Bill C-25 (Historical)

An Act to amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the Income Tax Act and to make a consequential amendment to another Act

This enactment amends the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to enhance the client identification, record-keeping and reporting measures applicable to financial institutions and intermediaries. It establishes a registration regime for money services businesses and foreign exchange dealers and creates a new offence for not registering.
It allows the Financial Transactions and Reports Analysis Centre of Canada to disclose additional information to law enforcement and intelligence agencies, and to make disclosures to additional agencies.
It permits the Centre to exchange compliance-related information with its foreign counterparts and permits the Canada Border Services Agency to share information about the application of the cross-border currency reporting regime with its foreign counterparts. It also includes a consequential amendment to the Canada Border Services Agency Act.
It creates an administrative monetary penalty regime.
It amends the Income Tax Act to allow the Canada Revenue Agency to disclose to the Centre, the Royal Canadian Mounted Police and the Canadian Security Intelligence Service information about charities suspected of being involved in terrorist financing activities.

Proceeds of Crime (Money Laundering) and Terrorist Financing Act

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Mr. Speaker, I will be splitting my time with the member for Winnipeg Centre.

[The Acting Speaker, Royal Galipeau]

We are still in the first round and in the first round you cannot split your time unless you have the unanimous consent of the House.

Does the House give its consent?

[Some hon. members]

Agreed.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Mr. Speaker, I thank the House for allowing me to split my time with the member for Winnipeg Centre. I see that some members were in a bit of a quandary as to whom they would rather hear. Given that we are in neighbouring constituencies, we have the common characteristic of speaking vociferously and at length about issues of concern to us.

I am pleased to speak to second reading of Bill C-25. Anyone watching this debate will wonder what the debate is about. We are using a lot of acronyms, short forms and technical language. Really this issue comes down to something that is very important for all of us: money laundering. Often we think of that in terms of criminal activity and organized crime.

I am glad that the Bloc raised another dimension to this whole issue. It is pretty hard to deal with questions of money laundering and money lost to governments and to our revenue source without dealing with tax evasion, without dealing with the presence in our society of tax havens, something that has been a problem throughout the last decade of Liberal rule and now does not seem to be on the agenda of the present Conservatives. That is a matter with which we must deal.

We cannot continue to allow Canadians' hard-earned dollars to leave the country by way of tax loopholes and tax havens. I would hope that the government and the Minister of Finance would be prepared to come back to this chamber with some more definitive answers to questions we have been raising for a long time about why the former prime minister, the member for LaSalle—Émard, closed some tax loopholes and tax havens but he did not close the Barbados. He did not choose to definitively deal with the issue. Instead, he provided apparently avenues for some of his numbered companies to continue transactions through such tax havens. He continued to find a way through his steamship company to change the flags conveniently in order to avoid paying taxes and to avoid fulfilling his obligations according to the standards of this country on the environment, workplace safety and proper compensation and income.

Bill C-25 is an attempt to deal with some very serious flaws in our ability as a country to track and deal with proceeds of crime, money laundering and terrorist financing. This issue has been before us for a long time. The Auditor General has been talking about it for a good period of time, specifically since November 2004 when she put forward a report on implementation of the national initiative to combat money laundering. At that time she said that we were far from being able to deal with this problem effectively and she recommended a number of changes.

It is a big problem. Billions of dollars are involved. We are talking about illegal activities and money that could be used to promote illegal activities in this country and terrorist endeavours around the world. It is something we have to address and we need to do it expeditiously.

The Auditor General's report is a very valuable source for analyzing the bill and for determining whether or not Bill C-25 is truly in line with the Auditor General's recommendations. As a side note, it is important to note that the government says that it has respected the wishes of the Auditor General and followed the recommendations through the introduction of this legislation. We will be doing further study and research to ensure that is the case. During the committee process we will be questioning witnesses along those lines.

In addition to that significant study, we now have the benefit of a major study just completed by the Senate. It put a report out this month entitled “Stemming the Flow of Illicit Money: A Priority for Canada”. The study was coordinated by the Hon. Jerry Grafstein and the Hon. David Angus and it is comprehensive look at the issues of money laundering and terrorist financing. We need to know whether or not this bill actually respects and follows some of the recommendations from this report as well.

I want to note that in the conclusion of this report it states that Canada, as a global partner in making the world safer and more secure, must ensure that our anti-money laundering and anti-terrorist financing regime is in line with international standards and obligations.

The study goes on to say:

Crimes that underlie money laundering and terrorist activity financing--including fraud, embezzlement, drug trafficking and trade in arms – have harmful human, societal and economic effects, with domestic and international consequences.

That really sets the context for what we are hoping to achieve with this legislation and why we need to get this bill to committee. We need to begin that thorough scrutiny and thorough analysis to see whether it is in line with the Auditor General's wishes and whether it reflects some of the recommendations from the Stemming the Flow report.

We are prepared to give support to the bill in principle. It may need some changes as we go through it but we certainly believe in its necessity and that it should be studied at committee.

However, a couple of concerns have been identified and I want to put them on the record. First, let me mention the questions raised by Democracy Watch in a release put out on October 12. This important organization, which has been an incredible watchdog for the integrity of our institutions from a democratic point of view, has called on the federal Minister of Finance to deal with a gap in the bill before us. It wants us to add senior Canadian politicians and government officials to the bank account watch list of the Financial Transactions and Reports Analysis Centre of Canada. It says that this change is recommended by the international standard setting task force, the financial action task force and, therefore, if we are bringing our legislation in line with this task force, then surely we must address this particular aspect.

Democracy Watch also says that it has been recommended by article 52 of the UN Convention Against Corruption. It seems that there might be a flaw in the bill that we need to look at very seriously and determine how to amend the bill to bring it in line with these international obligations.

Specifically, I should probably point out that article 52 of the UN Convention Against Corruption states the following:

...each State Party shall take such measures as may be necessary, in accordance with its domestic law, to require financial institutions within its jurisdiction to...conduct enhanced scrutiny of accounts sought or maintained by or on behalf of individuals who are, or have been, entrusted with prominent public functions and their family members and close associates.

Perhaps the government is leery about going this far, ensuring that actual politicians are included in this part of the legislation.

I would conclude by saying that there are many issues to discuss. I thank the House for its attention to this matter.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Mr. Speaker, the substance of hon. member's speech was actually well within the bounds of reason but the preamble to her speech seemed to be totally off side.

I do not want to leave a misapprehension. The hon. member, in her preamble, was complaining about transactions in offshore jurisdictions, transactions which are frequently treaty obligations and treaty supervised transactions.

I want the hon. member to say quite categorically that the transactions that she referred to in her preamble are neither terrorist suspicious transactions nor organized criminal transactions. I want her to clarify that for the purposes of the record because I do not think she wishes to slander all of the Canadian companies that conduct business around the world.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Mr. Speaker, obviously I have struck a raw nerve with the Liberals.

If the member had listened closely to my speech, he would have heard that I made a clear distinction between money laundering as an illegal activity and terrorist financing, separate and apart from my concern about activities which I consider should be illegal but are not at the present, and that is the flow of money offshore to tax havens so companies do not have to pay taxes.

If the member is so sensitive about this issue, perhaps he will support our efforts and the efforts of the Bloc over the past number of years to have this matter brought before the finance committee of this House and to this chamber. We are talking about the loss of billions of dollars to our public coffers that would go a long way toward meeting the needs of Canadian citizens.

I would suggest that the member participate with us in getting to the bottom of this very serious issue that was not addressed by the Liberals when they were in government and which, in fact, may have been advanced and enhanced by their wishes to keep tax havens in place for the purposes of escaping taxes and moving money offshore.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I just want to ask my colleague to flesh out perhaps a bit more what some of our concerns are about what that side of the House calls tax motivated ex-patriation and what we call sleazy, tax cheating loopholes. I wonder if she could comment on why his government tore up 11 tax treaties with different tax haven countries and left only one, the very country where the former prime minister and current member of Parliament for LaSalle—Émard happens to have his offshore tax haven companies.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Mr. Speaker, my colleague from Winnipeg Centre raises the precise point that we have been pursuing throughout this Parliament in different ways, and that is the continued existence of a tax loophole, of a tax haven, left in place by the former Liberal government to apparently provide an offshore place for people like the member for LaSalle—Émard to flow his money from his steamship companies and thereby avoid paying taxes. If that is not the case, then why are we having this study and why are we dealing with it in this place?

This reminds me of another important loophole. We had a case before this House that the Liberals refused to deal with, which was the project loophole case. It dealt with a prominent family in this country that was taking $2 billion out of this country and flowing it offshore and avoiding paying taxes on any of that money. Officials in the Department of Finance at the time, under the Liberal government, condoned that, defended that and supported that. If anything, we need to get to the bottom of that kind of mentality and deal with it once and for all.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I thank my colleague from Winnipeg North for sharing her time with me so I too can enter into the debate on Bill C-25 dealing with money laundering and the funding of terrorists, a very pressing issue.

I am glad Parliament is seized of the issue because it is something my constituents and people I know have raised with me, especially stemming from the recent information we have had. We were horrified to learn that research has recently identified that $256 million worth of illegal funds have flowed through Canada to terrorist groups. That is just what we have been able to identify and that we know about for a fact. No one is disputing those facts either, so we can attest to the veracity of those figures. Something has to be done urgently.

Although my colleague has identified some reservations about the bill, I support aspects of the bill, one detail of which I would like to dwell on somewhat, and that is the issue that the proceeds of crime could be seized from someone who has been convicted of a crime. If someone is part of an illegal organization, whether that is an illegal criminal organization or an illegal terrorist organization, the government should have the right to demand to know if the things that person owns are the proceeds of crime. If that person cannot demonstrate by a reverse onus that those items were purchased with other resources, then the government should be able to seize those proceeds of crime and use that money to further resource the criminal investigation of other criminals and terrorists.

That is a good idea and it is a bold idea. The NDP government in my home province of Manitoba is seeking to introduce the very same concept. Somehow we need to make it abundantly clear that crime does not pay. Law enforcement officers have conceded to the fact that under the current regime crime does pay because the burden of proof on the government, the courts and on the police is very onerous at times. Even though we know that some person is up to no good and has no other visible means of support, it is tough to prove that the luxury home in which the person lives or the luxury cars in the driveway are in fact the proceeds of crime.

I say that we should give more tools to the law enforcement agencies and act on the side of the Canadian people in this case and shift that burden of proof onto the crooks. They should be telling us how they bought that luxury home when they have not had a job in 20 years. If a rich uncle died and left it in his will, then they should show us the will. If they cannot show us any other visible means of support, then we want to know how they are able to live in a mansion with all these luxury cars in the garage. We should seize those assets, send the message that crime does not pay, sell those assets and give them back to the law enforcement agencies so they can go out and bust more criminals. That is a good idea.

I should point out that this would be law in Manitoba today were it not for the two solitary members of the Liberal Party in the Manitoba legislature who blocked and opposed the legislation. I do not know what problem the Liberals have with this. I do not think it is any great infringement on civil rights to ask the legitimate question of where a person received the money to pay for the luxury home. If that simple question cannot be answered, then we should seize it.

I have a few other points to raise and I will do so in a way that I hope does not inflame the passions of the Liberals opposite. This idea of offshore tax havens has a broader context than just wholesale tax avoidance. The same logic that allowed these offshore tax havens to flourish gives licence or gives opportunity for people to funnel ill-gotten gains with less ability to track offshore as well.

In the context of the bill, as we go through Bill C-25 and its goals and objectives of limiting money laundering and trying to curb the financing of terrorist activity, we should be revisiting the tax treaties that have allowed Canadian businesses to avoid taxes on a rampant basis. Whatever tax regime we put in place, let us make it fair, let us make it balanced and let us make it favourable to business if we like, but at least let us make businesses pay their fair share once we have established what that rate of taxation shall be.

It is such a contradiction to hear the Conservative government say that it will cut back on $1 billion worth of social spending, but then show this wilful blindness to $7 billion worth of lost tax revenue by allowing, what I call, tax fugitives to avoid paying their fair share of taxes in our country.

There is a polite term for it, and I know my colleague from the Liberal Party is an economist. The polite term is tax motivated expatriation. The street name for it is sleazy, tax cheating loophole. There is only one place we can still do it and it just happens to be where our former prime minister had his companies, his shell companies, his dummy companies, established so he could avoid paying his fair share of taxes in Canada. It is appalling. A Canadian prime minister should be proud to fly the Canadian flag on his ships and to pay his taxes in our country. I cannot understand the thought process that would lead him to believe otherwise. It is beyond comprehension.

My colleague from the Liberal Party is helping me grope for the words to put some kind of definition to this appalling practice of tax avoidance.

The logic, though, about the proceeds of crime element is that any person convicted of an indictable offence at the direction of or in association with any criminal organization must demonstrate that every item of property owned by that person is not the proceeds of crime. That is just common sense to me. That is a burden with which no one in this room would have any difficulty.

If I were driving a luxury car that cost $100,000 and I had no visible means of support for the last X number of years, it is not unreasonable to ask me where I got that car. If I cannot say that I either inherited the money, or I found the money, or I dug it up in the cabbage patch or whatever story, if I am not believed, if I do not meet the test, that should be seized from me. That sends a profound message throughout the community of those who would break the law for their own personal advantage or those who would break the law in order to fund terrorism, which is even worse, that crime does not pay, at least not in Canada. I do not view that as heavy-handed or an infringement of a person's civil rights whatsoever.

Bill C-25 gives us an opportunity to finish a job that was started in previous parliaments. I should recognize and pay tribute to the work done by my colleague from the Bloc Quebecois, Richard Marceau, who is no longer an MP. He managed to get this concept into the House of Commons in the 38th Parliament through a private member's bill. I believe, even prior to that, a Canadian Alliance member, Mr. Paul Forseth, a former colleague of ours, introduced this notion into the 37th Parliament.

It has taken approximately 10 years for us to mature in our thinking about this concept or to be able to embrace this concept and not be threatened or feel afraid of this very worthwhile idea.

When Bill C-25 deals with the proceeds of crime, it also deals with issues pertaining to the Canada Border Services Agency, which permits the new centre of financial transactions and report analysis, FINTRAC, to exchange compliance related information with its foreign counterpart. That, too, is a necessary and commonplace measure if we are to curb the international activity that does threaten our national security. That as well is a concept that we should be able to embrace and not feel threatened by.

My colleague, the member for Winnipeg North, cited some of the reservations NDP members have about Bill C-25. To summarize our view of it, we have to give law enforcement agencies the tools to do their jobs to make the point that crime does not pay in Canada to fund terrorism or self-enrichment.

[Rick Dykstra, Conservative, St. Catharines, ON]

Mr. Speaker, I am honoured to speak today on Bill C-25. The bill will strengthen the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to ensure that Canada continues to be a global leader in combatting organized crime and terrorist financing. This is just another example of Canada taking the threat of terrorism seriously.

Once passed by Parliament, these changes will make Canada's overall regime consistent with international standards. The bill targets either the financial rewards from underlying crimes, such as drug dealing, prostitution and extortion, or by stopping the flow of funds to terrorist groups.

Money laundering and the financing of terrorist activities are serious crimes that affect all Canadians. Criminals are constantly changing their tactics and finding new ways to avoid and evade the law. Therefore, we need to make laws that will keep up with criminals and, in fact, stay ahead of them.

The National Post has reported that Canada has long been a fundraising base for international terrorist groups, from the IRA and Hezbollah to the Iranian MEK. This can simply not continue.

The background on this is that the foundation of this tax regime was originally set out in the Proceeds of Crime (Money Laundering) Act and then adapted to the changing global reality of terrorism. It was renamed the Proceeds of Crime (Money Laundering) and Terrorist Financing Act in 2001.

I would like to touch on the government's four key amendments that it has set out to accomplish the updating of what it needs to do.

First, we are enhancing information sharing between the Financial Transactions and Reports Analysis Centre of Canada, more commonly known as FINTRAC, law enforcement and other domestic and international agencies. In fact, this group reports regularly through the House's finance committee and did so just this past month.

Second, we are creating a registry for money service businesses. This really speaks to ensuring we have some accountability within that registry.

Third, we are enabling legislation for enhanced client identification measures. We need to ensure we know who we are dealing with.

Fourth, we are creating an administrative and monetary penalty system to better enforce compliance with the act.

There is a need for why we need to do it. Financial Transactions and Reports Analysis Centre of Canada reported in early October, as I mentioned, to the finance committee that terrorist groups funnelled an estimated $256 million through our country last year. This is up from $180 million the year before and $70 million the year before that. We are starting to identify and the bill enhances what needs to be done.

There are up to 34 terrorist financing networks operating within the country. Another $4.75 billion was laundered by crime groups, which is up from the $2 billion in 2005. Recently there was the case of four Canadians with links to the University of Waterloo accused of funnelling money to the Tamil Tigers. This shows that Canada has a responsibility to its international partners to continue to crack down on terrorist financing. Canada will not be a safe haven for those who support terror.

How did we come to this legislation? As a founding member of the Financial Action Task Force, we are committed to implementing its regulations, including new ones released in 2003, which require this update to be made. Canada has committed to implementing the 40 recommendations of the FATF on money laundering and 9 special recommendations on terrorist financing. The bill brings our standards in line with the Auditor General's recommendations of 2004 and the Treasury Board report of 2004.

Finally, it also fulfills demands of the interim report of the Senate committee on banking to implement tougher measures on money laundering and terrorist financing.

In Canada there is a need to balance increased vigilance and monitoring with the fundamental need to protect the privacy of Canadian citizens. This is an issue we take very seriously in Canada.

As we did with this legislation, we will continue to consult widely with Canadians. In the future, we need to ensure that a better system does not come at a price of a loss of privacy for all of our citizens.

As a prelude to the bill, the Department of Finance issued a consultation paper entitled, “Enhancing Canada's Anti-Money Laundering and Anti-Terrorist Financing Regime” in June 2005. Over 50 submissions from stakeholders were received followed by further face to face consultations.

As a result, the proposed bill contains amendments that seek to address industry concerns and minimize the compliance burden by tailoring wherever possible proposed new requirements to existing business practices.

The proposed legislation serves to meet Canada's international commitments to combat money laundering and terrorist financing while ensuring that our domestic regime remains robust and up to date.

Those who benefit from crime and steal hundreds of millions of dollars should not be allowed to drive armoured vehicles full of money and waltz over to their local banks. That is the last thing Canadians want in their country.

Criminals who are laundering money should do one thing. They should stew in jail about it. The government and its law and order package and its agenda will help prevent organized crime and terrorism from organizing in any of our communities.

Speaking to that, I come from a riding that is very close to three access points on the border. One of the commitments that we have made, both before the election and since we have taken government, is to ensure that security, whether it be RCMP or our security officers at the border, is funded, prepared and supported in order to ensure that Canadians, both in Niagara and across the country, are safe.

[Maria Mourani, Bloc, Ahuntsic, QC]

Mr. Speaker, if the objective of this measure is, among other things, to fight money laundering, the government will have to close all the restaurants and bars in Canada, and also a number of other businesses.

I now come to my question. In my riding, I met a person who told me about a Lebanese bank called Byblos. That bank has branches all over the world, except in Canada. Why? Simply because that bank is based in Lebanon. That is as simple as that. Why? Because, in Lebanon, there is a group called Hezbollah, and in Canada that group is deemed to be a terrorist group.

So, that bank, which is not run by Hezbollah, cannot open branches here because it could potentially have Hezbollah members among its clients.

So, we are preventing a perfectly legitimate institution, which has branches all over the world, from doing business here in Canada simply because it is based in Lebanon, where there is a group called Hezbollah that is considered to be a terrorist group by Canada.

What does the hon. member think of this whole situation? Is it not rather strange?

[Rick Dykstra, Conservative, St. Catharines, ON]

Mr. Speaker, I appreciate the context in which the member makes her point. Part of the reason we are updating and presenting Bill C-25 is to ensure that we take into account the fact that times change, people change, organizations change.

What criminals want to do is ensure they stay one or, as far as criminals are concerned, two steps ahead of the law.

To get directly at the question, the structure of the bill and how those four pillars enhance it pay particular attention to the member's concerns. They enhance what we are already doing. Since 9/11 and the experience we have gone through, it is incumbent upon us, the House of Commons for the country of Canada, to ensure that we continue to update and ensure that we stay ahead of those who want to and who do criminal activities and laundering money in our country.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Mr. Speaker, I do not think there is much doubt that the House, in a general proposition, is in favour of this bill. By and large, I think, speeches have been in support of the bill. Every once in a while the NDP members wander off the rail, but they are prone to do that anyway.

The genesis of this bill lies in the tragedies of 2001. Bill C-36 was passed. There was a significant court case in 2003, which opened up an avenue for lawyers. Then, in 2004, there were a number of inquiries, none of which have at this point resulted in any convictions.

First of all, I am interested in the hon. member's views with respect to the compromise position between the government and the legal profession, which is essentially a “know your client” proposition. I am interested in knowing whether he feels that relieving the lawyers of the obligation to report in the same fashion as other institutions would be required to report is adequate in the circumstances, and whether he thinks that their merely keeping a list of the relevant information will fill this very significant hole in this regime.

I want to make it clear that I am not criticizing the government in this particular instance. This is a very difficult issue of balancing solicitor-client privilege with the right and the need of government and law enforcement agencies to know what is going on in financial services.

At one point in another life I practised law and I know that on any given day we would be flushing literally millions of dollars through our trust accounts. I also know that there were times when I did not know my client and times that my colleagues did not know our client. They had come in for a particular real estate transaction or a corporate transactions or things of that nature. They appeared to be who they were. When asked, they presented verifying information with respect to who they were, but in truth, I am not a police officer and I was not a police officer, nor are my colleagues who are practising now. I had no way of verifying information that appeared to be legitimate on the face of it.

I am interested in my hon. colleague's comments with respect to whether he thinks this apparent opening in the legislation has been adequately addressed.

[Rick Dykstra, Conservative, St. Catharines, ON]

Mr. Speaker, I certainly appreciate the comments from my colleague on the finance committee, who also in early October had a chance to hear FINTRAC's presentation in terms of where things have gone to this point and how we are actually getting better.

It gets back to these points. Where do we start? Is that enough? Do we continue to ensure that whatever legislation we are doing we get back to the point of ensuring that legislation stays one or two steps ahead of those who are intent on finding ways of breaking the law and laundering money?

To his point specifically about his past career in the legal profession, I can understand his concerns around whether or not he or his colleagues knew their clients, or whether all lawyers are in the process of understanding their clients, knowing their clients, or in some circumstances perhaps not knowing their clients. One word comes to mind in that respect . All of us as parliamentarians understand that we can introduce legislation but we cannot introduce accountability and ethics. Part of being professionals is knowing and understanding when something is going to happen or has happened, and we have or may have played a role in illicit and illegal activity, that we need to identify it.

[The Acting Speaker, Royal Galipeau]

I should point out to the hon. member for Lévis—Bellechasse that there is less than one minute left for the question and answer.