THE STANDING SENATE COMMITTEE ON NATIONAL SECURITY, DEFENCE AND VETERANS AFFAIRS
EVIDENCE
OTTAWA, Thursday, February 12, 2026
The Standing Senate Committee on National Security, Defence and Veterans Affairs met with videoconference this day at 10:31 a.m. [ET] to study Bill C-12, An Act respecting certain measures relating to the security of Canada’s borders and the integrity of the Canadian immigration system and respecting other related security measures; and, in camera, for consideration of a draft report.
Senator Hassan Yussuff (Chair) in the chair.
[English]
The Chair: Good morning. I am joined by my fellow committee members, and I welcome them to introduce themselves. We will start with my colleague and friend and the deputy chair, Senator Al Zaibak.
Senator Al Zaibak: Mohammad Al Zaibak, Ontario.
[Translation]
Senator Youance: Suze Youance from Quebec.
[English]
Senator Dasko: Donna Dasko, Ontario.
[Translation]
Senator Audette: Good morning. Michèle Audette [ Innu‑Aimun spoken ] from Quebec.
[English]
Senator White: Judy White, Newfoundland and Labrador.
Senator McNair: Good morning. John McNair, New Brunswick.
Senator Kutcher: Hi there. Stan Kutcher, Nova Scotia.
Senator M. Deacon: Hello. Marty Deacon, Ontario.
The Chair: Thank you, colleagues. Today, we continue our study of Bill C-12, An Act respecting certain measures relating to the security of Canada’s borders and the integrity of the Canadian immigration system and respecting other related security measures.
For the first panel, we have the pleasure of welcoming Hartland Elcock, Assistant General Counsel and Vice President, Canadian Bankers Association; Brian Sauvé, President and Chief Executive Officer, National Police Federation; and Adam Lajeunesse, Associate Professor, St. Francis Xavier University.
Thank you all for joining us today. We will begin by inviting you to provide opening remarks to be followed by questions from our committee members. I remind you that you have five minutes for your opening remarks. We will start with you, Mr. Elcock.
Hartland Elcock, Assistant General Counsel and Vice President, Canadian Bankers Association: Good morning. I would like to thank the committee for the opportunity to speak to the study of Bill C-12, An Act respecting certain measures relating to the security of Canada’s borders and the integrity of the Canadian immigration system and respecting other related security measures. I will refer to it as Bill C-12.
My name is Hartland Elcock. I am the Assistant General Counsel and Vice President with the Canadian Bankers Association, or CBA. I am pleased to be here today to speak with you.
The CBA is the voice of more than 60 banks operating in Canada, employing more than 300,000 Canadians and helping to drive Canada’s economic growth and prosperity.
Our members take the fight against money laundering, terrorist financing and sanctions evasion seriously. Among the most active reporting entities in Canada’s anti-money laundering, or AML, regime, they devote significant resources to their AML programs, including their internal controls and employee training. Much of the investment focuses on continuous improvements to address the shifting landscape of compliance requirements and the evolving nature of risk. Their goal is to effectively deter, detect and report suspicious activity and to mitigate money laundering, terrorist financing and sanctions evasion.
As major stakeholders within Canada’s AML regime, our members’ participation moves well beyond compliance. Banks play a leadership role in public-private partnership, or PPP, projects with the Financial Transactions and Reports Analysis Centre of Canada, or FINTRAC. One of these PPPs is Project Guardian, which is focused on identifying transactions or attempted transactions where there are reasonable grounds to suspect money laundering related to fentanyl trafficking. This project has led to FINTRAC operational alerts that highlight indicators of suspicious transactions for all reporting entities to use.
The CBA and its members also actively participate in ongoing enhancements to Canada’s AML regime. For example, the CBA and members have long sat on the federal Advisory Committee on Money Laundering and Terrorist Financing. We have also been advocates supporting comprehensive beneficial ownership transparency in Canada and increased private-to-private information sharing for AML and anti-terrorist financing, or ATF, purposes. These changes are a step forward for Canada’s AML regime.
In alignment with our members’ position and investment in Canada’s AML regime, we suggest targeted changes to Bill C-12 — which do not change the substance of the bill — and new regulations to help the bill achieve its policy goals while mitigating adverse outcomes.
More specifically, the CBA suggests the following targeted changes to provide clarity on Bill C-12’s proposed amendments to the regime that will reinforce a risk-based approach, preserve the efficacy of recent enhancements to the AML regime, like private-to-private information sharing, and encourage the transparent and predictable application of new compliance and supervision powers.
I will list them for you now.
First, defer the coming into force of the increased administrative monetary penalties, or AMPs, until regulatory criteria are established to ensure their transparent and predictable application, reserving the highest AMPs for egregious or systemic issues.
Second, add a regulation-making power to establish and provide certainty on the government’s expectations and its criteria for assessing if a compliance program is reasonably designed, risk-based and effective, all in alignment with fundamental justice expectations under the Canadian Charter of Rights and Freedoms.
Third, remove the one-year limit for extending a compliance remediation agreement to prevent the arbitrary application of significant additional fines, especially where a delay is outside the control of a reporting entity.
Fourth, prohibit the opening of accounts under obviously fictitious names based on a clear legislative definition of what constitutes an “obviously fictitious name.”
Fifth, exempt banks from mandatory FINTRAC enrolment due to existing oversight.
Sixth, amend the proposed false information offence to reflect the intent to deceive — this is consistent with other similar criminal law provisions — to avoid triggering the offence when providing information or failing to provide information is done in good faith.
Lastly, clarify that, like a violation, an offence alleged to have been committed before the coming into force of the proposed new provisions in Bill C-12 will not be subject to them.
Adopting the technical changes to Bill C-12 will help ensure a fit-for-purpose, risk-based AML regime that can effectively target and keep pace with evolving risks. This will strengthen our collective ability to protect the interests of all Canadians.
Thank you again for having me.
Brian Sauvé, President and Chief Executive Officer, National Police Federation: Thank you, Mr. Chair and members of the committee. I am a member of the Royal Canadian Mounted Police, or RCMP, and the President of the National Police Federation, which is the union that represents about 20,000 members of the RCMP across Canada and internationally.
I would like to begin by sending my thoughts and prayers to those affected by the tragic events in Tumbler Ridge a couple of days ago, and I acknowledge all of our members in British Columbia and the “E” Division who acted quickly, decisively and heroically to prevent further loss of life.
Our members work tirelessly to protect public safety, and we have long advocated for enhanced tools and resources to ensure they are fully equipped to safeguard our borders and respond effectively to the growing and evolving threats facing Canadians. Some of these tools are contained in this bill, which is why we support its passage. Many of the challenges our members face stem from outdated legal frameworks. This legislation addresses real operational gaps, including the RCMP’s capacity to respond to the trafficking of illicit drugs.
Part 2 of Bill C-12 allows the Minister of Health to quickly classify new or emerging precursor chemicals under Schedule V, enabling law enforcement to seize them before they are converted into dangerous opioids. This empowers the RCMP’s Federal Policing and Organized Crime units to act earlier against traffickers who exploit gaps in existing controls. For example, such measures could have allowed the RCMP to intercept the precursor chemicals used in the March 2025 fentanyl labs in British Columbia before the drugs reached Canadian streets.
Another critical area of focus is information sharing. Enhancing interagency cooperation is essential for our members, as timely and coordinated intelligence is the most effective defence against sophisticated criminal networks. Bill C-12 strengthens interagency information sharing, both domestically and internationally. It provides RCMP members with clearer authority to exchange operational intelligence with partners, including the Canada Border Services Agency, the Canadian Coast Guard and other law enforcement agencies. For example, Bill C-12 strengthens Canada-U.S. collaboration on sex offender monitoring by expanding the collection and sharing of offender data, including travel details and border movements.
Meanwhile, Part 11 helps ensure that the RCMP’s National Sex Offender Registry receives timely, real-time updates, improving investigative capabilities. This allows law enforcement to proactively track and respond to high-risk offenders crossing borders, reducing the risk of undetected re‑entry into Canada.
Strengthened collaboration amongst law enforcement partners will directly translate into improved public safety outcomes for communities across Canada. Beyond the measures included in this legislation, our members require modern equipment, technology and rapid deployment tools, including helicopters, drones and surveillance systems. Canada’s current procurement process is slow, cumbersome and often prevents our members from getting the equipment they need in a timely fashion. The National Police Federation urges procurement reforms to ensure members of the RCMP can rapidly access the essential resources and equipment needed to protect public safety and fully achieve the objectives outlined in this legislation.
Lastly, I’d like to note our disappointment that the government chose to split the previously introduced Bill C-2, removing vital digital lawful access provisions. These measures would allow RCMP members access to critical digital evidence in real time while closing critical vulnerabilities exploited by organized crime. The exclusion of these provisions leaves Canada lagging behind our Five Eyes partners and weakens our public safety framework. We recommend that future legislative efforts include robust public education and engagement on the importance of lawful access and digital evidence reforms.
In conclusion, the National Police Federation supports Bill C-12 and urges its swift passage. However, for Canadians to truly benefit from these legislative amendments, it is essential that our members are provided with the resources they need, including modern investigative and operational equipment. This will allow those who devote themselves tirelessly to keeping our communities safe to continue their work with the support and protection they deserve.
Thank you.
The Chair: Thank you, Mr. Sauvé.
Next we will hear from Mr. Lajeunesse. You have the floor, and you have five minutes.
Adam Lajeunesse, Associate Professor, St. Francis Xavier University, as an individual: Thank you for having me. It’s a pleasure to speak to the committee on this important topic.
Today, I’d like to take five minutes to discuss the importance of the Canadian Coast Guard to northern security, explain that evolving security environment and offer some suggestions for how the Coast Guard’s new security mandate can be implemented over the short and medium term.
To begin with, I think it is important that as the government defines the Coast Guard’s security patrols and collection mandate, the operating environment is well understood. Too often, Arctic security is conflated with global great power conflict, and discussions turn to war fighting and high-intensity conflict. I have heard many commentators speak of Chinese or Russian submarines and warships anxious to surge into the Canadian Arctic. Likewise, the media and even the government are far too anxious to paint a picture of Canadian sovereignty and security as weak and brittle. This assessment of threats is important because our response will be based on our understanding of the dangers.
While high-intensity military threats are possible, they are unlikely to materialize, and our strategy should focus on likely threats. In the Arctic, the most likely threats will be hybrid and unconventional. These will sometimes be tied to great power competition but will materialize at the low end of the safety-security-defence spectrum.
What that means is that we are less likely to face enemy warships in the ice-covered Arctic waters and more likely to face non-state and quasi-state threats. The Coast Guard is not going to become another military service, and it doesn’t need to be. Instead, its new security mission will likely focus on illegal fishing, trespassing, grey zone activities — like cable cutting — and adversary marine scientific research. The common thread in all of this is the need for monitoring and perhaps even jurisdictional enforcement. Here, the connection to the Department of National Defence, or DND, becomes critical.
The Royal Canadian Navy has only six platforms to maintain presence and situational awareness in Canada’s vast Arctic waters and exclusive economic zone, or EEZ. For now, that’s sufficient; however, as activity grows, it likely won’t be. The Coast Guard’s icebreaker fleet amplifies the navy’s surveillance capabilities by expanding its footprint and ability to monitor the region by feeding information into a common operating picture.
In the immediate future, this should include new streamlined information-sharing processes, which will fuse data from the Coast Guard and other sources and allow for a smoother flow of information back and forth to the Coast Guard. It may also involve a change in Coast Guard taskings. At present, Coast Guard icebreakers go where they are needed by commerce and communities. DND may need them to undertake something very different, namely patrols in areas beyond those normal duties. DND should have a set of criteria for when Coast Guard icebreakers can be tasked with those extra duties, understanding that time away from icebreaking duties is going to have implications for northern traffic.
Over the medium term — perhaps the next five years — DND and the Coast Guard should move rapidly to identify Coast Guard assets that can be leveraged to build this common operating picture. That may mean using Coast Guard buoys as platforms for DND sensors, icebreakers used to deploy those systems or even icebreakers with embarked DND personnel able to operate long-range drones. Coast Guard icebreakers may also be ideal platforms for deploying and recovering long-range autonomous under-ice drones. These technologies exist now, and a clear vision is needed for how they will be deployed and who is responsible for using them.
In the Arctic, everything is harder and there are never enough platforms to do what needs to be done. The Coast Guard’s move into DND is, therefore, the right decision and will be critical to leveraging everything that Canada has to a common purpose. Operationalizing this merger, however, requires a realistic perception of the threat environment and a creative and collaborative approach to using those existing assets.
Thank you.
The Chair: Thank you, Mr. Lajeunesse. We will now proceed to questions. I offer our first question to the deputy chair, Senator Al Zaibak.
Senator Al Zaibak: Thank you all for being with us today and for your very informative opening remarks, rendering most of my questions redundant. I would like to have my first question directed to Mr. Lajeunesse.
Bill C-12 expands the Canadian Coast Guard’s security-related mandate. At the risk of some repetition, in your assessment, does this materially strengthen Canada’s Arctic sovereignty, or does it risk creating overlap with the Department of National Defence and the RCMP?
Mr. Lajeunesse: It strengthens Canada’s security in the North. It is important to recognize there is a difference between sovereignty and security. Additional presence does not support additional sovereignty, but it does strengthen Canadian security. I don’t believe there is going to be overlap, but quite the opposite. If these two agencies — the navy and the Coast Guard — are merged effectively within DND, you will find that these two are able to produce a result or an effect that is greater than the sum of their individual parts. It is important to leverage everything that is there in the North to a common purpose, and right now what this bill does is it allows for improved information sharing, communication and the tasking of Coast Guard assets.
Senator Al Zaibak: In that regard, how important is enhanced maritime intelligence sharing with allies, particularly the United States, in protecting Canada’s Arctic approach under the evolving U.S. national security strategy? Do you have any concerns in that respect?
Mr. Lajeunesse: The Americans are a bit of a wild card in this picture. The Americans have traditionally been our premier partner and our best ally in the North, stretching back to the 1950s. Now, obviously, the last year has called that into question somewhat, as the U.S. challenges Arctic sovereignty in Greenland and, quite frankly, has continued to make mention of the Canadian Arctic in disturbing ways. That being said, the reality is the Americans still have an important role to play in Arctic continental defence, and from a Canadian perspective, we have to remember that working with the Americans not only allows us to leverage American capability, but it also makes our forces an important part in their continental defence.
From a Canadian perspective, what we want to have is an American military that is reliant on us as much as possible for their own Arctic defence. While we are very concerned — and I think rightly so — about what may come out of Washington next, over the long term, it remains important to continue working with the Americans.
Senator White: Thank you all for your presentations here. I have a number of questions, but my first will be for Professor Lajeunesse.
As it relates to the Canadian Coast Guard, my understanding is that they face significant staffing shortages and all these challenges, such as aging infrastructure and technological gaps. Could you expand a little bit on what their current capabilities are and what needs to be done to ensure that they have the capacity to actually take on these added security responsibilities?
Mr. Lajeunesse: Thank you, senator. The Coast Guard, like the Royal Canadian Navy, has been facing recruitment and retention issues for some time now, so you’re quite right. I can’t speak with too much detail on those particular issues.
From a broader capacity issue, I can say that at least the Coast Guard is on the right track. This government and previous governments have identified, from an Arctic perspective, the platform requirements that are needed, and we are moving forward with the polar icebreakers, the program icebreakers and the Arctic and offshore patrol vessels, or AOPV, capacity.
From a platform perspective, we are building out what needs to be built out, but you’re quite right that more focus needs to be placed on personnel recruitment and retention. I know the Coast Guard is not ignorant of this fact, but I am afraid I can’t provide more details as to where they are right now.
Senator White: I’m trying to formulate these questions, but I’d like to hear a little bit more about the current anti-money laundering regime as it relates to both the enforcement and industry compliance. How do we compare in the work that we’re doing to our peer jurisdictions, like the United Kingdom and Australia, and are there lessons that we should be learning now as we move forward in these tumultuous times?
Mr. Elcock: That is an excellent question, and I think it, actually, relates directly to some of the amendments we are seeking in Bill C-12.
The key in any enforcement regime is clarity and predictability. One of our key amendments is around creating predictable regulatory language around how administrative monetary penalties, or AMPs, will be applied. In line with the administrative monetary penalties goal, which is to encourage compliance — and everybody agrees that is important — we’d like to see key criteria that help to encourage compliance. If you’ve taken ameliorative steps to address a compliance fault, that reduces an AMP that you could potentially receive. If it’s a relatively minor missed report in the context of, potentially, millions of reports, that would be relatively minor.
What we don’t want to see is a high degree of AMPs applied to a non-systemic or non-egregious issue. You want that predictability, and this is important to learn from other jurisdictions as well because what we do struggle with slightly in Canada — and I think policy-makers have made great efforts to address this, but it’s still an outstanding problem — is there is a high degree of reporting in Canada. It is magnitudes higher than jurisdictions like the U.K. and the U.S., and it isn’t yielding the prosecutions that we would like to see. Everybody, I think, is aligned, and we’d like to see this reporting turn into actionable intelligence that yields prosecutions.
The fear is if you have unpredictable AMPs that are not applied in a way that everybody is aware of, where you know the rules of the field you’re playing on, then you risk overreporting. You risk defensive reporting. You risk creating more noise in the system and worsening that reporting trend rather than creating a predictable environment, where you know transparently exactly what an AMP will be applied for, or generally what an AMP will be applied for, and you’re rewarded for a strong investment in your anti-money laundering, or AML, program.
Currently, we’re not seeing that in Bill C-12. There is a regulation-making power that would allow for regulations like we’re speaking about, but we’re seeing these new AMPs be brought in before those regulations are made.
Our concern is that is going to create a lack of clarity. We have a sequencing issue. That might worsen some of these trends, and in the past, we have seen a recent worrying trend, again, on clarity and quite a few challenges at the Federal Court around FINTRAC’s AMPs — not from our members but from other reporting entities.
These challenges and their outcomes compound that lack of clarity because then FINTRAC needs to revise how it is applying AMPs and consider if it is appropriate within the law. If we started sequencing and if we had these regulations first and applied AMPs in a predictable way, then I think we would help encourage compliance, which is the goal of AMPs, but we would also ensure that we don’t have unintended outcomes and worsen some of these trends around the reporting not leading to prosecutions.
What we also see in other jurisdictions — and we think it is important here too — is investment in law enforcement. You can have all the reporting you want, but you want that reporting to get into the hands of people who can prosecute or who can investigate and prosecute. What we have seen from the government with the financial crimes agency is a promise to invest in the RCMP and hire a significant amount of officers and really focus on complex financial crimes. These are positive trends which, I think, will help the ecosystem holistically.
Senator Kutcher: My first question is to Mr. Sauvé.
You talked about the importance of modern investigative and operational equipment, and you alluded to challenges in procurement of the same.
Could you help us understand what some of those challenges are and what you see as the ways to ameliorate them?
Mr. Sauvé: I certainly can. I can give you three examples just off the top of my head.
In 2020, the government of the day announced the implementation of body-worn cameras for the RCMP. That rollout hasn’t been completed yet. It’s well on its way. The first provider was selected in late 2024, so it took four years to go through procurement, and then that provider failed its pilot test. We went to a second provider, and now they’re continuing the rollout.
The sidearms that the RCMP carries are 1998 models. Parts have not been made by Smith & Wesson for over a decade. The analogy I’ve used with the commissioner is that NASA put a man on the moon faster than we can replace a sidearm. We started in 2018. Here we are in 2026, and the selection still hasn’t been made for the rollout of a new sidearm for our membership.
The third one that comes up quite often is the carbine. As you know, it was available — almost — in 2014 when we had a tragic shooting in Moncton, and the buildup to that was a decade long to select and review.
From the RCMP’s perspective, when we’re looking at new, modern public safety equipment, I think there is an opportunity to consider whether or not it meets the national security exemption and to allow the commissioner to defend decisions that bypass procurement.
Senator Kutcher: That’s the solution?
Mr. Sauvé: That is a solution.
Senator Kutcher: Thank you very much for that. I did not know that issue about the sidearm. I’m gobsmacked. Other members of the committee will be somewhat concerned as well. Thank you for that.
My second question is to Mr. Lajeunesse. It’s nice to see a fellow Maritimer.
You talked about hybrid and unconventional threats and the necessity for the Canadian Coast Guard to be able to address those with the operational platforms that are necessary for those. Could you help us understand? When you use the phrase “hybrid and unconventional threat,” do you know what it means in your head? Could you help us understand by maybe giving us a few examples of what kinds of threats these are?
Mr. Lajeunesse: Absolutely. These are best described as grey zone threats, meaning not quite black, not quite white. They exist below the threshold of conventional war. We are seeing this sort of operation around the world today. You have cable cutting in the European EEZ. You have illegal fishing all around the world as well as trespassing and surveillance activity. In the Arctic, you have Chinese marine scientific research which is, for the most part, legitimate scientific research but a great deal of which is now increasingly geared toward obvious military objectives.
What Canada is likely going to need from the Coast Guard and I think the most important thing about the Coast Guard’s movement into DND is going to be DND’s use of the Coast Guard’s platforms to expand its situational awareness and to monitor. It’s not necessarily to fight, of course — not at all to fight — but to monitor this growing possibility of malign actors operating in Canadian waters for these kinds of purposes.
We are seeing this more and more all around the world, and it would be foolish to assume it is not going to extend into Canadian waters.
Senator Kutcher: Thank you for that. That’s helpful.
With the current fleet and the current assets that the Coast Guard has, we heard the other day that they are woefully inadequate for military kinds of operations. In your opinion, are the current assets or the projected assets sufficient for this? Because if we are talking about grey zone operations, we can’t even predict today what those grey zone operations are going to be. What are your thoughts on the adequacy of the assets we currently have?
Mr. Lajeunesse: My impression is that the assets we are procuring are fairly adequate for these purposes. We are not expecting the Coast Guard to engage in combat. Nobody is saying that. The Coast Guard doesn’t want that, and DND doesn’t want that. What future Coast Guard assets and today’s Coast Guard assets can do is be relatively easily retrofitted or built on with modern sensors and particular drones, both for aerial and undersea capabilities. What the Coast Guard offers are platforms — ships — in an area like the Arctic where we have very few platforms.
The ships themselves, like I said, are probably less important than what DND can put on them, whether they have long-range surveillance capabilities or they’re some form of modern technology that is able to look over the horizon or under the water. The big question for DND is not what kinds of ships the Coast Guard is going to get, but how are they going to be tasked and what additional sensors does DND want to put on them?
Senator M. Deacon: Thank you for being here today and, of course, virtually. We appreciate it. My first question is for Mr. Sauvé. Welcome.
You say that there is legislation; we have it, and we work with it, but it needs to be accompanied by more adequate resources and personnel. I’m thinking about something I read in the media last week. While we’ve seen, I think, an uptick — the numbers are there — in people applying to the RCMP, it may not necessarily translate into successful applicants to the same degree. While many maybe don’t qualify or they are not good fits or good matches, the article noted that the whole process takes 300 to 400 days from start to finish, and some withdraw their candidacy in that time. Is that an accurate picture? Is there anything that can be done to compress that time because you need these people?
Mr. Sauvé: Yes and yes. On the first “yes,” I know the RCMP has had challenges in the processing of applicants. We have seen record numbers in the last year, and it’s projected to be record numbers in applicants this year. We are really pleased that some of the greatest Canadians want to join the RCMP.
Getting them to Depot has been the challenge in ensuring that the highest calibre of those 20,000-plus per year get there. It has been a challenge. The beds are there, and they have met their capacity this fiscal year to train, so we are getting people through.
A pilot project was just started in British Columbia and the Yukon, and I believe their goal is 180 days from application to Depot. The RCMP has been exploring a number of alternatives and ways to modernize and improve and expedite the application to training process. Obviously, you see this government making a commitment to increasing the cadet training allowance. There was another small barrier. I’m sure we will see an increase in interest from Canadians to join the RCMP because we are almost doubling that allowance, which had not gone up in 18 years.
Senator M. Deacon: Those are promising. I’m thinking about the beginning and the end. If you have more funding for resources, can you show up? So thank you for that.
My next question is for Dr. Lajeunesse. We talked about the Coast Guard in several meetings the last few days: The Coast Guard is often a victim of its own success, and it is so good at making do with what it has and its antiquated equipment, but it doesn’t receive sufficient funding, perhaps, as a result.
This legislation breaks wide open its roles and responsibilities. We understood from officials earlier this week that they are due to receive sufficient training resources and staffing to take on these roles. I wonder if you believe that they will get what they need or they may continue to fall victim to their own efficiencies.
Mr. Lajeunesse: There is probably a limit to what I can say about that because we are looking specifically at human resources and capacities. I can’t speak to that in too much detail. I can tell you that from an equipment perspective, looking at the North, what is on the order book is probably what the Coast Guard needs. The big question there is whether or not that equipment is delivered. Canada has a bad track record of pledging equipment and signing contracts even, but then, of course, not delivering in the end. I am afraid that’s probably all I can say on the subject. To talk about human resources, you would really need someone within the Coast Guard to talk about that.
Senator M. Deacon: Thank you for trying.
Senator Dasko: Thank you, witnesses. I want to follow up on comments made by Professor Lajeunesse about the Coast Guard, and I want to make sure I understand what you were saying. Yesterday, we had a witness here at committee who was in favour of the Coast Guard reporting through DND, just as you are, but they expressed concern about the interaction between the two.
Your comments start out by focusing on what you called non‑state threats to Canada — illegal fishing being one of them — and threats that are at the low end of the spectrum. I want to understand if you are saying that these threats are not going to be taken as seriously because they are now under DND, or is it something different? I’m not quite sure I understood what you meant by the relationship between those two.
Mr. Lajeunesse: Happy to clarify, senator. I think those threats will always be taken very seriously. I hope I wasn’t misunderstood there.
What I said about the combination between the Coast Guard and the navy within DND more generally is that what this will do is allow Canada to combine two different federal fleets — in this case, the Coast Guard and the navy — in order to generate much better situational awareness and a much better picture of what is happening within our maritime space.
As the Coast Guard currently stands, siloed from the navy and the different departments, you actually have fairly significant reporting barriers going back and forth between agencies. There are different considerations surrounding the Privacy Act while reporting is slower and more cumbersome. There are certain things that cannot go back and forth. One of the most important considerations from the Coast Guard’s movement into DND is that a lot of these communication barriers are going to be knocked down. That’s less dramatic than big icebreakers sailing with the navy, but that collaboration, as you said, and the work between the personnel of the two agencies will become much easier. That’s certainly what DND, the Coast Guard and the navy have highlighted to me in conversations. The Coast Guard is actually quite excited to knock down some of those barriers.
Senator Dasko: Are you saying the low-level activities will be better handled than they are now?
Mr. Lajeunesse: Yes. I think they will be better handled because you will not have siloed fleets. You will have one common operating picture.
Senator Dasko: Thank you. I wanted to make sure I understood that.
Mr. Sauvé, I want to pick up on your comments about procurement. You gave us some dramatic examples. This is the National Security, Defence and Veterans Affairs Committee, and we’ve been studying procurement. There is a new Secretary of State (Defence Procurement) now for the Department of National Defence, or DND.
At the very end of your comments, you suggested a solution. I want you to elaborate. We heard the dramatic examples. I want you to elaborate on what you said. Could you say a few more words about that? It sounded like sidestepping a certain set of protocols. I leave it up to you to elaborate, please.
Mr. Sauvé: I’m not the legislative expert. However, for our research into this with respect to the government’s Red Tape Review or the Auditor General’s report on procurement, we did provide some input — and we’re happy to share that with this committee — to the minister responsible for procurement with some recommendations that spelled out exactly the examples that we’ve shown in how molasses-like that process can be for an agency that needs to be more nimble such as the RCMP.
I’m open to being corrected here: It is my understanding that should the procurement need be tied to a national security requirement — whatever that might be, such as a Black Hawk helicopter or something of that perspective — there is an opportunity for that deputy head to make a request to step outside the normal procurement process to expedite the selection and purchase of that asset in order to meet that national security need.
Senator Dasko: That would be in an extraordinary circumstance, though. What about the usual issues and how to deal with them?
Mr. Sauvé: One of the recommendations we made to the minister, for example, was in the policing context just generally. We have a number of police services across the country. They are all buying a lot of the same equipment: guns, body-worn cameras, police cars, et cetera. Is there not an opportunity for the government to lead and utilize its economies of scale to create some form of National Master Standing Offer with authorized vendors who have gone through the vetting and procurement process?
If you are looking for a tactical armoured vehicle, for example, and you are a small police service like the Lakeshore Regional Police Service in Alberta, you can get on that list since you are a chief, you have your department credit card and you can go see what is approved — whether it is the BearCat or such — and you can place that order because it is an approved vendor, and you are accepting the Government of Canada’s economies of scale and abilities to create savings for that service, similar to a sidearm, similar to OC spray and similar to those types of equipment.
Senator Dasko: Thank you.
[Translation]
Senator Audette: I will ask my question in French. This is mainly for you, Mr. Sauvé, and if time permits, for Mr. Lajeunesse.
Indigenous police services in Ontario and Quebec are considered pilot projects and not essential services. In your discussions, do you talk to police officers who are also feeling the effects of organized crime and the pressure it is putting on them?
My home community is Mani-Utenam. A few weeks ago, if not a few months, homes were being burned by organized crime, always in connection with fentanyl and synthetic drugs. I think the bill has a big gap to fill in terms of support for our Indigenous police forces. In your discussions, are you ensuring that the critical need for essential services in Indigenous communities is also being considered?
There was a success story in my community. The Sûreté du Québec, the Sécurité publique de Uashat mak Mani-Utenam (SPUM) and the RCMP have been working together for a little over a year. There have been a number of arrests. In your recommendation, can you reassure me that you are aware that organized crime gleefully fills legal vacuums, but also operates on territories where it is unclear who will have jurisdiction? It should be a shared responsibility to protect the people we love in our communities.
Mr. Sauvé: I will answer in English.
[English]
The First Nations and Inuit Policing Program is the only one I am very familiar with.
[Translation]
It goes back to 2020.
[English]
Minister Blair was the Minister of Public Safety, and he opened a project to study the First Nations and Inuit Policing Program in Canada with the goal of making it an essential service. Obviously, I think we participate in — I might get the number wrong — 165 First Nations or Indigenous policing regimes.
One of the challenges, obviously, is you have the Community Tripartite Agreements. You have the confusion around band bylaws. You have the confusion around history and heritage and what gets enforced and how it gets enforced. But you also have the confusion around consistent and predictable funding. With that, it obviously becomes challenging to be able to resource and provide resources to integrated teams, as you are speaking about. We know it’s with the Sûreté du Québec, the RCMP or a First Nations or Indigenous police service — and that happens all across Canada. I would love to see the Alberta law enforcement teams be able to integrate with the Lakeshore Regional Police Service or the Blood Tribe Police Service. But do they have consistent, predictable funding? Can they provide the resources to do that? If you look at the Blood Tribe reserve in Alberta, it is one of the largest in Canada — it borders right on Montana as well as British Columbia.
Yes, it is top of mind for us. We are happy to share with the committee the submission that we made to Public Safety Canada in late 2020 or it might have been 2021. The dates get confusing for me sometimes. We made a number of recommendations as to how that can move forward.
Senator Audette: For you on Zoom, what is your relationship with the people who live in the North and are facing those crises? Do you have a protocol or a relationship to make sure that information is exchanged, even if we don’t have a police force coming from the Inuit or Innu?
Mr. Lajeunesse: Thank you, senator. I’m afraid I don’t have anything to offer on the subject of northern policing.
Senator Audette: As a witness, you spoke about the Coast Guard. What is your organization’s relationship with the people in the North?
Mr. Lajeunesse: To that I can speak a little bit. Both the Coast Guard and the navy, certainly over the last two decades at the very least, have come to recognize that operations in the North have to not only take into consideration the wishes and the knowledge of those living in the North, but, of course, they also have to leverage that. Operating in the North is such a difficult environment, and, of course, it relies upon a lot of Indigenous knowledge. Both the navy and the Coast Guard have been making efforts for decades now to integrate Indigenous communities as well as possible in order to bring local knowledge into those operations and, of course, to build interpersonal relationships between the people operating, coming up from the South, and the northern communities themselves.
The navy is now affiliating the AOPV with local — I shouldn’t say communities but regions. And it’s trying to build those relationships with port visits and trying to find practical ways to support communities by bringing material up, by providing services where necessary and by providing disaster response and search and rescue capacity.
Over the next 10 years, as Canada builds out its northern presence, a big part of what the Coast Guard and the navy will be doing is at the safety end of the security spectrum, which means search and rescue, community response, facilitating relationships with communities and helping northern communities deal with all of the extra commercial presence due to the fishing and shipping that will be in the region.
[Translation]
Senator Youance: My question is for Mr. Sauvé.
In your brief submitted to the Standing Committee on Public Safety and National Security on November 20, you indicated that the bill also improves international mechanisms for sharing information, particularly with the United States. Are you not concerned about the negative consequences of even greater sharing between Canada and the United States?
[English]
Mr. Sauvé: Yes. It did at the time, and I believe it still does. I think you heard one theme, at least amongst the witnesses today: The reduction of silos and the increasing of an operational presence through better information sharing, whether it be with our partners to the south or with our Five Eyes international partners, will increase and improve the efficiency and response of law enforcement across the globe.
[Translation]
Senator Youance: Thank you.
I would also like to understand how Bill C-12 changes the current work of the RCMP. On the first day that Bill C-12 potentially passes, what changes in terms of the work of the RCMP? Once again, your brief calls for stable funding and an overhaul of the RCMP’s funding model, a recommendation that goes beyond adopting legislative amendments. I would like to hear your response.
Mr. Sauvé: Thank you.
If the bill is passed on Friday, my experience as a police officer leads me to believe that nothing will change on Monday morning. The context will change a bit on Monday morning.
[English]
But it is like a dimmer switch with changes in the legislation, especially when we are talking about something that impacts organized crime, transnational organized crime and border security. Those investigations are normally months long, if not years long, from our perspective. Yes, it does change the landscape and the authorities that we can operate under, and, yes, it does improve intelligence and information sharing immediately. Will we see results within a week or a month or three months? Probably not, mainly because there are such long investigations that go on.
[Translation]
Senator Youance: Thank you.
Since the bill won’t change anything overnight, then why the urgency to pass it? You can give a two-part answer. Why is it urgent to analyze and pass it? Second, could there be other provisions that could be made at another level that would lead to efficient and effective change in the work of the RCMP?
[English]
Mr. Sauvé: No, I don’t think so. Perhaps my previous response was not clear.
Yes, the legislative framework changes from a Friday to a Monday. Will we see results from that legislative framework in a prosecution or criminal case? Not for a while. However, the authorities of the police officer operating under that legislative framework will improve on that Monday morning. And the RCMP, obviously, increases its ability to share intelligence with the Coast Guard or to receive intelligence from the U.S. Customs and Border Protection or to share intelligence with United States law enforcement or Australia or the U.K.
From that perspective, the quicker Canada can actually become more in line with its Five Eyes partners, as well as from that perspective, it makes more sense. It will change and will have an impact immediately. Will we see results in a week? We have to measure the fact that these investigations take a long time.
Senator McNair: Thank you for being here. My question is for Mr. Sauvé.
Senator Youance went down the track I was wondering about. To clarify, do you feel that the measures proposed in Bill C-12 will break down those information-sharing barriers domestically and internationally, specifically with our Five Eyes partners, when enacted?
Mr. Sauvé: They will start, and I understand that there is another piece of legislation that might address our lawful access concerns, which is coming down the pipe. We will see where that goes because that will be one of the larger pieces that will have an impact with our Five Eyes partners and some of the transnational organized crime that we see, yes.
Senator McNair: The other thing I wanted to thank you for was the example of the handguns and the issue of the revolvers. It is staggering. You said Smith & Wesson doesn’t make the parts anymore?
Mr. Sauvé: No, they don’t. The RCMP armour shop has a fantastic crew. They have been manufacturing replacement parts on their own or sourcing them out.
The organization has been trying to extend the life cycle of this particular pistol, but getting through the procurement process for the selection of a new gun has been a challenging morale thing for our membership because they see it evolving, and it never materializes.
Senator McNair: You used the analogy of NASA getting someone on the moon, which makes it very clear to everyone. I appreciate that. Coming from New Brunswick, I’m well aware of the delay on the carbines and the tragic impact that had.
Mr. Sauvé: And NASA was working on that in the 1960s.
Senator McNair: That is good information. Thank you.
Senator Al Zaibak: My question is for Mr. Elcock. As you know, Bill C-12 significantly increases administrative monetary penalties. From the bankers’ perspective and banking sector’s perspective, are these penalties proportionate and aligned with international AML standards?
Mr. Elcock: The key is how they are applied. There is not a necessary concern on the quantum of AMPs. It’s when you have a quantum like this, you need clarity and predictability in their application. The highest quantum needs to apply to systemic or egregious issues. If we don’t see an appropriate application, it is guided through regulation.
What we are concerned about is we will see a worsening of trends, such as overreporting, which the government has diligently been trying to address through information-sharing changes or other tweaks in the regime. We don’t want to move backwards, potentially worsening trends such as challenges at the Federal Court, which create even more lack of clarity or more deleterious effects on the regime. What we really want to see is clarity in application because that will be key with these new AMPs.
Senator White: I’m looking for the enforcement perspective now on my previous question as it relates to the anti-money laundering regime compared to others.
Mr. Sauvé: Our members in the RCMP do a fantastic job. You give them whatever, and we will be able to make it work. I think you’ve seen this over the last 15 years where the mandate has expanded and sometimes shifted depending on the government of the day. Our Integrated Proceeds of Crime teams, for example, and the “C” Division in Quebec seized $56 million of crypto-currency just last fall through one investigation. They continue to shine when resourced and when given a mandate to focus on.
With the government’s commitment to 1,000 new personnel — I say 1,000 new police officers, but I understand there is some debate on that — and added resources and technology, which we can hopefully get through procurement, software, et cetera, we will hopefully see a federal policing mandate where they can focus on those investigations and actually deliver results because they do an extremely good job when given the resources and the tools to do their job.
The Chair: Thank you. Colleagues, this is the end of our time with this panel. I want to thank Mr. Elcock, Mr. Sauvé and Mr. Lajeunesse for being here today and for sharing their thoughts and making a contribution to our work in studying this important legislation.
For the next panel, we are pleased to welcome, from the Office of the Privacy Commissioner of Canada, Philippe Dufresne, Privacy Commissioner of Canada, who is accompanied by Marc Chénier, Deputy Commissioner and Senior General Counsel. We are also pleased to welcome, from the Financial Transactions and Reports Analysis Centre of Canada, Michael-John Almon, Assistant Deputy Director, Strategic Policy and Review. He is accompanied by officials from the Department of Finance Canada: Erin Hunt, Director General, Financial Crimes and Security Division; and William Kendall, Senior Advisor, Financial Crimes and Security Division.
Thank you all for joining us today. Welcome to the committee. For those who will be making opening remarks, you have five minutes for those remarks. Mr. Dufresne, you are welcome to make your opening remarks. You have been here so often that we should give you a regular seat.
[Translation]
Philippe Dufresne, Privacy Commissioner of Canada, Office of the Privacy Commissioner of Canada: Thank you, Mr. Chair.
Members of the committee, thank you for the invitation to appear before you today to support your study of Bill C-12, the Strengthening Canada’s Immigration System and Borders Act. I am accompanied by Marc Chénier, Deputy Commissioner and Senior General Counsel.
Bill C-12 would amend a number of laws and regulations with a view to strengthening immigration and border security and combatting transnational organized crime and the flow of illicit narcotics and financing. These are important public-interest objectives.
[English]
In the privacy context, I would note that Bill C-12 contains important positive safeguards with respect to information-sharing agreements for disclosures outside Immigration, Refugees and Citizenship Canada. Specifically, Bill C-12 requires written information-sharing agreements for when the Minister of Immigration discloses specified immigration-related personal information outside the department.
The bill indicates that such agreements must include the elements of personal information that may be disclosed, the purpose of the disclosure, any limits on secondary use and subsequent transfer of information and any other relevant details.
Moreover, it includes an explicit prohibition on onward sharing of personal information to a foreign entity in the absence of ministerial authorization.
The initial version of the bill included a provision that would grant customs officers free access to premises or places where goods destined for export are stored. I recommended that the bill clarify that an officer may not enter a dwelling-house without the consent of the occupant except under the authority of a warrant. I am pleased to see that an amendment to that effect was adopted in the other place.
[Translation]
Finally, as the bill allows for the government to issue regulations with respect to the disclosure of information, it will be important for my office to be consulted by the government in the development of these regulations.
With that, thank you very much. I look forward to your questions.
[English]
The Chair: Thank you, Mr. Dufresne.
Next we will hear from Erin Hunt. You have the floor for five minutes.
[Translation]
Erin Hunt, Director General, Financial Crimes and Security Division, Department of Finance Canada: Thank you, Mr. Chair and honourable senators. My name is Erin Hunt, and I am the director general of the Financial Crimes and Security Division at the Department of Finance.
The Department of Finance plays a central role in Canada’s anti-money laundering and anti-terrorist financing regime. The regime brings together 13 federal departments and agencies, as well as various federal, provincial, territorial and municipal partners working to combat financial crime based on three pillars.
The Department of Finance’s responsibilities involve the first pillar, policy and coordination. As the regime’s coordinator, the Department of Finance is responsible for its governance, including coordinating and organizing various public and private committees. The Department of Finance is also responsible for coordinating the regime’s performance measures and reports, including representing the regime internationally.
As the policy lead for the regime, the Department of Finance is responsible for developing and coordinating anti-money laundering and anti-terrorist financing policies.
[English]
The Minister of Finance is responsible for the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, which is a key piece of legislation underpinning the regime. The act defines the businesses and professionals subject to anti-money laundering and anti-terrorist financing regulation, known as reporting entities, as well as their obligations, such as establishing and maintaining a compliance program, knowing your client and reporting certain transactions to the Financial Transactions and Reports Analysis Centre of Canada, or FINTRAC for short. My colleague from FINTRAC is here with us today.
The Proceeds of Crime (Money Laundering) and Terrorist Financing Act also establishes FINTRAC as Canada’s financial intelligence unit and anti-money laundering and anti-terrorist financing regulator.
FINTRAC is an independent agency that reports to the Minister of Finance. Its responsibilities relate to the second pillar of the regime: prevention and detection. It receives and analyzes reports and discloses financial intelligence to law enforcement and related entities to support the third pillar of the regime: investigation and disruption.
The measures in Parts 9 and 10 of Bill C-12 relate to the second pillar of the regime: prevention and detection. FINTRAC will be responsible for implementing these changes, and FINTRAC will help answer questions on behalf of these changes.
Specifically, Part 9 proposes a comprehensive set of amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to strengthen anti-money laundering and anti-terrorist financing supervision, compliance and enforcement.
Part 9 will enhance FINTRAC supervision, including by requiring all reporting entities to enrol with FINTRAC. With tens of thousands of reporting entities, this measure will help ensure FINTRAC knows its regulated population, supporting effective regulation.
Part 9 will also enhance compliance by addressing ineffective compliance programs, which is the main reason for violations of the act, through a new overarching requirement for reporting entities’ compliance programs to be effective, risk-based and reasonably designed.
Compliance will also be strengthened by addressing situations where a money services business winds up its operations to avoid paying an administrative monetary penalty, or AMP, by enabling FINTRAC to revoke or refuse registration of a money services business with an outstanding administrative monetary penalty.
Finally, Part 9 includes a suite of measures to strengthen enforcement to ensure non-compliance is not treated as the cost of doing business. This includes a 40 times increase to administrative monetary penalties, a 10 times increase to criminal fines and the introduction of a new mandatory compliance agreement to ensure the failures in controls that led to an administrative monetary penalty in the first place are addressed.
Strong coordination between regulatory agencies is another key element in fighting financial crimes. Part 10 of Bill C-12 proposes amendments to the Office of the Superintendent of Financial Institutions Act and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to make FINTRAC a member of the Financial Institutions Supervisory Committee, or FISC, to support high standards of regulatory compliance.
The government takes financial crimes seriously and is committed to taking the measures required to protect Canadians and the integrity of Canada’s financial systems from these serious crimes.
Thank you.
The Chair: Next we’ll hear from Mr. Almon.
Michael-John Almon, Assistant Deputy Director, Strategic Policy and Review, Financial Transactions and Reports Analysis Centre of Canada: Thank you, Mr. Chair.
[Translation]
I would like to thank the Committee for the invitation to appear before you today. My name is Michael-John Almon, and I am the assistant deputy director responsible for strategic policy and review from the Financial Transactions and Reports Analysis Centre of Canada, also known as FINTRAC.
I am pleased to appear alongside colleagues from the Department of Finance to provide testimony for proposed amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act as proposed under Bill C-12.
[English]
FINTRAC plays an important role within Canada’s anti-money laundering and anti-terrorist financing regime. FINTRAC has a dual mandate as both Canada’s anti-money laundering supervisor and as Canada’s financial intelligence unit.
In very practical ways, FINTRAC acts as a bridge among a broad range of private sector entities, law enforcement and international partners in combatting money laundering, terrorist activity financing and threats to the security of Canada.
FINTRAC is not a law enforcement or investigative agency. We are not responsible for money laundering or terrorist financing investigations or prosecutions. In fact, we are required and maintain an arm’s-length approach from law enforcement and prosecution as per our legislation.
As the anti-money laundering and anti-terrorist financing regime supervisor, we ensure businesses subject to the act, such as banks, casinos, real estate, securities dealers and money services businesses, fulfill their legislative and regulatory requirements, including implementing a compliance program, identifying clients, record-keeping and providing certain types of reports to FINTRAC related to transactions or property.
With quality reporting, we generate actionable financial intelligence in support of law enforcement and national security investigations.
FINTRAC works with businesses to assist them in understanding and complying with their obligations by providing comprehensive guidance, answering thousands of inquiries, hosting dedicated fora and meetings with vulnerable sectors and introducing new communication tools and platforms.
We do not access bank accounts, seize or freeze funds or monitor transactions in real time. This is why good reporting and record-keeping by business are crucial for the development of financial intelligence.
When businesses don’t fulfill their requirements, we can and do issue administrative monetary penalties that are designed to encourage compliance.
In analyzing reports submitted by businesses, among other sources of information, in 2024-25, FINTRAC produced approximately 2,700 unique disclosure packages in support of hundreds of project-level investigations at the municipal, provincial and federal levels across the country as well as internationally.
[Translation]
The proposed measures under Bill C-12 support better integration of financial intelligence in national security and organized crime investigations, by enhancing the centre’s enforcement tools and closing regulatory gaps.
Additional enforcement tools, including mandatory compliance agreements for non-compliant entities, a criminal offence for false information, and prohibiting anonymous accounts, will all serve to comprehensively enhance FINTRAC’s supervisory regime.
Put together, the measures proposed for FINTRAC’s legislation in Bill C-12 would contribute to a safe, secure, and trustworthy financial system, and align with international standards.
Thank you.
[English]
I look forward to the committee’s questions.
The Chair: Thank you, Mr. Almon. We will now proceed to questions. I would like to offer our first question to the deputy chair, Senator Al Zaibak.
Senator Al Zaibak: If you don’t mind, I have two questions for Mr. Dufresne.
Commissioner Dufresne, are you satisfied that expanded information-sharing provisions in Bill C-12 meet the Charter test of necessity and proportionality?
My other question is related to the safeguards governing the sharing of financial and personal information. Are they sufficiently clear to prevent overcollection or misuse or abuse? Thank you.
Mr. Dufresne: Thank you, senator, for the question.
In terms of collection, both necessity and proportionality are things that I continue to recommend that should be included in the Privacy Act. The Privacy Act will govern the collection activities of all federal departments, and, currently, we do not have a requirement for necessity and proportionality. The requirement that we have now is that the collection be linked to the lawful exercise of the department’s mandate, so that’s a gap in legislation that, in my view, can and should be corrected by amending the Privacy Act. I look forward to law reform in that space.
In terms of information sharing and the disclosure aspects, as I indicated in my opening statement, a key part of it which we have been recommending is that there be constraints in terms of the information that’s going to be shared, and this should be done in the context of these information-sharing agreements which should have sufficient specificity in terms of what is going to be shared outside.
I see this example here in Bill C-12 as a positive way of doing those information-sharing agreements. In fact, in the other place, on Bill C-8, I pointed to the provisions of this bill as a good example of how to do information-sharing agreements and how to provide sufficient specificity, so I am satisfied with that. Thank you.
[Translation]
Senator Carignan: My next question is about the more financial aspects of FINTRAC. When penalties are increased, it’s usually because the ones that were in place before didn’t work. Which recurring offences have you identified? Do you think that strengthening penalties would have a stronger deterrent effect? What do offenders do?
Ms. Hunt: Thank you for your question. I’ll start and see if my colleagues have anything to add.
We reviewed the system and the way we look at administrative monetary penalties, because there were major loopholes.
[English]
There were some significant compliance failures, both in Canada and internationally, which made us rethink how we were looking at administrative monetary penalties. We wanted to make sure that administrative monetary penalties are not seen as the cost of doing business. In the previous regime or the current regime before these changes would be in force, it was for certain entities, which is not sufficient in our view to really ensure that we are supporting compliance across all of the broad range of entities that FINTRAC supervises. FINTRAC supervises a very broad range of entities, including small- and medium-sized businesses as well as multinational and international companies. The way that the penalty structure was built meant that certain penalties were, perhaps, not as dissuasive in order to encourage further compliance with the regime.
It was in this new environment where we took a comprehensive look at the penalty structure as well as the entire compliance regime, so this isn’t a question of just increasing the penalty structure, but it’s also a whole series of other measures to ensure that FINTRAC has the tools to be able to support ongoing compliance because, as my colleague from FINTRAC said, the compliance with the regime and the reporting that we receive from reporting entities are absolutely critical to the fight against money laundering and terrorist financing. We need each member of Canada’s regime to take these obligations seriously to support our collective efforts in fighting financial crime in Canada.
[Translation]
Senator Carignan: My second question is about transactions. Clause 100 creates an obligation to enter into a compliance agreement and to ensure follow-up. That changes the mechanics a bit. How are you going to ensure that? It’s somewhat imposed. An agreement usually involves free, informed and voluntary consent. Now an agreement is being imposed. Aren’t you abusing your power by forcing the entity to act? How are you going to ensure a balance? I know that you’ll say that you won’t abuse the power, but imposing an agreement . . . I have a bit of trouble seeing how that will work.
[English]
Ms. Hunt: Thank you for the question. It’s an excellent one. The purpose of the compliance regime is to incentivize and support compliance with the obligations under the act. Having an ongoing compliance agreement and an action plan ensures that companies are held to account for the failures that led to the imposition of an administrative monetary penalty in the first place. It also ensures that there is a clearer path toward compliance and that there is an agreement between both the supervisor and the entity being supervised regarding what those steps are to be able to bring an organization into compliance. We see this as an important way to ensure that there is an understanding of where the obligations may not be being met and how to bring your organization into compliance.
The purpose of the regime is to support compliance and support organizations’ participation in the regime. It’s not supposed to be a punishment but an incentive to support that compliance. We see this as a really important way to ensure that both the supervisor and the entity have clarity regarding what is required going forward.
[Translation]
Senator Youance: My question is for Ms. Hunt.
In her brief to the Standing Committee on Public Safety and National Security, the Honourable Marie Deschamps, Chair of the National Security and Intelligence Review Agency, or NSIRA, pointed out that with Bill C-12, “. . . expanded powers . . . must be symmetrically matched by well-resourced independent review,” and that:
Many of the changes brought by Bill C-12 involve entities and activities which have been, and will be, subject to NSIRA review.
She is concerned
. . . that the expansion of government powers in Bill C-12 . . . comes at the very moment NSIRA faces potential budget reductions.
I could also mention that the National Police Federation is asking for stable funding to achieve results that Canadians expect. What is the Department of Finance planning to ensure that there will be adequate funding for the additional workload?
[English]
Ms. Hunt: That one is a little difficult for me to answer alone. I think these are political decisions in many ways. With respect to Parts 9 and 10 of the bill, we are trying to ensure that tools are available to our agencies so that they are able to do the work that they’re already doing with better tools. We don’t see this as necessarily requiring additional resources with respect to Parts 9 and 10 but rather enhancing the tools that are available.
[Translation]
Senator Youance: My second question is also for you. I’m asking for figures, so if you don’t have the numbers, you can send us the information afterwards.
What is your estimate of the additional expenses for applying Bill C-12 at the level of the various institutional entities that will be affected by its application? For comparison purposes, what is your estimate of potential penalties and compliance, meaning entries that result from the application of Bill C-12?
Ms. Hunt: Thank you for the question. I’m going to go back to the broader question, which relates to a number of different departments. I won’t be able to answer it.
In terms of the funds that the government could receive in administrative monetary penalties, I would like to see none. In fact, we would like all entities in Canada to comply with their obligations under the act. It’s hard for us to estimate the amount of money. Higher penalties could encourage more compliance with the various obligations under the act. It’s hard to estimate, but it’s more to support an environment where all entities under our regime at the national level understand the obligations and properly implement the obligations.
Senator Youance: I like your answer. It leads us to believe that the institutions are rather compliant.
Thank you.
[English]
Senator Kutcher: My question is for Mr. Almon.
We’ve just had representation from the Canadian Bankers Association. Have you seen their suggestions that they have made to the committee?
Mr. Almon: I have, yes.
Senator Kutcher: One of the suggestions is to exempt banks from mandatory FINTRAC enrolment due to existing oversight. Can I have your thoughts about that suggestion?
Ms. Hunt: That is actually a question for me. I’m so sorry.
Senator Kutcher: This question is to anybody.
Ms. Hunt: The policy and legislative or regulatory framework falls to the responsibility of the Department of Finance. I will gracefully take the answer to this question.
Yes, we understand the Canadian Bankers Association. We have a very close relationship with the Canadian Bankers Association and work closely with them.
Under Bill C-12, we are looking to create a regime of universal enrolment so that every entity that has responsibilities under the act provides certain information to FINTRAC to allow them to understand their supervisory population. This is something that is important for supervisors to know who they are supervising. We see this as an important tool in the compliance tool kit to understand that population.
Certain entities under the regime, banks in particular, have reporting obligations and significant regulatory requirements to a variety of different entities under the regime. For example, banks are supervised by the Office of the Superintendent of Financial Institutions, and they gather a lot of information with respect to banks as well as the obligations that FINTRAC supervises.
When we are thinking about moving this requirement forward, it will be elaborated through regulation, which will give us the opportunity to clarify what requirements are needed for certain industries or others and whether there are areas where we can simplify the obligations.
That said, we think this is the type of information that every organization should have and should be able to easily provide to FINTRAC so that they have contact details and information about the population that they are supervising to ensure they can do supervision effectively in Canada.
Senator Kutcher: Mr. Almon, would you agree with that?
Mr. Almon: I think from an operational standpoint, it will be key to have a consistent picture of what the population looks like in all sectors.
Senator Kutcher: Thank you. I will cede my time to any one of my friends on this committee.
Senator McNair: Thank you for being here today.
Following up on what Senator Kutcher was talking about, in the brief we received from the Canadian Bankers Association, they stated that amendments to section 9.2 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act are likely to create confusion for banks.
The intention appears to be to prohibit the opening of a bank account by a bad actor who is using a fictitious name. However, the bill uses the term “obviously fictitious” but does not define what factors would determine a name to be obviously fictitious.
Furthermore, the bill states that an account cannot be opened if the person or entity cannot verify the identity of the client in accordance with the regulations or if the client’s name is obviously fictitious.
Can you speak to why this specific language was used and how banks are meant to interpret the term “obviously fictitious”?
Ms. Hunt: Thank you for the question.
This is a question of ensuring that Canada’s regime is compliant with international standards. Canada is a member of the Financial Action Task Force, or FATF, which is the international anti-money laundering and anti-terrorist financing standard-setting body. It has a series of 40 regulations that each country in the world is required to implement and also demonstrate its ability to be effective in its implementation.
Recommendation 10 requires that anonymous accounts be prohibited. In our last evaluation, which Canada had in 2016, they identified there was a gap in the language in Canada’s law which may not be fully in line with international standards. The change here is to make sure that the language is in line with international standards.
Essentially, already in practice, this requirement is already in force because you need to be able to verify the information. This is just clarifying in the law the language with respect to the Financial Action Task Force requirements.
We have been engaged with the Canadian Bankers Association to ensure that there is an understanding of what the intention of the law is. We don’t see the lack of clarity as something that is expected to, in practice, be a concern.
Senator McNair: Have you seen the proposed amendment to the language?
Ms. Hunt: We have. The language could not allow Canada to actually meet the Financial Action Task Force requirements. It could lead to increased uncertainty for Canada. That is why we have proposed the language that we have in the bill.
Senator McNair: The Canadian Bankers Association is not taking that view, are they? They talk about the FATF also.
William Kendall, Senior Advisor, Financial Crimes and Security Division, Department of Finance Canada: The words “obviously fictitious names” are in the FATF standard, and they have to be in our legislation. If we further define that, it could possibly be weakening that and bringing us out of line with the standards.
It is important to note that the FATF specifically identified this as a gap in Canada’s framework, and that’s why we need the specific language.
The Chair: While we are on this, as the chair, I will ask in a more succinct way to try to get to the answer to this question.
In the obligation that the bank has to meet, you have provided them with an understanding of what that is. There’s no confusion about what that is.
Okay. Thank you.
Senator Dasko: Thank you, witnesses.
This question, again, is for anybody. I don’t want to step on anybody’s toes here.
Part 9 of Bill C-12 would introduce a new mandatory compliance agreement regime. Among the changes, it would authorize FINTRAC to disclose certain information to the Commissioner of Canada Elections. I would like to understand the background of that and what essentially is contemplated here. What kind of information and what kinds of circumstances are involved?
Ms. Hunt: These are two different issues. I will take the first one with respect to the compliance agreements. As I mentioned before, we see this as an important tool.
Currently, under the regime, compliance agreements are voluntary. One of the things we want to try to do is enhance and incentivize compliance while ensuring that if an administrative monetary penalty is imposed, then companies, businesses and professions under the act are clear on what is required to bring them into compliance because that is the purpose of the administrative monetary penalty regime.
Making this tool a requirement will ensure that transparency and clarity are there between both the supervisor and the entity to bring them into compliance, which is the ultimate goal.
With respect to the information to the office of Elections Canada, as we mentioned, FINTRAC is the financial intelligence unit of Canada. Entities that are eligible to receive financial intelligence from FINTRAC need to be listed in Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
This would allow the office of Elections Canada, which undertakes investigations with respect to election financing issues, to receive financial intelligence to assist in their work to ensure that Canada’s elections and Canada’s election financing are safe and secure.
Senator Dasko: Was this prompted by any particular issues that have arisen? We’ve had a lot of discussions in this country about foreign interference in elections taking many different forms. It could take the form of financing, misinformation, disinformation or other issues. Is that related to what we are talking about? Can you give me a little bit on what has prompted these measures?
Ms. Hunt: Over the past several years, the government has added several new entities as disclosure recipients — that’s what we call them in the regime — to receive financial intelligence. We have made sure that financial intelligence is a tool that can be used by a variety of different actors that have investigative responsibilities in Canada. This is a really important thing to ensure that the information that we are receiving through the anti-money laundering and anti-terrorist financing regime is there to support these really important investigative efforts to help keep Canada, Canadians and our financial environment safe and secure. The more entities that are able to access this to support their investigations, we see this as value added to Canada’s regime.
It is in that broader framework that the office of Elections Canada — which has a very specific role in looking at financial elements related to Canada’s elections — is a really important candidate to bring on board within Canada’s regime to receive this information through FINTRAC disclosures.
Senator Dasko: So FINTRAC is collecting more and the elections organization is able to receive this data?
Ms. Hunt: Yes. This will allow the office of Elections Canada to receive FINTRAC intelligence and FINTRAC disclosures to support their investigations. As my colleague mentioned, last year, they provided over 2,000 disclosures to a variety of different law enforcement and other organizations in Canada to support their investigations into potential criminality in Canada. We see this as a really important tool to be able to help advance those investigations across a variety of different partners.
Senator Dasko: But the RCMP is also part of this?
Ms. Hunt: Yes. There is a list in the act that specifically identifies those entities that are able to receive this. This is adding a new entity that will be able to receive that. All law enforcement in Canada — federal, provincial and municipal — are, for example, already included and actively receive regular disclosures from FINTRAC.
Senator Dasko: I understand. You are just adding to the list of entities that can get information from FINTRAC.
Ms. Hunt: Yes.
Senator Dasko: Thank you.
Senator Kutcher: Seeing as I have no friends on the committee, I’m taking my time back. This question will go to whomever is best, but it comes from a FINTRAC report. In a recent report, you noted that 18 out of 50 small- and medium-sized banks that you examined had serious deficiencies. You noted the “. . . quality of their money laundering and terrorist financing risk management . . . .” and that they showed “. . . vulnerabilities to money laundering and terrorist financing risks . . . .” particularly in mortgage-related transactions.
We are all aware of the TD Bank issues. Does this legislation provide a framework for you to feel comfort that the deficiencies that have been reported would not continue to be a problem?
Mr. Almon: I would start by saying that at the heart of our supervision program is both identifying these deficiencies and addressing them. I will agree — and I think I said so in the opening remarks — that the nature of the changes that are being proposed here will send a message in terms of the importance that is being placed on the compliance with the regime and the nature of their obligations to install that compliance program and to have the proper procedures and policies in place to detect money laundering, terrorist financing and sanctions evasion, as well as to undertake the appropriate reporting to FINTRAC.
I will note, of course, even as the maximum is increasing for the administrative monetary penalties, we do have an obligation both within the proposals and also within the way we administer it to ensure that the appropriate levels take into account the severity of the infraction and the compliance history of the entity, that we’re encouraging compliance and not attempting to punish, and then there’s the ability-to-pay component. All of that will come together, but I do believe the measures proposed here will strengthen overall our ability to conduct compliance activities.
Senator Kutcher: You have comfort in what the bill does here so that, hopefully, the next time you do a report, you are not going to find 18 out of 50 small- and medium-sized banks have substantial deficiencies that can allow terrorist financing. I am particularly interested in the mortgage part, with the money laundering discussions happening about the buying of Canadian properties as a way to hide money. How does that work?
Mr. Almon: We won’t speak to individual cases, of course. Often, where we find deficiencies can be in the Ps and Ps, which are the procedures and policies that are in place in relation to how they undertake identification activity, the types of information they collect and the record-keeping. By identifying it to the reporting entities — which are the medium-sized banks, in this case, or mortgage brokers that have been recently brought into the regime — we have an education component on those first passes as we identify elements, and then there is that obligation to then address it such that, to the point that you are making, when we go back on subsequent examinations, this problem is not identified again.
[Translation]
Senator Carignan: My question is about the identifying information in the new subsection 54.2(3). The clause states that when an entity registers, some identifying information must be published. In your opinion, what would the identifying information be to avoid creating unintended consequences?
Mr. Dufresne, what do you think the identifying information should be?
Ms. Hunt, what are your intentions? Mr. Dufresne, do you agree or disagree?
Ms. Hunt: Thank you for the question. We would like to get information so that FINTRAC can know how many entities it has to supervise. In the system we are going to put in place, through regulations that will be developed with all reporting entities under our regime, it will be possible to publish certain information to ensure transparency with respect to entities that have obligations under the legislation.
The system will be developed through regulations in co‑operation with reporting entities. From my perspective, this will be basic information to ensure transparency for entities that have obligations under the act.
These are entities that have declared their intentions and obligations to FINTRAC. In a financial control mechanism, we want to know whether the entities know that they have to comply with the requirements. Providing information to FINTRAC can be an important transparency measure for other services, such as banking. That way, they know that they are part of Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime.
Senator Carignan: When you say basic information, what exactly are you referring to? How should identifying information be understood? I imagine it identifies the entity, but how extensively?
Ms. Hunt: That’s something that will be developed in the regulations rather than in the legislation.
I’ll turn it over to my colleague.
[English]
Mr. Almon: We do have in place right now, for example, the Money Services Business Registry, which has a public registry of those entities within that sector who have been identified and registered with FINTRAC, and they have a list of the particular types of information that are available, such as the name of the business, the location of the business and their business number. This sort of information helps identify who the individual entities are and that they are meeting their obligations to have registered with FINTRAC.
Mr. Kendall: And these businesses will sometimes say, “I am regulated by FINTRAC,” so this provides a method to verify that.
[Translation]
Mr. Dufresne: I would add something about the development of regulations. As I mentioned in my opening remarks, I expect us to be consulted on these issues, precisely to be able to identify the type and if it goes too far in getting personal information that is not necessary for the purpose.
We have an excellent relationship with the Department of Finance and with FINTRAC. We work closely with them on these issues.
Just recently, there was the amendment to allow banks to share personal information with each other to identify criminal trends, and we reviewed codes of practice as set out in the act. There is excellent co-operation. We review FINTRAC’s information-gathering activities on a biannual basis. That’s also going well. In fact, we are in a position to say that if you have too much information, stop gathering it, erase it and do not keep it. It goes back to the theme of necessity and proportionality. It even helps investigations, even police ones. Not getting more information than they need imposes more discipline.
I want to take this opportunity to highlight the themes of international co-operation and standards that have emerged today, which is important in the area of privacy. The theme of encouraging organizations to comply with legislation is very important. I’ll take this opportunity to point out that, when it comes to privacy, there are no such incentives, because there are no fines available for violations of the Privacy Act in either the public or private sectors. Modernizing the act to provide the same type of incentive should be a priority for Parliament. I agree with my colleague Ms. Hunt. I don’t want to impose fines, but the possibility of fines encourages compliance.
Senator Carignan: If it were offered by the commissioner —
[English]
The Chair: Do any other senators have questions for our witnesses before we wrap up this section?
If I may, Commissioner Dufresne, I want to, first of all, thank you for your intervention. The original Bill C-12, of course, had a provision that gave police this unilateral power to enter a premises without a warrant. I thank you for your intervention to see the expunging of that part of the bill because we live in a country that is protected by the Charter, and now it brings this bill in compliance with the Charter.
In a country where the police have reasonable suspicion, they should go to the courts to get the necessary legal authority to do what they do, and it brings us back to a place, because there were a lot of concerns raised when that bill was first tabled. Thank you for your due diligence and effort in trying to secure the change that was made in the legislation.
If I may, I have a question for both Ms. Hunt and Mr. Almon on this new regime. I’m seeing it in action in dealing with the banks in regard to, for instance, a mortgage right now where they are asking a significant amount of questions about my previous life. In many cases, they are asking — which I fully understand from sitting on this committee and the Banking Committee — in regard to giving them some records of financial transactions, in many cases going back four years to authenticate their compliance with the regime that you’ve put in place.
The only worry that I have in this context is that there needs to be some assurance for those of us who are customers that the platform that you are using for transmitting information is secure and safe because, quite often, it is going across the internet. As we know, if you don’t have a secure platform for transmitting that information, you are putting the information in jeopardy and, at the same time, allowing for nefarious actors to gain access to that information, who would not be entitled to it.
Is the department thinking about how that will be complied with? I realize the banks are trying their best, but I know that in the context of an individual customer transmitting information on the internet, there is always a possibility that there will be breaches. What is the protection that you provide when that breach does occur?
Ms. Hunt: Thank you for the question.
I can say very clearly that ensuring the protection of this information is a foundational pillar of both Canada’s anti-money laundering regime and also the banking regime writ large. This is something that is not taken lightly, and it is something that is looked at in every possible way when we look at how we develop policy with respect to Canada’s financial sector.
It is something that is an emerging risk and opportunity that needs to continue to be part of our forward-thinking agenda to ensure that we can keep Canadians’ information safe and to ensure that we’re able to advance these really important public policy objectives, such as fighting financial crime within our institutions and across the country.
Mr. Almon: I would say that the protection of both the information and the privacy of Canadians and the information that we receive is a core part of the mandate of FINTRAC, not just in the processes that we put in place but also legislatively too.
In terms of how we have been created, it was put up there on par with the work that we do as supervisor as well as the work that we do as the financial intelligence unit.
Senator M. Deacon: Thank you all for being here. I apologize for my late arrival.
When we look at Part 9 of Bill C-12, it would introduce a new mandatory compliance agreement regime that requires persons and entities to enrol with FINTRAC. We’ve listened and read that the registration process at present can take months, and it could be upwards of 20,000 to 30,000 new businesses that need to go through the enrolment process as a result of this legislation.
Am I on track? Is that correct? Are you confident that FINTRAC is sufficiently staffed and resourced?
Ms. Hunt: I will take that one, senator. Thank you for the question.
There are two different regimes that are being contemplated with respect to registration, and so I will use two different words.
Money services businesses have a particular registration regime because given the risks within the money services businesses in Canada that we see, there are really high risks for money laundering and terrorist financing in this regime. We have created a very specific regime with very clear requirements, including things like criminal record checks that need to be provided to FINTRAC to ensure legitimacy and that there are not criminals operating these types of businesses. This is a very specific regime to address a very specific risk.
What we are looking at in Bill C-12 is an enrolment process, which is a simplified way to ensure that FINTRAC has awareness of all of the entities that it supervises. Right now, FINTRAC does not have an obligation for each entity in Canada to provide information to FINTRAC where it has obligations under the act.
This is a new tool to ensure that as a supervisor, the supervisor is aware of all of the entities in Canada that have obligations under the act and can enhance FINTRAC’s ability to supervise these entities effectively. This specific information with respect to this enrolment process will be identified through regulation, and it is through the regulatory process that we will work with all of the reporting entities to ensure that we are rightsizing the information requests to ensure that FINTRAC is able to do its supervisory activities effectively. It is aware of the population, but it is also not putting undue burden on any one of the businesses in Canada.
We are envisaging that the types of information should be things that every business in Canada should have ready access to. These are things like name, address and those types of information that FINTRAC just needs to have to be able to do its job as supervisor.
Senator M. Deacon: Thank you very much. I appreciate that.
The Chair: This brings us to the end of our time with this panel. I’d like to thank our witnesses for taking the time to meet with us here today. We greatly appreciate your contribution and the time you took to share your knowledge with us.
We say this quite often here, but I would like to provide an acknowledgment and thank you for the work you do on behalf of the country. We really appreciate it, and I know the difficult challenges we face, but, more importantly, it is good to see you on the front lines doing what is important, and we appreciate your work.
(The committee continued in camera.)