Welcome, everyone, to this 56th meeting of the Standing Committee on Access to Information, Privacy and Ethics.
Pursuant to a standing order and our previous motion, we are glad to have with us today representatives from FINTRAC for a briefing session. From the Financial Transactions and Reports Analysis Centre of Canada, we have Mr. Gérald Cossette, director, who has been here before; and Barry MacKillop, deputy director, operations, compliance and intelligence.
Thank you for coming, Barry.
We also have with us Mr. Paul Dubrule, general counsel.
Gentlemen, we thank you very much. We have about an hour to discuss the items that we would like to address. If you would like to start with an opening set of comments—I'm assuming that it's you, Mr. Cossette—we'll then proceed to some questions. Once we're satisfied with that, or if an hour elapses, whichever happens first, we'll be finished with this.
Mr. Cossette, the floor is yours.
Thank you, Mr. Chair, for inviting us to speak with you regarding our handling of an access to information request in relation to the penalty that FINTRAC levied against a Canadian bank in 2015.
As Mr. Chair just mentioned, I am joined today by Barry MacKillop, our deputy director of operations, and Paul Dubrule, our general counsel.
I would like to take a couple of minutes this afternoon to describe FINTRAC's mandate and the role we play in helping to protect Canadians and the integrity of Canada's financial system. I will then explain our administrative monetary penalty program and the decision I took in relation to the penalty imposed on a Canadian bank.
FlNTRAC was created in 2000 by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. As a financial intelligence unit, FINTRAC facilitates the detection, prevention and deterrence of money laundering and the financing of terrorist activities, while ensuring the protection of personal information under its control.
The legislation creates obligations for financial services entities, real estate brokers, money services businesses, casinos and other business sectors subject to the act to establish an internal compliance program; identify clients; monitor business relationships; keep certain records; and report specific types of financial transactions to FINTRAC, including suspicious transactions and international electronic funds transfers of $10,000 or more.
As part of Canada’s anti-money laundering and anti-terrorist financing regime, FINTRAC houses both supervisory and intelligence functions, which allows it to effectively assess and ensure the compliance of regulated businesses and produce financial intelligence for its police, law enforcement and national security partners.
Over the past year, we provided 1,655 disclosures of actionable financial intelligence to our police, law enforcement and national security partners to assist their investigations of money laundering, terrorism financing and other threats to Canada's security.
Our financial intelligence has become increasingly valued by our partners as lead information to expand or define their investigations, and to obtain search warrants and production orders to gather information in pursuit of criminal charges.
For example, just a few weeks ago, FINTRAC's contribution to Project Silkstone was singled out by the Ontario Provincial Police following the arrest of a number of individuals for allegedly trafficking 11,500 pills containing fentanyl and other illicit drugs in Ontario, Quebec and the United States. This is just one example of many dozens over the past couple of years where FINTRAC’s assistance in helping to protect Canadians was recognized by our police and national security partners.
In December 2008, FINTRAC received the legislative authority to issue administrative monetary penalties to businesses that are in non-compliance with their obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its regulations.
I want to be very clear that as set out in the act, the penalty regime is focused on changing the behaviour of entities to bring them into compliance. It is not to punish them for laundering money.
There are other measures in place should FINTRAC have reason to believe that businesses are facilitating, or are knowingly being used to launder money or to finance terrorism. These include non-compliance disclosures to police. This was not appropriate when we penalized the bank for administrative deficiencies last year.
Under the act, the centre may publish specific details of a penalty imposed once all proceedings in respect of the penalty have concluded. This means that all avenues of review and appeal, including court proceedings, have been exhausted. FINTRAC has established and published criteria to guide its decision-making in relation to the naming of businesses that are subject to a penalty.
These internal criteria, however, do not supersede the authority that Parliament afforded FINTRAC's director under section 73.22 of the act to publish or withhold the name of a business that has been penalized.
When we penalized Manulife for non-compliance with the act, I exercised my discretion to withhold its name. I did this because of the administrative nature of the violations. Again, the violations committed by the bank were not in relation to money laundering or the financing of terrorism. In making my decision, I also took into account the mitigation measures the bank had taken in this case.
At the same time, by deciding not to name the entity, we were able to avoid a potentially lengthy court process. We have found that court proceedings often take many years, with information usually being sealed and outcomes uncertain. By not naming the entity, we sent a timely message of deterrence to the other 31,000 businesses subject to the act.
In responding to numerous access to information requests in relation to this penalty, we had to take into account the fact that the bank's name had been withheld, and that we had signed a legally binding agreement with Manulife in order to conclude court proceedings. This meant that FINTRAC had to exempt details from information released under the Access to Information Act that would potentially identify the bank. The centre also withheld confidential proprietary information that was supplied to it by the entity.
As well, we were aware that the name of the entity was known. However, FINTRAC couldn’t confirm this. As a result, the Centre took care to exempt details of its assessment of the bank's non-compliance that, if released, would prejudice the competitive position of, or cause financial loss to, the entity. This is not the intended purpose of the penalty regime, which, I repeat, is non-punitive.
From the increased reporting that we’ve received from businesses across the country and the discussions that we’ve had with them following the publication of the penalty, I believe our message of deterrence was heard very clearly.
However, improvements can always be made. On that note, I’ve acknowledged the need to work with Finance Canada to review the legislation in relation to our penalty program. We’re also currently examining our administrative monetary penalty policies to ensure they strike an appropriate balance between the need for transparency and the requirements of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
Thank you, Mr. Chair. We’re now ready to answer your questions.
It's difficult to assess if it is one for one.
What we know for a fact—and we could provide you with numbers for it—is that we see now and have seen over the recent three to five years a significant increase in the number of the suspicious transaction reports we receive. Last year, we received 125,000 suspicious transaction reports, which are really the bloodline of what financial analysis is all about. Therefore, if the purpose of the regime—and indeed this is the purpose of the regime—is to provide intelligence to our law enforcement partners and our national security partners, the first provider of that information is the private sector. It is the 31,000 businesses that contribute to the regime.
Every increase in quality and every increase in the timeliness of these transaction reports we receive is of greater value to the regime. That's what we've seen over recent years: numbers, timeliness, quality, and openness. If we want to talk about the relationship that we have with the banking sector right now, for instance, we have participated in a project called “Project Protect”. It's not the project that is of interest to us—it's that it was initiated by the private sector, not by us. The relationship is changing, and the credibility of FINTRAC in that relationship is changing as well.
Sure. I can understand, especially with that court decision in the interim, that it changes the negotiating playing field, as it were.
Mr. Cossette, I think you rightly pointed this out when you spoke about the public's expectations regarding transparency and why you want to engage in a general review of the disclosure policy. When you take a step back, from the public's points of view, it strikes me that the public ought to have a right to know if their financial institutions have been penalized for non-compliance.
There are worries with respect to the application of discretion. My colleagues, Mr. Ehsassi and Mr. Blaikie, have indicated that there may be, by virtue of the ability to pay for high-powered lawyers, a disparity in the application of this discretion as it relates to small players and big players. Mr. James Cohen, from Transparency International Canada, says we should remove that discretion and clearly lay out the criteria for naming financial institutions so that it is publicly available.
Do you think that would be a fair way of approaching it, given your history of the exercise of this discretion and the policy since 2013?