C-17 Committee Meeting

37th PARLIAMENT, 2nd SESSION

Legislative Committee on Bill C-17

EVIDENCE

CONTENTS

Tuesday, March 18, 2003

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The Chair (Mr. Bob Kilger (Stormont—Dundas—Charlottenburgh, Lib.))

Mr. John Ossowski (Assistant Director, Government Relationships and Communications, Financial Transactions and Reports Analysis Centre of Canada, Department of Finance)

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1540

The Chair

Mr. Claude Bachand (Saint-Jean, BQ)

Mr. John Ossowski

Mr. Claude Bachand

Mr. John Ossowski

Mr. Claude Bachand

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1545

Mr. John Ossowski

Mr. Claude Bachand

Mr. John Ossowski

Mr. Claude Bachand

Mr. John Ossowski

Mr. Claude Bachand

Mr. John Ossowski

The Chair

Mr. Claude Bachand

Mr. John Ossowski

The Chair

Mr. Steve Mahoney (Mississauga West, Lib.)

Mr. John Ossowski

Mr. Steve Mahoney

Mr. John Ossowski

Mr. Yvon Carrière (Senior Counsel, Financial Transactions and Reports Analysis Centre of Canada, Department of Finance)

Mr. Steve Mahoney

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Mr. John Ossowski

Mr. Peter Bulatovic (Assistant Director, Terrorist Financing Analysis, Financial Transactions and Reports Analysis Centre of Canada, Department of Finance)

Mr. Steve Mahoney

Mr. Peter Bulatovic

Mr. Steve Mahoney

Mr. Peter Bulatovic

Mr. Steve Mahoney

Mr. John Ossowski

Mr. Steve Mahoney

Mr. John Ossowski

Mr. Steve Mahoney

Mr. John Ossowski

Mr. Yvon Carrière

Mr. Steve Mahoney

Mr. Yvon Carrière

Mr. Steve Mahoney

Mr. Yvon Carrière

Mr. John Ossowski

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Mr. Steve Mahoney

Mr. John Ossowski

Mr. Steve Mahoney

Mr. Yvon Carrière

The Chair

Mr. Rex Barnes (Gander—Grand Falls, PC)

Mr. Denis Meunier (Assistant Director, Reporting Entity Relationships, Financial Transactions and Reports Analysis Centre of Canada, Department of Finance)

Mr. Rex Barnes

Mr. Denis Meunier

Mr. Rex Barnes

Mr. Denis Meunier

Mr. Rex Barnes

Mr. Peter Bulatovic

Mr. Rex Barnes

The Chair

Mr. John O'Reilly (Haliburton—Victoria—Brock, Lib.)

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1600

Mr. John Ossowski

Mr. John O'Reilly

Mr. John Ossowski

Mr. John O'Reilly

Mr. Yvon Carrière

Mr. Peter Bulatovic

Mr. Claude Bachand

Mr. John Ossowski

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Mr. Peter Bulatovic

Mr. Claude Bachand

Mr. Yvon Carrière

Mr. Claude Bachand

Mr. John Ossowski

Mr. Denis Meunier

Mr. Claude Bachand

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Mr. John Ossowski

Mr. Claude Bachand

Mrs. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.)

Mr. John Ossowski

Mrs. Marlene Jennings

Mr. John Ossowski

Mrs. Marlene Jennings

Mr. John Ossowski

Mrs. Marlene Jennings

Mr. John Ossowski

The Chair

Mr. Steve Mahoney

Mr. John Ossowski

Mr. Steve Mahoney

Mr. John Ossowski

Mr. Steve Mahoney

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Mr. John Ossowski

Mr. Steve Mahoney

Mr. John Ossowski

Mr. Steve Mahoney

Mr. John Ossowski

Mr. Steve Mahoney

Mr. John Ossowski

Mr. Steve Mahoney

Mr. John Ossowski

Mr. Steve Mahoney

Mr. John Ossowski

Mr. Steve Mahoney

Mr. John Ossowski

Mr. Steve Mahoney

Mr. John Ossowski

Mr. Steve Mahoney

Mr. Claude Bachand

Mr. John Ossowski

Mr. Claude Bachand

Mr. John Ossowski

The Chair

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CANADA

Legislative Committee on Bill C-17

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NUMBER 014

l

2nd SESSION

l

37th PARLIAMENT

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EVIDENCE

Tuesday, March 18, 2003

[Recorded by Electronic Apparatus]

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[English]

    The Chair (Mr. Bob Kilger (Stormont—Dundas—Charlottenburgh, Lib.)): I'm pleased to call the legislative committee on Bill C-17 to order and welcome our witnesses.

    I'll ask Mr. John Ossowski to introduce those accompanying him and then make his presentation. Then we'll begin with questions.

    John.

    Mr. John Ossowski (Assistant Director, Government Relationships and Communications, Financial Transactions and Reports Analysis Centre of Canada, Department of Finance): Thank you, Mr. Chairman.

    With me today is Denis Meunier, who is the Assistant Director, Reporting Entity Relationships; Yvon Carrière, Senior Counsel; and Peter Bulatovic, Assistant Director, Terrorist Financing Analysis.

    I appreciate this opportunity to speak to you about the Financial Transactions and Reports Analysis Centre of Canada, also known as FINTRAC, and the proposed amendments to Bill C-17, the Public Safety Act. I will be addressing the three amendments that affect FINTRAC's operations, clauses 100, 101, and 97.

    As you know, FINTRAC was established with the passage in June 2000 of Bill C-22, the Proceeds of Crime (Money Laundering) Act. It has been in full operation for almost 18 months. FINTRAC began receiving reports in November 2001, and in December 2001 its mandate was expanded to include terrorist financing. Canada's Financial Intelligence Unit, or FIU, came into being as a result of both domestic and international pressures. It was part of a comprehensive federal initiative directed against organized crime, but it was also a response to growing international concern.

    In 1989 the destabilizing effects of money laundering on national economies and the global banking system prompted the G-7 to form the Financial Action Task Force on Money Laundering, known by its acronym, the FATF. The FATF set out 40 universally applicable recommendations to act as counter-measures against money laundering, and FINTRACs creation was one part of Canada's response to this initiative. By adopting these recommendations that promote economic safety and security, Canada confirmed its position as a respected and competitive member of the global marketplace.

    In December 2001, when Parliament passed the Anti-Terrorism Act, FINTRAC's mandate for detecting and deterring money laundering was expanded to include terrorist financing under the renamed Proceeds of Crime (Money Laundering) and Terrorist FinancingAct, or the PCMLTFA.

    This additional responsibility, with its requirement that the centre detect and deter terrorist financing as well as money laundering, was one of many strategies the government adopted in response to the events of September 11. It also affirmed Canada's continuing cooperation with the FATF and its corresponding eight special recommendations related to terrorist financing. Today the FATF's 40 recommendations and eight special recommendations are internationally recognized as an effective global action plan against organized crime and terrorist financing activities.

    FINTRAC's governing legislation has been carefully crafted to balance the needs of law enforcement and the privacy rights of Canadians. Indeed, privacy is paramount in everything we do. The significance of protecting the information received is reflected in the act, which sets out what information may be disclosed and under what circumstances. It also stipulates that FINTRAC employees and contractors are subject to criminal penalties of up to five years in jail or a fine of $500,000 or both for unlawful disclosure or use of information.

    FINTRAC can gather and analyze financial transactions and produce intelligence, but it cannot conduct investigations. The centre is independent and operates at arm's length from the police and agencies to which it discloses information. In fact, the police and CSIS do not have access to our database or to complete analytical files except by court order.

    As required by the PCMLTFA, FINTRAC receives and analyzes information from more than 100,000 financial entities and intermediaries across Canada, including financial institutions, accountants, real estate brokers and agents, life insurance companies and agents, money service businesses, foreign exchange dealers, and casinos.

    Each month we receive thousands of reports from these entities, including suspicious transactions related to money laundering or terrorist financing, terrorist property reports, international electronic fund transfers of $10,000 or more, large cash transactions of $10,000 or more, and cross-border currency movements of $10,000 or more.

    This data is combined with information received from a number of sources, databases maintained for the purposes of law enforcement where FINTRAC has signed a memorandum of understanding or MOU with the holder of the information, databases that are commercially available, information received voluntarily from law enforcement for security agencies, and information from foreign financial intelligence units with which Canada has signed an information-sharing agreement.

    Using technology and internationally accepted typologies, analysts sift through this body of information and search for links and patterns that suggest money laundering and terrorist financing. When this process reveals intelligence that the centre has reasonable grounds to suspect is related to a threat to the security of Canada or that might be relevant to an investigation or prosecution of money laundering or terrorist financing, it is then required to disclose what is referred to as “designated information” to the Canadian Security Intelligence Service or to the appropriate police force.

    FINTRAC can also disclose designated information to a foreign financial intelligence unit with which Canada has an information-sharing agreement. This designated information includes the names of persons involved in the transaction, the size and volume of the transactions, and where and when they took place. As I mentioned, if the police or CSIS need more information, they must obtain a court order. No one else can apply for such a court order.

    It is important to emphasize that as the act now stands--I'm referring to the PCMLTFA--FINTRAC already has the authority to access databases that are commercially available and those that are maintained by the federal or provincial governments for the purposes related to law enforcement, where FINTRAC has signed an MOU.

    The revision contained in proposed section 100 of Bill C-17 will allow the centre to seek access to databases maintained for national security purposes, such as those held by the Canadian Security Intelligence Service and the Communications Security Establishment.

    Access to this vital information, which is conditioned on the centre entering into a memorandum of understanding with the relevant organization, will assist FINTRAC more readily to track the movement of money to terrorists and their organizations. Giving FINTRAC the ability to seek access to this relevant intelligence does not expand when or to whom we can disclose. It will, however, permit FINTRAC to examine information that is essential to identifying terrorist financing and threats to the security of Canada.

    Proposed section 101 of Bill C-17 relates to the compliance of the financial entities that must report to the centre under the PCMLTFA. Under the current legislation, FINTRAC can monitor the compliance of financial entities and intermediaries by conducting an audit of their operations. However, compliance-related information held by financial entities is currently available to their regulatory and supervisory agencies, of which there are more than 50 in Canada.

    The amendment will allow FINTRAC to gain access to compliance-related information that is already collected by supervisory bodies like the Office of the Superintendent of Financial Institutions, provincial securities commissions, and other financial industry regulators. The proposed amendment will result in substantial savings in time, effort, and cost for entities who must comply with the record-keeping and reporting provisions of the PCMLTFA. It will also increase the centre's efficiency in obtaining compliance-related information in a cost-effective manner.

    These are worthwhile benefits, but the import of the proposed amendment lies in the degree to which it serves public safety. In this respect it should be noted that ensuring compliance with the PCMLTFA is directly linked to the FINTRAC's ability to detect and deter money laundering and terrorist financing. While the proposed amendment streamlines the process by which FINTRAC receives compliance information, it does not expand the centre's information base or powers. It does, however, strengthen FINTRAC's ability to detect terrorist activity and organized crime.

    Finally, the corresponding amendment in proposed section 97 of the bill will allow the Office of the Superintendent of Financial Institutions to disclose to FINTRAC information it has gained in the performance of its functions. Only compliance-related information concerning the financial institutions that have obligations under the PCMLTFA will be provided to FINTRAC.

    To reiterate, just as with proposed section 101, this amendment would maximize the speed and efficiency with which the centre can obtain information, minimize potential regulatory duplication, and does not represent an expansion of information or powers.

    Fighting organized crime and terrorist activity demands the concerted effort of national and international intelligence agencies, law enforcement and government. For its part in this fight, FINTRAC has two central concerns. One is to detect and deter the operation of organized crime and terrorist activities. The other is to protect the privacy of our information holdings. We recognize that the success of FINTRAC's mandate depends on our resolute commitment to both these important obligations.

    Thank you, Mr. Chairman, for inviting me to speak here. I would be happy to answer any questions you may have.

[Translation]

    Thank you. I you wish to put your questions in French, I'll make every effort to respond to them.

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[English]

    The Chair: Thank you, Mr. Ossowski.

    We'll begin our rounds. For your information, our rounds are at five minutes and we try to keep to that as best we can.

[Translation]

    We'll begin the first round with Mr. Claude Bachand.

    Mr. Claude Bachand (Saint-Jean, BQ): Thank you, Mr. Chairman.

    Thank you for your presentation. It was announced recently in the House of Commons that Hezbollah was now on the list and could no longer seek financing for its activities.

    Did you in fact say that CSIS or the RCMP could no longer request intelligence information from you? Is that in fact what you said in your presentation? You can respond to the question in English.

[English]

    Mr. John Ossowski: Merci.

    It's quite clear that we can only disclose information when we've reached the threshold of believing there are suspicions of terrorist financing or money-laundering activity.

    In the case of CSIS, they can't query us directly. They couldn't approach us and ask what we have on individual acts. They can provide us voluntary information on individual acts, and if that happens to match up with other information we already have available to us and it meets the threshold where we would be required to disclose, then we can disclose that information to CSIS.

[Translation]

    Mr. Claude Bachand: However, if my understanding is correct, you are seeking a change; you are asking CSIS and the RCMP to supply you with information that you do not have. You want this provision to be incorporated into the legislation. Correct?

[English]

    Mr. John Ossowski: That's correct. Currently, with our existing mandate we have access to law enforcement databases for the purpose of dealing with money laundering. That information only goes so far in our ability to help us detect and deter terrorist financing. That's why the information we'll be able to have access to or be able to query in the context of national security databases will be most important for us in terms of exercising that mandate to detect and deter terrorist financing.

[Translation]

    Mr. Claude Bachand: Getting back to my example about Hezbollah, I imagine you were involved in the investigation into this organization. What led to this group being placed on the list? Did you look into their financing sources and how funds were spent? Did you agree with CSIS and the RCMP that there were in fact problems with Hezbollah and that the group should be listed? Did you have a hand in the decision to ban Hezbollah from seeking financing, as it does on a regular basis?

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[English]

    Mr. John Ossowski: Well, my colleagues could correct me if I'm wrong, but I believe we played no part in that decision.

[Translation]

    Mr. Claude Bachand: I thought you were an expert on the subject of money laundering. Are you saying that some sections of the RCMP and CSIS investigate money laundering operations and conduct parallel investigations, without your knowledge? Is that what happened in the case of Hezbollah?

[English]

    Mr. John Ossowski: No. What used to be understood is that we're clearly responsible for developing the financial intelligence. If we collect information from a variety of sources, whether they be natural security databases, suspicious transaction reports, or whatever is available to us, it reaches the threshold.

    In the case of terrorist financing, we refer that information through a disclosure to CSIS. It would be up to them to conduct an investigation. We don't do any investigations; it's completely up to them. We just produce the intelligence. We give them the analytical intelligence on what we believe is suspicious in nature and is worthy of following up on.

[Translation]

    Mr. Claude Bachand: If it's not a state secret or information that you are not at liberty to disclose, could you tell me how many organizations or situations were deemed to be problematic and were subsequently referred to the RCMP or to CSIS? Can MPs see this list? Was assigning you this responsibility a worthwhile endeavour?

[English]

    Mr. John Ossowski: First of all, we have as of March 1 made 72 case disclosures. The information is not available to MPs. It's considered financial intelligence and it's closely guarded. Under our act we would be, as with any intelligence product, subject to severe penalties if we were to talk about it in any detail.

    But as of March 1, there have been 72 disclosures made. Some of those disclosures were referred to CSIS because there were suspicions of terrorist financing.

[Translation]

    Mr. Claude Bachand: You say that information was conveyed to CSIS. However, how do you decide whether or not to convey the information either to CSIS or to the RCMP? Do you make a distinction between these two agencies? Are there cases where information can also be passed along to the RCMP?

[English]

    Mr. John Ossowski: The general rule of thumb is that if it has anything to do with terrorist financing or national security, it's referred to CSIS. If it has anything to do with money laundering, it's referred to the RCMP and/or the appropriate police force.

[Translation]

    The Chair: This is your last question.

    Mr. Claude Bachand: Of the 72 cases that were referred, was the evidence deemed to be conclusive in any of these by the RCMP and CSIS and were measures ultimately taken or charges laid?

[English]

    Mr. John Ossowski: I think it would be best to refer to the RCMP to see what they're doing with the disclosures we've made.

    The Chair: Mr. Mahoney.

    Mr. Steve Mahoney (Mississauga West, Lib.): Thank you, Mr. Chairman.

    Has the privacy commissioner commented on your operation at all, and if so, is there a written report or...?

    Mr. John Ossowski: I believe that when our original act was created, the privacy commissioner was involved at that point. I think it's important to point out that the privacy commissioner and the access to information commissioner can audit us at any time. We're subject to the Privacy Act.

    Mr. Steve Mahoney: Has he expressed any concerns in relationship to your role in this bill?

    Mr. John Ossowski: Not that I'm aware of.

    Yvon, perhaps you want to comment.

    Mr. Yvon Carrière (Senior Counsel, Financial Transactions and Reports Analysis Centre of Canada, Department of Finance): Aside from the comments the privacy commissioner made when the original bill came before Parliament, I'm not aware of any other comments he made.

    Mr. Steve Mahoney: I'm assuming you would be, since you state that privacy is paramount in everything you do; you'd want to be involved in that.

    You talk about the FATF's 40 recommendations and eight special recommendations. Do we have those? Do we have the eight special ones? Do you know, Mr. Chair, through you, to the clerk? There are eight special recommendations that are internationally recognized--if you look at page 3 of this presentation--that deal specifically with organized crime and terrorist activities. If we haven't seen that or if we have a copy of it, I'd be interested in seeing what those eight are.

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    Mr. John Ossowski: We'd be more than pleased to send copies to all the members of the committee.

    Mr. Peter Bulatovic (Assistant Director, Terrorist Financing Analysis, Financial Transactions and Reports Analysis Centre of Canada, Department of Finance): Mr. Chair, those are also available on the FATF website on the Internet.

    Mr. Steve Mahoney: I think it would be helpful to see that.

    I'm just a little curious about the difference between gathering information and conducting investigations. Concerns have been expressed by some folks about the breadth, if you will, of the ability to compile databases and collect information on people. While you state that you're not empowered to conduct investigations, it seems to me it might be a fine line, where you're going to have to conduct an investigation to be able to get information. How else would you get it?

    Mr. Peter Bulatovic: We consider FINTRAC as an organization to be a passive analytical body. The reports we receive, we take them at face value. We do not follow up on reports that are missing information. We do not go back to reporting entities and say they're missing this piece of information. We deal with information that is given to us from a passive, analytical perspective. We make a conclusion within fact. We do meet our threshold in terms of reasonable grounds to suspect that the information we have in our database would be relevant to money laundering or terrorist financing investigations.

    But we do not follow up on any information we receive, and there is a reason for that. We do not want, for example, to go back to one of the reporting entities and say that in this report they submitted on such-and-such a person they're missing this field. We would then in fact disclose to that reporting entity the analysis we're conducting on that individual.

    Mr. Steve Mahoney: So you wouldn't phone CSIS or the RCMP and say you want some information on some kind of transaction or something of that nature that might have come to their attention.

    Mr. Peter Bulatovic: We would not, no.

    Mr. Steve Mahoney: You make the statement on page 5 that CSIS or the RCMP do not have access to your database or to your “complete analytical files” except by court order. The word “complete” just causes me some curiosity.

    Mr. John Ossowski: It's a two-part process. When we reach the threshold to believe that we have information relevant to suspicions of money laundering or terrorist financing, we are required to make that initial disclosure, which has that template--tombstone information, if you will--namely the name of the person and when and where the transactions took place, that type of thing. We can go into more detail in the regulations if you like in terms of what is in that first designated bit of information.

    Beyond that, though, when we look at all the information available to us, we actually put together a case analysis, link it all together, and come up with what we believe to be the basis for the suspicion. That's the information they would have to come back and get from us through a court order. That's not available unless they come back with a court order.

    Mr. Steve Mahoney: What you're saying is if you compile information that you think leads towards criminal activity, you can't give that to the RCMP or CSIS.

    Mr. John Ossowski: Not unless it's through a court order.

    Mr. Steve Mahoney: What are you collecting it for, then?

    Mr. John Ossowski: It's part of a threshold that was established in the original legislation. We're ensuring that we're not....

    Help me out here, Yvon.

    Mr. Yvon Carrière: The information we would give, let's say, to the RCMP would consist of the name of the person who carried out the transaction, the date the transaction was carried out, and the amount of the transaction, that type of identifying information. It would be up to the RCMP then to look at that transaction report and to go and make further investigations.

    Mr. Steve Mahoney: I'm sorry, then you give them that information without a court order initially.

    Mr. Yvon Carrière: That's correct.

    Mr. Steve Mahoney: Then if they need more, they must--

    Mr. Yvon Carrière: Then they have to convince a judge that they have reasonable grounds to believe we have information that might help them conclude their investigation. If the judge is convinced that there are reasonable grounds to believe that information exists and that we have it and it would further this investigation, then the judge can order FINTRAC to give the entire case analysis. Of course, the director is authorized to intervene in that process and give reasons why he thinks that information should not be made public, if it would be against the national interest or for some other reason.

    Mr. John Ossowski: This is the very essence of the arm's-length relationship in law enforcement that we have. We can provide them with the lead information, and they have to go out and do the legwork after that and see if what we've given them is cause for further investigation or prosecution. But then it's a two-step process. They have to come back and ask for the details.

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    Mr. Steve Mahoney: I'm assuming that if you're going to give them that information, you must have suspicions, or why else would you give it to them?

    Mr. John Ossowski: Yes.

    Mr. Steve Mahoney: So if they get something from you, they know they just have to dot some i's and cross some t's, and then go for a court order.

    Mr. Yvon Carrière: There is one essential difference. We disclose that information when we have reasonable grounds to suspect that it might be useful. They have to convince a judge that they have reasonable grounds to believe it would be essential. So there is a different threshold there.

    The Chair: Mr. Barnes.

    Mr. Rex Barnes (Gander—Grand Falls, PC): Just to go a little further, I suppose, database has always been a big concern with regard to people who have testified so far. There has always been a big debate. How do you get the database? How do you collect your database?

    Mr. Denis Meunier (Assistant Director, Reporting Entity Relationships, Financial Transactions and Reports Analysis Centre of Canada, Department of Finance): There are a large number of reporting entities that must provide us with a variety of reports, whether they be large cash transactions, suspicious transaction reports, electronic funds transfers, and so on. So a large part, probably the largest part of our database, consists of reports from reporting entities on financial transactions. So under the PCMLTFA, these reporting entities are required by law to provide us with those reports.

    Mr. Rex Barnes: So do banks use the reporting entities? You're saying the banks notify you if there has been a large sum of funds transferred or moved out of the country or moved into the country?

    Mr. Denis Meunier: Exactly.

    Mr. Rex Barnes: You don't share that with anyone, then, unless an investigation has to be done?

    Mr. Denis Meunier: This information, this large body of transactional reports, is brought together to the analysts, with their access to databases, volunteer information reports, and I guess access to commercial databases. It's brought together to be analysed. So it's not just the information from let's say the reporting entities, the banks; it's also combined with other information to which our analysts have access in order to generate some intelligence.

    Mr. Rex Barnes: Would CSIS ever call you up and say they want you to analyse a certain group?

    Mr. Peter Bulatovic: No one can call us up and ask us. No one can make a request to us to ask us to analyze anything. What happens is, in accordance with the act, organizations, individuals, CSIS, law enforcement can provide volunteer information to us and say “This information is being provided to you in a voluntary manner; you can make whatever use you want of it.” In fact, that's what most of the voluntary information says to us.

    Now, just based on something coming from anyone from law enforcement does not result in a disclosure. We have to meet a threshold, our own threshold in terms of whether we would believe this would be relevant to a money-laundering or terrorist-financing investigation.

    In terms of the databases my colleague talked about, we also have access to commercially available databases like 411, where we verify the data we receive, LexisNexis.... There are numerous databases of this nature that we use when the analyst in fact looks at the analysis information. But the important thing is, as my colleague John said earlier, we take great pride as an organization in really maintaining that arm's-length relationship, where we simply do not respond to any queries.

    Mr. Rex Barnes: So there's no way in the world.... Well, you just answered the question I was going to ask.

    Okay, that's all for now.

    The Chair: Mr. O'Reilly.

    Mr. John O'Reilly (Haliburton—Victoria—Brock, Lib.): Thank you very much, Mr. Chairman, and I want to thank the witnesses for coming. I showed a picture to them earlier that explains everything in Ottawa. I think they enjoyed that. It was a picture of a stop sign with “no stopping at any time”, in both official languages, hung on it.

    In my former life I was a real estate broker and dealt sometimes with religious organizations that don't deal with banks. They obviously deal in cash transactions--Amish and other groups that don't believe in our banking system. At times I have had a trigger when trying to make a deposit, as a real estate broker, where the bank will not accept a certain amount of cash without an affidavit. Do groups that come into that purview of religious organizations that deal entirely in cash or people I deal with who keep money in their socks and so forth and don't use banks trigger an investigation?

    I fear that now all of these groups will be subject to further investigation if in fact there isn't some way to pre-clear them. They obviously mirror some of the organizations you're looking for. But if you look at some of the basic real estate transactions that take place, a lot of them involve a lot of cash being transferred, not necessarily electronically, but by being deposited in lawyers' trust accounts and in real estate agents' trust accounts and so forth.

    If that is triggered initially in the transaction, will that group continually be monitored, or do you recognize that some people operate this way and they are not terrorists?

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    Mr. John Ossowski: There are a couple of issues you have referred to you.

    Certainly in terms of large cash transactions, anything over $10,000, as a result of regulations that came into force on January 31, has to be reported to us. On the other side of the question, though, in terms of this particular community that doesn't use banks too often, one of the main components of our compliance regime is that banks and financial institutions are required to know their clients--to have an understanding of who these people are who are coming in and using them. Unfortunately, if people don't use the banks too often, they're probably going to be asked some questions that otherwise someone who comes in and does things regularly may not be asked, if it were below a certain threshold. If it is above a threshold, everyone is going to get asked those questions anyway.

    Do you want me to add to that in terms of compliance?

    Mr. John O'Reilly: Does the Bank Act not already have a regulation that you can only put $9,000 cash without triggering the signing of an affidavit to say that it came from somewhere?

    Mr. John Ossowski: I think that's a bit of an urban myth, actually. Until the large cash transaction regulation of $10,000 came into effect, I wasn't aware there was any kind of reporting requirement or restriction.

    Mr. John O'Reilly: It was maybe just internal with the banks that they wanted to know where the money came from.

[Translation]

    Mr. Yvon Carrière: I just want to say that there is nothing to prohibit a deposit of over $10,000. The legislation and regulations stipulate that when a bank receives a cash deposit in this amount, it is required to produce a report.

[English]

    Perhaps some banks do have an internal practice that they won't accept it or they'll accept it with an affidavit. I'm not aware of any, actually, myself, but I don't think the new law would prohibit them from asking for an affidavit. I'd be surprised if they would, but certainly nothing in our act or regulations would prohibit or limit that in any way. The only thing it requires is the production of a report in that case.

    Mr. Peter Bulatovic: Also, just in terms of your question on the use of cash, a cash transaction itself will not for example spring FINTRAC into action in terms of an analytical point of view. There has to be more than just a cash transaction. That insult is not triggered because of the thousands or literally millions of transactions we will have. That would not trigger.

[Translation]

    Mr. Claude Bachand: I have one final question concerning the handling of information. Judging from what I read in your document, you seem to deal with vast amounts of information. You have handled up to 100,000 pieces of information and you have drawn up a king of grid. Do you find some of the information you receive rather far-fetched and hence discard it immediately? Or, do you treat every single piece of information you receive seriously? Are there guidelines in place which lead you to dismiss some information as far-fetched and to consider other information more seriously? Do you follow any kind of grid which allows you to reject outright information that is most probably inaccurate?

[English]

    Mr. John Ossowski: Certainly there are internationally accepted typologies that would suggest either the presence of money laundering, or suspicions of money laundering or terrorist financing, and if we see those types of things it leads us into further analysis.

    Perhaps Peter could expand on it a little bit further.

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    Mr. Peter Bulatovic: There are several factors we look at when we do the analysis, be that on the money laundering side or the terrorist financing side. The other important element to look at too is the act requires us to keep the information we've received for a minimum period of five years; it's a legislative requirement.

    Yes, but you're right in your question, in terms of we do discard a lot of the information right at the front end based on what we've put in terms of the factors we look at.

[Translation]

    Mr. Claude Bachand: My second question concerns agreements that are entered into. Apparently, some agreements give you access to financial information from abroad. You also stated that you have agreements in place with the federal government as well as with certain provincial administrations. Do all provincial governments have an agreement with you when it comes to communicating information of this nature?

    Mr. Yvon Carrière: Pursuant to section 66(2) of the act, an agreement must be in place before databases can be accessed. The legislation also stipulates that agreements must be entered into before information can be exchanged with another financial information unit. I couldn't tell you how many agreements of this nature are in place to ensure access to commercial or other databases. Was that the gist of your question?

    Mr. Claude Bachand: Yes, but as you may have surmised, the matter isn't quite settled yet. I've just realized that you do not have an agreement in place with CSIS, the RCMP and the CSE. You would like to enter into such agreements in order to be able to exchange more information. A number of agreements or accords have been negotiated with international institutions for the purposes of exchanging information. You're seeking to enter into agreements of this nature with the federal and provincial governments, and even with the Office of the Superintendent of Financial Institutions, provincial securities commissions and other regulatory bodies.

    I'm not certain how the Privacy Commissioner would react to this. Does the Privacy Commission scrutinize closely all of your requests when you ask to access certain information? It seems to me as if you're asking for a great deal.

[English]

    Mr. John Ossowski: You asked two sides to the question there. In terms of the first side, relating to provincial regulators and regulators of financial institutions, or OSFI, the Office of the Superintendent of Financial Institutions, we already have access to that information.

    The amendment we're seeking in clause 101 of Bill C-17 is simply about reducing the burden on reporting entities so that they don't have the regulator going through one week and then us coming in the week after to ask for the same information. So it's really about regulatory efficiency and reducing the burden on them, and quite frankly for us, reducing cost.

    In terms of the access to national security databases, this is information that would be vital for us in terms of our ability to detect and deter incidents of terrorist financing. Yes, we already have some agreements in place to share information with law enforcement databases for money laundering. Clause 100 of this bill is specifically for access to national security databases.

    I'm trying to respond to the two clauses here. One is compliance for which we already have the mandate to get this information: clause 100 on national security databases is really to help us in our mandate to detect and deter terrorist financing.

[Translation]

    Mr. Denis Meunier: Just to add to that, agreements with the Office of the Superintendent of Financial Institutions and with other regulatory agencies respecting the sharing of information wouldn't really increase the flow of information. As my colleague mentioned, we already have access to this information. What we want is a better way to manage the way in which information is collected and to work together with agencies that often share the same interests as we do. We want to eliminate duplication and overlap.

    Mr. Claude Bachand: Regarding regulatory agencies, several weeks ago before the break, we heard from lawyers and representatives of the bar association. There seemed to be a problem in that members of the profession must abide by the rules of professional privilege when dealing with their clients. Representatives of the bar association found sections 100 and 101 to be quite vague. They expressed some concern about finding themselves in a situation where they might be compelled to disclose information, even though they are sworn to upholding client privilege. I'd like to hear your views on this subject.

º  (1610)  

[English]

    Mr. John Ossowski: I'm happy to report, actually, that after the Law Society appeared here, they contacted us to clarify that. We explained to them, and they understand now, that we would only exchange that information with them if we had in place a bilateral agreement with them. If they don't want to have an agreement with us, we won't share the information, and there's no expectation of them to receive it.

[Translation]

    Mr. Claude Bachand: I see. I have no further questions.

    Mrs. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Thank you, Mr. Chairman.

    Thank you very much for your presentation which also touches on the subject of law societies. I'm a lawyer and therefore I have an interest in this subject. Thank you for clarifying section 100. However, the Law Society of Upper Canada did raise one issue with the committee. Representatives mentioned a current case involving

[English]

Proceeds of Crime (Money Laundering) and TerroristFinancing Act and that they believe this clause 100 is built on that.

    Mr. John Ossowski: My understanding of clause 100 is that it is the amendment for the national security database.

    Mrs. Marlene Jennings: Yes, I understand. But in clause 100 it talks about financial entities, regulators of individuals who are subject to part 1 of the act, and then says that it may apply to lawyers. That's why they're litigating that. It allows FINTRAC to disclose or receive from regulators of individuals or entities subject to part 1 of the act information relating to their compliance with part 1. So in terms of your answer about not disclosing unless you had a bilateral, I'd like a little bit more clarification, given that the Federation of Law Societies is already litigating the fact that they come under part 1 of the PCMLTFA, and clause 100 of this Bill C-17 relates to part 1 of that previous legislation.

    Mr. John Ossowski: All I can say is that pending litigation before the courts, lawyers are exempt from part 1 as it applies to lawyers, until the case is heard.

    Mrs. Marlene Jennings: You're interpreting it as them being exempt until?

    Mr. John Ossowski: There's no requirement for them to report until the case has been heard.

    Mrs. Marlene Jennings: To date, since the creation of FINTRAC, the privacy commissioner and the information commissioner have audited FINTRAC?

    Mr. John Ossowski: No. They have the ability to audit FINTRAC under our act, but we have not been subject to an audit by either of them.

    Mrs. Marlene Jennings: Thank you.

    The Chair: Mr. Mahoney.

    Mr. Steve Mahoney: We had concerns expressed by the Law Society about the fact that the changes in this bill might force them to disclose information that is confidential in terms of their client relationship. How do you respond to that particular concern?

    Mr. John Ossowski: I think you'd really have to go back to the Department of Finance, which basically can speak to the policy intent of why they were included in the first place. From my perspective, the scope of the act was purposely created very broadly to capture all those who can function as financial intermediaries. But, quite frankly, FINTRAC is responsible for operationalization and implementation of the act, so really to get back to the policy intent, you'd have to speak to other departments.

    Mr. Steve Mahoney: But I've noticed under your subtitle, “FINTRAC's Operation”, you list financial institutions, accountants, real estate brokers and agents, life insurance companies and agents, money service businesses, foreign-exchange dealers, and casinos.

    Mr. John Ossowski: That list is not exhaustive.

    Mr. Steve Mahoney: That's not exhaustive? So lawyers would fall under this as well?

º  (1615)  

    Mr. John Ossowski: If the case weren't before the courts right now and subject to litigation, they would be included. They were originally included, in the original act.

    Mr. Steve Mahoney: So their concern is that they might be required to disclose information that could be used in some way against either their members--this was the Law Society--or against the clients of their members?

    Mr. John Ossowski: Depending on the outcome of the litigation, that may very well be the case.

    Mr. Steve Mahoney: But it would be the outcome of the litigation, so it would come as a result of a conviction or something of that nature?

    Mr. John Ossowski: No, of the litigation where they're currently challenging the application of the PCMLTFA to lawyers.

    Am I answering the right question?

    Mr. Steve Mahoney: I'm not sure I follow.

    Mr. John Ossowski: If you're talking about the compliance information, the same applies. We wouldn't share any compliance information with them. For example, let's say that there was no litigation and lawyers were covered under the act and subject to part 1. If we came across compliance information and we had an agreement in place with the Law Society to share that information that we felt a lawyer was not being compliant or wilfully non-compliant--

    Mr. Steve Mahoney: But you'd have to have an MOU with the Law Society.

    Mr. John Ossowski: We'd have to have an MOU with them.

    Mr. Steve Mahoney: You don't have that now?

    Mr. John Ossowski: No.

    Mr. Steve Mahoney: So before you could even do anything, you'd need to go and negotiate that MOU.

    Mr. John Ossowski: The litigation would have to be resolved. They would have to be subject to the act, and we'd have to negotiate an agreement with them to share that information.

    Mr. Steve Mahoney: And what would happen if they refused to sign an MOU?

    Mr. John Ossowski: We wouldn't share any information.

    Mr. Steve Mahoney: That's it.

    Mr. John Ossowski: That's right.

    Mr. Steve Mahoney: At that point there could be a court order sought by law enforcement if they felt that was--

    Mr. John Ossowski: I suppose the situation could arise where one of our disclosures was investigated and a lawyer was involved and charges could be laid in that context, but that's just a hypothetical.

    Mr. Steve Mahoney: But that would be legitimate anyway if it was.

    Mr. John Ossowski: Absolutely.

    Mr. Steve Mahoney: Thank you.

[Translation]

    Mr. Claude Bachand: As I understand it, your agency was created following a G-7 meeting to address the problem of money laundering. It was established to ensure compliance with international agreements and also because it was felt money laundering destabilized the world economy. As I also understand it, beginning in 2000 or 2001, you were given a mandate to detect and deter funding of terrorist activities.

    I have several questions for you concerning your organizations.

    First of all, to which department do you report?

    Secondly, how many people are presently in the employ of your service?

    Thirdly, do you feel that the services you perform and the amount of laundered money that you manage to uncover compensate largely for what society has invested in your operations?

[English]

    Mr. John Ossowski: First of all, to your first question, I can say that we report through the Minister of Finance.

    We currently have about 165 employees. In terms of value for money, of the 72 disclosures that we've made so far, as of March 1, they have a value in excess of $200 million.

    Our budget in the coming fiscal year is being reduced down to $31 million, so I'd leave it up to you to decide on the cost-benefit analysis of that.

[Translation]

    Mr. Claude Bachand: You just said that your budget had been cut by $31 million. How much money did you have to work with before?

[English]

    Mr. John Ossowski: This current year it's $41 million. The money purposely drops down as we complete our implementation and have established our infrastructure, setting up the IT system, setting up the premises, that sort of thing. Once we have gone through the bulk of our implementation, our budget was purposely meant to scale down in the coming fiscal year.

    The Chair: Mr. Mahoney? Mr. O'Reilly? Madame Jennings? No?

[Translation]

    On behalf of the committee, I'd like to thank the witnesses for being here today and for assisting us in our study of Bill C-17. This concludes today's proceedings.

[English]

    The meeting is adjourned. Thank you very much.