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

[Chris Warkentin, Conservative, Peace River, AB]

Mr. Speaker, I do believe that criminals who are found to be involved in terrorist activity or in some type of activity that would define them as being in contravention of the law. We do need to investigate what we do with the property that they own.

Like many Canadians, as I am sure we would both agree, criminals should not be able to retain the proceeds of crime. I do not know if Bill C-25 is the right place to put in that measure but I would be supportive of a measure that would require criminals who could not prove that they got the assets in any other way to give up those things.

I believe this government is championing the reverse onus. We have seen it in the dangerous offenders legislation. We are thankful for the member's support on that legislation which would require criminals to prove they will not continue to involve themselves in this type of activity.

The Conservative government has been very active on the file of getting tougher on crime, putting the onus on the criminal and protecting the citizens of our country. The measures the member talks about would protect the citizens from any future types of those activities. I also agree with him that we need to ensure that crime does not pay any more.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Mr. Speaker, I listened to my hon. colleague's speech with interest and he noted that the government's funding in the last budget had increased for the Department of Justice, the Border Services Agency, the RCMP, et cetera. It brought to mind that this is in an overall context when we deal with terrorism and crime.

I would like the member to comment on a couple of things from a general policy perspective because they end up dealing with terrorism. The first one deals with drug smuggling and the associated activities with it. We look at how it funds terrorism in places, particularly Colombia, and we see that the Taliban are now getting a lot of its funding through the heroin trade.

The other question I would like him to comment on is how the government's overall package on law and order in totality is helping to deal with the issue of terrorism in general, things such as more RCMP, et cetera, even if they are not directly targeted at terrorism, how they are helping the justice agenda on this file.

[Chris Warkentin, Conservative, Peace River, AB]

Mr. Speaker, there is no question that in the last number of years we have seen that many of these terrorist organizations, which have come under fire, were funded through illegal activities, whether it be arms dealing, drug trading or any number of things. What Canada needs to do, and it is something this government has committed itself to doing, is to ensure we are not part of the problem.

We have done it through this legislation but we have also done it by cracking down on the things that come into this country. We have improved our border security and the inspections at the border regarding the illegal drugs and whatever else comes across our borders and is traded for money, which is then laundered out of the country to fund these types of organizations. We have started to put in the necessary measures to stop these things from coming into the country. That is something to which we are absolutely committed.

In the finance minister's budget of this past year, a substantial amount of money was given to improve RCMP services and to put more RCMP officers on the street. We have seen a number of measures, including arming our border guards. Of course there was a financial requirement to do that. We have heard from the minister responsible for public security that the border guards are now receiving these arms.

These measures are all important as we try to move toward a safer and more secure nation within a safer and more secure world. We do have a role and a responsibility to ensure that we have a safe country here but we also need to implement some of these measures to ensure the entire world is a safer place.

I do believe we are on the right track but we have a long way to go before we crack down on all the illegal activities that are happening in our own country. We are in the process of cleaning this up and the investment that we have made into crime prevention will go a long way to begin that process.

[The Acting Speaker, Royal Galipeau]

Questions and comments. The hon. member for Montmagny—L'Islet—Kamouraska—Rivière-du-Loup. We have one minute left for the question and the response.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Speaker, I will proceed very quickly.

We support this bill overall. I believe it will improve how we manage the fight against terrorism. However, we must ensure some degree of balance.

My question is as follows. Are the government members open to having certain witnesses, for example, the privacy commissioner, testify at committee hearings to ensure that there are no more errors like the one committed by the RCMP in the Arar case, and to ensure that, despite the bill's best intentions, it will not have any loopholes that would allow for the violation of human rights?

[Chris Warkentin, Conservative, Peace River, AB]

Mr. Speaker, the hon. member talks about striking a balance. The committee will do its work to ensure this is a balanced bill. However, as Canadians we do need a balance. We need to get tough on crime to ensure that criminals do not have the same rights as law-abiding citizens in terms of being able to continue to involve themselves in many of these things.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Speaker, I rise today to speak to Bill C-25, 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.

As I speak today, I am thinking about the reality we have faced for the past several years, that is, the increase in terrorist activities and the tools we have tried to put in place to fight against terrorism. As we all know, the Bloc Québécois took up a major challenge in the past regarding the fight against organized crime.

I would remind the House of the battle waged here, led by the Bloc, to enact anti-gang legislation. Many individuals have continued that battle, including the leader of the Bloc Québécois and hon. member for Laurier—Sainte-Marie and the hon. member for Hochelaga—a young child in his riding was unfortunately a victim of organized crime warfare. My former colleague, Michel Bellehumeur—who is now a judge, but who was the justice critic at that time—successfully led one offensive after another, as did Richard Marceau, regarding the elimination of the $1,000 bill. The Bloc Québécois' credibility is well established here, as it is in many other areas.

We have led battles and we have helped to develop the best laws possible. Today, we are discussing legislation that the Bloc Québécois will support because it will enable Canada to comply with the recommendations of the financial action task force on money laundering. This is a group that was created by the G-7 to examine in depth the issue of the financing of organized crime world wide. The group can make recommendations to all countries on ways of countering criminal use of money. It has been said that money is the sinews of war, and it is the same in the fight against terrorism.

There is a real battle that can be fought on the ground in terms of propaganda, but there is also the whole issue of financing. Let us hope that we can do our share in a meaningful and concrete way.

However, at the same time—this will be a continuing concern for the Bloc—during the committee stage, we must ensure that in the application of the law we are not faced with the excesses we have already seen, such as in the case of the treatment of Maher Arar by the RCMP. We know that the RCMP slipped through the cracks in existing mechanisms to end up accusing Mr. Arar and that he suffered unacceptable treatment. In the final analysis, Mr. Arar suffered harm that will be very difficult to repair.

In the previous instance, it was the case of an individual. Today, we are dealing with the financing of terrorism. We must ensure that in the application of this law that there is no similar hole in the legislation.

I am referring, for example, to the fact that under the law an official of the Department of National Revenue would have the power to forward information that was sent by another official under the provisions of the charities registration act. That information could be forwarded to the Financial Transactions and Reports Analysis Centre of Canada.

This could be done in good faith and be completely legal. It could involve the forwarding of relevant information; however, we must ensure that there are safeguards to prevent excesses.

After they have debated the actual principle of this bill and its general appropriateness, the committee members should pay particular attention to the issue of protection of personal information. I would like the privacy commissioner to appear before the committee so that she could say how the act for which she is responsible applies to the reality of Bill C-25 and to the regulatory framework defining how to track the financing of terrorist groups so that such financing is clearly opposed and minimized, and how at the same time the rights of individuals will be respected.

We should recall that Bill C-22 was the forerunner of Bill C-25, which we have before us. It was tabled on behalf of the Minister of Finance in 1999 and intended to counter money laundering. That was Bill C-22. It was very similar to Bill C-80, presented in May 1999, but died on the order paper when the House was prorogued.

The general objective of the bill was to correct the shortcomings of Canadian legislation respecting money laundering, as they were identified in the 1997-98 report by the FATF, the financial action task force on money laundering, created by the G-7.

In addition, the FATF recommended in its report that any provisions respecting reports in Canada—which at present are voluntary—be made public and that a financial information unit be created with the responsibility of gathering, managing, analyzing and distributing reports of suspicious operations and other relevant information. So it was an international committee that made the recommendations and the 1999 bill was designed to put them into force.

That bill was passed. Since then it has been mandatory for regulated financial institutions, exchange offices, casinos and other financial intermediaries to report suspicious financial transactions. Another of the bill’s objectives was to put in place, together with the Canada Customs and Revenue Agency, a system for reporting large cross-border movements of currency. A lot of money changes hands. We will see a little later that the quantities of money are very significant.

Furthermore, the bill provided for the creation of a new independent agency, namely the Financial Transactions and Reports Analysis Centre of Canada. This centre receives and administers the information reported. Bill C-22 was enacted on June 21, 2000, and replaced the Proceeds of Crime (Money Laundering) Act then in effect.

The Conservative government is proposing to amend Bill C-22 with Bill C-25, which we are debating today. This new bill is designed to increase financial institutions' duties to keep records and report suspicious transactions, with a view to eliminating funding for terrorist organizations. The idea is to achieve greater transparency in the circulation of money. Banks are institutions that are responsible for the quality of their work. In my opinion, in the fight against terrorism, they need much clearer and more specific guidelines and instructions. Let us hope that this bill will clarify the situation.

First of all, the bill extends the application of the act to all organizations that, in addition to dealing in securities, deal in other financial instruments. Targeting securities alone does not go far enough, in light of terrorists' investment methods. The act also applies to persons and entities engaged in the business of remitting or transmitting funds by any means or through an intermediary to electronic funds transfer companies or of issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments. In other words, the framers of the bill became aware of all the actions and the financial and monetary transactions that the bill needed to cover to try and control the circulation of money used to finance terrorist activities. The people who sell prescribed precious metals will be subject to Bill C-25.

The new bill prohibits any entity from opening an account if the bank cannot establish the identity of the client. The bank must be certain that it knows the identity of the client. Furthermore, the bill ensures requires any institution that does business with a politically exposed foreign person, foreign judge, head of state or minister, to obtain the approval of its senior management before entering into a transaction. Thus, safeguards are established. Such requirements apply to all sectors. For example, in the case of electronic funds transfers, the bank or other business must include the name, address, account number and all client reference numbers, whether sending or receiving such transfers.

This is where we must consider the issue of authorization given to officials of the Canada Revenue Agency to disclose information to the Financial Transactions and Reports Analysis Centre of Canada. We will have to be very vigilant to ensure that we do not erode the right to protection of personal information and to establish an appropriate balance so that the legislation falls within the desired framework.

Of particular concern is the laundering of proceeds of crime, which is the conversion of the proceeds of criminal activities into goods making it difficult to trace the proceeds to their criminal origins. It consists of hiding proceeds of crime by making them seem legitimate. It is money laundering. A large portion of these goods and assets are derived from the illegal drug trade and others result from criminal activities such as burglary and cigarette smuggling. The criminal activities that they seek to hide are, by their very nature, clandestine activities. It is difficult to have a precise idea of the extent of money laundering operations.

Experts estimate that, overall, some US$300 billion to US$500 billion in criminally derived funds enter international capital markets annually; $300 to $500 billion is a lot of money.

In Canada, the federal government estimates that between $5 billion and $17 billion in criminal proceeds are laundered in this country each year. There was therefore a need to take action and find a way of shedding light on these transactions in order, at least, to reduce them as much as possible.

There is also the problem of the financing of terrorist organizations. We know that terrorists were going so far as to take advantage of charitable organizations and ultimately use them for purposes other than those they were intended for. We need to re-consider things in this regard as well to be sure that we can also follow the financial transactions.

The financial action task force on money laundering established in 1989 is an international organization which wants to ensure that the different countries around the world have legislation for dealing with this problem. However, we have seen a major increase in terrorist group activity over the last few years. I think that we need to move faster and provide more support. The FATF’s mandate was renewed in 2004 to run until 2012, and it will continue to monitor the situation.

Through the mandatory reporting of suspicious transactions, this bill will ensure that we do not suddenly find ourselves in a situation where a whole series of suspicious transactions have to be identified because they were not being followed. The mechanism being put in place will hopefully take care of this.

In regard to the reporting of major cross-border currency movements, the bill will ensure that certain precious metals are also regulated and included in the currency to be reported.

There are two provisions authorizing customs officers to search people or the vehicles of people when the officers have reasonable grounds for suspecting that the people are hiding on or near their persons currency or monetary instruments that were not reported in accordance with the act's regulations. Finally, a new provision makes it possible to conclude cooperation agreements between Canada and the customs agencies of foreign countries that have similar requirements to report cross-border movements of currency and monetary instruments.

The comparison I made with the Arar affair also applies here. We must ensure that we are not creating a ripple effect by inadequately protecting personal information. When we give information to a foreign agency, we must ensure that we do so in accordance with the law and that the other country uses it in accordance with the law. We must not damage people's reputations because of incorrectly conducted transactions. In this case, it might not end with the kind of torture Mr. Arar suffered through, but it could damage reputations. We must be vigilant in ensuring that, if necessary, this bill is amended in such a way as to guarantee the protection of personal information.

The third important element is the creation of the Financial Transactions and Reports Analysis Centre of Canada covered under clauses 40 to 72. This is the framework, the organization, the structure that will ensure the implementation of this legislation. We hope the centre can operate because it will be responsible for analyzing and evaluating the reports it receives, as well as other information. If necessary, it will provide information to law enforcement organizations. It will also be responsible for making recommendations to the Department of Justice, the RCMP or other organizations. Here, too, we must be vigilant to ensure that the management and analysis of personal information are done correctly.

Bill C-25 sets out guidelines concerning individuals and groups eligible for registration with the centre. Any person whose name appears on the list of terrorist groups, who was convicted of terrorist activity or of participating in, facilitating, instructing to carry out or inciting to commit terrorist activities, who was convicted of participating in organized crime activities, or who was convicted once on indictment or more than once for fraudulent transactions or for an offence under the Controlled Drugs and Substances Act, except for consumption, is eligible to register.

Clearly, what we are seeking is a comprehensive framework that will allow for proper intervention regarding cash flow linked to terrorists. Accordingly, the Bloc Québécois believes that this bill deserves our support.

It also includes serious offences so that criminals are well aware of the seriousness of their actions.

To conclude, I refer back to my comment on privacy. I would like to see this bill passed as quickly as possible, given the study that will be required in committee. Indeed, it must be carefully studied to prevent individual cases from slipping through security and, above all, to prevent honest, law-abiding citizens from being penalized by such legislation.

Significant amounts of money circulate in this area of activity and this legislation could, in due course, have implications for human life. Terrorist activities funded at the source by this type of monetary flow often lead to the deaths of innocent bystanders.

It is a fine idea to create tools to stop this money from circulating, but we must strike a balance with the protection of privacy.

The Bloc Québécois supports the principle of this bill. We will see if, through amendments, we can adapt it more to the reality of these people and make it more compliant with the Privacy Act.

[Raynald Blais, Bloc, Gaspésie—Îles-de-la-Madeleine, QC]

Mr. Speaker, I congratulate my colleague for Montmagny—L'Islet—Kamouraska—Rivière-du-Loup on his speech to which I listened with great interest. I would like to take this opportunity to ask him a question about the ideological winds that are blowing these days in this House with the minority Conservative government. Of the 30 or so bills introduced by the government, a dozen concern law and order.

[An hon. member]

There are 17.

[Raynald Blais, Bloc, Gaspésie—Îles-de-la-Madeleine, QC]

There are 17.

In my opinion, that is also the case for this bill. I understand and believe that it is important to bolster our system because of terrorism. That being said—and my colleague mentioned this in his speech—we must be careful that this does not lead to unfortunate situations such as those experienced by Maher Arar. Perhaps others have had similar experiences.

I would like the member to comment on the ideological winds that we hear, feel and sense coming from the Conservative minority government. It is fortunate that they are in the minority.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Speaker, I wish to thank my colleague for his pertinent question.

The current government is quite taken with the issue of public order. It often believes that it can resolve situations by, for example, increasing sentences for certain criminal activities, investing fewer resources in rehabilitation, and believing that stiff punishment will lead to an automatic change in behaviour. This causes resistance to adoption of these bills. We can feel it in the House. All opposition parties, at one time or another, have shown their opposition. This leads us to realize, in my opinion, that this vision does not correspond to the values of Quebec society nor the values of Canadian society at large.

For this reason, each bill must be assessed individually. That is the practice that the Bloc Québécois has adopted. When a bill is advantageous for Quebec, at the very least, we support it, we promote it; when it is not, we do not support it.

Obviously, the Bloc Québécois will oppose this wind from the right and not support any government initiative to tighten the Criminal Code and, for example, criminalize younger and younger people, including children and adolescents. The Bloc Québécois will stand up to the government and make sure that such bills are not passed and that they are subjected to every possible parliamentary test before returning to us, when we in the Bloc Québécois will clearly show our opposition.

I remember that we opposed the Young Offenders Act in the past, and we were proven to have been right at the time, and now we are opposing other bills.

In this case, it is a bill that refers to laundering proceeds of crime. The Bloc Québécois led the war on organized crime in the past, to reduce organized crime and make sure it can be dismantled.

Consider the anti-gang bill. There is a very clear difference between this type of bill, which is designed to ensure better, fairer treatment in our society, and all the bills that criminalize young people in particular and, in my opinion, do not reflect how we want things to work in our society in future. The Conservative Party has a minority government—fortunately, as my colleague said—and will have difficulty getting these bills passed.

In the end, the next time we face the voters, we will have seen, this year, that the Conservative government is borne along by the right-wing current coming from the United States, but more from the Alliance and Reform parties that preceded the Conservative Party. Nevertheless, the Conservative members from Quebec have been asleep at the switch all this time. And when the next election is called, these people will have to answer to their constituents for the bills they passed or supported that ran counter to the values of Quebec society. They will have to answer to the people.

We are already seeing it in the polls, which show the Conservatives at 16% to 18% of decided voters in Quebec. They will pay the price if they do not alter their policy on these issues.

[Catherine Bell, NDP, Vancouver Island North, BC]

Mr. Speaker, small branch credit unions, of which I am a member in my riding, have difficulty with administration costs and making ends meet because they do not have the resources of large banks and larger institutions.

What does the member think of the issue of credit unions having to monitor and carry the burden of the investigation process with respect to criminal activities and the hardship of that for them?

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Speaker, I thank my colleague for her question. I myself am a member of the Desjardins Group, the largest association of credit unions in Quebec and in Canada. Desjardins collaborates with international credit union-type organizations.

I understand the argument. This is one of the things that the committee will have to study to ensure that small financial institutions can cope with the implementation of such measures and will not be taken over by larger institutions. This issue is not directly related to fighting terrorism, but it would have an impact on how small financial institutions are run. The committee will have to pay close attention to this. Its work on this bill will be very important.

Earlier, I talked about Canada's privacy commission. It is important that financial institutions, both large and small, appear before the committee so the bill can be amended as necessary and to avoid adding too many additional rules to current regulatory regime. That could penalize the cooperative movement, which is very significant at home and also gaining strength in developing countries.

In Africa, Desjardins' markets are growing significantly. I would also like to draw attention to the Nobel prize awarded to the creator of microcredit lending. These small institutions must be allowed to continue to progress, protected from manipulation by terrorist movements. They must not be crushed under superfluous regulations. I support its ideology and hope that the parliamentary committee studying this bill will look closely at this matter. I hope the committee will hear witnesses who can discuss it concretely, that is, administrators and managers of these small institutions.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I thank my colleague from Kamouraska for his sensitivity to the needs of these smaller institutions and the burden that the bill might place on them.

As I was speaking to the bill, I received an email from a general manager of a credit union on Vancouver Island. He has pointed out that his small credit union may have to deal with costs of up to $200,000 per year just to track, administer and file the necessary paperwork stemming from Bill C-25.

His second point, which I would like my colleague's view on it, is that in a small neighbourhood community institution, he resents that he may have to turn in activities of his friends and neighbours, which may not quite meet the standards or may seem suspect to some from thousands of miles away. He is not comfortable having to report private information to the government in his function as the general manager of a credit union.

My colleague mentioned the Privacy Commissioner. Is he concerned as well that neighbours may be called upon to blow the whistle on other neighbours?

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Speaker, that is a good way to illustrate my suggestion that the Privacy Commissioner appear as a witness to reveal what effect this will have on privacy.

We could also study its effect on other individuals within the same community. The Desjardins group is based on the democratization of banking and financial processes. In the beginning, each credit union had a credit committee made up of people elected locally to review credit applications. In small municipalities, this often led to friction. Privacy must be guaranteed.

In this sense, we must also make certain that this does not become an open door for terrorist groups. If we regulate this problem only among the big banks and suddenly open a side door to the smaller institutions, we must ensure that they have sufficient protection, that they are able to deal with this influx, and that tools exist to properly identify relatively ordinary transactions without disproportionate costs. We must not find ourselves faced with the monetary flows to finance terrorist groups taking a new path that is not covered by this legislation.