Through witness presentations and submissions, the Committee heard about a variety of topics in relation to Canada’s anti–money laundering and anti–terrorist financing regime: its objectives and operations; its international basis; domestic reviews and proposals to improve effectiveness; and privacy considerations.

A. Objectives and Operations

One of the Committee’s witnesses – the Department of Finance – focused on the objectives and operations of Canada’s anti–money laundering and anti–terrorist financing regime. According to the Department of Finance, the overall objective of the regime – the framework for which is provided by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) – is to protect the integrity of Canada’s financial system and the security of Canadians. It noted that the regime, which consists of 11 federal departments and agencies, complements the work of law enforcement and intelligence agencies.

The Department of Finance stated that $70 million annually is allocated to the Department of Finance, FINTRAC, the Department of Justice, the Public Prosecution Service of Canada, the RCMP, the Canada Border Services Agency (CBSA), CSIS and the Canada Revenue Agency (CRA) to support their activities in relation to Canada’s anti–money laundering and anti–terrorist financing regime. It also identified federal agencies and departments that are part of the regime but that do not receive specific funding for regime‑related activities; these entities include the Office of the Superintendent of Financial Institutions (OSFI), Public Safety Canada, and the Department of Foreign Affairs, Trade and Development (DFATD).

According to the Department of Finance, Canada’s anti–money laundering and anti–terrorist financing regime is based on three interdependent pillars: coordinating policy; preventing money laundering and terrorist financing; and disrupting money laundering and terrorist financing. Regarding the first pillar, it said that the PCMLTFA requires reporting entities, which include financial institutions and intermediaries, to identify their clients, keep records, send reports to FINTRAC on suspicious financial transactions, large cross-border currency transfers and certain other prescribed transactions, and have an internal compliance program to ensure that these reports are sent.

As well, the Department of Finance noted that the second pillar is the responsibility of the reporting entities, FINTRAC and OSFI. It stated that FINTRAC collects and analyzes financial transactions reports received from reporting entities, and discloses relevant financial intelligence contained in these reports to selected law enforcement and intelligence agencies.

As described by the Department of Finance, the final pillar involves investigations by CSIS, the CBSA, the RCMP and the CRA, with these investigations supported by FINTRAC intelligence; prosecutions are conducted by Public Prosecution Services of Canada. It also mentioned that Canada’s anti–money laundering and anti–terrorist financing regime has a terrorist listing process led by Public Safety Canada and DFATD that permits the freezing of terrorist assets pursuant to section 83.01 of the Criminal Code and the United Nations Act.

B. International Basis

A number of the Committee’s witnesses commented on international organizations involved in anti–terrorist financing. The Royal United Services Institute explained that, at the multi-lateral level, counterterrorism financing policy is set by the Financial Action Task Force (FATF), of which Canada is a member, and UN Security Council resolutions. In his submission to the Committee, Yee-Kuang Heng stated that the FATF uses a risk-based approach in developing its recommendations, as a rules-based approach would be limited by countries’ differing resources for implementation and enforcement of anti–terrorist financing rules.

The Department of Finance and the CRA emphasized that Canada’s anti–money laundering and anti–terrorist financing regime is consistent with FATF standards. The Department of Finance also remarked that, like other countries, Canada uses a risk-based approach when assessing and combating terrorist financing threats. The Department of Finance indicated that, when compared to countries with weaker anti–terrorist financing regimes, the terrorist financing threat in Canada is not as great. It also commented that the FATF will begin to evaluate Canada’s regime in autumn 2015.

The Egmont Group of Financial Intelligence Units noted that seizures of assets and convictions for terrorist financing are rare in many jurisdictions, and that anti–terrorist financing reporting requirements are not effective in all jurisdictions. In its view, the detection and deterrence of terrorist financing would be improved through a number of actions: having a better understanding of the types of financial intelligence; working with the private sector to identify terrorist financing risks; assisting reporting entities in filing reports with FINTRAC; and working with the RCMP to trace funds that are suspected of being used for terrorism.

In suggesting that the FATF is not as effective as it should be, Christine Duhaime made two proposals: that it be led by the same person for a longer period of time, rather than having a new leader each year; and that a separate organization be created for the FATF’s counterterrorist financing functions.

The Royal United Services Institute suggested that the dynamic nature of geopolitical developments requires constant reappraisal of counterterrorism financing laws.

C. Domestic Reviews and Proposals to Improve Effectiveness

The Committee’s witnesses spoke about selected reviews of the PCMLTFA and FINTRAC. For example, the Department of Finance commented that the PCMLTFA was recently reviewed by the Standing Senate Committee on Banking, Trade and Commerce, and that the Committee’s March 2013 report contained recommendations designed to increase the performance of FINTRAC, enhance information sharing, and ensure an appropriate scope for Canada’s anti–money laundering and anti–terrorist financing regime. It noted that the PCMLTFA was amended in response to these recommendations. The Canadian Bankers Association requested a third-party review of the regime.

The Privacy Commissioner of Canada stated that FINTRAC does not have a review body that is responsible for examining the Centre’s activities to ensure that they are lawful, reasonable and effective. He indicated that a biennial review of FINTRAC in relation to privacy issues found that certain information provided to FINTRAC was not related to money laundering or terrorist financing, and that the Centre was retaining data that were not related to its mandate. For example, he told the Committee that financial institutions were applying discretionary criteria based on the ethnic origin or the age of the individual to determine whether a transaction was suspicious, which may have resulted in FINTRAC applying discriminatory criteria in its analysis of the resulting suspicious transactions reports.

The British Columbia Civil Liberties Association suggested that – as requested by the Commission of Inquiry in relation to Maher Arar – a consolidated review mechanism for national security agencies, including FINTRAC, should be developed. In its opinion, a review of FINTRAC’s mandate, efficiency and role in relation to national security agencies should be conducted. It noted that there is little information available to assess the extent to which Canada’s anti–terrorist financing regime is meeting its objectives; that said, the information that is available suggests that either there is less terrorist financing than expected or the regime is not particularly effective in addressing terrorist financing.

As well, the British Columbia Civil Liberties Association commented that the Standing Senate Committee on Banking, Trade and Commerce’s 2013 report and the Office of the Privacy of Commissioner of Canada reached similar conclusions about FINTRAC’s efficacy. It identified its support of evidence-based policy-making when considering government oversight of FINTRAC. Both MNP LLP and the Clement Advisory Group said that FINTRAC should be subject to greater oversight.

Christine Duhaime, who appeared as an individual, proposed that Canada should take a leadership role in counterterrorist financing, perhaps by creating a centre of excellence or financial crime centre to facilitate information sharing and a dialogue between the public and private sectors, and to study such issues as digital terrorism. The Royal United Services Institute supported a greater public-private partnership and financial intelligence sharing between the authorities and the banks regarding terrorist financing.

Anthony Amicelle, who appeared as an individual, suggested that the risk-based approach to Canada’s anti–money laundering and anti–terrorist financing regime conflicts with the concept of risk for financial institutions, as those institutions prioritize reputational risk over terrorist financing risks. He said that the concept of risk in relation to terrorist financing is defined differently by each member of the regime, which may lead to more information being reported by financial institutions and difficulties for financial intelligence units (FIUs) in analyzing financial information. In his view, the risk management practices of each member of the regime should be examined.

D. Privacy Considerations

The Committee was informed about certain privacy considerations in relation to Canada’s anti–money laundering and anti–terrorist financing regime. The Department of Finance stressed that Canada’s regime respects the constitutional division of powers, the Canadian Charter of Rights and Freedoms and the privacy rights of Canadians. It also noted that privacy concerns are examined during the five-year statutory review of the PCMLTFA.

The Privacy Commissioner of Canada said that the PCMLTFA should prescribe clear and reasonable standards for collecting, sharing, using and retaining personal information, and that independent and effective review mechanisms should exist to ensure compliance with these standards; these mechanisms should include the courts.

Regarding access to – and disclosure of – personal information, FINTRAC stated that it cannot access the bank accounts of Canadians, and nor does it give law enforcement agencies or CSIS access to the database that contains the information that it collects. It indicated that it discloses information to local law enforcement agencies, the RCMP or CSIS only if there is a probability that the information would be useful in investigating and prosecuting money laundering, terrorism financing or national security offences.

The British Columbia Civil Liberties Association noted that the over-reporting of suspicious transactions results in FINTRAC receiving excess information, and suggested that it is more cost-effective to leave this information in FINTRAC’s database than to remove it. In its view, important and specific information about suspicious transactions should be collected. It commented that governments have to be scrupulous about the manner in which people are screened and identified as being a risk in relation to money laundering or terrorism, and with whom personal information is shared, as sharing information could be problematic from a security perspective.

John Hunter, who appeared as an individual, suggested that any proposed legislation to prevent terrorist financing should respect solicitor-client privilege as determined by the Supreme Court of Canada in respect of lawyers’ duties to clients and their duties under the PCMLTFA, and indicated that the legal profession’s regulatory bodies can play a collaborative role in preventing terrorist financing.