FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Friday, October 26, 2001

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[English]

The Chair (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I'd like to call the meeting to order and welcome everyone here.

As you know, the finance committee has been travelling across the country seeking pre-budget public input. One of the emerging themes, of course, has been the issue of national security.

As I welcome the Secretary of State for International Financial Institutions, I must tell you that your presentation is indeed going to be timely. There's no question in the minds of the finance committee members that the importance of national security has been raised quite a bit during the last few months.

You've been here before, Minister. You may begin.

Hon. Jim Peterson (Secretary of State (International Financial Institutions)): Thank you very much, Mr. Chairman and honourable members.

Perhaps I can start by introducing a wonderful group of people who are here with me today. I feel very privileged to have them here with me.

I would like to introduce, from the Department of Finance, Yvan Roy, Richard Lalonde, and Charles Seeto; from the Office of the Superintendent of Financial Institutions of Canada, Superintendent Nick Le Pan; from FINTRAC, Director Horst Intscher; from the Royal Canadian Mounted Police, Superintendent Dave Beer, of the Proceeds of Crime Branch, and Inspector Rick Reynolds.

Honourable members, it has been more than six weeks since that terrible day when terrorist attacks against New York and Washington claimed thousands of lives. All of us, no matter where we live, have been affected by this tragedy.

Let me assure you that the Government of Canada is committed to taking strong and effective action to defeat terrorism. A key element of this strategy is depriving terrorists of the funding they need to conduct their violent activities.

[Translation]

Since February of this year, Canada has had sanctions in place against both the Taliban regime of Afghanistan and Osama bin Laden and his associates. In the aftermath of the September 11 attacks, the Government has taken a number of steps to strenghen the measures in place to freeze terrorist assets. I would like to take a moment to summarize those activities.

On September 21, OSFI wrote to all federally regulated financial institutions, reminding them of their obligations under the United Nations Afghanistan Regulations. OSFI requested that they review their records for names of individuals under investigation by the U.S. Federal Bureau of Investigation in connection with the terrorist attacks and also asked institutions to cooperate with law enforcement agencies.

This was followed by another letter from OSFI on September 25, which provided additional names of terrorists and terrorist organizations whose assets must be frozen.

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On October 2,

[English]

Canada implemented the United Nations suppression of terrorism regulations, expanding the government's authority to freeze terrorist assets and combat terrorist financing.

On October 12 these regulations were amended to add more names to the list. This action was complemented by letters from OSFI to our financial institutions.

These regulations freeze the assets of terrorists and terrorist organizations who are listed by either the United Nations or the Governor in Council. The regulations establish key terrorist financing countermeasures and provide a bridge to the anti-terrorism plan that will be accomplished through the bill before you.

Mr. Chairman, I will focus my discussion of Bill C-36 on the measures aimed at depriving terrorists of the ability to finance their activities. These new measures are set out in the Criminal Code, the Proceeds of Crime (Money Laundering) Act, and the newly created Charities Registration (Security Information) Act.

First, the Criminal Code.

[Translation]

Changes to the Criminal Code make it a crime to wilfully collect or provide property, either directly or indirectly, knowing that it will be used to carry out terrorist activities. The changes also make it a criminal offence to knowingly provide financial or other related services that will facilitate terrorist activities.

It is not enough, however, to simply criminalize terrorist financing. Effective means must also be found to deter and detect these harmful activities.

To this end, changes to the Criminal Code require all persons to report to the RCMP and CSIS if they have property in their possession or control that they know belongs to terrorists.

In addition, the Criminal Code amendments require financial institutions to report monthly to their regulator on property in their possession or control that is owned or controlled by a listed person or group. The Minister of Finance has committed to making regular reports on terrorist assets that have been identified and frozen by financial institutions.

[English]

The bill also broadens the scope of the PCMLA. A key initiative is the expansion of the mandate of FINTRAC to include combatting terrorist financing. There are a number of changes to the money laundering legislation.

First, financial intermediaries will have to report to FINTRAC any financial transactions that they suspect are related to terrorist financing offences. They'll also be required to report to FINTRAC if they are in possession of terrorist assets, or have knowledge about a transaction or proposed transaction involving such assets.

FINTRAC will be responsible for disclosing key identifying information to law enforcement agencies if the centre suspects the information is relevant to the investigation of terrorist financing.

FINTRAC must report to CSIS if this information is relevant to threats to the security of Canada.

Finally, FINTRAC will be able to share information about terrorist financing activities with its international counterparts, subject to certain safeguards.

Mr. Chairman, a distinct advantage of expanding the scope of money laundering legislation to address terrorist financing is that the fundamental privacy safeguards that are contained in that legislation would continue to apply. In particular, the information reported by financial intermediaries goes to FINTRAC for analysis and not directly to law enforcement agencies. FINTRAC remains at arm's length from law enforcement, and its operations are subject to the Privacy Act.

A final issue I want to mention is the tax treatment of charities. Bill C-36 includes income tax provisions to prevent terrorists from exploiting the tax privileges associated with charities. The bill enacts the new Charities Registration Act and amends the Income Tax Act to prevent organizations that support terrorist activities from enjoying tax privileges.

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[Translation]

The Solicitor General and the Minister of National Revenue will now be empowered to issue a certificate denying an organization its status as a charitable organization. The Federal Court will be mandated to review the certificate to ensure that it is reasonable.

Beyond the measures in the charities legislation to deny tax privileges, other elements of Bill C-36 relating to the criminalization of terrorist financing would support additional steps by the government. If an organization wilfully provides financing for terrorist activity, then there would be grounds for proceeding with criminal sanctions and the forfeiture of assets.

These new measures will protect the integrity of the registration system for charities under the Income Tax Act, and maintain the confidence of Canadian taxpayers that the benefits of charitable status are available only to organizations that operate exclusively for charitable purposes.

Mr. Chairman and honourable members, Canada is committed to taking away the capacity of terrorists to finance their unlawful activities. However, achieving this objective requires both strong domestic measures and a unified international effort.

[English]

It is clear that a rapid and coordinated international response is needed to ensure that terrorists are not able to exploit differences between various regulatory regimes. To this end, the G-7 has called on the financial action task force to develop a specific action plan to establish and develop international standards to assist in detecting and preventing the misuse of international financial systems.

As well, Canada will use its role as chair of the G-20 to develop broad support for international action in combatting terrorist financing. This issue will be one of the key items on the agenda next month, when the G-20 ministers of finance meet here in Ottawa under the chairmanship of the Honourable Paul Martin.

Canada's international efforts also include support for such organizations as the Caribbean Financial Action Task Force, which works with Caribbean nations to ensure that regulations governing the financial service sectors meet international standards. On this note, I was pleased to see the strong statement issued recently by members of the task force expressing their commitment to ensure that their financial systems are not used as conduits for terrorist funding activities.

Above all, Mr. Chairman and honourable members, our government realizes that combatting terrorist financing and money laundering is not a short-term or easy fight. It is a long-term battle that will be fought on many fronts. We remain convinced that strong domestic action and cooperation with our international allies is the best strategy to cut off funding for terrorist groups operating throughout the world.

I thank you.

The Chair: Thank you very much, Minister.

We now have a statement to be made by Mr. Nicholas Le Pan of OSFI.

Mr. Nicholas Le Pan (Superintendent of Financial Institutions of Canada): Thank you, Mr. Chairman. I provided some material to the committee in advance. I do not intend to go through it in any detail, but I would just emphasize three points, if that would be helpful.

First, I believe organizations such as OSFI should enhance their activities to deal with issues like the ones we're talking about today. The material I provided the committee indicates the efforts we've taken and the efforts we will continue to take, with some further augmentations.

Second, I want to note that even prior to the tragic events of September 11, OSFI, like other regulators, had been encouraging financial institutions to have in place robust compliance systems, which are a key part of this. In that sense, our approach, in assessing compliance systems from a top-down perspective, I think is complementary to the more detailed efforts that happen between institutions and law enforcement authorities.

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Third, over the past few weeks, as the minister has indicated, we were one of the organizations to which the government turned to remind institutions of their obligations and to help in the fight against the financing of terrorism.

I'm convinced, based on our experience in dealing with institutions over the recent past, that they are, and have been, treating very seriously their obligations with respect to anti-terrorism financing and proceeds of crime. They've been comprehensively going through records and allocating significant resources to reviewing transactions and working with law enforcement authorities.

It is a complex task. It is one where there are large volumes of material to go through. There are uncertainties about exactly what kinds of accounts are associated with what kinds of names, and all those kinds of things. I think those are understandable, and there is a learning process going on in the reporting of this information to OSFI.

Again, I think that is normal at this stage in the process, but I am convinced, based on the evidence we have, that institutions have been putting in a very important and serious effort in treating these types of requirements very seriously, with the appropriateness they deserve.

Perhaps I'll stop there. I'm available, of course, with others, to answer questions.

The Chair: Thank you very much, Mr. Le Pan.

We'll now proceed to the question and answer session. It's going to be a five-minute round for every member who wants to participate.

We'll begin with Mr. Jaffer.

Mr. Rahim Jaffer (Edmonton—Strathcona, Canadian Alliance): Thank you, Mr. Chairman.

Thank you to the minister and everyone else making the presentation today.

As you know, the Canadian Alliance has been calling for measures to cut off funding to terrorists for quite some time, so we're very pleased, obviously, with many of the initiatives we see in the current legislation regarding financial institutions. However, my concerns today deal specifically with accountability and due recourse. In times of crisis, it's obvious that swift action is required in order to deal with certain problems, but sometimes the result is that some innocent people may be caught up in this widely cast net.

I think the problem with Bill C-36 is that it grants exceptional powers to the government, and there doesn't seem to be any clear recourse, other than the courts, especially for some people who may be innocent.

So I want to ask specifically about cases where, for example, individuals are identified by CSIS, or the CIA, or the UN, as terrorists. Often they may be involved in organizations without being aware of their activities. Once they find out, and they try to distance themselves, or they get rid of the particular person who may be involved in shady activity, there may be cases where they still might be implicated when swift action is taken.

There's one particular case here in Canada—I believe the organization's name is Human Concern International—where six years after a particular a member of their organization was identified as a terrorist they kicked him out. They basically isolated themselves and said they had no idea what this this person was doing. This organization deals specifically with helping refugees and a number of groups around the world, in Pakistan, Afghanistan, and other areas. They found, six years later, that their funds had been frozen.

So my question is, what type of protection has the minister thought about for this particular legislation to be put in place to protect legitimate charitable organizations from wrongful accusations?

Mr. Jim Peterson: I think that's a very important question, Mr. Jaffer. What we have put in place is that if a charitable organization is listed, or is de-listed, on reasonable grounds, by the Solicitor General, they would have the opportunity to appeal to the Solicitor General. They would have the opportunity to appeal that to a court. There also is a provision for court hearings if a charity is going to be denied charitable status.

I don't want to comment on any particular case, including the one mentioned by you, but that would be the process we envisage. It would allow full recourse to the courts.

Mr. Rahim Jaffer: The only other concern, I guess, is that some of these members are trying hard, obviously, to do the business they normally do, and to distance themselves from any of this activity that may be undesirable. There is significant damage done to them in the process, obviously, if in fact they are accused wrongly. I think that's where the concern lies.

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Perhaps the minister can tell the committee what he foresees as potential recourse in the sense of trying to help some of these organizations that might be clearly clean but where damage is done in the process. What can we be doing as parliamentarians to help with that particular type of problem? Because this is where their concern really lies. Many of these people are obviously legitimate Canadians doing humanitarian work, and are wrongfully accused. That, I think, is where the big concern is.

Mr. Jim Peterson: Certainly, Mr. Jaffer, I think members of Parliament such as yourself may have a very important role to play in ensuring that something that went on in the past and that might have tainted it years ago does not continue to do so.

In terms of the legal position, I'll turn to Mr. Roy.

Mr. Yvan Roy (Assistant Deputy Minister and Counsel, Department of Finance Canada): Thank you, Mr. Minister.

Let me try to supplement a little bit what the minister said by referring to the charities legislation but also to other pieces in this package, which may help you understand where the protections and checks and balances are in this system.

With respect to the charities act, which is to be found at part 6 of the legislation the government has tabled, you have first the issuance of the certificate the minister mentioned. Once this certificate has been issued, it does not become operative immediately. There's a requirement under the law for that to go before a judge, for the judge to make the determination that the certificate was reasonable. So right off the bat there is a protection in the system to catch the right people and no one else.

But there's something that is of further assistance, in my view. If the circumstances of the organization that lost its charitable status have changed, they can seek to have that de-certification removed. The law provides for that. So you may at some point in time have been helping with the financing of terrorism, for instance, a certificate is issued, and a judge rules that it is reasonable; if you take the appropriate steps in order to remove the people who might have tainted the organization, you can then regain that status. I think that is important.

Let's go now inside the Criminal Code itself. It is not readily evident to someone who is not familiar with those provisions. That's why I think it's important that it be put on the record. When the state is trying to seize assets, to have them forfeited, there is, in the provisions we're talking about in the Criminal Code, a cross-reference to provisions found in the proceeds of crime legislation that require the state to give an undertaking as to whether, if there are damages, the state, having made the mistake, would be willing to compensate the person. So it's not as though there is absolutely nothing that applies in those circumstances.

Finally, as a third layer of protection, these provisions in Bill C-36 do not in any way, shape, or form change the status of our laws with respect to civil liability. So if there is a cause of action, you can go before a court and get relief.

As you can see, the system is built such a way that we're trying to make sure no mistakes will be made. If changes in circumstances happen, there is a way to correct the situation. You have, with respect to some of the provisions, the obligation of the state to issue an undertaking. Finally, the general law of the land continues to apply. There are no special immunities built in here.

So the government feels that this is the kind of system that provides the checks and balances, especially when we are clearly directed by the government, ministers in particular, to use those provisions only in cases that are appropriate. Indeed, there is supervision by the government itself, because with respect to some lists that are created, they're created by cabinet. They're not even created by civil servants.

The Chair: Any further questions, Mr. Jaffer?

Mr. Rahim Jaffer: I'm fine, thank you.

[Translation]

Mr. Ménard.

Mr. Réal Ménard (Hochelaga—Maisonneuve, BQ): Thank you, Mr. Chairman.

Mr. Roy, I was quite concerned when I heard your name associated with that of the Department of Finance during the introduction. I was tempted to call a point of order, but I realized that you still call the Department of Justice home.

I have three short questions, and, if I may, I will begin with the RCMP.

How many terrorist organizations are known to be operating in Canada? Secondly, when I sat on the subcommittee on organized crime, the amount of money laundered in Canada was estimated to be $20 billion. Does this amount still apply?

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Finally, could you please confirm that Mr. Peterson and his officials have only managed to confiscate a mere $150,000 worth of assets from terrorist organizations in Canada?

I still have other questions, Mr. Chairman.

[English]

Mr. Jim Peterson: For the first one I'll turn to Inspector Dave Beer.

Are you going to tell us precisely how many terrorist organizations there are in Canada?

Mr. Réal Ménard: Don't be shy.

[Translation]

Mr. Dave Beer (Superintendant, Proceeds of Crime Branch, RCMP): I would like to give you a specific number, but you will have to ask CSIS. I seem to remember having heard that it was between 25 and 30, but I am not sure.

Mr. Réal Ménard: Maybe Mr. Peterson knows, but to your knowledge, has the RCMP drawn up a list of terrorist organizations and, to help us understand, could you give us two or three examples?

There is obviously a link between money laundering and terrorism. Would $20 billion sound about right? What is the value of the assets that have been seized since OSFI issued its guideline? Mr. Peterson must have the answer, and I am sure he would like to share it with us.

Mr. Jim Peterson: I would like to deal with the amounts that have already been frozen. The amounts that we have made public represent a figure of about $150,000.

Mr. Réal Ménard: That isn't very much.

Mr. Jim Peterson: That being said, we have received a report from the superintendent which we are discussing with his office, as well as with financial institutions and with the RCMP in order to confirm the amount, and more specific information will be forthcoming within a week.

Mr. Réal Ménard: So you have managed to freeze slightly more than the salary of a member of Parliament.

Mr. Jim Peterson: Well, it depends on the member. The Liberal members earn much more than that.

Mr. Réal Ménard: Yes, that's true, and we ask ourselves why.

Mr. Jim Peterson: Perhaps Mr. Le Pan can give you an answer.

Mr. Nicholas Le Pan: Mr. Chairman, I don't know if it is better to freeze a large or a lesser amount. It all depends on how you see it, but the question implies that the amount we have stated is not large enough.

As I have just said, I am convinced that the financial institutions have taken their responsibilities very seriously and have acted with the utmost care. The amount affected by these regulations can vary from one day to the next. That is just how it is. There are a number of reasons why this amount does not remain static.

Mr. Réal Ménard: If I may, I would like to follow-up on the issue of money laundering. We are told that $20 billion worth of funds are laundered here in Canada. You are right in saying that we can either be ecstatic or despondent. What we can do is wonder whether or not C-36 is excessive in view of the threat that exists. Each one of us is free to interpret the situation as we see fit, but there has to be a relationship between terrorism and money laundering. If $20 billion worth of funds are laundered but you have frozen $150,000, then there is something missing in this picture. Can you tell us a little about the money laundering operations and what information you might be able to share with the committee in order to help us better understand? My question is to the RCMP.

Mr. Jim Peterson: Mr. Beer.

Supt Dave Beer: There are three parts. First, we must understand that terrorist organizations, by definition, are involved in organized crime. We know that the amount of money laundered in Canada on an annual basis is between $5 and $17 billion.

Mr. Jim Peterson: That is an estimate, we can't be any more specific.

Mr. Réal Ménard: No, of course.

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Supt Dave Beer: With respect to the amount of money that we have identified so far, it is rather difficult to do because the United Nations list includes mainly people who are not in Canada. The challenge, for us, is to identify those who transfer money to the people whose names are on the list. I am convinced that after an investigation, we will uncover a second group of people who are involved in moving the money into the hands of those whose names are now on the list, and the names of these people will one day be added to that list.

Mr. Réal Ménard: Are you going to release the list of groups? It is all fine and well to read reports by the Canadian Security Intelligence Service and the RCMP, but everything is so general that it could mean almost anything. I am more or less visiting this committee, but my only objective is to serve, Mr. Chairman.

I do not know if we could have the list compiled by your services. I am not asking you for names, because I do not want to be indiscreet, but I would like to know how many individuals are facing a seizure of assets. If you had to give us an order of magnitude for the individuals whose assets will be seized in Canada, what number would you give us? I do not want to be indiscreet, but we need to fully understand the situation.

[English]

The Chair: While they confer, Mr. Le Pan, you wanted to make a comment?

[Translation]

Mr. Nicholas Le Pan: I want to point out something else. You have to compare apples with apples.

[English]

I think the kinds of numbers we were talking about earlier, comparing billions to $150,000, really is missing the point.

One is the whole issue of proceeds of crime, in total, versus what may be happening on a specific list of people relative to terrorist financing, where there are appropriate levels of detail of processes that have to be gone through before financial institutions, as we talked about earlier, should properly freeze assets. So the question, I think, was comparing a little bit one with the other in an imperfect way.

[Translation]

Mr. Réal Ménard: Mr. Le Pan, be careful. If I have understood correctly, the figure put forward by your colleague from the RCMP dealt with money laundering, and not all of the proceeds of crime. I will repeat my question. You want to compare apples with apples and pills with pills, but my question dealt essentially with money laundering. You have told us that it is between $5 and $17 billion.

[English]

The Chair: Very quickly, because we have other questioners.

[Translation]

The Hon. Jim Peterson: It is not the same thing.

Mr. Yvan Roy: I think, Mr. Chairman, that it is important to clarify this. The $5 to $17 billion amount that has appeared in certain publications is a figure covering everything involved in money laundering. It includes organized crime, petty crime and possibly terrorist activities.

When we talk about $150,000 and compare it to $5 to $17 billion, it obviously does not seem like very much. However, the two things are completely different. What we have to compare is the amount that we can identify as having been earmarked for terrorism financing. In that regard, I am not aware of any data, none at all. We do not know what that amount is. So it is difficult to make the comparison.

Mr. Réal Ménard: But it is not unsound.

Mr. Yvan Roy: I would even say that it is impossible.

[English]

The Chair: Thank you very much for clarifying that, although it was made evidently clear to us that you were talking about.... I think the issue you raise is very clear to most people around the committee.

Mr. McCallum.

Mr. John McCallum (Markham, Lib.): Thank you, Mr. Chairman.

I have maybe three questions.

First, the minister stated:

Financial intermediaries will have to report to FINTRAC any financial transactions that they suspect are related to terrorist financing offences.

Well, as one who used to work for a bank, I know the banks will do their best to do that, not only because they're subject to going to jail if they don't but also, if you think back to September 11, many of the people killed were bankers. So I've every confidence that the banks will do their best.

My question is, how are they supposed to do this, to report financial transactions they “suspect” are related to terrorist financing? If it's on the list, that's one thing, but if you picture yourself as a front-line teller—underpaid, overworked, and not terribly sophisticated about terrorism—how is that person supposed to know if some transaction or deposit is suspicious, whether it's related to terrorism or money laundering? How is an individual teller going to pick up the suspicious from the unsuspicious?

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Mr. Jim Peterson: I'll start the response to that very first-rate question.

First of all, there's a training program going on involving FINTRAC and the financial institutions working together. Yes, it does impose added onus on employees of financial intermediaries. We have set what we feel is a reasonable standard, that it has to be on reasonable suspicion, which is basically an objective standard.

Recognizing the added onus, I'll turn it over to Mr. Roy, or Mr. Intscher.

Mr. Horst Intscher (Director, Financial Transactions and Reports Analysis Centre of Canada): Thank you.

With respect to the requirement to report transactions suspected of being connected to money laundering, we, as well as our colleagues from Finance Canada, have worked very closely with the financial industry, with CSIS, with law enforcement, and with our international partners as well to develop a list, or a series of lists, really, of potential indicators of suspicious activities. These were issued in a guideline that has been made available to reporting entities.

With respect to terrorist financing, I think the development of suspicion will be even more complicated for financial institutions, as you rightly point out, but we are, and will be, working closely with them, as well as with our colleagues in CSIS and with international groups who are engaged in similar activities to ours to try to develop as comprehensive a set of guidelines as possible that will assist financial reporting entities to make that kind of a determination or to detect activity that might be suspected of being connected to terrorist financing.

This is a work in progress, as is the development of guidelines for money laundering. Those will be updated as we become aware of new techniques, aware of new factors.

For example, when a financial institution discovers a transaction by someone who is in some way connected to a listed organization, or a listed individual, that would certainly be an element of suspicion that they would want to take into account. However, we will try to develop a fairly comprehensive guideline to assist reporting entities to make that determination.

You are absolutely right in pointing out that it will be difficult to make that determination, but we're getting excellent cooperation from financial institutions, and I think we will devise the means of making it possible for them to make those sorts of reports to us.

Mr. John McCallum: Would I be correct to infer from your answers that suspicions of the front-line teller are not really the main thing you're relying upon to find terrorists, that rather it's a list of names that hopefully will expand over time to broaden the net?

Mr. Horst Intscher: Well, I think we would be relying on the suspicions of the front-line teller, but also suspicions of other officers in financial institutions, including the compliance officers and the security officers and others who review transactions within a financial institution.

Mr. John McCallum: Okay.

In this committee a while ago, before the summer, we were looking at this bill on tax deductibility of charitable contributions. A number of us had some concerns that if it's contributing to terrorism, you shouldn't just not be allowed to tax-deduct it; you shouldn't be allowed to do it at all. This question might reflect my misunderstanding, but now I thought we were, having this bill, making it illegal to give money to terrorists.

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If we have a bill that makes it illegal to give money to terrorists, why do we need another provision that makes it non-tax-deductible? Or am I missing some point?

Mr. Yvan Roy: It is true that between the two regimes being created there is a certain amount of overlap. It is possible, under the standard that exists here in the bill, to prosecute someone for financing terrorism. There is a provision that you have to do that knowingly, and it has to be proved beyond a reasonable doubt.

I think there are going to be some cases, Mr. McCallum, where that standard will not be achievable by the state. We will not have the evidence, or we will not have the evidence that is sufficient to prove that beyond a reasonable doubt. I think in those circumstances Canadians, and the Canadian state, will want to be able to do something about some organizations that perhaps are abusing the system by diverting to the financing of terrorism some of the resources contributed by people. In those circumstances, it's going to be useful to have the piece of legislation we're talking about—to get rid of the possibility for these organizations to continue their activities.

Let's not forget, that portion of the bill, that new piece of legislation, is not only removing the possibility of getting a tax deduction, but, as well, the organization that is going to be certified, or de-certified, de-registered, has under the legislation a year to either clean up their act or to transfer the assets to a legitimate charity. If they do neither of the first two things, they will be taxed for 100% of the assets they have. In other words: expropriation.

So it's not as though the two regimes cannot coexist. I think they should coexist, actually, and it will depend on the circumstances as to which one is going to be more appropriate for the state to use again, to make sure we're targeting the terrorism and targeting the nerf de la guerre, which is the financing.

The Chair: Any further questions?

Mr. Tirabassi, do you have a question?

Mr. Tony Tirabassi (Niagara Centre, Lib.): Not at the moment, Mr. Chair.

The Chair: Mr. Kenney or Ms. Gallant.

Go ahead, Cheryl.

Ms. Cheryl Gallant (Renfrew—Nipissing—Pembroke, Canadian Alliance): Thank you.

In the event that frozen funds are absolutely determined to have been intended for terrorist activity, once the money is seized what mechanism is in place to ensure that the money will go directly to fighting further terrorism?

Mr. Jim Peterson: We have not linked that. Any money seized by the federal authorities would go into the consolidated revenue fund. If it's seized by provincial authorities, it would go into their revenue funds.

Our commitment to funding the battle against terrorism is, I think, pretty evident in the new expenditures we have made in this regard, with $280 million already announced. And combine that with...the total being $1.8 billion in the last year that we've devoted to enhanced expenditures for defence, security, and combatting terrorism.

Ms. Cheryl Gallant: So there's no direct channelling of these funds towards the agencies that are expected to fight this.

Mr. Jim Peterson: No, we don't think they should have to work on commission.

Ms. Cheryl Gallant: So it's not a bonus to them either, then, in the way that it has worked in other countries.

Mr. Jim Peterson: No, we think we've funded them adequately. If that doesn't prove to be the case, they'll come back to us. We've said that we will make the security of Canadians our priority, and we shall. If you have evidence that they're not capable of doing their job, I would certainly welcome hearing from you.

Ms. Cheryl Gallant: This legislation focuses on financial institutions, but we know that there are underground banking systems. What steps are being taken to fight, for example, the chit system, whereby money is transferred from one country to another, including inside Canada, outside the official banking institutions?

Mr. Jim Peterson: That's a very good question.

We refer to these other systems outside the usual financial intermediaries as being alternative remittance systems. They are, in our opinion, caught by this legislation.

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That said, with their obligation, under full penalty of law, to comply, I can't sit here and tell you that we are going to be able to find every one of these that's operating. I think a lot of that fight is going to come from citizens who are going to come to us and say, do you know that some very suspicious financial transactions are taking place? We have every intent to try to track them down.

Perhaps Inspector Beer can add a few thoughts on this.

Supt Dave Beer: You're absolutely right, these systems do exist, and they are very challenging for us. The extent to which they are outside the normal financial systems, and even, to a certain degree, what we call alternative remittance systems, poses a challenge.

That said, we are able to pursue these during the course of a normal investigation in organized crime. Albeit it is a challenge, we have no reason to believe we'll be any less successful in doing that now than we have been in the past. They have existed for some time. We've been faced with them in an investigation of organized criminal activity for some time, so it's certainly not new to us, and we do recognize the challenge.

Mr. Jim Peterson: Part of the international approach, of which we are part through the financial action task force, will be try to find ways to deal with these ARS groups.

Ms. Cheryl Gallant: Okay.

In Ontario, for example, Premier Harris has brought in various initiatives to fight terrorism, particularly in policing. What steps is the federal government taking to ensure that there is not a duplication and that you're working together to maximize participation?

Mr. Jim Peterson: Let me say this: The federal government welcomes any added initiatives taken by the provinces to assist us in either combatting money laundering or the financing of terrorists. We are very happy to have that.

Who would like to answer the question of coordination? Inspector Beer.

Supt Dave Beer: I have 28 years of service in the RCMP, and unquestionably, the last eight weeks since the tragic events of September 11 have been unprecedented, in my experience, in terms of cooperation and collaboration, both inside and outside the police community and in the private sector, including with the Canadian Bankers Association, in terms of fighting money laundering and the movement of terrorist funds.

So the level of collaboration and cooperation is absolutely unprecedented, and I have absolutely no hesitation in saying that.

The Chair: Thank you, Ms. Gallant.

Monsieur Godin.

[Translation]

Mr. Yvon Godin (Acadie—Bathurst, NDP): Thank you, Mr. Chairman. I want to welcome our guests.

I have several questions. For how many years has the government known that there are terrorist groups in Canada? How many groups had been taken to court before the events of September 11, 2001, when the world received a wake-up call?

Supt Dave Beer: According to security organizations in the country, there have been terrorist groups in Canada for several years, or at least groups that support terrorists. I think that is clear.

I am sorry, but I have forgotten your second question.

[English]

Mr. Yvon Godin: I asked how many years the government knew about those terrorist groups, and whether the government or the authorities had caught any of them and done something with them before September 11.

Supt Dave Beer: I think perhaps that's a question more properly directed to CSIS, but I also think it's fair to say that the government has been aware that there have been supporters of foreign terrorist groups in the country for some time. I know that CSIS has been diligent in their investigation and surveillance of those groups.

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Mr. Yvon Godin: Last night I was listening to the news, and I was very shocked to hear about a young person who was killed at the age of 17. I mean, we have a motorcycle group that.... I don't know if we can call them terrorists, but they surely put terror into many Canadians. It seems to me that the government could do something about them. I'm not going to get into it here, but I don't mind going on record as saying that it's a real shame, and that we're not doing a good job.

[Translation]

As for money laundering, we are talking about financial institutions, but rumour has it that a lot of money is laundered in casinos. Has the government taken steps to look beyond financial institutions?

Supt Dave Beer: You are correct. That is why casinos are included in the bill.

Mr. Yvon Godin: Here's my last question. I am going to leave my colleagues the opportunity to ask some questions as well.

[English]

How does one draw the line between a terrorist and a freedom fighter? I'll give you an example. Under this law, would groups raising money for Nelson Mandela have been considered terrorist-financing?

[Translation]

The Hon. Jim Peterson: Mr. Roy.

Mr. Yvan Roy: Mr. Godin, you are leading us to the definition of what constitutes a terrorist act. The difference between the two is in the means.

When you use means that are violent in nature, that go as far as murder, and you do so for ideological purposes, with a view to terrorizing people or part of the population, you are committing an act of terrorism. That is set out in the act.

Freedom fighters who try to achieve their end democratically, who take part in demonstrations, who try to change people's minds through discussion and by expressing their deepest beliefs, will never be considered members of groups involved in terrorist activities. Once people take action for ideological purposes with the objective of terrorizing part of the population, and once you use violence to achieve your ends, you are covered by this legislation.

Mr. Yvon Godin: There was a fence at the Summit of the Americas. How do you define the people who climbed the fence? How would you define people who climb fences to defend their views? Would you define them as terrorists? What they did could be considered violent, but that may be going a little too far. How do you view this?

Mr. Yvan Roy: Mr. Chairman, this is not about a little violence or shaking a fence. Those are not terrorist activities. The bill is clear and does state that the activity must be serious in nature.

In addition, I think you and I would agree that individuals who use demonstrations of this type to fire weapons at people are engaging in a terrorist activity. It is all a question of degree. Peaceful demonstrations or even demonstrations that go somewhat beyond being peaceful would not be covered by these provisions. The purpose of the provision is not to get at this type of behaviour, and it is careful not to go beyond the limits I have just described.

I would add that the definition referred to here is one used elsewhere, for example, to a large extent in the International Convention for the Suppression of the Financing of Terrorism. That leads me to respond briefly to the question you were asking earlier as to how long we have known...?

The International Convention for the Suppression of the Financing of Terrorism has been available for ratification since December 2000. To date, only four countries have ratified it, and Canada will be one of the first to do so if this bill is passed by Parliament. I do not thing we are behind other countries.

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[English]

The Chair: Thank you.

Mr. Kenney, and then we'll go to Mr. Tirabassi.

Mr. Jason Kenney (Calgary Southeast, Canadian Alliance): Thank you, Mr. Chairman.

My first question relates to the chronology the government followed in terms of regulations, and now the legislation, on the financing of terrorism.

Minister, in your statement you outlined the regulations that were passed under the United Nations Act, first regarding Osama bin Laden and his associates, I believe, on September 21. My question is, when did the government pass regulations, in accordance with the United Nations Act, freezing the assets of organizations listed in the U.S. executive order?

Mr. Jim Peterson: That was done by regulation on February 22, 2001.

Mr. Jason Kenney: But that was with respect only to Osama bin Laden, not with respect to some 35 other organizations.

Mr. Jim Peterson: No, you're right, that was with respect to Osama bin Laden and Taliban assets. It was on November 10, 1999, that Canada implemented resolution 1267 by issuing the United Nations' Afghanistan regulations.

Mr. Jason Kenney: But again, that was with respect only to.... You see, my concern is this. On September 25 in the House, I asked Minister Martin whether the government has the power under legislation to seize and freeze the assets of such groups as Islamic Jihad, the Armed Islamic Group, and Hamas, all of which, according to CSIS, are operating in Canada. He said the government did, but it wasn't until some time later, I think on October 12, that in fact the government published new regulations under the United Nations Act freezing the assets of organizations such as Hamas and the Armed Islamic Group and Islamic Jihad under the U.S. executive order.

Is that correct?

Mr. Jim Peterson: Let me say this: We did have in place regulations that allowed us to freeze the assets of the Taliban or Osama bin Laden or his associates during the month of September.

Mr. Jason Kenney: Right. My concern is with broadening the net. Other organizations' assets were frozen by Canadian regulations, if I'm not mistaken, identified by President Bush in his executive orders. Correct?

Mr. Jim Peterson: Yes.

Mr. Jason Kenney: My question is, if the government has the statutory power already to freeze those assets through those regulations, then what new power is granted by this legislation that it doesn't already have?

Mr. Jim Peterson: Let me try to answer, and then Mr. Roy will help me.

Up until October 2, we had the power to seize Taliban and Osama bin Laden. As of October 2, we were able by regulation to expand that capacity to other terrorist groups, to be able to freeze their assets. And then in this law, which we're asking you to look at, we're asking for the power to, among other things, seize all terrorist assets.

Do you want to add to that?

Mr. Yvan Roy: I'm not sure I can actually improve on the answer given by the Secretary of State. However, perhaps I can add to what took place with respect to the order you're talking about.

The order by the President of the United States was done on September 23, which was a Sunday, but came into force at midnight on September 24. What the government was capable of doing was using the United Nations Act for the purpose of passing regulations, the purpose of which is to allow for the freezing of those assets with respect to all of these organizations. What the government did was pass that set of regulations on September 25, which became law at midnight on that day.

So we were basically 24 hours behind the United States. As you can well appreciate, in order to make that order the government had to satisfy itself that these groups would be covered by our legislation.

Mr. Jason Kenney: All right.

My second main question is, by what criteria will Canada continue, as necessary, to add organizations to the list of organizations so identified? I know the criteria under the legislation, but so far we've essentially piggybacked on either orders of the UN Security Council or U.S. executive orders. Do you foresee an independent assessment, according to the criteria outlined in the legislation, for other terrorist organizations?

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I have a follow-up from that.

Mr. Jim Peterson: Absolutely. And I think it's a very good point. We fully expect that we will be generating additional lists, both on our own and, as is most likely, in consultation with our international partners. I think this is the way it's going to work best. It may originate from our security forces, it may originate from theirs.

Mr. Jason Kenney: But how is this determination made?

Mr. Jim Peterson: Under the law it will be made by the Governor in Council, who will have to be acting on the basis of reasonable evidence available.

Mr. Chair, can I just say something here? I'd like to take this opportunity to do so.

We were able to respond so quickly on September 21 and 25, with notices going out to our financial institutions and everything else, because of the superb, superhuman efforts by our officials in the government. I want to use this occasion to thank them, because they were working around the clock for many, many days.

Mr. Jason Kenney: I'd like to second your commendation, Minister.

Finally, you've identified that in fact it's the Governor in Council...to cabinet who will determine the additional groups to be added to this in accordance with the legislation. Is there any provision for ministers who may have had some historical association with organizations that are under investigation, to recuse themselves from that decision-making process?

I refer in particular to Minister Martin's assistance at a fundraising event held by the Federation of Associations of Canadian Tamils last year, an organization identified by CSIS, I understand, the U.S. State Department, and indeed the Attorney General of Canada, in documents filed at court, as having associations with the Liberation Tigers of Tamil Eelam, which of course is listed throughout the world as a terrorist organization.

Would Minister Martin have to recuse himself from decisions affecting the listing of that organization as a financier of terrorist activity?

Mr. Jim Peterson: As is the usual course, it will be the Solicitor General who is involved in this decision.

And let me assure you, I have known Mr. Martin for a very long time, and I have never met anyone who's conducted himself in public life with such honour.

Mr. Jason Kenney: Do ministers have to recuse themselves or not?

Mr. Jim Peterson: I'm not going to answer that question.

The Chair: Thank you, Mr. Kenney.

Mr. Tirabassi.

Mr. Tony Tirabassi: Thank you, Mr. Chairman.

My question is to the minister. Certainly since the events of September 11 the government has moved quickly and effectively on several fronts, be it national defence to meet and cooperate with NATO, making sure our forces were able to deliver a very commendable assistance in this fight against terrorism; be it the transport department, with airline and airport security and the measures they've taken there; or be it the Prime Minister setting up the cabinet committee on security.

Regardless of much of the fear-mongering that's gone on, and the exploitation of this particular issue for gains, I think average Canadian citizens, people who deal with banks, would like to know that when they attend their bank, whatever it may be, their bank is serious about identifying any accounts or transactions that may feed terrorism and that cooperatively the government will move in to assist the bank to seize those assets and indeed cut off the pipeline to this terrorist group.

What assurances can you give that indeed this government is very serious about this?

Mr. Jim Peterson: We're very serious. The front line in the battle against the funding of terrorists and money laundering is our financial institutions. We have asked them to join with us in this battle against money launderers and terrorists. We're not paying them one cent to do so. We have not had to coerce them to do so. They have come to the table voluntarily, and with a great deal of alacrity.

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I am very impressed with the way they have responded, even though it means a large additional burden on these institutions. I have every expectation that in Canada they will continue to cooperate with us in the same manner.

The Chair: Further questions, Mr. Tirabassi?

Mr. Tony Tirabassi: No.

The Chair: Okay.

Minister, you opened by saying that it has now been a little more than six weeks since the terrible day when terrorist attacks against New York and Washington claimed thousands of lives. All of us, no matter where we live, have been affected by this tragedy. I think your comments encapsulated really the essence of what we heard as we travelled—to Vancouver, Edmonton, Winnipeg, Montreal, Halifax, and indeed Toronto—to seek input, as the finance committee, on the next budget.

There's no question in our minds—I think a consensus already has emerged among committee members—that indeed our number one priority has to be the issue of national security. There's no question that's the immediate priority.

What we sensed from Canadians from coast to coast was that they want to get a sense from people like you, who are really dealing with this issue every day and taking a leadership role, that in fact we are meeting our objectives as a government, and government agencies, in dealing with the national security issue. They want to restore a sense of security for themselves and for their families.

You now have an opportunity to address those individuals. What would you tell them? Are you meeting your objectives since September 11? How are the plans evolving? What is the status of this major national security initiative?

I think Canadians need to hear from you.

Mr. Jim Peterson: That's a very good question, Mr. Chairman.

I'm very pleased with the part of the fight against terrorism that we have been able to implement in terms of trying to wipe out terrorist funding. That goes right back to the edicts that have gone out from OSFI to our financial institutions, and the cooperation we've received from them. It involves being able to expand the network that we were able to put in place from Taliban and bin Laden to all terrorist groups. And it goes to the drafting of this Bill C-36—in very quick time, I think—which will be implementing additional aspects and giving us new tools to fight the funding of terrorism.

So from that point of view, we look forward to the passage, as quickly as possible, of Bill C-36 to give us those added tools we're going to need.

I also want to say something that I know you've talked about, Mr. Chairman. It's based on an experience I had earlier this week with Ms. Helen Liddell, Secretary of State for Scotland. She'd been very much associated with the treasury department in the United Kingdom. She was in my office, and I asked her, “How do you recommend that we try to cope with this new reign of terror we've found ourselves in as Canadians?” She had explained to me how those in the United Kingdom had gone through this reign of terrorism, from the 1970s, with the threats of bombs going off.

She replied that the vast majority of Britons had long ago determined that the best way to fight terrorism was to live their normal lives—their normal lives, yes, but with, of course, an enhanced sense of vigilance.

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I certainly know you've talked about this, as have others, that probably the greatest blow we can deal to terrorism is to not let them set our agenda.

In conclusion, let me again pay tribute to the terrific team of public servants that has been working with us on this, and let me pay tribute to the efforts of this finance committee, under your very capable chairmanship, a committee of which I have such very fond memories.

Thank you, Mr. Chairman.

The Chair: Thank you very much, Minister.

On behalf of the committee, I want to thank everybody who participated today. You have certainly given us a great update on what is going on at the government level. More importantly, I think, you also have given us an opportunity both to tell Canadians that work is indeed being done on their behalf and to reassure them, to give them the sense of security they all seek during these very challenging times.

Thank you very much.

Meeting is adjourned.