It's a pleasure to be here at the committee. I want to thank the committee very much for the invitation to come to present to you today and to answer your questions. One of the reasons why I felt it was particularly valuable to take you up on this invitation is that I believe we have a very serious issue and are in need of concerted federal effort and assistance in dealing with it. I really wanted to bring that message to the committee personally.
I would like to share with you a few remarks and a bit of a narrative about my experiences in becoming a new minister in British Columbia. In July, I was sworn in as Attorney General with responsibility for gambling. That was really when my eyes were opened about some of the activities that have been taking place in British Columbia.
It was on one of my first days as minister responsible for gambling that I was briefed by our provincial regulator as part of the briefings I received as the new minister responsible. The first words that I heard at that briefing from a member of our regulator, the gaming policy and enforcement branch, were, “I think we are going to blow your mind.”
Mr. Chair, I can say that my mind was, indeed, blown. The regulator walked me through extensive and overwhelming evidence of large-scale money laundering in Lower Mainland casinos. I was shown video and photographs of individuals wheeling large suitcases packed with $20 bills, others bringing stacks of cash to casino cages. I was astounded by the audacity of those involved. On a purely practical matter, $800,000 in twenties is very heavy. It looked like they were helping somebody move a box of books.
I was equally astounded that this activity had been taking place in British Columbia without an effective criminal, legal, regulatory, or policy response for almost a decade. There have been, to my knowledge, no related criminal charges or tax prosecutions to date related to the activity that I witnessed.
Suspicious cash transactions began climbing at B.C. casinos in 2009 following the defunding of B.C.'s provincial integrated casino policing team. Large, suspicious cash transactions continued unabated from 2009 until late 2017, when our new government instructed B.C. casinos that they should no longer accept large cash transactions when they didn't know where the cash was coming from. We're still not done yet in terms of solving this problem.
I retained anti-money-laundering expert Dr. Peter German, a former senior RCMP officer and the author of Canada's leading textbook on anti-money-laundering law, who has been investigating and reviewing what has happened in British Columbia. He will advise me in a report that I will receive at the end of the month about how the province, at the provincial level, can address this problem.
At the federal level, I would really like this committee to understand the colossal nature of the regulatory failure that took place and, frankly, may still be taking place in British Columbia. The issue in British Columbia is so notorious and so severe that I was briefed on an international intelligence community training session in which international intelligence members were taught about something called the Vancouver model of money laundering.
We are famous internationally—or, more accurately, we have become infamous—for money laundering.
In the Vancouver model of money laundering, a wealthy individual from China, a country with strict currency export controls, wants to gamble. A gangster will meet that gambler at a casino, offering cash in amounts as high as hundreds of thousands of dollars. In one transaction, it was $1.2 million in cash. The cash is the proceeds of gang crime. To pay for the cash, the gambler agrees to transfer money in China from his bank account into a bank account under the control of the gang. The gambler walks the illicit cash into the casino, completes a FINTRAC reporting form, buys chips, gambles, and on leaving, either cashes out, receiving a cheque, or carries the chips out of the casino.
In sum, the criminal gang has successfully laundered difficult-to-manage twenty-dollar bills, moving the money out of Canada while keeping their names off of FINTRAC forms. Those involved in the transaction can truthfully report that everyone is following all of the reporting rules. FINTRAC will aggressively audit and confirm that the reports have been made accurately.
The only real evidence of a problem is a guy lugging a hockey bag full of $20 bills into the casino. You might think that this alone would be enough to start a police investigation or a Canada Revenue Agency investigation. It has not been. B.C.'s casino policing team was funded again and resurrected with a better mandate in 2016 and is now, unsurprisingly but thankfully, involved in a massive transnational criminal investigation.
I'd like to thank those who work at FINTRAC. I believe they collect critically important information and ensure it is accurate. The issue is not their fault, but there is a problem. An anti-money-laundering system that rigorously enforces compliance with reporting but does not have an enforcement arm puts a sheep mask on a wolf's face. While I know it is not true, I picture submitted FINTRAC forms being picked up by a lonely person at a fax machine in a giant warehouse, who puts the reports into boxes, and the warehouse is filled with boxes from floor to ceiling as far as the eye can see. Although this is clearly not the actual situation, it may as well be true given the apparent lack of action in British Columbia taken with regard to casino money launderers.
Unfortunately, the impact of FINTRAC reporting in B.C. has been that any criticism of allowing massive cash transactions with money from unknown sources is answered simply by, “We comply with all federal anti-money-laundering reporting rules.” I have no confidence that any enforcement or investigation action would result from a report submitted this afternoon with the words “highly suspicious” in all caps and triple underlined. In fact, I believe the current reporting system actually reduces the possibility of action, because the individual completing the form would mistakenly believe that writing “highly suspicious” on the form and then submitting it was the same as reporting it to police. It is not the same.
Unfortunately, if FINTRAC has been concerned about a lack of action on its reports, it has been unable or unwilling to speak publicly about that lack of action. That needs to change. British Columbians take no comfort in the suggestion that this is somehow limited to casinos.
We will be asking Dr. German to take on a second phase, this time looking into real estate, following highly publicized reports of a link between money laundering and our real estate market in British Columbia. Dr. German has requested that I provide you with his interim federally focused recommendations, given the timing of your committee and the timing of his report. It's a little bit like getting the last page of the book without receiving the book itself. I do have the recommendations for the committee here for you today, Mr. Chair, but unfortunately I didn't receive them in time for them to be translated for the committee. I'm in your hands about the best way to ensure the committee receives them.
Important work with the federal government is happening behind the scenes. I'm grateful for that support from the federal government. I'm appearing here so that all members of federal parliament—and as much as possible, all Canadians—can understand why we are asking for more support from the Canada Revenue Agency, the RCMP, and other federal agencies. We certainly hope the federal Parliament supports any interventions that are proposed by the government.
Thank you, Mr. Chair.
I'll focus on the recommendations themselves.
For reference when you receive the official document, I'll start at paragraph 14, under the heading, “The Legal Profession”:
Without question, the absence of reporting by lawyers is a significant gap in Canada and is a significant impediment to police investigations involving the movement of money through real estate and other financial sectors. Canada is an outlier here as well. Other common law jurisdictions, including the United Kingdom, have robust provisions in place which require financial reporting by lawyers. Quite frankly, consultation has occurred for years. There is a real need for legislation which can withstand a Charter challenge and requires the reporting of monies held in lawyer trust accounts.
The irony is that in British Columbia, most personal real estate transactions are handled by notaries, who do report to FINTRAC. It is hard to rationalize why their handling of money should be treated differently than that of lawyers.
Under the heading, “High Risk Sectors”:
The consultation paper lists several businesses and persons to which legislation could be extended, through amendments to the POCMLTFA. It is something akin to 'whack a mole' as FinTRAC attempts to close gaps with vulnerable sectors that do not currently report. Of interest are the following:
Under the heading, “Par-mutuel or horse racing sector”:
—that's the gaming policy enforcement branch in British Columbia—
currently regulates this industry. I am not aware that B.C. has ever examined the prevalence of money laundering in the horse racing sector. Reporting requirements would certainly shed light on what is occurring.
Under the heading, “Auto dealers”:
It is well documented that the criminal lifestyle is often attracted to expensive consumer goods; such as luxury cars and pleasure craft. Due to their high value, these items are also excellent places in which illegal cash can be reintroduced to the legitimate economy during the integration phase of the laundering process.
Luxury items are of interest because there is no tracking by government of cash purchases. They are not reportable transactions to FinTRAC.
Vancouver has been described as the number one super car city in North America. Also, auto dealers in Greater Vancouver are among the highest new and used luxury car dealers in Canada, by sales volume.
In essence, an individual can walk into a luxury auto dealership and purchase a high-end vehicle with $400,000 cash. The only obstacle will be dealership policies.
An incredibly large number of 'curbers', unregulated intermediaries, are believed to be operating in B.C. and a vigorous awareness campaign is underway to alert British Columbians of the dangers inherent in dealing with curbers. The fact that these are all cash-based activities makes them extremely vulnerable to the introduction of dirty money.
Under the heading, “Company Service Providers”:
This high-risk sector is relevant to the issue of beneficial ownership.
Pardon me, Mr. Chair, but it's difficult to pull out the recommendations, because clearly they are part of a larger integrated document. Maybe I'll start a little earlier because I might be able to get through the two pages that would give some context.
On February 7, 2018, the released a public consultation paper with respect to PCMLTFA. Parliamentary committee hearings on the statute are taking place this month in Ottawa.
Since 1989, Canada's Criminal Code has contained the offence of laundering as well as possession of the proceeds of crime. In 1993, Parliament enacted a federal statute, which required financial institutions to keep records of certain transactions. That legislation was replaced in 2000 by the PCMLTFA—I'll call it the act from here on in—which has been amended many times since.
The act moved Canada from a recording to a reporting regime and created Canada's financial intelligence unit, FINTRAC. The legislation was a response to international commitments made by Canada.
Although the Criminal Code falls under the purview of the Attorney General of Canada, the Minister of Finance is accountable for the act. Approximately 100,000 businesses and financial institutions are now required to make large cash transaction reports and suspicious transaction reports to FINTRAC. Some industries have additional reporting requirements. In this regard, casinos must also make cash disbursement reports.
FINTRAC performs audits on reporting entities and does so every two years at B.C.'s casinos. It has the power to impose administrative monetary penalties. The largest penalty ever imposed with respect to casinos was meted out to BCLC in 2010. BCLC, the B.C. Lottery Corporation, appealed the administrative monetary penalty to the Federal Court. The case was resolved in 2016 in what is best described as a draw. By this time, FINTRAC was satisfied with the quality of BCLC reporting. In addition, its entire administrative monetary penalty structure had been called into question because of unrelated cases, which questioned the lack of objective criteria being used to determine the quantum of a penalty.
I'll skip ahead, Mr. Chair.
It is beneficial to review the latest FATF mutual evaluation of Canada's legislation, which points to various deficiencies in Canada's existing scheme. In the past, it has almost always been through this form of international peer pressure that substantive changes have been made to Canada's various criminal and other federal legislation related to proceeds of crime, money laundering, and corruption. The FATF review can be found at the link provided.
There are numerous references to casinos in the FATF report. I will not comment on the issues of beneficial ownership and whistle-blowers, with which the minister is already very familiar and which are covered in some depth in the consultation document.
Mr. Chair, I hope it was of some use to the committee to provide a little bit of an overview of the contents of that recommendation document. As I say, it is a piece of a much larger report that we're expecting to receive at the end of the month.
Thank you very much, Mr. Chair.
Thank you, Minister, for your report. Also thank you for very quickly, given the time that you've been in office, drilling down on an important and, I think, huge issue for Canada and certainly for British Columbia in dealing with the proceeds of money laundering and terrorist financing.
I really appreciate, also, how you pointed out the loophole we seem to have in terms of dealing with how the criminal element can be using casinos to launder their money. I'm very interested in something, though. You made passing reference to it, but it's also come out in a lot of testimony, and it came out in the Department of Finance report, as well. It's the question of beneficial ownership.
I was wondering if you could give us a sense as to what British Columbia is doing in terms of increasing the transparency regarding beneficial ownership, in terms of private corporations that are registered on the provincial books, and how British Columbia would like to see Ottawa work co-operatively with it to perhaps establish a Canadian registry.
Thank you, Minister, for coming from British Columbia and making the sojourn to be with us today.
You mentioned a number of areas where FINTRAC can be utilized in a different way to serve more than it currently does. They do important work. I've floated the idea of allowing FINTRAC, legislatively, to aggregate its data, so that policy-makers such as you in British Columbia can see the overall picture of how many cash sales are being done, which are perhaps not being picked up by Canada Mortgage and Housing Corporation or OSFI because they are provincially regulated mortgages.
I think that information is being collected now, but FINTRAC, legislatively, is not allowed to share information, beyond that for an individual case referred for investigation of terrorism, organized crime, or other money laundering. Would you be supportive, as a policy-maker from British Columbia, of seeing personal data being aggregated in such a way that it wouldn't affect any privacy laws but would give policy-makers such as you a better lens?
I was the critic responsible for gaming for a couple of years in opposition before becoming the minister responsible, and I raised the issue of large cash transactions in our casinos. The answer that invariably came back, whether it was from people in the industry or whether it was from government, was that everybody was adhering and there were extensive audits and reviews of the reporting regime, and that as a result we could all have confidence that money laundering was not happening, and that the proceeds of crime, to quote the former finance minister, were not welcome in B.C. casinos. Obviously that was not the case.
I unfortunately don't know what's happening in other provinces and I can't speak to that, but I have no reason to think that criminal gangs confine themselves to metro Vancouver or that they don't share information about how things can work. However, there are some significant differences when I look at, for example, Ontario, which has a much larger police force in casinos than we did in British Columbia. We didn't even have a regulator present in the casinos outside of Monday to Friday, 9 to 5. I'm sure none of the members in this House frequents casinos, but if you've ever found yourself in a casino—as I have on social occasions—it tends not to be Monday to Friday, 9 to 5. We needed to have the regulator in place in the casino evenings and weekends, which is when this activity was taking place.
I apologize for taking all your time with this answer, but we had a pretty unique situation in B.C. in terms of a lack of regulatory presence in our casinos and a provincial government that, in my opinion, did not take the actions necessary to clamp down on this. I hope it's not the case in other provinces, but I don't know.
I asked Dr. German to advise me about how we got to this situation in British Columbia. That's one of the questions he will be providing information about. There are some pieces that are already in the public domain.
In 2009, when our integrated casino team, which received $1 million per year in provincial funding, was defunded, there was a report prepared in advance of that to make recommendations about how to reform that team so it would be more effective. It advised the government, at that time, that there were criminal organizations operating in B.C. casinos, that they were laundering the proceeds of crime through B.C. casinos, and that there were extensive illegal gambling houses in the Lower Mainland. The government decided to move ahead with the defunding of the team. I believe that was a critical error and a very significant one that resulted in the situation that we faced.
There were a number of internal memos. There were individuals within the gaming policy enforcement branch, likely, within the B.C. Lottery Corporation, as they had shared responsibility. They were providing information to the ministry about this. An audit into this specific activity was prepared by a third party business firm called MNP. The report was completed the year before I was elected. That report was not released to the public. I released it shortly after taking responsibility for the file, when I was briefed on it, because I believed the public deserved to know what was happening in B.C. casinos. In my opinion, the government made a decision not to release that report because they were unprepared to take the action necessary, given the implications it would have for the provincial proceeds that come from gambling.
People who were bringing this money into the casinos were actually gambling and—I don't want to let any secrets out in front of the committee, but they were losing, because the house always wins—they were losing significant amounts of money and the province was making money from this activity.
Yes, the money was walked in the front door. That's the way the money was coming into the casinos. It wasn't in armoured cars or some sort of official channel. People with a shopping bag full of $20 bills would walk up to the cage. This is what was taking place in casinos, and the casino service providers, in their defence, were doing everything that the provincial government asked them to do in terms of reporting, filling out forms, and disclosing this. Obviously it's a human activity. There are problems with the reporting from time to time, and so on, but the issue is not, in my opinion, with the reporting. The issue was that, if you walked the money into the casino, then it appeared to be no problem.
There is a very interesting story that broke about a gentleman named Michael Mancini. The allegation in a newspaper article was that Mr. Mancini had a significant amount of money in his car. The allegation is that he was involved in a car accident, was pulled over by police, and they found a significant amount of money. He was on his way to the casino, and when he was stopped by police they seized money from him. He also allegedly had drugs in the car.
It seems to me that, if you were able to get the money in the front doors of the casino, it was almost like getting it into the embassy. It was a whole different world from driving down the street and being stopped by a police officer and having a duffle bag full of $20 bills in the back seat. That would have been seized, but if you were in the casino, it wouldn't be. I don't know why that is. I don't know why it was treated so differently.
When I was briefed about it, just as for you, it was beyond my comprehension that this had been taking place for so long and so openly.
Again, thank you, Minister, for your presence here.
We have heard that the CRA works with FINTRAC when cases are flagged. I hope, though, that there are ongoing investigations or, based on some of your comments today, that some of those files could be looked back on.
The frequent filers, so to speak, in large amounts could perhaps could be looked at by CRA to see whether tax evasion is happening.
You've said that phase two is to focus on real estate. Are you looking into the practice of builders' liens? I heard it is also the case that someone will buy a property—the builders will pay them for it—and then they'll fix it up, and that person will sell it as their principal residence so that there are no capital gains, and so on. However, what they'll do is put a builder's lien on it, because the house was originally bought with money that may be laundered. That's how they're able to get the money laundered; by actually using something like a builder's lien to do that. I really hope you look at that, because the touch points are all provincial.
Furthermore, we had an individual come in last week, as well as the Federation of Law Societies of Canada. I asked a question about a foreign subsidiary attempting to launder money in Canada from a foreign jurisdiction. They will come into an agreement with a host company with a backdoor agreement. They'll break an agreement, sue one another, and then the proceeds will then be cashed out.
Many foreign countries will have capital controls that will allow money to flow only if there is a court order.
Have you heard of any of this kind of activity? So far, one of the representatives of the law societies said it's theoretical, but have you heard of this technique, and do you think it needs to be looked at?
There were two separate sets of allegations about the connection between the activity in our casinos and real estate.
On March 5, 2018, Kathy Tomlinson of The Globe and Mail wrote about allegations that 17 lenders, allegedly with connections to crime, loaned $47 million in builders' liens and other loans against 45 properties. Postmedia's Sam Cooper, on September 30, 2017, made a series of allegations about a gentleman named Paul Jin and others who were allegedly involved in laundering money and transferring money in casinos. Mr. Jin was also allegedly heavily involved in real estate.
As the member said, some of these were builders' liens. Others appear to be just debt registered against the properties. As I say, these are good examples of us reading about this kind of thing in the newspaper. I've not heard about the specific situation that the member outlined, but certainly there is no end to the creativity of the schemes I have heard alleged.
The challenge for law enforcement on any of these files is, first of all, the complexity of determining the extent of the arrangement. I understand that the second piece is then proving that it's connected to an indexed offence that created the proceeds of crime in the first place. Those two factors are quite difficult for law enforcement, as I understand it. In the situation you described, it's incredibly difficult to—
I'm glad all of these things are on your radar, Minister, because it is a problem the public wants tackled.
Again, we know that lawyers are not subject to FINTRAC. In the recommendations, you've raised that as being a concern. We heard from the law societies, They say that every province has a process for self-auditing and whatnot. The point was made, though, that in some cases, there was not enough data forthcoming from those law societies to point out that the job is being done at a FINTRAC level, or at least to that national standard.
That being said, we live in a federation. If a law society, let's say, in British Columbia was not forthcoming with data, would you look to put in place a framework that would secure that information to deal with this issue? I don't think that because of the Supreme Court decision a pan-Canadian approach is going to be applied. Perhaps that might be a way to deal with certain provinces where there is an issue of data.
What are your thoughts?
Welcome, Minister. Thank you for coming from B.C.
This week The Hill Times has run a piece on money laundering, obviously piggybacking off our committee's work, and I commend it for doing that. It's entitled “Feds float idea of beneficial ownership registry as House Finance Committee reviews anti-money laundering law”. I was reading it over earlier this afternoon, and it states that “The RCMP estimated in 2009 that [approximately] $15-billion was being money laundered in Canada each year.” I don't know if that's an exact number, but it's a pretty big number, and it may speak to some of the things you've seen in B.C.
A white paper that was issued by the Department of Finance just prior to the beginning of our study recommended expanding the types of entities that must report to FINTRAC to include mortgage insurers; land registry and title insurance companies; non-federally regulated mortgage lenders; dealers in high-value goods, such as auction houses and jewellers; and unregulated financial companies.
Would you care to comment on that?
Thank you again, Mr. Minister, for being here.
There has been some discussion about mutual ownership, and I agree that there is a lot in the international community, going back to a meeting in the U.K., at which David Cameron, the Prime Minister at the time, made transparency in some of these things one of the most important things to go ahead, so I appreciate your point. There is a lot of international pressure to see all jurisdictions, including provinces, territories, and the federal government, up their game.
One of my first jobs was actually working at a law office, where I used BC OnLine, the old system. It is a tremendously helpful system for land title, and it works quite well.
Rather than looking at brand new registries—because right now people may not know that the federal government has a registry for all federally regulated incorporated companies, as does every province and territory—Minister, do you think there could be a way for us to look at including this information using existing registries, or do you think there must be a pan-Canadian one?
That may be a very difficult system to put in place. What are your thoughts about that?
Thank you for being here.
One of the areas you touched on is something I have asked several questions on, especially to FINTRAC, in terms of accountability when they put together a report and send it to the police or to investigators. I don't think even FINTRAC knows if it's then taken on.
It sounds as though, based on earlier testimony, FINTRAC believes it has the resources to handle the claims or the issues coming in. But one of the areas I was curious about—so I appreciate your testimony—is how anybody know, even if CSIS were to provide FINTRAC with information, that they then put that into a report and pass it on. How do we know if anybody is actually acting on that once FINTRAC makes the report?
With that being said, something raised in testimony was about the federal committee on public safety and the possibility of oversight opportunities there. I can't predict what the recommendations from this committee would be or even what the government's actions would be.
What would be the role, then, for provincial and territorial governments? You mentioned the frustration of not knowing if the police you are responsible for are acting on this. Have you given any thought to a potential role for that oversight, keeping in mind, for example, that a committee might be given that oversight role in the future?
If you haven't given that any thought, that's totally fine. I'm just kind of wrestling with how we deal with it from the national perspective while keeping in mind that police forces fall under provincial and territorial jurisdictions, in some instances.
How do we work together? Do you have any thoughts on working together and on how to close that gap?
The Blockchain Association of Canada welcomes the opportunity to present today and share our perspectives. The Blockchain Association of Canada's mission is to promote the acceptance and use of digital assets and blockchain-based technologies. We are supported by a diverse community that represents the industry both in Canada and globally. Through education, advocacy, and coordination with policy-makers, regulatory agencies, and industry across various jurisdictions, our goal is to develop a pro-growth legal environment that fosters innovation, job creation, and investment.
We represent a community of the world's leading innovators, operators, and investors in the digital asset and blockchain technology ecosystem, including leading-edge start-ups, software companies, global IT consultancies, financial institutions, insurance companies, law firms, and investment firms. The BAC understands that while many new financial technologies, or fintechs, are emerging, blockchain and other distributed ledger technologies, DLTs, impact governments and regulators throughout the globe. DLT applications offer a wide variety of practical and readily applicable opportunities for many industries.
The BAC supports legal and regulatory clarity around DLT and related smart contract technologies. Defined contours are needed to combat regulatory overreach, which is a potential issue for DLT in many jurisdiction at this time. Onerous regulatory requirements present obstacles to industry growth as DLT solutions develop and seek to enter the marketplace. A significant impediment to the fintech industry is the risk of burdensome regulations being imposed too early, which would hinder future innovation, discourage further investment in innovation, and/or restrict the utilization and incorporation of DLT into the financial services industry and other industries.
DLT raises many novel legal issue for lawmakers and regulators. For example, decentralized technologies may operate based on automated protocols and lack a centralized governor. These issues must be carefully studied before imposing rules that may not be well suited for their intended purpose. Lawmakers and regulators must not act too quickly by imposing regulations that risk hindering the efficiencies and promise that such technologies may deliver.
The BAC generally encourages regulators and governments to adopt a do-no-harm approach to regulation to allow DLT to develop and companies to innovate within a principles-based rather than a prescriptive environment.
The BAC encourages the government and regulators to facilitate the development and implementation of fintech, and specifically DLT, by supporting regulatory harmony. Consistency in regulatory treatment will be an important factor towards industry growth.
The Blockchain Association of Canada supports regulatory regimes, only to the extent that such obligations clarify the regulatory environment and do not pose additional or overlapping burdens and potential regulatory conflicts. The potential for multiple oversight authorities to certify and impose requirements on this emerging technology may hinder the development of the industry and the evolution of the technologies both in Canada and abroad.
I look forward to answering any questions you may have. Thank you.
I'm Dina McNeil, Director of Government Relations at the Canadian Real Estate Association, or CREA. I'm joined today by Simon Parham, one of CREA's in-house legal counsel. We would like to thank the committee for the opportunity to participate in the five-year review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
Our membership is made up of more than 125,000 real estate brokers and agents across the country. The Canadian Real Estate Association, or CREA for short, is one of Canada's largest single-industry trade associations. We work on behalf of our members, as well as homebuyers and the public.
Given the size, importance, and stability of the real estate sector in this country, we understand why investors from around the world would be drawn to investing in real estate in Canada. We recognize that CREA and its members have a role to play in Canada's money laundering and terrorist financing regime. We continue to work with FINTRAC to improve guidance and create conditions conducive to realtors complying with the existing obligations. We communicate regularly with our members on the importance of complying with the law. We do this by delivering in-person or online presentations across the country, and by sharing comprehensive, updated information through articles, blogs, monthly newsletters, and email communications.
CREA also provides valuable tools such as FAQs and template compliance manuals and forms to facilitate record keeping and to help with the reporting obligations of our members. Most importantly, realtors and their brokerage offices from across this country do their part by trying their best to comply with Canada's money laundering and terrorist financing regime. They maintain complex, detailed compliance regimes and conduct a myriad of regulatory paperwork that FINTRAC requires, but that ultimately never sees the light of day.
That said, we do have concerns with the law and the application of the law as it stands today. As this committee has heard from other witnesses, money laundering and terrorist financing activities are highly intricate and complex, and are often difficult to recognize and detect. Many different actors and parties are involved in real estate transactions and we believe they should all have a role to play in combatting money laundering and terrorist financing.
However, we are concerned about the reporting and record keeping obligations, which cause a significant burden on realtors. It is not just a matter of reporting suspicious transactions to FINTRAC. Members have to keep various records and create a detailed compliance regime. This involves identifying a compliance officer, developing and maintaining compliance policies and procedures, conducting risk assessments of business activities and relationships, creating and maintaining a written ongoing compliance training program, and conducting an effectiveness review to test the compliance of the program every two years. The regulatory burden is significant and many brokers and agents try their best, but are frustrated, confused, and at a loss at how to keep up with the overwhelming requirements.
We feel that insufficient attention is being paid to the regulatory burden and compliance costs. Many realtors operate small businesses and have minimal expertise in analyzing money laundering indicators. Additionally, changes to the regulations and guidance are frequent and at times unclear, which makes it difficult for small business owners to keep up. We feel that implementing new requirements around beneficial ownership and politically exposed persons would cause significant frustration and increase the cost of compliance drastically. CREA would like to see a stable legislative and regulatory environment—
CREA would like to see a stable legislative and regulatory environment giving realtors an opportunity to fully understand and comply with the existing obligations without continually having to adjust.
Closing existing loopholes for the real estate sector should be a focus of the government. We are encouraged that the white paper released by the Department of Finance presents the idea of expanding the types of reporting entities that must report to FINTRAC. This would create a more level playing field for real estate; yet, an obvious gap in the law continues to be ignored. Currently, real estate can be sold directly by individuals, which creates a vulnerability where money launderers can conduct real estate transactions without the transparency and examination required when using a realtor. CREA feels that reporting and record keeping obligations should be extended to the companies that facilitate such transactions. While the government is considering extending obligations to other reporting entities, we feel it would be wise to include the for-sale-by-owners companies.
If obligations continue to evolve, education and ongoing outreach efforts are essential for new and existing realtors to make sure that they understand their requirements. We ask that FINTRAC put in place a better outreach strategy to build strong partnerships with reporting entities to maximize compliance. It would also be helpful to clarify existing guidance in a manner that is meaningful to brokers and agents, and adopt policy interpretations that make sense. FINTRAC has the responsibility to try harder to understand that all reporting entities are not the same. A one-size-fits-all model should not be applied across the board. Moreover, when reporting entities ask for policy interpretations and clarifications, responding to the entities' concerns in a timely manner is critical. We feel that greater outreach would have a greater impact in fighting money laundering and terrorist financing for the real estate sector.
We look forward to the committee's report and continuing to help improve the proceeds of crime money laundering and terrorist financing regime.
Thank you for listening.
Mr. Parham and I would be glad to answer any questions the committee members have.
Thank you, Mr. Chair and members of the committee.
My name is Ian Russell, and I am President and CEO of the Investment Industry Association of Canada, or IIAC.
Thank you for the invitation to come before the committee today to present the views of the IIAC.
We look forward to giving our views on your five-year statutory review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
As some of you know, the IIAC is the national association representing 123 investment dealers on securities regulation and public policy. Dealers have important obligations as reporting entities under the act and its regulations, similar to the other regulated financial intermediaries in Canada. Our members follow an extensive and onerous process to verify client identity and to ensure that they do not represent unacceptable financial crime risk. They're also required to have in place real-time risk mitigation measures to prevent suspicious transactions, and due diligence processes, especially in dealing with politically exposed persons.
We keep detailed records, and we submit mandatory reports on suspicious transactions to FINTRAC. We are subject to an audit process by FINTRAC and other regulatory authorities in Canada. We reviewed the Department of Finance discussion paper, and our perspective is really framed through that consultation paper that proposes measures both to improve the effectiveness of the legislation and also to facilitate the obligations and responsibilities of reporting entities.
First off, we applaud the consensus reached by the federal, provincial, and territorial finance ministers last December to improve the transparency and consistency of beneficial ownership information and access to the information.
Although corporate information reporting requirements are in place at both the federal and provincial levels, there are differences that pertain to the definition, collection, and disclosure of the information and the access to the information. In our view, governments really need to move expeditiously to harmonize beneficial ownership standards across Canada and in both the federal and provincial corporate law statutes.
They really need to look carefully at mechanisms to improve access to this information. We believe that the committee could play a significant role in encouraging federal and provincial governments to give a high priority to creating a central registry that can contain current and accurate information related to beneficial ownership. As was cited here in earlier testimony, the example that stands in front of us is the U.K.'s people with significant control register.
I think that a central registry, from your perspective, would achieve a more efficient and accurate transactional surveillance process for the marketplace. Finance ministers have committed to changes that will make information on beneficial ownership available to law enforcement, tax, and other authorities. We think that it should be extended, as it is in the U.K.'s model, to be accessible to, certainly, all reporting entities, and possibly to the general public, to meet public policy objectives. A central registry, as I said, would be of enormous benefit to securities dealers, who find it a very complicated and time-consuming process to work through the complexity of business structures, particularly private corporations.
Our other recommendations relate to facilitating the obligations of securities dealers and other reporting entities to improve the efficiency of the reporting exercise and also to relieve the compliance burden.
First, the legislation should be flexible to accommodate new technologies, such as digital identification in the verification process, and it should be sufficiently flexible to enable timely adaptation of a range of innovative technology. Facial recognition is a case in point.
Second, FINTRAC should engage in ongoing dialogue with securities dealers and other reporting entities to ensure greater transparency on FINTRAC requirements. For example, when reporting entities such as securities dealers send suspicious transaction reports to FINTRAC, we believe that FINTRAC should provide timely feedback to reporting entities, indicating which STRs happen to be suspicious, or not. In our view, that kind of an interactive process would certainly be helpful to the reporting entities that are trying to track these transactional flows by particular counterparties.
Third, interactive communication between FINTRAC and the other regulators is important in our view. Regulators, such as the self-regulatory bodies that securities dealers are responsible to, also have money-laundering regulations. It certainly would be helpful if we could have congruence or a process that could ensure that there isn't a duplication in the rule-making process. That would come about by close coordination between FINTRAC and the regulators.
Finally, the other recommendation is with regard to subsection 62(2) of the act. It provides certain exemptions from the record-keeping and verification requirements for reporting entities. What I have in mind here, in particular, are listed corporations and regulated financial institutions in Canada. In our view, there is scope to expand these exemptions to certain foreign-regulated entities that are subject to a comparable regulatory regime as in Canada. I'm thinking in particular of hedge funds and asset managers of all sorts in regimes such as the United Kingdom, where they are regulated under the FCA, or in the United States under the SEC. Again, the advantage of that is it would relieve the reporting entities of an identification burden that you could justify in this mutual-recognition process.
My understanding is that we have put forward this recommendation a number of times to Finance in the past. I think the push-back is creating precedents among some of these foreign jurisdictions, but, in our view, you can start with the U.S. and the U.K. You can include the G7, but certainly most of the transactional flows internationally or institutional flows are coming from the U.K. and the U.S. The other reason why it's important, aside from eliminating the compliance burden, is that these requirements can discourage these regulated financial institutions from transacting with dealers in the Canadian market in Canadian securities—and certainly, that's not in our public benefit. So we think that the protections are there from a money-laundering point of view and also from an investor protection point of view if a careful recognition process is in place.
With that, I'll close my remarks.
I'm happy to answer any questions on this subject matter, or anything else related to the act.
Thank you, Mr. Chair.
Good afternoon, Mr. Chairman, and members of the committee.
Thank you for the opportunity to contribute to the committee's review. I will be giving my presentation in English but would be happy to answer questions in English or French.
I am an Advisor on Beneficial Ownership and Anti-Money Laundering with Transparency International Canada. I'm a former Deputy Director of FINTRAC and former Director General with the CRA's criminal investigation directorate.
Transparency International Canada is a member of the world's leading non-governmental anti-corruption organization, with more than 100 chapters worldwide and an international secretariat in Berlin. TI Canada has been at the forefront of our national anti-corruption and transparency agenda.
TI Canada welcomes the review of PCMLTFA. We recognize and support the work played by all the anti-money laundering/anti-terrorism financing partners in Canada and the critical role reporting entities play as a first line of defence in this fight.
We will be providing to this committee and the Department of Finance a more comprehensive submission on our recommendations. As we don't have much time, I would like to move directly to TI Canada's five key recommendations.
First, TI Canada recommends implementation of a nationally integrated, publicly accessible beneficial ownership registry of corporations in an open data format. The registry would be a one-stop shop with registrars, or a registrar, having appropriate powers to apply proportionate and dissuasive sanctions when information is untruthful.
Also, the act should be amended to require all reporting entities, including what are called DNFBPs—basically the ones that are not financial entities or institutions, such as real estate, which is now exempt from the obligation to identify beneficial ownership—to determine and verify the identity of the beneficial owner; determine if their customers are politically exposed persons, family members, or associates; and ensure that no accounts are opened or financial transactions completed until the beneficial owner has been identified, with their identity verified by a government-approved ID. Of course, this recommendation will be facilitated by the implementation of a publicly accessible beneficial ownership registry.
Canada needs to make beneficial ownership transparent. In Canada, more rigorous identity checks are done for individuals getting library cards than for those setting up companies. We need a proactive corporate registry function harmonized and integrated across Canada with powers to audit, compel information, apply sanctions, and detect and report suspicious activities.
Pending final legislative approvals, all 28 European Union member states are expected to implement a public registry by the end of 2019. A majority of the 37 FATF members—the international standard-setting body on money laundering—are expected to implement a publicly accessible beneficial ownership registry. It's not a stretch to anticipate that such a public registry will be the new FATF standard in a few years. That's the standard Canada should meet.
We welcome the positive steps the finance ministers announced on December 11, 2017 to ensure appropriate authorities know who runs which corporations in Canada. However, we believe they must go further. They must make the registry publicly accessible and look to also create a registry of trusts.
A public registry will allow all reporting entities, the public, and the media to work together to prevent and dissuade the abuse of corporations and trusts by secretive beneficial owners. This will lighten the burden on reporting entities and anyone doing business with corporations to more accurately assess their business risks. A publicly accessible registry is an investment in prevention. It would also ensure that Canada keeps up with international best practices such as those adopted by the UK and our new EU free trade partners.
Second, Canada's 2015 risk assessment was clear: legal professionals are inherently highly vulnerable to money laundering. The FATF evaluation of Canada also highlighted the gap created by the absence of lawyers from the AML/ATF regime and the lack of scope in their own regime. Without an independent expert assessment, Canadians have little information to be assured that the legal profession's rules and practices meet the current Canadian standards set by the act or even the FATF standards in protecting against money laundering and terrorist financing.
We recommend that the government bring legal professionals into the ALM/ATF regime in a constitutionally compliant way. The Solicitors Regulation Authority that regulates solicitors in England and Wales is a model that the Federation of Law Societies of Canada and the government should seriously explore.
We also recommend that the act should designate as high risk all financial transactions by legal professionals, especially those using trust accounts, and require reporting entities to take enhanced due diligence measures on those transactions, including determining the beneficial owner and the source of funds.
Third, we recommend strengthening the regime by expanding the number of DNFBPs covered under the act, as per the Department of Finance’s recent consultation paper, especially for non federally regulated mortgage lenders because of the high vulnerability of real estate to money laundering.
We understand from law enforcement that money laundering charges by prosecutors are abandoned because of the complexity of linking money laundering to the predicate offence. The government should consider recklessness or gross negligence as a standard of proof.
This leads to our fourth recommendation, that the government bring Criminal Code amendments to make money laundering easier to investigate and prove, and that resources for police and prosecutors be re-examined to better support enforcement. Otherwise, laws without adequate enforcement are meaningless.
Concluding with our fifth recommendation, we recommend that comprehensive annual reports be published by the Government of Canada, in collaboration with all provinces and territories, on the AML/ATF regime’s results for all Canadian jurisdictions, including the number of compliance violations, penalties issued, money laundering investigations, charges laid, prosecutions, convictions, forfeitures, and seizures, as well as activities by the Canada Border Services Agency that are related to the act.
We believe that more information and transparency should be available publicly on the results of the AML/ATF regime.
Thank you for the time you have offered us to speak today. I’d be happy to answer your questions.
Thank you, Mr. Chair. I'm Jeremy Clark. I'm an Assistant Professor at the Concordia Institute for Information Systems Engineering in Montreal, at Concordia University. I received my Ph.D. in 2011 from the University of Waterloo. It was around that time, about eight years ago, that I first became interested in Bitcoin.
Bitcoin is an emerging digital currency that uses cryptography in a novel way to provide a secure cash-like system for creating new money, enabling transactions between participants, and recording transactions in a decentralized way on a ledger that we now call the blockchain.
Given my expertise as an engineer or a technologist, I feel that I can best assist you by providing the technical details of how Bitcoin and blockchain technologies work. I have had many conversations with regulators at FINTRAC, as well as Bank of Canada, the AMF in Quebec, the Department of Finance, CRTC, the RCMP, and others. I could perhaps play a policy expert on TV, but I'll stick to the technology for the purposes of today.
I continue to maintain that successful regulation in these areas requires an accurate understanding of the technology. Cryptocurrencies, including Bitcoin, are decentralized. What does that mean? It means they're operated by a network of computers. Anyone can join or leave at anytime from anywhere in the world with no one company or server in charge. Transactions are deemed valid or invalid through the consensus of this network. For the best cryptocurrencies, transactions clear and settle in the order of seconds and can be conducted 24/7 with e-mail-like efficiency.
I want to emphasize that after the transaction is confirmed by the network, the unit value has actually moved. It's not like a digital authorization and then there's some actual settlement that happens behind the scenes. Once it's confirmed, the unit of value is actually settled and cleared.
If you hold Bitcoin, what does that actually mean? What is a Bitcoin, and where is it? It simply means that there's an entry on Bitcoin's ledger for you, and a balance that can go up or down. It's basically intangible beyond that. One parallel you might think about is cellphone minutes. What's a cellphone minute? Why do you have it? What exactly is it? It's basically just a ledger entry. Cellphone minutes have coincidentally been used as a makeshift currency in countries such as Kenya.
Anonymity is often ascribed to cryptocurrencies, but the level of anonymity varies. For Bitcoin, all transactions are recorded but without real world identities. Other cryptocurrencies might obfuscate identities further and/or hide transactional amounts. In all cases, transactions are Internet packets that originate from a computer and are no different from other forms of online communication that might be of interest to regulators or law enforcement. Cryptocurrencies have been suggested as being perfect for various financial crimes, such as tax evasion, terrorist financing, and currency smuggling. Governments have primarily looked at the on ramps and off ramps between cryptocurrencies and, say, the Canadian dollar. This is sensible in the short run.
There is also concern about the use of cryptocurrencies on online markets for illicit goods. Law enforcement has a very good track record of shutting these markets down, essentially by framing the issue as tracing Internet packets rather than focusing on the currency that is being used.
If we can zoom out for a second, we can take one of two postures in dealing with illicit cryptocurrency activity. We could try to take a stance of prevention, or one of detection. I think prevention will fail. Cryptocurrencies are open. It's an Internet-driven technology, and Bitcoin is just the first attempt at strong confidentiality and anonymity. It would honestly be technically easier and perhaps more productive to ban paper money than Bitcoin. Instead, we should focus on detection of criminal activities.
Finally, inside of Bitcoin, underlying it, is a novel technical innovation called the blockchain. We've seen blockchain projects from within the government, for example, from the Bank of Canada and the National Research Council. This technology has the potential to bring changes to accounting practices, transparency to procurement processes, new methods for raising capital within a company, and new ways of organizing financial markets. We're hopeful that blockchain technology generally adds transparency and accountability to the financial system.
I've tried to keep my remarks concise and brief. I once taught an entire course on Bitcoin, so I can literally talk about it for 24 hours. Thank you for your time. I look forward to answering your questions.
Thank you for that good question.
One of the challenges with managing innovation is understanding that the effects of our decisions in in these rooms can have enormous consequences for the industry at large. Before we can go and make these regulations, it's really important that we understand the technology and its scope or the opportunities it presents.
Blockchain technology is a paradigm-shifting technology. It is like the Internet. It is like the automobile. It stands to change the very fabric of society. Around here, we have been discussing the rules and the regulations and looking at this from a wax and wick point of view, and now we have electricity. We need to be building sockets to encourage and utilize the benefits of this technology.
Listening to my fellow panellists here, they mentioned an open corporate registry. Absolutely. Blockchain can solve this perfectly. As far as real estate goes, and putting real estate titles onto a blockchain, absolutely.
As far as FINTRAC and compliance go, having proof that all of those records are submitted and are verifiable would be excellent, excellent, excellent.
The scope of the opportunities is just incredible. From an investment point of view, being able to track that, and thinking about when we register a corporation, as opposed to just assigning a number that says 100,000 shares to you and 100,000 shares to you, we could actually use tokens that are tied to digital identities, tied to permissions about whether you can vote, about who's the officer, who's the secretary, who's the legal counsel, and do you have access to a building. It all comes full circle.
Where are the regulations that are hindering it? I think there are those who speak very negatively about it, or suggest potentially banning the cryptocurrency. We saw that in New York, as one example, with their BitLicense agenda, to requires anybody who is developing solutions around Bitcoin and cryptocurrencies to have state approval. It actually pushed a lot of the businesses away.
If we develop regulations that way, if we think about the Internet, and if we require people to get licences to open websites, people are just going to open websites in other countries. They're going to move away to jurisdictions that are more friendly.
We need to understand that we're in a time of convergence where we have technologies like artificial intelligence, robotics, and automation all coming together as one, and that in order to register your company, you're going to be looking for the best conditions do that. So it's our duty. Thank you.
Sure. Once again, I'm more on the technology side than the policy side, but I'll try to answer as best I can.
On whether or not different countries have taken different approaches to regulating cryptocurrencies, I don't have a shining example of a country that did it wrong. There is a lot of criticism of something called the BitLicense in New York state. The community seemed to feel that this was a regulatory overreach.
In Canada, most Bitcoin people, or cryptocurrency or blockchain people, are fairly happy with the current state where exchanges are sort of operating as money service businesses. They're doing financial reporting. There are some concerns about banks, commercial banks, shutting down the bank accounts of businesses that operate with Bitcoin. That's maybe one criticism I've heard.
But, yes, sometimes regulation also can pave the way to say that we like this technology, and so sometimes remaining silent on certain issues as well can be a detriment. I know one bureaucrat, whom I won't name, who was basically shopping around a blockchain project and said, “I stopped asking whether we can do this, and I started asking, 'Do you know of a specific rule that you can point to that would get broken if we try to do this'”?
That was their approach for trying to make these blockchain projects work within government policy.
I'd have to say that the best people to comment on that would certainly be active members of law enforcement.
In my own experience, I've had opportunities in the past to speak with crown prosecutors in a few provinces, and at the federal level—and they're swamped. To be fair, I believe FINTRAC probably has produced close to 2,000 disclosures, money laundering and terrorist financing, for the police. It's like drinking from a fire hose, if you're in the police investigation business. That's an issue. There are not 2,000 money laundering investigations ongoing in Canada every day.
There are choices being made by investigators and prosecutors, and the information that I had at the time when I was there was that prosecutors, because of the complexity of tying money laundering to the predicate offence, would be trading it off. They'd say to plead guilty to something and they'd drop it, and they would get an agreement with the defence.
I would say, work with the exchanges. We have this pulled-out-of-thin-air $10,000 number where every time a transaction is over $10,000, an STR is submitted. That's leading to so much data going into FINTRAC that it's being completely swamped with it.
The exchanges are the ones that are actually handling it. I've worked with the exchanges, and I've worked with many people in the industry. We know. We're the front-line warriors. Work with us towards building a better communications system and better data towards actually making qualified STRs, as opposed to just blanketing anything over this number.
You can tie that back to digital identities and verified claims around things, as well, that will lead to.... I don't really know. The gentleman earlier was talking about them just being faxed off to the room.
The cryptocurrencies and digital currencies are not included in the 20 boxes at the bottom of the STR form. If they were included, if they were partitioned, and if you actually used blockchain behind them, you could have excellent actionable data. However, currently the forms are literally going in the mail and into a room. Who knows if action is being taken on them. It's a daunting task, and there is no way you could ever possibly have the resources to do that. However, if you make it a little bit more, and perhaps reward or incentivize action and good results and put in positive feedback loops, we will get to the bottom of identifying the criminal activities that are hurting society.
Welcome, everyone. It's very insightful testimony. I'm not really sure if I understand blockchain, Bitcoin, or cryptocurrency yet.
I'll just start with Mr. Meunier.
You seem to have some past experience with FINTRAC, I believe, and you also mentioned the CRA, if I am correct. Now you're over at Transparency International Canada, which is wonderful, and I'm sure they're leveraging your experience.
If you had to provide a quote or two about where Canada is in this in terms of transparency, anti-money-laundering effectiveness worldwide, say against our G7 or G20 partners, where would we rank today, in your view?
Mr. Meunier makes a very good point about the importance of the registry. When I saw the announcements by the governments, I was a bit concerned that they were talking more about the transparency of the system and standardization, which is very important, and maybe putting insufficient emphasis on an accessible registry. That certainly was in the white paper. I think that should carry a lot more priority.
To your point about jurisdiction, there isn't a jurisdictional issue here. We're simply talking about the provinces coming to some agreement on harmonizing the thresholds for beneficial ownership. I think everybody would benefit from having a uniform registry.
As the attorney general of B.C. said, if you leave out one province, then you're going to create distortions in the market. You need everybody to play.
The other option here in getting ahead of it is that you could build these things. I noticed that the attorney general talked about a B.C. registry. With technology today, you can link these registries. I was most intrigued by Mr. Meunier's point—he's much more of an expert in this area than I am—about the initiative to develop a more international database. This isn't unprecedented. We already have the CRS for tax reporting. We now file tax reports on non-residents in Canada in a central repository. The OECD oversees that. Precedents are in place to do it.
I think Canada can move quickly. We do have two levels of government, but I think we could do it.
Thank you to each of our witnesses. I might not get a chance to directly interact with you, but I certainly think we have all benefited by your presence and certainly appreciate the comments and expertise you have today.
I will start with the real estate association. Thank you for your presentation.
In almost every conversation I've had with many of your members, often in my constituency and sometimes here in Ottawa, I will hear the common refrain that FINTRAC is a big pain in the tochus. They complain about it endlessly, saying that there is a lot of paperwork. FINTRAC has come here, and obviously they have very important work to do. I don't think either of you would say it's not important work.
Has FINTRAC met with you to discuss ways that your industry can comply more efficiently or any suggestions? I think you said it has been a one-way street and you're not sure whether they've listened. Is that correct?
There are a number of ways we could work better with FINTRAC, or FINTRAC could work better with us, in order to get to where everyone wants to go, which is fighting money laundering.
You are correct. We recognize that there is money laundering in the real estate sector in Canada, and our members play a role, but there is a lot that they can do. They can give us tools in order to get where they want to go. One example would be more meaningful outreach.
We do meet with them on occasion, but not regularly. It can be a struggle sometimes to meet with them. When we do meet with them, we ask for policy interpretations. Sometimes we email them policy interpretations. It's great that we can do that, but when we get a response, which sometimes can take many months, which is not helpful, the policy interpretations we get can be vague or require further confirmation from them of what they exactly mean. They might just quote us the legislation again. They might not use the language that real estate brokers and salespersons use, which is really important. A one-size-fits-all approach and the use of generic language is not a helpful policy interpretation. That is something else that we could get.
Also, there may be instances where clear and specific regulation and guidance tailored to the real estate industry might be necessary. We're seeing this on the guidance side. Right now, FINTRAC is looking at updating their suspicious transaction reporting guide. What we're looking at right now is core guidance that is applicable to all sectors, but if you look at the language, a high percentage is geared towards financial institutions.
There are lots of ways that we think we can benefit.
Maybe I'll add that from my viewpoint, to be fair to FINTRAC, they actually are no longer the first thing cited by real estate professionals. There is now a regulator in B.C. that has been set up, and right now, when I talk to real estate people, complaints about it are actually well ahead of those about FINTRAC, at least to my mind.
Right now, FINTRAC, though, to be fair to them, is legislatively restrained from sharing information of any sort outside of what has been determined in law by Parliament. Would your organization be in favour of amendments being made to FINTRAC allowing them to give forward regulatory guidance to deal with what Mr. Russell is saying, as well as your data outlining where some of the issues are, so that there would be a better understanding? Moreover, would you be in favour of what I mentioned to the minister from British Columbia, namely, that FINTRAC be given authorization to aggregate the data so that no personal privacy rights were waived but allowing real estate professionals who actually go through those efforts to give that information to FINTRAC and actually have a return where they could know what the market is doing and how many private cash sales there are?
I'll extend that as well to Mr. Russell.
I would suggest that they're not going to want to have measurements and statistics about their efficiency because they're not doing a good job. They're inundated with information. We need to consciously and critically think about the goals of these organizations, and start thinking about the fact that we have electricity and don't need to be thinking about candles anymore. We need to think about how we redesign these entire systems to be very efficient, seamless, and not even require centralized authorities to oversee them all. That is the potential that blockchain brings to us.
It worked for FINTRAC, but it also works for real estate, identity, taxation, and monetary policy. However, we are now in a time of change and need to address at a very high level how we're going to move forward as a country and a civilization. Are we going to try to take this new technology and hem it into the previous paradigm, or are we going to embrace it and ascend into the new age? To that end, there's a need for a national blockchain strategy or a task force with decision-making power, with the ability to make mistakes, work with international partners, and to try things, to implement pilots.
One of the things we've done at the Blockchain Association is to work with superclusters. We put in a bid for superclusters, but we're a horizontal industry that's spread out everywhere, representing global interests. There is tons of support; everybody is supported. We put out letters of support to all of the supercluster finalists and to those that were selected. We're looking forward to working with each of them, to bringing together all the stakeholders, and identifying and understanding the challenges industries face at a multi-stakeholder level.
As a government, you can't tell the industry how to do things, and industry can't tell the government how to do things. Collectively, you must agree and then work together toward implementing these new solutions, and not be afraid of making mistakes, in the understanding that we don't know everything. Then we move forward.
First, I would mention that the regulations already include some measures to encourage compliance, such as fines or AMPs. Also, recently specific obligations were introduced to basically require brokers and agents to document every step of the way. They're called “reasonable measure” records.
There are, then, some things in place. I think, however, that you can streamline some areas in cases in which the obligations imposed don't really make sense. For example, we have a policy interpretation from FINTRAC that says you have an obligation to know who your client is, and if you do repeat business with them you have an obligation to make sure that, say, their occupation hasn't changed.
However, what if you're doing two transactions concurrently? Basically, what FINTRAC has told us is that if you ask someone what their job is—let's suppose they say they're a plumber—and you're doing another transaction, you have to ask them again: “Remember that a minute ago I asked whether you were a plumber? We want to know whether you are still a plumber.” This makes no sense.
If we had a policy interpretation that recognized the way real estate actually is being conducted, which is that people often buy and sell homes at the same time or in a very short period and there is no need necessarily to ask the exact same question, such as, “Did your date of birth change?” or “Did your occupation change?”, it would be a way for FINTRAC to have more credibility. Then we could tell that what they're really saying is that they want to make sure you know whom you're dealing with.
We don't have an issue with that. We know we have a role, but it has to make sense.