sure that there are obligations on all elements of the real estate sector to ensure that we’re identifying all of those gaps and are able to identify the risks in Canada’s system.
The last is another clarification which we have discovered when we were learning more about charitable donations. The regulations speak to charitable donations, but actually we only wanted to speak about all donations whether they are charitable or not. There is a confusion in there.
Those are the principles of these changes. We think that these are foundational to ensure that there is clarity in the law but are not the only pieces. That’s why the budget spoke to the commitment to stand up a financial crime agency as well as the commitment to Bill C-12 and Bill C-2, both of which bring forward more ambitious changes and a broad range of changes to support Canada’s money-laundering regime overall.
Senator Varone: I applaud these changes. Money laundering and terrorist financing are all part of the Canadian underground economy, the underbelly of Canadian society. But what are we doing on the other side of the underground economy? What tools do you have to go after that? I’m talking about the cash workers, those that finish a basement in drywall, the plumber who only works for cash, the guy who delivers your food only for cash or the PSW that has a second shift and only wants to work for cash. It is a scourge on our economy, and I see nothing here that even attempts to go after that incredibly large segment of the underground market.
Ms. Hunt: Thank you for the question.
You are right that these specific provisions don’t address the cash measure. Cash is one of the primary tools used by money launderers and criminals because essentially you can’t track it. The government has put forward in Bill C-2 — and reaffirmed its commitment in the budget this year — the desire to try to address this most prominent form of money laundering, which is also used for other crimes such as tax evasion.
There are two specific commitments brought forward in Bill C-2 and reaffirmed in the budget. The first is a restriction on cash for large transactions over $10,000. This is important to make sure that our businesses remain safe and that we’re being transparent in the use of cash for large transactions. Second, it would be to prevent cash deposits in other people’s bank accounts, so what are called third-party cash deposits. This is a typical money-laundering technique where money mules, people, are used to put dirty money in other people’s bank accounts in a way to try to hide the illicit origin of the proceeds. That would ban the ability of people to do that. You can still put cash in your own account and then you can transfer that to other people’s accounts using traceable means which allows us to make sure that we’re nipping that abuse of cash in the bud.
Senator McBean: When you said criminals will continue to find loopholes in the system, it reminded me of my previous life in sport. It used to be that the science of taking drugs was well ahead of the science of testing for drugs. My information is out of date now, but I’ll continue with it. It used to be that the science of taking drugs was six to eight years, or two Olympic cycles, ahead of testing. Every now and then there is a breakthrough that closes the gap. I am wondering if these divisions help you close the gap significantly and where you are in the catching-the-criminal process.
Ms. Hunt: I think these provisions — accompanied by the things in Bill C-2, as well as the changes in Bill C-12, as well as the proposal in Budget 2025 to stand up a new financial claims agency — are the types of ambitious proposals that will help us continue to move ahead and respond actively and effectively to money laundering and terrorist financing in Canada.
Canada participates in the Financial Action Task Force, for example, which is the international standard setter for anti‑money laundering and anti-terrorist financing to make sure that we remain on the cutting edge of international typologies and other issues and to ensure that we understand how criminals are moving money both domestically but also internationally. Our changes being brought forward are to respond to the typologies that we see emerging. The government has repeatedly brought forward changes, recognizing the importance of being nimble, and bringing forward changes in a regular way to assure that we continue to remain on top of the typologies and issues with respect to Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime.
Senator McBean: You think these are the kind of things that will make the criminals be wary or they’re cutting edge enough that you feel the criminals are worried about these?
Ms. Hunt: I think the direction setting in the budget, which establishes a new agency to tackle financial crimes, an ambitious package of amendments to ensure that companies that have obligations under Canada’s Anti-Money Laundering and Anti‑Terrorist Financing Regime don’t treat them as a cost of doing business but as an important role to play to ensure that they are contributing to Canada’s regime, and to ensure that Canada’s disclosures and financial intelligence are getting to an even broader range of authorities with the Canadian government or within Canada, to have them utilize that information in their investigations — yes, I think those are the types of things that are really important to address these issues.
The Chair: Thank you, senators. That concludes our discussion on Division 37. I want to congratulate Ms. Hunt for her very salient and concise answers. We are impressed. Thank you to your colleagues as well.
I propose moving to Division 45.
[Translation]
I would like to invite Ms. Hamel and Ms. Wong to speak. Welcome back.
[English]
For the benefit of other Department of Finance officials, we will probably not hear from you on the other divisions because of a lack of time. Thank you for coming, but it’s unlikely we’ll have time to go to other divisions. We have a hard stop at 5:20 because we have to go to vote and it’s a walk from here.
[Translation]
Welcome back, Ms. Hamel. I know you’re involved in Division 9, which deals with the open banking system. For now, it’s time for you to make your opening remarks on Division 45, which deals with stablecoin. You have the floor.
Judith Hamel, Director General, Financial Services Division, Department of Finance Canada: Thank you very much.
[English]
The new stablecoin act is a new framework that will regulate the issuance of fiat-backed stablecoins made available in Canada. It is part of the government’s plan to support innovation and competition in Canada’s financial sector and aims to provide a regulated environment and a safe and predictable space for stablecoin issuers to operate in Canada.
The act applies only to fiat-backed stablecoins, which are stablecoins that are designed to maintain a stable value relative to a fiat currency such as the Canadian dollar or the U.S. dollar. The act does not apply to stablecoins that are not pegged to a fiat currency. The act covers both Canadian and foreign issuers and fiat-backed stablecoins that are delimited in the Canadian dollar and other currencies.
The framework applies to issuers that are not already regulated as financial institutions. In other words, the act does not apply to financial institutions such as banks or credit unions or caisses populaires, as these are already subject to comprehensive rules on all their service offerings.
Attention was also given so that the proposed legislation respects our constitutional background respecting provincial jurisdiction over securities trading, while recognizing federal jurisdiction over the regulation of payment and interprovincial and international trade. The proposed approach respects this while ensuring that there are strict and comprehensive requirements for all issuers in Canada.
These requirements include maintaining reserves worth 100% or more of the value of the stablecoins that have been issued, and the reserves have to be in cash or in high-quality cash equivalent assets. Redeeming stablecoins at par is another requirement, and maintaining a transparent redemption policy for stablecoin holders will be required. There will be a need to establish risk-management policies and maintaining other safeguards such as protection of personal information, cybersecurity, and the recovery and resolution plans. The issuers will have to register with the Bank of Canada.
These requirements are consistent with international frameworks regulating stablecoins, and they align with the recommendation of the Financial Stability Board.
[Translation]
The act will be enforced by the Bank of Canada, which will conduct ongoing supervision of issuers covered by the act.
The act provides the Bank of Canada with the authority to enforce compliance, including a system of administrative monetary penalties.
In addition, the act gives the Minister of Finance the authority to work with national security agencies and FINTRAC to ensure that issuers don’t pose a risk to national security and to ensure compliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
The stablecoin bill doesn’t cover activities other than issuance. However, on page 596 of Bill C-15, you’ll find consequential amendments to the Retail Payment Activities Act, to allow for the regulation of the activities of payment service providers that perform payment functions using prescribed stablecoins.
The Chair: Colleagues, we have about 15 minutes left, so you will each have two minutes for questions.
[English]
Senator C. Deacon: It’s very nice to see you here again. Thank you for coming in.
At a strategic level, what thought has the Bank of Canada put into the extent to which stablecoin payment rail might usurp all the long-standing efforts that have been in place around real-time payments in Canada? The real-time rail keeps getting delayed. This is a new approach and certainly being widely considered internationally as a new payment rail. Has there been consideration into how that may be disrupting strategically efforts that have been in for many years and finally give us a solution in real-time payments?
[Translation]
Ms. Hamel: Thank you for the question.
[English]
I won’t answer for the Bank of Canada. I’m from the Department of Finance.
It’s an excellent question. Yes, people have been thinking about that specifically, including us at the Department of Finance, and at the Bank of Canada too. The challenge for the legislator at this stage is that it’s a very fast-moving space, and it’s not obvious to see exactly how it will evolve in the coming years or decades. For now, the proposed legislation wants to ensure that innovation can happen in Canada. The aim is to create the space, and it’s also to protect the users of stablecoins in Canada that are not protected at the moment.
Senator C. Deacon: I really like that answer, I have to say, because what I hear you saying is you want to enable the innovation to occur and see which way the market goes, but you want the innovation to occur in a regulated space.
My question then is: That’s not how we tend to regulate in Canada. There is a cultural shift when you’re following innovation and making sure there is safety and security for consumers, rather than innovators bumping up against regulation and being told that’s not how we do it. There is a big culture shift. Is Finance Canada getting ready for that culture shift?
Ms. Hamel: Hopefully, we are.
Senator C. Deacon: This cannot be by accident, is really my point.
Ms. Hamel: No, it’s not by accident.
Senator Fridhandler: In your introduction, you spoke to the potential hybrid jurisdiction that might exist here. It’s an area that bothers me. I’m wondering whether you’re being polite or whether the department has a view. There were several Supreme Court cases that spoke about credit cards and spoke to insurance not being in the exclusive jurisdiction under the Constitution. Amendments during the Harper government period to the preamble to the Bank Act talked about banking services and banking products. Would you assert exclusive jurisdiction on stablecoin, or will you share it with the provincial securities regulators?
Ms. Hamel: As I mentioned in my introduction, the stablecoin act covers the issuance activity only of stablecoin issuers, not the use cases. There are amendments being made to the Retail Payment Activities Act to enable the regulation of payment service providers that would be using stablecoins as a unit of payment.
I listened to the testimony of the CSA earlier today, and they were referring to the use of stablecoins in a crypto-trading platform, for example, which is an activity that they aren’t currently regulating, and we see them continuing to regulate these activities, yes.
Senator Fridhandler: To follow up on another question I posed to the CSA reps on the provisions relative to creditor protection of the reserve of the issuer and my skepticism on the provision being able to do that, there is a consumer risk here.
Ms. Hamel: Yes. Thank you for the question.
It’s a very good and valid point. It’s a concern that we have heard from others since the tabling of the BIA, and it’s an issue that we are looking into. As we’re developing the regulations for the stablecoin act, we’re also considering how we can improve the protection of consumers in cases of bankruptcy.
Senator Loffreda: I will continue on consumer risk, but more specifically, given the documented history of hacks and smart contract failures in the crypto-markets, what concrete operational cybersecurity and independent audit requirements does Division 45 establish for stablecoin issuers? How will the regulators ensure that custodians also meet equivalent standards to protect Canadian consumers?
Gloria Wong, Director, Digital Assets, Department of Finance Canada: Thank you for the question.
I believe the provision you referred to in terms of monetary requirements relates to the existence of reserves to ensure that when holders of stablecoins would like to redeem the stablecoins, that the money is there for redemption. This proposed legislation covers the issuance of stablecoin, and it does say that reserves have to be saved or held by a qualified custodian, but the legislation does not govern some of the behaviours of the custodian themselves apart from how they will hold stablecoins under regulations.
Senator Loffreda: Does it provide sufficient statutory clarity with respect to governance and protection?
Ms. Wong: There are other provisions in the proposed legislation that require issuers to develop and publish a governance framework and how they manage different risks. Those would be statutory requirements because they are part of the act, and as the regulator, the Bank of Canada would have to verify compliance, including whether issuers have met the statutory requirements to publish the required policies as part of the act.
Senator Loffreda: Thank you.
Senator Yussuff: The big gap here is that regulation is going to be the essence of how many the nuts and bolts of this are going to operate. We’re taking you at faith that you’re going to do all the right things and you’re going to collaborate with all the right people to make sure we get this right. What assurance do we have that the department, in regard to guidelines that we have to have as a minimum to the regulatory regime, is going to govern the market of stablecoins in this country?
Ms. Hamel: We are starting now to work on the development of the regulations. You’re right that they will be extensive regulations that will be spelling out many of the details on how the framework will be working. We have already been engaging quite a bit with the different players in the industry, the regulators both at the federal level, the various agencies that are implicated, but also at the provincial level, and we will continue to do that. Gloria and our team will be consulting broadly, and we’ll be following the regulation development process, so there will be draft regulations published at some point for even broader consultation.
Senator Yussuff: From an international perspective, when people look at Canada, they don’t see jurisdiction, they see Canada. One of the biggest challenges we have had in this country is the provincial jurisdiction tends to guard their domain like hawks. How do we ensure collaboration for the greater good of the country? Who is going to govern what the regulation might entail to help build confidence outside of the country but also build confidence within the country?
Ms. Hamel: We have been working with provincial authorities, the ministries of finance and also the securities regulators over the last few months, so they have been playing a role in shaping the act. I think we can count on their collaboration. They have been very open to collaborate. We had the testimony of the CSA today and, as you can see, they want even more collaboration, like a formal table, which was an interesting recommendation and something that we will certainly be bringing back. In any case, we will be engaging with them formally over the next few months on the regulations to ensure that we’re not creating duplication where there doesn’t need to be duplication and that the rules are consistent.
The Chair: Thank you, senator. We will now have the sponsor of the bill, Senator Pupatello, for two minutes.
Senator Pupatello: I will need even less. I just need to understand who the clients will be that will be issuing the stablecoin. Are they individuals or companies? Give me examples of whom they might be and from what sectors.
Ms. Wong: Thank you for the question.
Our anticipation is that there will be fintech companies who would look to issue stablecoins under this proposed legislation. Many of them have expressed their desire for federal regulation or legislation so that they could have certainty in how they could issue stablecoins in Canada. Based on that information and what is happening outside of Canada, we anticipate that it would mostly be fintech companies who would look to issue stablecoins in Canada and make them available to Canadians under the framework.
The Chair: To close this panel and this session, I will ask my question. CSA defined stablecoin as a security, but is that the case in all countries? Some people mentioned that it’s more currency than a security. That matters because if it’s security, provinces are involved. If it’s currency, it’s more Bank of Canada and provinces have no say. Is it a currency or is it a security?
Ms. Hamel: Thank you for the question. It’s a good question and probably one that we can debate for a long time. Maybe it’s a good topic for your holiday parties coming up.
The Chair: We want to avoid a constitutional crisis like we had 14 years ago.
Ms. Hamel: The proposed legislation is agnostic on that. It doesn’t take a side. We didn’t feel it was required in order to complete a comprehensive framework for stablecoin issuers. We looked at what that product was, and it can be used in many ways. We want the framework to be applicable for the issuance of stablecoins independently of how they will be subsequently used.
The Chair: We have three minutes left, and I will use the privilege of my position to just conclude with the last question.
You were involved in the open banking Division 9 the other day, and we didn’t have enough time so I didn’t ask my question. I tried to understand how it would work. Many of us talked about the Bank of Canada, but in Quebec, for example, it is the Autorité des marchés financiers.
[Translation]
Does the Bank of Canada have an agreement with the Government of Quebec, the Department of Finance, to give the Autorité des marchés financiers the power to operate?
Ms. Hamel: In fact, the provincial government in question must first apply to have its regulator designated as a trusted regulator. Following this application, negotiations will take place, and an agreement will be reached with the Bank of Canada regarding the provisions that will be overseen by the provincial regulator. Once these provisions are clarified, it will be up to the federal Minister of Finance to designate the provincial regulator.
The Chair: Shouldn’t the Autorité des marchés financiers be accountable to the Bank of Canada?
Ms. Hamel: The agreement between the provincial regulator and the Bank of Canada will explain how information will be shared between the two.
The Chair: In conclusion, were the provinces consulted on this matter, or were they informed of these provisions in the budget at the same time as everyone else?
Ms. Hamel: There were many discussions with the provinces before the bill was introduced. I would say that the provinces were consulted, because this proposal didn’t come out of nowhere, but rather from conversations with the provinces. I would even say that this concept was made public last fall, when the 2024 Fall Economic Statement was tabled. A bill might have been appended to this bill, but that didn’t happen because Parliament was prorogued.
However, there was a document accompanying the fall economic statement that described this model. It had been public for several months.
The Chair: Thank you for your availability over the past few days. We apologize to your colleagues who were asked to appear, but whom we won’t have time to hear from.
[English]
On behalf of my colleagues, I want to thank our witnesses, as well as our interpreters, the IT and research staff, and the clerk who replaced Mr. Boulianne today as he is temporarily unavailable.
Colleagues, the vote is at 5:32 p.m. We’ll see you tomorrow at 2:00 p.m. It’s not 2:30 p.m. tomorrow but 2:00 p.m., please. Thank you.
(The committee adjourned.)