Vancouver
Monday, October 17, 2005
Thank you very much.
I am very pleased to be here today, to see so many friends and colleagues and to have the honour of kicking off this conference.
Let me begin by thanking Mr. Chris Walker of ABC Solutions for organizing this conference. We all recognize the importance of opportunities such as this for all of us to meet here to exchange ideas and information—in short, to learn from each other.
This conference is a welcome occasion for us at FINTRAC to meet and learn from you and an opportunity for you to hear from government and law enforcement officials who work on anti-money laundering and terrorist activity financing every day. It is this collaboration and exchange that has resulted in the robust anti-money laundering regime we have in Canada today.
This morning, I want to provide an update on what we have been doing at FINTRAC and then to give you my sense of what the future holds in terms of combating money laundering and terrorist activity financing.
It has been five years since the coming into force of the proceeds of crime and money laundering legislation that created FINTRAC and which represented a big step forward in strengthening Canada’s national initiative against money laundering.
You will note that I said Canada’s initiative. The initiative launched by the federal government five short years ago includes much more than FINTRAC. It was deliberately constructed to leverage the abilities and resources of the RCMP, the Department of Justice, the Canada Border Services Agency, and the Canadian Security Intelligence Service among others.
And those are just the federal agencies. Encompassed by this initiative are provincial and municipal law enforcement and regulatory agencies, all of which have played a critical role. Moreover, the entities that send the reports to us are also at the heart of the fight against money laundering and terrorist activity financing. The banks, credit unions, trust and loan companies—the deposit-taking institutions-- as a sector, provide two-thirds of the suspicious transactions reports we receive. Others providing financial services, such as foreign exchange dealers and money service business, real estate and accountants, as a group, provide the remaining third.
Through the efforts of FINTRAC, law enforcement at all levels, reporting entities, national and provincial associations and regulators, Canada now has a deterrence and detection regime that has made it much harder to launder money
in this country. The creation of this regime, spanning the country, is I believe one of the most important accomplishments of the national initiative.
Thanks to all of our contributions, Canada has much greater scrutiny of customers and of financial transactions, more and better information for law enforcement about illegal money flows and their likely origins, and certainly better intelligence on money laundering and terrorist activity financing. I especially want to flag the importance of the deterrence and detection regime to putting great impediments in the way of persons and groups who would seek to abuse Canada’s financial system to launder ill-gotten gains or to funnel money toward terrorist purposes.
On the financial intelligence side, since we became operational just over three years ago, FINTRAC has made more than 500 case disclosures to enforcement and security agencies. These disclosures have identified more than 5,000 individuals and businesses and some 50,000 financial transactions. Over this same period, the total dollar value of the transactions in our case disclosures has mushroomed. Last year the value—$700 million-- was almost double from the year before. And in our annual report for this year, which will be tabled soon, you will be surprised by the very significant figures we provide.
These results are a clear demonstration that we are tracking the money, that suspicious transactions are being reported and that the initiative is working.
With our growing experience, and our expanding databases, the analysis of the cases we disclose to law enforcement and CSIS has become
much more sophisticated. We are detecting patterns and schemes unfolding over time and across jurisdictions. The various methods and techniques criminals use to hide money are coming into focus. This intelligence is being passed to law enforcement and security agencies
who in turn are increasingly providing us with voluntary information reports that can help us take our analysis further and make further disclosures to those agencies. In this regard, I think we do better than any other country in working together to continually improve our intelligence product.
The detection of patterns is a reflection of the richness of our database and of our growing experience in detecting and analyzing transactions of suspected money laundering and terrorist activity financing.
When I speak of the richness of our information holdings, there is another important factor that needs to be mentioned. Canada’s regime is comprehensive in nature. FINTRAC receives a broader range of report types than do many financial intelligence units in other countries. We receive large cash transaction reports, suspicious transaction reports, cross-border currency and cash seizure reports, terrorist property reports and international electronic funds transfer reports. In fact, in the case of international wire transfers we are one of only a
small handful of FIUs around the world that collect such data. Doing so provides us with a global view of the movements of money, and reveals critical information in respect of suspected money laundering and terrorist financing. I can tell you, for example, that well over half of the financial transactions contained in our case disclosures on suspected terrorist activity financing were international electronic funds transfers.
And allow me to reiterate that the detection and deterrence part of the regime owes a great deal to the active and conscientious reporting by the financial entities. You might be surprised at how often I hear from my foreign counterparts who marvel at how quickly and thoroughly the Canadian financial sector, the reporting entities, got down to work to help make the new regime a reality. This has been crucial to the evolution of the initiative and the success of our regime.
This is why we take seriously our relationships with the reporting entities. We consult them regularly to see how we can help them to provide us the best possible information and to support their efforts to institute and maintain comprehensive compliance regimes. We have been working hard to give feedback to reporting entities, just as we do to law enforcement, so that we can all do the best we can to detect and deter money laundering and terrorist activity financing in Canada.
Each reporting entity sector represented here today provides us with reports. Our value added is that, with our centralized capacity to receive and analyze these reports, FINTRAC can detect suspicious activity that no single reporting entity, or sector, can easily discern. Let me give you a simple illustration of this. The percentage of our case disclosures involving transactions from six or more different reporting entities increased to 39 per cent in 2005 from 18 per cent the previous year.
So in all, Canada’s implementation of the anti-money laundering regime has been quite successful. A very solid foundation has been built. However, all of us in this room know that more can be done.
This brings me to the second area I want to touch on—where FINTRAC is headed and what’s in store for everyone here.
Since becoming operational, we have been seeking feedback on our product, studying our operations and looking to the future. Our Act provides for a review of the legislation by Parliament after five years and the time has come.
In preparing for that review, we are taking into consideration the report of the Auditor General last year, some of the changed and updated obligations called for by the international Financial Action Task Force and, the feedback that you--the private, academic and law enforcement and intelligence sectors and others-- have provided.
The Government has suggested a range of improvements to the legislation, and these are detailed in the Finance Department’s consultation paper that was released this past June.
Taken together, the proposed changes will, I am confident, result in important and significant improvements to the anti-money laundering and anti-terrorist financing initiative. I would characterize the first five years of experience with the Act as largely getting the regime up and running and producing financial intelligence. The next five years will no doubt see us meeting our commitment to remain one of the best and most effective regimes
among the G8 countries.
There is an important global dimension to the fight against money laundering and terrorist financing. As someone who participates in the Egmont Group of financial intelligence units worldwide, I can tell you that the implementation of the FATF recommendations by states, and continued and intensified international collaboration, are reaping, and will continue to reap important dividends. The standards and obligations have been raised and collaborative efforts such as sharing of state-of-the-art technology solutions and assisting new financial intelligence units in starting up has accelerated progress and considerably increased international cooperation against a common threat.
Let me discuss just a few of the key ideas we are looking at to update and reinforce the existing law. As the Department of Finance outlines in its consultation paper, some key objectives are to strengthen the know-your-client standards, close identified gaps in the legislation revealed by five years of experience, strengthen FINTRAC’s intelligence function and increase compliance, monitoring and enforcement.
In FINTRAC’s case, strengthening our intelligence function includes expanding the information contained in our disclosures to law enforcement or CSIS. This is a key recommendation of the Auditor General and something that law enforcement would like to see happen. So, we are looking at enhancing the critical identifiers and investigative links that law enforcement and intelligence agencies can use to advance their investigations. We believe this can be done without diminishing either the privacy or Charter rights of Canadians.
Another key refinement being proposed will affect the money services sector. This is a diverse sector, including everything from large international firms to small services run by individuals. The proposals in this regard respond to the identified problem that currently MSBs and foreign exchange dealers are not licensed or registered in Canada. This is a concern for the FATF, for the government and for the MSBs.
MSBs are being asked, from time to time, by foreign jurisdictions and others to provide proof that they are licensed or registered. Also, it is difficult for us to identify these entities and hence ensure that compliance and reporting regimes are in place. This is a gap that needs to be closed, because the current state of affairs makes this sector vulnerable to exploitation by criminal elements.
In accordance with the FATF recommendation that countries take measures to ensure that money service businesses are subject to licensing or registration, the Department of Finance is proposing in its consultation paper that this sector be registered with FINTRAC.
As I have already noted, reporting entities are on the front lines of the fight against money laundering and terrorist activity financing and it is not our goal to place an undue burden on these entities. We are very conscious of this issue and watchful in terms of both content and timing of the implementation of any new requirements in this area.
It is clear that the international standard now calls for more rigor in implementing due diligence measures in terms of client identification, the scrutiny of transactions and record-keeping requirements for professional intermediaries.
It is also clear that countries need to ensure that there are effective sanctions in place to deal with those who fail to comply with their statutory obligations. That is why the consultation paper calls for an administrative and monetary penalties scheme to give FINTRAC a broader range of sanctions for non-compliance. It is, of course, important that such a system be flexible, proportionate and graduated in its approach.
The intent of the changes contemplated in the consultation paper is to ensure that Canada’s anti-money laundering and anti-terrorist financing efforts remain current effective.
Looking back from where Canada has come in terms of combating money laundering and terrorist financing, I think that we are well started on our journey. We at FINTRAC look forward to the Parliamentary review and to the further evolution of Canada’s anti-money laundering and terrorist financing regime. There is no doubt in my mind that in five year’s time all of us here will look back and once again take pride in our accomplishments and at how much progress we all will have made.
Thank you for your attention and I wish you a successful conference.
