Notes for remarks by Denis Meunier, Assistant Director,
Financial Analysis and Disclosures Directorate,
before the House of Commons Finance Committee
March 8, 2011
Check against deliveryMr. Chairman,
I would like to make brief opening remarks about FINTRAC's mandate and what we do. With me today is Senior Legal Counsel Yvon Carrière.
The legislation adopted by Parliament in 2000, the Proceeds of Crime (Money Laundering) Act, created FINTRAC as an independent agency, reporting to the Minister of Finance, with a mandate to detect, deter and prevent money laundering. In 2001, post 9/11, the Anti-Terrorism Act added combating terrorist activity financing to our mandate.
FINTRAC is Canada's financial intelligence unit, or FIU. We have a staff of slightly over 300, and we have three regional offices in addition to our headquarters. We are a unique agency in Canada as our mandate is both to analyze financial transaction information and disclose certain information to investigators within the thresholds our Act provides, and to provide strategic level financial intelligence.
The Minister of Finance is responsible to Parliament for our legislation and developing any proposals for changes to it or the attendant regulations.
I think I should make it clear exactly what money laundering is. The Financial Action Task Force (FATF) defines money laundering as the processing of criminal proceeds to disguise their illegal origin.
Essentially, money laundering makes it difficult to trace now-clean money back to its original criminal origin. That's where we come in.
Under Canadian law, a money laundering offence involves various acts committed with the intention to conceal or convert property or the proceeds of property (such as money) knowing or believing that these were derived from the commission of a designated offence.
In this context, a designated offence means most serious offences under the Criminal Code or any other federal Act. It includes, but is not limited to those relating to illegal drug trafficking, bribery, fraud, forgery, murder, robbery, counterfeit money, stock manipulation and since very recently, tax evasion.
To give you the most accurate picture of our agency I would also underline what FINTRAC is not: we are not an investigative body and we do not have powers to gather evidence, lay charges, seize and freeze assets or create watch lists of suspected terrorist financiers. FINTRAC does not investigate or prosecute suspected offences. Rather, we are an analytic body that produces financial intelligence to be disclosed, if appropriate, to help further investigations conducted by law enforcement and security agencies and to provide strategic-level analysis to policy departments and assessment agencies.
Because we hold millions of financial transaction records of Canadians, Parliament wanted to ensure the Act was drafted quite carefully to be very specific and clear on what information we can receive and what information we can disclose. The Act stipulates that we can only release information to police where we have reasonable grounds to suspect that the information would be relevant to an investigation or prosecution of a money laundering offence or a terrorist activity financing offence.
Furthermore, the Act requires that, once FINTRAC has reached that "reasonable grounds to suspect" threshold, it must disclose that information. In the same way, once FINTRAC has reasonable grounds to suspect that certain information would be relevant to threats to the security of Canada, the Act stipulates it must disclose that information to the Canadian Security Intelligence Service.
Our job, in brief, is to provide financial intelligence leads to law enforcement and to national security and intelligence agencies. We are a resource for every police department in Canada, with a unique ability to follow the criminal money trail across the country and around the world.
We also disclose information to the Canada Revenue Agency, the Canada Border Services Agency and the Communications Security Establishment when specific additional statutory tests in relation to disclosure to these agencies are met. Finally, we may disclose information to foreign financial intelligence units, as well.
Our work begins with the daily intake of over 65,000 reports on several kinds of financial transactions from a variety of businesses, which we call reporting entities. The most prominent of these entities are banks, however we also receive reports from casinos, credit unions, life insurance companies and money service businesses, not to give you an exhaustive list, but all of whom are obligated by the Act to send reports to us.
We receive several categories of reports: we are required by law to receive terrorist property reports, suspicious transaction reports, or STRs, and reports of attempted suspicious transactions, large cash transaction reports of $10,000 or more, or LCTRs, casino disbursement reports and reports of international electronic funds transfers, or EFTs, of $10,000 or more. When I say international, I mean EFTs entering or leaving the country. We are not authorized to receive reports of domestic EFTs.
Over the years we have built a very large database of these different types of transaction reports. Through sophisticated computer programs and the skills of highly trained and experienced analysts, we can analyze this data from both a tactical and strategic perspective and understand it in combination with information from other sources, such as law enforcement databases, commercially or publicly available databases and, sometimes, information from foreign financial intelligence units.
We specifically look for financial transactions and patterns that make us suspect money laundering or terrorist activity financing. As you can imagine, the movement of illicit funds is often a well-hidden and complex affair, involving hundreds and sometimes even thousands of transactions, as well as dozens of individuals and companies.
I would like to note that our Act was carefully crafted to provide the highest possible protection for personal information while also making it possible for some information to be disclosed to law enforcement. We are the only federal agency whose mandate specifically includes an obligation to ensure the protection of personal information under its control. Our data banks cannot be accessed by any other outside body. And the Act provides for serious criminal penalties to be applied to the unauthorized disclosure of information.
Now let me turn to the subject of interest to this committee, that is, tax evasion by Canadians through use of offshore bank accounts.
In the last two years, we have stepped up our disclosures to the Canada Revenue Agency, sending them 287 cases. These disclosures have been used for criminal investigation into tax matters and also by their Special Enforcement Program, which targets those persons suspected of deriving taxable income from such crimes as commercial fraud and drug trafficking. We know from feedback from CRA that our disclosures have been useful to them in carrying out their investigations and audits and recovering millions in federal taxes.
Until just recently, FINTRAC could provide case disclosures to the Canada Revenue Agency when a dual threshold was met. First there had to be a reasonable suspicion that the information being disclosed was relevant to money laundering, and secondly, a determination had to be made that the information was relevant to tax evasion. In the cases we disclosed to the CRA in the past the predicate offence was very often linked to drug trafficking or fraud. I might add that in these cases, the police are the lead investigators and the culprits are usually investigated in relation to the predicate offence and money laundering. In other words, the law did not permit us to use tax evasion as a predicate offence—that is the criminal activity giving rise to the proceeds—from which to build a case disclosure.
With the recent adoption of Bill C-9, we are now permitted to use tax evasion as a predicate offence from which to build a case disclosure. The Criminal Code regulations were amended to make tax evasion a predicate offence to money laundering when determining whether to send a case to the CRA. But equally important, just weeks ago, on February 14, pursuant to the coming into force of the regulations to the Bill, the threshold for disclosing information to CRA was lowered from "determining" to "reasonable grounds to suspect" that the information being disclosed is relevant to tax evasion.
As you may know, we received additional funding in Budget 2010 to help fight tax evasion. FINTRAC analysts recently received in-depth training on the impact of these legislative and regulatory changes. Also we received training from CRA specialists on tax evasion with respect to the work they do. In cases of money laundering, we have developed what we call indicators of money laundering, which are used more or less by financial intelligence agencies around the world, to determine money laundering.
We have now done the same with tax evasion, through the assistance of CRA. Over the last 3 years we have worked with the Canada Revenue Agency to develop indicators of tax evasion that would help our analysts determine when cases could be referred to the CRA. With the changes in the law, the additional funding and with such training, we feel we are poised to provide more information to help tax investigators with their tax evasion cases.