Standing Committee on Finance Tuesday, March 31, 2015 Chair FINA

Standing Committee on Finance Tuesday, March 31, 2015 Chair FINA
Standing Committee on Finance
FINA
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NUMBER 075
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2nd SESSION
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EVIDENCE
Tuesday, March 31, 2015
Chair
Mr. James Rajotte
41st PARLIAMENT
1
Standing Committee on Finance
Tuesday, March 31, 2015
● (0845)
[English]
The Chair (Mr. James Rajotte (Edmonton—Leduc, CPC)): I
call this meeting to order. This is meeting number 75 of the Standing
Committee on Finance. The orders of the day pursuant to Standing
Order 108(2) are a study of terrorist financing in Canada and abroad.
I want to thank our witnesses for being with us here in Ottawa and
also from Maryland and from the United Kingdom.
First of all, we have Daniel Therrien, the Privacy Commissioner of
Canada. Welcome back to the committee.
Appearing as an individual, we have Ms. Christine Duhaime.
Welcome to the committee. Thank you for being with us.
As well, we have Mr. Paul Kennedy, appearing as an individual.
Welcome back to the committee.
We have Mr. Christian Leuprecht, associate dean and associate
professor at the Royal Military College of Canada.
By video conference from Pasadena, Maryland, we have Mr. Amit
Kumar. Mr. Kumar, thank you for being with us here this morning.
From the United Kingdom, we have Mr. Bill Tupman, a professor
as well. Thank you so much for being with us here from the U.K.
Each of you will have five minutes for your opening presentation,
and then we'll have questions from members.
[Translation]
We will start with Mr. Therrien.
Go ahead.
Mr. Daniel Therrien (Privacy Commissioner of Canada,
Office of the Privacy Commissioner of Canada): Thank you,
Mr. Chair and members of the committee, for the invitation to
address you today.
The subject of your study, Canada's regime for combatting the
financing of terrorism, is clearly a timely one.
As you are aware, in light of Bill C-51 and other recent legislative
activity, the past year has seen much public debate about the rules
that regulate how information is collected, shared and analyzed by
and among our law enforcement and intelligence agencies. Indeed,
information sharing is a very important aspect of combatting crime
and terrorism. It can also, however, pose risks from a privacy
perspective.
Operating under the Proceeds of Crime (Money Laundering) and
Terrorist Financing Act, FINTRAC is one agency that is a key player
in information gathering and sharing, and one that my office has had
many interactions with over the years.
As I outlined in my recent submission on Bill C-51, in a country
governed by the rule of law, it should not be left for national security
agencies to determine the limits of their powers. Generally, the law
should prescribe clear and reasonable standards for the sharing,
collection, use and retention of personal information, and compliance with these standards should be subject to independent and
effective review mechanisms, including the courts.
In this case, the legal standards are established under the Proceeds
of Crime (Money Laundering) and Terrorist Financing Act and
accompanying regulations, which I find to be reasonable in their
current state, as they target individuals and organizations suspected
of criminal or terrorist activity or financial transactions of a
significant value. This could change as a result of Bill C-51 or
other measures currently under consideration that would require the
sharing of all electronic transfers regardless of the amounts involved.
In terms of review, the office of the commissioner is mandated to
conduct biennial reviews of FINTRAC's personal information
handling safeguards, under section 72 of the enabling legislation.
We also measure their activities against sections 4 to 8 of the Privacy
Act, under our authority to conduct reviews as outlined in section 37
of that act.
● (0850)
[English]
While we know that current laws and regulations contain
reasonable standards, our audits have found problems with the
collection and retention of personal information in excess of these
standards. We have found that some of the information shared with
FINTRAC related to activities that did not demonstrate reasonable
grounds to suspect money laundering or terrorist financing, and that
FINTRAC was retaining data that is not relevant to its mandate. This
presents an unquestionable risk to privacy by making available
personal information for use and sharing that should never have been
provided to FINTRAC.
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To address this problem, after consulting with FINTRAC, we've
prepared guidance for private sector organizations to reduce the risk
of overreporting in violation of the risk to privacy. Furthermore,
explicit authority under subsection 54(2) of the PCMLTFA, Proceeds
of Crime (Money Laundering) and Terrorist Financing Act, as
enacted by Bill C-31, was also recently granted to FINTRAC for the
destruction of information that is not related to money laundering or
terrorist financing. Despite these initiatives, the risk of overreporting
and retention remains, and we will be paying particular attention to
this issue in our upcoming two-year review.
The risks I've described will increase only if the reporting
threshold for electronic funds transfers is dropped to zero, as has
been discussed at this committee and elsewhere, and should Bill
C-51, which further widens the potential sharing of information, be
enacted without amendment.
March 31, 2015
our counterterrorist financing laws and our sanctions laws were
complied with around the world.
I'd like to make a quick note about digital terrorist financing, as I
think this plays into one of the issues we are facing, which is that we
have not kept pace with counterterrorism laws. Terrorist financing is
not static. One of the issues with the FATF is that for whatever
reason, it has not kept pace with counterterrorism. One of the issues
with the digital financing regime is that entities like the Islamic State
are quite versatile on social media. Not only do they fundraise on
that platform, but they upload lots of their propaganda. The more
they upload propaganda of horrific acts, the more they get funding
around the world for their activities. It's quite a vicious circle and it's
quite important that we come up to speed with what the digital
financing regime is like and get a grip on that.
Finally, let me say a few words about the review.
While our office is obligated to conduct compliance reviews of
FINTRAC, we can only examine privacy issues. FINTRAC does not
have a dedicated review body to examine their activities to ensure
they are lawful, reasonable, and effective.
I conclude by reminding the committee that the lack of a dedicated
review for FINTRAC was last raised by the O'Connor commission
and that it remains a serious problem.
For example, the Islamic State uses Twitter quite a lot, but they
use other platforms such as JustPaste.it and Ask.fm. Sometimes
when we ask law enforcement and counterterrorism officials about
those social media sites, they don't have a clue what we're talking
about. I think it's important that we understand what Ask.fm is, how
it works, what JustPaste.it is, and how organizations like ISIS use
them to fund their terrorist activities in this country and elsewhere.
Thank you. I look forward to your questions.
The Chair: Thank you very much, Mr. Therrien.
We'll go to madame Duhaime, s'il vous plaît.
Ms. Christine Duhaime (Lawyer, Duhaime Law, As an
Individual): Good morning and thank you. I have some brief
comments and then I'll be happy to take your questions.
I'm going to start my comments where the deputy minister left off
when he testified before you a couple of days ago, talking about the
FATF. The FATF, as he described to you, is the policy-setting body
that mandates policy that countries around the world implement in
terms of their national laws to follow anti-money laundering. There
are two other parts of that, one of which he discussed, which is
counterterrorist financing, and the third part is sanctions law. I bring
that to your attention because that's the regime we look at when we
think about terrorist financing and the two pieces especially, which
are sanctions law, i.e., sanctions avoidance if we're not complying
with it, and terrorist financing. Those are the three pillars from which
we gauge whether or not financial crimes are being committed in
terms of compliance.
The FATF has done a fairly comprehensive job of policy setting
for the first one, anti-money laundering policy. There are issues with
respect to its ability in providing leadership, guidance, and policy on
a responsive level on the other two, namely, counterterrorist
financing and sanctions law. I do not know why that is the case,
but the evidence is fairly strong that there are counterterrorist
financing issues and sanctions compliance issues in this country and
around the world. I would go so far as to say that those two regimes,
those two pillars, are broken and we need to find solutions to rectify
the situation. The reality is that there would not be an Islamic State
today or other terrorist activities to the extent that we see growing if
I point that issue out specifically to mention the fact that ISIS has
been around for two years now in digital terrorism, and digital
terrorist financing for as long, and yet in this country we don't have a
digital terrorism strategy or a counter-strategy, and we certainly don't
have one with respect to digital counterterrorism.
Let me talk briefly about the enforcement piece because it's an
important piece of the puzzle with respect to reporting entities and
law enforcement in this country.
In the past couple of years, the enforcement globally has followed
the same path as the FATF. By that I mean we are quite strong on
anti-money laundering law compliance and enforcement globally,
but in this country much less so when it comes to counterterrorist
financing and sanctions law. In this country we rarely enforce,
investigate, undertake compliance reviews and prosecute for
sanctions and counterterrorist financing. By contrast, in the United
States they have an exceedingly strong sanctions regime and they
enforce it strictly. There's no reason that we can't do the same here.
In terms of solutions, let me say that in my experience there is a
great need for dialogue between the public and the private sectors. I
hear all the time from both sides which I represent that there is a gap
in information sharing. They each want to know what the other is
doing. They each want to have more information. They are each
vitally interested in combatting terrorism in whatever way they can,
but they're lacking a dialogue. They're lacking the tools. They're
lacking the communication.
March 31, 2015
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● (0855)
My suggestion is that Canada take a leadership role in counterterrorist financing and sanctions, and that it contemplate putting
together some sort of a centre of excellence for us to bring together
all of these parties and assure that they have the dialogue that they
say they need to counter terrorist financing in Canada and abroad.
Thank you.
The Chair: Thank you very much for your presentation.
Now, we'll hear from Mr. Kennedy, please.
Mr. Paul Kennedy (As an Individual): Thank you.
I agree with the principle that access to money is a necessary
ingredient of one's ability to conduct criminal and terrorist activity.
Denying individuals such access will reduce the harm to society.
Ongoing efforts to strengthen and modernize the legislation are
necessary to address new technologies and financial practices.
I believe, however, that there is a significant weakness in the
government's ability to match enforcement action to the quality of
legislation that has been introduced and may, in fact, be introduced.
The RCMP, as it is presently constituted, is a municipal, provincial,
and federal police service. It has multiple demands placed upon it by
a myriad of political masters. Approximately two-thirds of its police
officers perform non-federal policing functions. This is the type of
policing that is performed by tens of thousands of police officers
throughout Canada and does not have to be performed by our federal
police force.
The federal government assumes about 30% of the cost of the
RCMP policing at the local levels. This commitment not only
distracts the RCMP from its federal policing role, but it occasions the
development of a recruitment and developmental model ill suited for
a police force that is required to successfully investigate a new class
of crime. This is the type of criminal activity which includes
terrorism and is interprovincial, national, and international in scope.
Such criminal actors employ the latest technology and are supported
by lawyers and accountants.
Since 2000, the government has invested hundreds of millions of
dollars in an initiative to combat money laundering, proceeds of
crime, and terrorist financing. How have we done? FINTRAC
receives and analyzes 25 million transactional reports annually and
provides disclosure of actionable financial intelligence to assist the
investigation of money laundering, terrorist financing, and national
security threats. Just between 2010 and 2014 it released 2,961 such
actionable disclosure cases. Both CRA and CBSA, according to their
annual reports to the Treasury Board, have either seized or collected
in reassessed tax arrears tens of millions of dollars.
By contrast, the RCMP, but for action taken with respect to drug
enforcement activities, which has been a core mandate for many
decades, appears to have taken very little action with respect to
terrorist financing or non-drug activity. I could find only two
references to alleged terrorist investigations, one of which was
attributable to undercover work.
The RCMP, as specified in the Security Offences Act, has the
primary responsibility for the investigation of terrorist activity. The
gap among the serious public harm occasioned by the financing of
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terrorism, the significant moneys invested by the government in the
investigative program, the admirable efforts by FINTRAC, and the
weak investigative follow-up by the RCMP should be a concern for
all members.
Parliament will be able to give meaning to legislation such as the
prevention of financing of terrorism by the RCMP only if the RCMP
rededicates itself to its federal policing role and recruits individuals
who possess, or trains active members to acquire, the skills essential
to address the new type of criminal behaviour that threatens
Canadian society. The government should reallocate the 30% federal
subsidy in support of contract policing to the federal portion of the
RCMP to allow it to better fulfill its federal policing role.
Thank you.
● (0900)
The Chair: Thank you very much, Mr. Kennedy.
We'll now to go to Mr. Leuprecht, please, for his presentation.
[Translation]
Dr. Christian Leuprecht (Associate Dean and Associate
Professor, Faculty of Arts, Royal Military College of Canada,
As an Individual): Good morning. Thank you for inviting me to
appear before you this morning.
[English]
I'll talk about context, problems, and what to do.
First is the distinction, of course, between terrorist financing and
money laundering. The challenge with terrorist financing is that
much of the money is legal and it's used for illicit purposes. I have
several documents here that I didn't enter into exhibits because
they're not translated, but I'd be happy to share them with the
members. One is an empirical study that maps some of the networks
to show that financing and recruitment networks are very different
and so they require different strategies. We're a diverse country, so
there's a lot of interest by various forces around the world to try to
obtain money in Canada. That's well documented. It's a longstanding issue dating back as long as the IRA, but also with regard to
Sikhs and Tamils.
We have a financial tracking agency, a financial intelligence
agency, that does a terrific job by all accounts, but it's extremely
difficult to extract any sort of intelligence from that agency. All you
need to do is to talk to other agencies around town. Trying to get
anything out of FINTRAC is exorbitantly difficult. We have an
obligation, under UN Security Council resolutions 1373 and 1624,
and in the 2014 resolutions 2178 and 2195, to do a lot more about
terrorist financing. I would remind the committee that those are
chapter 7 resolutions, so they are binding on all members of the
United Nations.
The problems in particular are intelligence sharing by FINTRAC
and coordination issues. I have an article here of empirical survey
evidence to demonstrate that there is a significant amount, albeit
small...but we can demonstrate a significant amount of sympathies to
finance such organizations within Canada. This is published peerreviewed work.
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As was pointed out, there is a significant delta between what
happens empirically in Canada and the actual convictions. In terms
of extraterritorial convictions, we don't have any, as far as I know,
with regard to money laundering. We don't have any that I know of
with regard to tax evasion. We only have one case, as far as I know,
with regard to terrorist financing. That dates back to 2010. That case
was essentially like taking candy from a baby, so I wouldn't consider
that one a particularly great success.
We know what the Hezbollah networks look like, but it seems we
have great difficulty doing anything about them. We know that
within the RCMP we lack the skill set to do complex financial
investigations. As was just indicated, there's a serious challenge here
with regard to building the professional development and skill set
capabilities to actually prosecute. We can survey everything that
happens in terms of financial intelligence, but we seem to have a
great deal of difficulty doing anything about it. Just changing laws
won't do much if we can't actually change the capacities.
We have the problem of morphing violent extremist organizations.
I've submitted to the committee a brief paragraph with regard to
north and west Africa. It shows how organizations regularly change
their names. We have great trouble in our listing regime actually
keeping up with these organizations as they split and as they change
their names, so we're constantly playing catch-up. It takes us years to
catch up. As far as I know, the Taliban weren't listed until 2012 as a
terrorist entity in this country.
We have organized crime connections to terrorism. I have
submitted, without going into detail, a four-page note on that
particular issue. It's a bit more tenuous and a bit more difficult to
demonstrate empirically, and yet we do have evidence out there. I list
that in the submission. There's the risk of extortion, as we know from
Tamil communities. There are export flows that inherently support
violent extremist organizations. I've documented that in a separate
peer-reviewed article with regard to the Canada-U.S.-based terrorist
networks. Most of them don't try to do bad things in either of our
countries; they try to export a whole bunch of stuff to the rest of the
world. We have an obligation to make sure that we do our part, that
we don't inadvertently support terrorist activities elsewhere.
There's the great challenge of microfinancing. People are trying to
raise a couple of thousand bucks to get on a plane and go abroad.
What we have is a changing picture with regard to terrorist
financing. However, the terrorist financing today, with regard to
ISIS, as was mentioned, is now largely either state-sponsored and/or
own-source revenue. There's less going on in terms of people
actually trying to raise funds here directly except for the opportunity
to go overseas.
What needs to be done? We need to think about the listing regime
and making our listing regime much more efficient. I have specific
propositions with regard to that.
We need to perhaps think about listing specific individuals abroad,
but that gets us into the problem that even terrorists go to the dentist.
Just because you transfer money to an individual abroad who might
be listed, it might be difficult to demonstrate that the money is used
for terrorist purposes.
March 31, 2015
We need to learn a lot more from our allies. The United Kingdom
has a system whereby they essentially can search passengers on an
entire plane, yet in Canada the CBSA has no outbound mandate. The
RCMP's jetway activity is only land-based, and the RCMP doesn't
have any money dogs. Again we have these coordination issues.
I think we need to get rid of the threshold for electronic funds
transfers altogether. I can demonstrate to you mathematically that it
makes no sense to have these thresholds, because it vastly increases
the number of false positives. We should either have it set by
ministerial discretion or by FINTRAC rather than picking arbitrary
thresholds of x thousand dollars.
● (0905)
What do we need to be looking at? In sum, we need to be looking
at the disconnects within our own government. We need to be
looking at the motivations and at why we don't have more
motivations to actually prosecute in this country. We need to be
looking at the methodology, and in particular learn from the
methodology that many of our allies have implemented. Besides the
U.K. example, I can give you a dozen other examples of how other
countries go about some of these measures.
The Chair: Thank you for your presentation.
We'll now go to Mr. Kumar, please, for five minutes.
Dr. Amit Kumar (Senior Fellow, Anti-Money Laundering
Association): Thank you, Mr. Chair and members of the committee,
for inviting me to discuss terrorist financing in Canada and abroad.
In my time today, I will highlight certain key threats that Canada and
the rest of the world face as regards terrorist financing. I will outline
a few steps that the Government of Canada, in cooperation with its
international partners, can take to help mitigate these threats.
As the juggernaut of ISIS rolls on unabated, and as al Qaeda and
its affiliates across the world show renewed vigour, terrorist
financing threats are on the rise. ISIS is flush with funds, and its
reliance on criminal methods and donations from rich individuals to
fund its operations has become all too obvious. Simultaneously, the
heightened activity of al Qaeda affiliates like Boko Haram and
AQAP, as well as Lashkar-e-Taiba and the Taliban, all of whom are
well financed thanks to their exploitation of criminal sources of
money and misuse of charitable organizations alike, is causing great
concern to the democratic denizens of Canada and the international
community.
A key factor that allows the aforementioned terrorist organizations
to thrive is their ability to launder the proceeds of their criminal
activities towards terrorist financing ends and purposes. Often in
concert with criminal organizations, as well as on their own, these
terrorist groups have been able to finesse the craft of money
laundering in order to disguise the sources of their income from the
ultimate destination that this income is bound for, and that is towards
perpetrating terrorist acts, setting up and administering new affiliates
and cells, and the training, recruitment, and online radicalization of
terrorists.
March 31, 2015
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An alarming trend is the global nature of the movement of terrorist
funds, which not only tends to misuse the international financial
system, but also makes it very difficult to trace these funds and to
prosecute and convict those engaging in the nefarious acts of
perpetrating, financing, and facilitating the terrorism that we in the
civilized world all love to hate.
Given the seemingly intractable task and mission of stemming the
flow of terrorist funds and their use to launch terrorist attacks, what
can Canada along with the global community do to mitigate the
terrorist financing threat?
First, it's important to recognize that terrorists succeed by moving
men, money, materiel, and messages across the world. Hence, a
broader and more expansive scope of material support to include
men, money, materiel, and messages should be adopted by the
comity of nations in order to make more informed and effective
choices in exercising the countering of financing of terrorism tools of
sanctions, investigations and enforcement, regulations, and outreach.
Second, given the free movement of money, men, materiel, and
messages in this day and age of the internet, ISIS, al Qaeda, and their
acolytes are not limiting their theatres of operation and fundraising
activities only to Iraq, Syria, and the broader Middle East, but they
are also extending them to north Africa, west Africa, southwest Asia,
south Asia, Europe, etc. ISIS-inspired attacks in Paris, Ottawa, and
Oklahoma are a case in point. So is the heinous attack by French
citizen Mehdi Nemmouche in Brussels, Belgium, as is the combined
training activities of Boko Haram, al Qaeda, and ISIS in Mauritania.
Foreign terrorist fighters may perpetrate terrorist acts not only in
their home countries; therefore, any counterterrorist finance strategy
should not limit itself to Iraq, Syria, and immediate neighbours, as
has been the wont of the international community for the past year or
so.
Third, given the serious online radicalization, fundraising, and
recruitment threat that ISIS presents, it's imperative to work with
social media companies to take down incendiary videos and websites
that train impressionable persons in bomb making, invite radical
thoughts and beliefs, and lionize those who commit atrocious
terrorist acts. Present efforts under way to bring in legislation in
Canada to address this issue are a step in the right direction. Of
course, it is hoped that these legislative initiatives will balance the
needs of security with those of free speech and the privacy concerns
of citizens.
Fourth, while there has been a lot of debate in the past several
years about the functioning and effectiveness of FINTRAC—and by
all accounts its performance has considerably improved—not much
has been spoken of in terms of the dire need for two-way information
sharing between law enforcement agencies and FINTRAC. This
two-way information sharing would further improve the effectiveness of FINTRAC and the quality of its financial intelligence
products.
Fifth, while targeted sanctions against the al Qaeda and Taliban
regimes by the UN are a noteworthy name and shame deterrence
phenomenon, and the capacity-building initiatives of the UN
Security Council resolution 1373 regime have gained high praise,
their effectiveness of implementation, as well as their impact at
stemming terrorist financing have yet to be assessed. The
5
Government of Canada, which is actively engaged in funding and
facilitating the countering the financing of terrorism capacitybuilding programs through the UN and its agencies, may like to
request information from both the al Qaeda and Taliban monitoring
team and the counterterrorism executive directorate with regard to
the effectiveness of implementation and the impacts of UNSCR
1267 and UNSCR 1373, respectively.
It is hoped that these thoughts and recommendations will help the
committee in its examination of terrorist financing in Canada and
abroad going forward.
● (0910)
In closing, thank you, Mr. Chair and members, for this
opportunity to discuss this issue. I welcome your questions.
The Chair: Thank you very much for your presentation, Mr.
Kumar.
We'll now go to Mr. Tupman, please, for your five-minute
presentation.
Prof. Bill Tupman (Professor, BPP University / University of
Exeter, As an Individual): Thank you, Chair.
The first point I'd make is that if you really want a longer
presentation from me, I did a lecture tour of Australia a couple of
years ago and you can see a YouTube video of my doing a 40-minute
presentation, with jokes, on the mix of terrorist financing, but I'm
going to spare you the jokes and the 40 minutes. For the sake of the
interpreters, I'm going to try to make six or seven quick points.
The first point is that my present interest is the increasing overlap
between terrorism and organized crime, that they are engaged in very
similar sorts of activities, that they are both networked and organized
as networks rather than as Weberian pyramids, and that they are
primarily cellular.
My second point is that we need to remember that most terrorist
operations now are self-financed. The cell finds its own financing for
the particular operation. There is seed core financing for what we
might call spectaculars, and for setting up an organization for the
purposes of recruitment. If we're going to talk about terrorist
financing, we need to recognize those differences.
My third point is that states are back as terrorist financers. There
was a period when it appeared that we were dealing with
organizations that were non-state actors. As things have changed
over the past five years, increasingly the big organizations are being
funded by states. I'm not going to name them because I don't know
whether I'm under the Chatham House Rule or whatever, but they're
fairly widely known, and if you're going to stop terrorist financing
you need to address the question of those states.
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My fourth point mirrors something one of the earlier speakers
said. We're dealing with a series of new technologies. Social media
represents one of those technologies, but we also need to remember
there are alternative forms of payment, such as bitcoin, and there are
all sorts of money substitutes used in games, like Second Life. An
awful lot of attention by the security services is focused in the wrong
place. We don't need gathering of general social media. The bad guys
have now gone to Tor; they've gone to the deep web where the
pedophiles are and where all sorts of dissidents hang out. We need to
know a lot more about how to investigate what's going on there.
My fifth point is that again over the last five years we've seen the
rise of the terrorist accountant. It sounds like a contradiction in
terms. Accountants are supposed to be terribly dull people and
terribly worthy, but accountants are now very important in assessing
businesses for the tax or extortion they're going to pay to the terrorist
organization. We need to remember that not just banks lend money,
but also accountancy firms and firms of solicitors. We need to pay
more attention to the accountancy profession.
My sixth point again mirrors something somebody else has said.
The most important thing is better trained investigators. We have
enough laws. We don't need more laws; we need more competent
investigators to produce evidence and prosecute. One of the big
traces you need to follow is, who is now dealing with the suspicious
activity records? Is anything being done with them? Are they
genuinely being analyzed, or are they just piling up on a computer
somewhere?
My seventh point is that we should remember the objective of
countering terrorist financing is the same as the objective of all
counterterrorism. It must reduce the number of terrorists.
● (0915)
If we use blunt instruments that hit non-terrorist targets that hit
spectators, we will end up increasing the number of terrorists.
My final point is the Islamic State point. The Islamic State since it
captured Mosul has access to large funds and doesn't really need to
raise a lot of money elsewhere, but it's also able to sell oil. We need
to know where that oil is going, we need to track it, and we need to
make sure the money is not getting back to them.
Those are my eight points. Thank you very much for listening. I
will enjoy taking questions.
The Chair: Thank you very much, Professor Tupman.
We will begin members' questions, colleagues, with Mr. Cullen,
for six-minute rounds.
Mr. Nathan Cullen (Skeena—Bulkley Valley, NDP): A great
deal of thanks to all our witnesses this morning. With this panel, we
don't have enough time to get through what we would probably like
to get through just by the quality and expertise of the six of you who
are here.
Very quickly, Mr. Leuprecht, I want to get this balance. We've
been trying to understand, particularly with regard to ISIS, ISIL, how
much of their money is coming from donations from people in North
America or Europe versus how much of their money they have
secured from extortion from the banks they have seized, from the
sale of oil as Mr. Tupman has alluded to.
March 31, 2015
Do you have any awareness of that?
Dr. Christian Leuprecht: Inherently concrete numbers are hard
to come by, but we do have a good British and a good Australian
report I can share with you on that.
In principle, the ISIS phenomenon is one of individuals in the
region and own-source revenue, and less one of ISIS going abroad,
but the challenge of focusing on ISIS is that, for instance, we miss all
the activities in North Africa that I outlined for you.
In that regard, I want to stress what the Department of Foreign
Affairs does, in particular, under Canada's counterterrorism capacitybuilding program and the anti-crime capacity-building program,
which is primarily active in the Caribbean. I think these are very
important efforts in making sure this phenomenon doesn't spread and
that we reinforce capacity.
● (0920)
Mr. Nathan Cullen: Thank you.
Mr. Kennedy, something Mr. Tupman said seemed to reinforce
what you were saying with regard to capacity. There's an indication
of new and broader powers for CSIS and for others that is being
debated right now and moving through the amendment stage.
Laws are what they are, but if there isn't capacity to follow
through on the laws, then they are simply something else other than
an intent to actually change things.
What is the RCMP's current capacity? You have a great deal of
expertise in this. What has their experience been in terms of tracking
down and pursuing?
Mr. Paul Kennedy: I'll give you some background. I prosecuted
complex drug cases, tons of materials. We didn't have the laws in
place to seize the proceeds so I advocated that. For five years, I
actually ran the proceeds of crime and money laundering program at
the Department of Justice, and I led as an ADM at the then Solicitor
General the creation of FINTRAC and the proceeds of crime units,
so I'm in it big time.
Mr. Nathan Cullen: You're in it. Are we doing it, is the question
when it comes to terrorism—
Mr. Paul Kennedy: Well, that's the problem. When I have looked
at the file, I can't find any files. There's one little Hamas-connected
thing.
I also led the initiative for the charities. That worked, because we
didn't want the government financing terrorists through tax receipts.
You look at a lot of institutions that violence was occurring in in
Canada that were charities...that has disappeared, so that has worked.
When I looked at the proceeds of crime forfeitures since 2000 by
the RCMP, it's about $243 million. If you break that down, it's about
$17 million a year. That tallies what our experience was with the
moneys we were collecting associated with drug trafficking.
March 31, 2015
FINA-75
I'm looking at it, and I think it is all drug trafficking. That data that
you need to make that collection is incidental to your drug
investigation, so it doesn't require a sophisticated analysis of the
kind of data you would get from FINTRAC. I suspect if you looked
at those 2,900 that I talked about just in the last four years from
FINTRAC, what were the values, because their data will tell you
what the value and what the counts are, and what has been acted
upon by the RCMP.
I would suspect next to nothing. They don't have the skill set for it.
Mr. Nathan Cullen: In all of this not knowing, which Parliament
doesn't know, it's part of our challenge just in terms of what's being
done and not being done.
I'll turn to Mr. Therrien for a moment about oversight.
You said in your opening statement that it should not be left to
national security agencies to determine the limits of their powers.
Are there other countries in the G-7 or the OECD that allow their
national security agencies to determine their own limits of power?
Mr. Daniel Therrien: On that point, I'm not sure about an
international comparison, but in terms of oversight of national
security agencies writ large, whether for terrorist financing or other
activities, Canada certainly has a number of review bodies for the
RCMP, for CSIS, and for the Security Establishment. As far as
FINTRAC is concerned, the only review body that exists is myself,
the Privacy Commissioner, and my mandate is limited to determining whether privacy laws are being respected.
For instance, on the question of the effectiveness of the gathering
of information and whether it leads to true enforcement action, there
is no review body to consider these issues.
Mr. Nathan Cullen: So we don't have the review body now.
What is being proposed is to greatly expand the powers of CSIS, and
it has been suggested that we lower the limit for an investigation, and
some are saying to zero dollars. I'm not sure who raised the point—I
think it was Mr. Leuprecht—about lowering it to such a point that
the net is cast widely, particularly as the definition of terrorism is
also going to be expanded to inhibiting economic interests. What
will be the net impact with no oversight of expanding the power and
the information sharing of privacy information on what we're trying
to get done here, which is stop international terrorism?
The Chair: Just a brief response on that, please.
Mr. Daniel Therrien: I guess my concern is that in gathering
massive amounts of information to identify suspicious transactions,
government receives, analyzes, and retains for long periods a lot of
information about law-abiding citizens.
Mr. Nathan Cullen: Thank you.
The Chair: Thank you, Mr. Cullen.
We'll go to Mr. Saxton, please.
Mr. Andrew Saxton (North Vancouver, CPC): Thanks to our
witnesses for being available today.
My first question is for Professor Tupman.
Professor, you said that ISIL is selling oil to finance their
activities. Who is buying that oil?
7
● (0925)
Prof. Bill Tupman: It is being sold to a number of different
clients. Some of it is being sold just across the border into Turkey to
individual purchasers and individual garages, but it actually appears
to be heading up towards the Black Sea on tankers—tankers
travelling up the road—and it appears to be getting onto boats and
crossing the Black Sea, possibly to the Romanian port of Constanta.
Somewhere between the oil wells and western Europe, eastern
Europe, it seems to change its identity, and obviously there are
matters under investigation there to which I'm not privy. That
appears to be the route by which it is passing at the moment, and that
was the information I was given by the Turkish police themselves
about 12 months ago.
Mr. Andrew Saxton: They likely would be selling this oil at a
deep discount to the market in order to find customers.
Prof. Bill Tupman: Yes, but if you look at Europol's threat
assessment of two to three years ago, they thought that organized
crime, European organized crime, was buying some of the smaller
refineries, and it is possible that some of it's going to those smaller
refineries to become petrol products. All this is surmised and relies
upon conversations with people off the record, I must explain. None
of this is evidence based.
Mr. Andrew Saxton: Thank you very much.
My next question is for Madam Duhaime.
Madam Duhaime, what role should government play in stopping
terrorist financing, and how can we work with the private sector?
Ms. Christine Duhaime: That's a loaded question.
I think it is incumbent on government to take a leadership role, to
grab the reins of the horse, as it were, and to actually take a much
more active role in ensuring the private sector can play the role it
needs to play, which in Canada is the role of gathering information
and reporting it to FINTRAC, and then FINTRAC does its role in
terms of assessing and reporting it to law enforcement.
Let me give you an example of what I think is important in terms
of what FINTRAC does, in terms of whether or not we have the
resources, and how the private sector can play a role. When
FINTRAC was testifying before you, one of the things Gérald
Cossette said that struck me as rather important was that in the last
year they have determined that there were national security threats or
terrorist financing incidents that occurred more than once every
business day. In other words, he referred to law enforcement, or
FINTRAC did, 234 reports that were in one of those two categories.
There do not appear to be sufficient resources in terms of policing
to deal with one terrorist financing report a day coming out of
Canada. That was just last year. Where are those 234 national
security threat reports and/or terrorist financing reports? No one
asked the question of what stage they're at or what's happening with
that. But I think that's an issue on the federal government side where
we need to be asking that question. What is the status of those
reports? What is the number of reports now into 2015? What role are
our federal policing agencies going to play in terms of determining
that?
8
FINA-75
March 31, 2015
On the private sector side, one of the things he also said was that
by working with some of the banks, they were able to determine
much more quickly than they would have that there has been an
increase in electronic funds transfers to the border towns of Turkey,
which of course implicates ISIS. They go to collect funds that have
been wired to them from Western Union, for example, and other
money services businesses.
place of destinations of an individual, or because the age of the
individual involved did not match the amount of money at stake.
I think that type of dialogue that they were able to attain rather
quickly, which I thought was crucial as a typology for money
laundering and terrorist financing, which is that the border towns are
funding ISIS, is really important. That information should go back to
the less large reporting entities, which is the money services
businesses that are most at risk and tend to be least compliant, so that
they can bring into their compliance programs that type of
information to make sure they engage in their role in counterterrorist
financing.
Mr. Andrew Saxton: Thank you.
There's a proposal apparently on the table to get rid of the
financial threshold that would result in reporting to FINTRAC from
$10,000 to zero dollars. I do not suggest that a financial threshold is
necessary, but certainly, if you remove a financial threshold, the risk
of catching information about law-abiding citizens increases mostly
into your question about protocols.
You talked about digital financing. Could you expand on that?
What role do Bitcoin and crowdsourcing, for example, play in this?
Ms. Christine Duhaime: FINTRAC said it has no evidence that
Bitcoin has played any role whatsoever in terrorist financing, and the
U.S. government said the same about eight months ago. I don't know
if that has changed recently.
With respect to digital finance, what's happening is that Twitter,
for example.... There will be thousands upon thousands of requests
from ISIS people requesting people all over the world to send money
to them through PayPal, or through some other means digitally. The
danger there is that it's immediate. It's from me to you. No one really
knows how that transaction has taken place other than it can be
global and is fairly quick. It's a small number, so it doesn't fit within
the typologies that we have typically assessed to counterterrorist
financing. We're not searching for it at the big banks, because we're
not required to under anti-money laundering laws.
● (0930)
Mr. Andrew Saxton: Thank you.
The Chair: Thank you, Mr. Saxton.
Mr. Brison, please, for your round.
Hon. Scott Brison (Kings—Hants, Lib.): Monsieur Therrien,
you said there's evidence of a problem in terms of the collection and
retention of data, and that FINTRAC is maintaining data not relevant
to its mandate. What type of data, just to give us some flavour for
this, is being retained that's not pertinent to their mandate, and what
type of protocol should there be to identify that type of data and to
purge it from FINTRAC? Where should it go?
Mr. Daniel Therrien: The information I was referring to was
uncovered in the course of our two-year review audits that we've
conducted over the years. Essentially, the problems stem from the
discretionary criteria applied by financial institutions and providing
information to FINTRAC, namely, that a transaction appears
suspicious.
It is for the financial institution to determine whether a transaction
is suspicious. The institution is well placed to determine that. But in
the course of our audits, we found that certain transactions were
referred to FINTRAC for reasons such as the ethnic origin or the
The risk, I think, is that in gathering massive amounts of
information and then trying to make sense of it, you will apply
criteria, some of which may be discriminatory. That's one issue.
Either you have objective standards for when financial institutions
share information with FINTRAC, or if you get rid of a dollar
threshold—and then there is no threshold, there is no objective
criteria—then there should be some objective criteria, whereby
FINTRAC looks at the data bank that contains all of this information
to ensure that it is investigating people involved in criminal or
terrorist activities as opposed to law-abiding citizens.
Hon. Scott Brison: You're saying that the problem actually could
begin or does begin with perhaps a public perception as to the source
of terrorist threats and potentially that people are identifying people
based on race and that may not necessarily reflect in any way actual
terrorist threat, that in fact, the information coming in from financial
institutions may be tainted from the outset based on false public
perceptions.
Mr. Daniel Therrien: I don't want to exaggerate the importance
of the problem, but we did find occurrences of reporting by financial
institutions to FINTRAC that appeared to be based in part on race,
place of destination, and age.
Hon. Scott Brison: You've said that amendments could help
address some of your concerns in terms of Bill C-51. Have the
government amendments addressed those issues?
Mr. Daniel Therrien: To distinguish between the current laws as
they apply to FINTRAC and Bill C-51, current laws, some of which
are being revisited or reconsidered including the dollar threshold, to
me are reasonable because reporting to FINTRAC is either on the
basis of whether a transaction is suspicious. So we're not tackling or
targeting law-abiding citizens. We're targeting suspicious activities
or the size of a transaction, which creates a particular risk
presumably for, again, suspicious activities. The elimination of the
dollar threshold would change the situation considerably in that
regard. That's point one.
Point two, Bill C-51 would also change the situation in that rather
than targeting suspicious activities or transactions of high amounts,
FINTRAC would be able to receive and share information based on
whether that information might be relevant to its mandate which is
the detection of money laundering and terrorist financing. The
objective standards that currently exist would be greatly diminished
and would increase the risk, again, that the information of lawabiding citizens would be caught by supervision.
March 31, 2015
FINA-75
● (0935)
Hon. Scott Brison: You were asked a question earlier about
oversight and you responded—I think it was in the context of what
other countries are doing in terms of the Five Eyes, in terms of
congressional or parliamentary oversight—with the description of a
review.
How do you define review versus oversight in terms of other
countries?
Mr. Daniel Therrien: There is all kinds of review and oversight.
There's review before the fact to authorize a certain government
action, for instance, a court authorizing the issuing of a warrant.
Review normally takes place after the fact. So it is an auditing
system whereby one verifies whether or not the government activity
was lawful. What we have currently for FINTRAC is only limited
review, again vis-à-vis privacy issues, not vis-à-vis the legality of its
activities generally or the effectiveness of its activities.
The Chair: Thank you, Mr. Brison.
Ms. Bateman, go ahead, please, for your round.
Ms. Joyce Bateman (Winnipeg South Centre, CPC): Thank
you to all of our witnesses this morning. I very much appreciate the
testimony we've heard. I'd like to start with Mr. Kumar.
By the way, I think we received very succinct and clear
recommendations from our two teleconference participants, and
that's sometimes difficult, so I very much appreciate that.
Professor Kumar, you mentioned how the issues have changed. I
reference your op-ed of September 24, in which you said that was
then with al Qaeda, and this is now with ISIS. We're dealing with a
different world. Would you be kind enough to use that as a lens to
say...? At the end of the day, we are a committee. We must make a
recommendation, and we must make report findings. What are your
top recommendations for this committee, sir, in that context of the
changing world?
Dr. Amit Kumar: I have outlined five recommendations, and I'm
not going chronologically based on my opening statement but rather
am speaking offhand. One is the fact that FINTRAC has always been
blamed for not sharing enough information with the law enforcement, but the way things are played in the FIU business, unless
FINTRAC gets the counterterrorism intelligence blended information from law enforcement, it's not able to inform and educate the
financial community or the financial institutions as to what to look
for in a suspicious activity report.
What is suspicious activity? There has to be a dovetailing of the
law enforcement counterterrorism information with the financial
intelligence that's gathered by FINTRAC from financial institutions
in order to remove the problem of defensive filing of suspicious
activity reports, overregulation, or not exact.... Because the financial
institutions badly need guidance from the government. That is one
recommendation I'd like to make.
Then there's always this fact of Canada being an active member of
the UN and funding a lot of UN programs and making requests to the
UN al Qaeda monitoring team as well as the counterterrorism
executive directorate for impact assessments and implementation
effectiveness assessments. Where are the taxpayers' funds going?
9
There has to be some accounting for that. There hasn't been any
study of either impact or implementation effectiveness.
Those are two key recommendations I'd like to make. Also, I did
look at whether in Bill C-51 the scope of material support could be
brought in to include.... The U.S., for example, has a pretty huge and
expansive scope regarding what material support is. It includes
anything that has value to a terrorist organization, be it messages or
money or materiel or men, or that could be of use to a terrorist
organization. I would recommend having a more expansive and
broader scope of material support.
Then I'd say you should work with social media companies to take
down videos, like the YouTube videos, which really give a lot of
information to the terrorists to do this or that. There has to be some
provision. I'm glad Bill C-51 has started mentioning taking down
videos, of course while balancing privacy concerns and free speech.
Basically those are the main recommendations I'd like to make.
There is also the fact that when you look at foreign terrorist fighters,
given Mehdi Nemmouche and other attacks, even in Ottawa, it's
difficult to really pinpoint Iraq and Syria as the two regions. The
ISIS phenomenon is global and worldwide. So men, materiel,
messages and money could be coming from any country, transiting
through any country and perpetrating acts in some third or fourth or
fifth country.
I thank you for that.
● (0940)
Ms. Joyce Bateman: Excellent. Thank you very much.
Professor Leuprecht, perhaps you could answer the same question
for me. We are going to be making recommendations. What are your
top recommendations to be effective and efficient in the fight against
terrorism?
Dr. Christian Leuprecht: You already heard my remarks with
regard to what we do on the extraterritorial side in terms of capacity
building, especially in Foreign Affairs and DND, which is very
important.
As Mr. Kennedy mentioned, I think the skill set within the
RCMP.... Here is an organization where I think we need to
completely rethink how we do federal policing in this country, the
current organizational set-up, and the professional development
schemes. An organization with minimum qualifications at entry of a
high school degree and no criminal record, and posting people from
somewhere in the north to Toronto and to white-collar crime
investigations, as sort of a reward, is not the way we can do federal
policing in this country. No other western democracy does federal
policing the way we do, in terms of throwing all this together from
local.... I think we need to completely revisit that.
With regard to Mr. Brison's question on FINTRAC, one of the
challenges on suspicious reporting is that there is no consistent way
of suspicious reporting. When banks file reports, essentially it's more
or less at the discretion of the banks how exactly they fill in that
report. In terms of data mining, for instance, if you're trying to get
patterns and trends, it creates huge problems because if you don't
have a consistent way of filing the data, it also makes it difficult to
get a consistent trend analysis across the data.
10
FINA-75
I think we need to look at our listing regime both for organizations
and for individuals.
The chair wants me to slow down, so I will.
The Chair: I apologize, but the time is up for Ms. Bateman.
Thank you, and we can return to that later.
Thank you, Ms. Bateman.
[Translation]
Mr. Dionne Labelle, go ahead.
Mr. Pierre Dionne Labelle (Rivière-du-Nord, NDP): Thank
you, Mr. Chair.
I also want to thank the witnesses for joining us today.
March 31, 2015
ness of FINTRAC's activities could look into these issues in a
concrete manner. There is currently no such review mechanism in
place.
Mr. Pierre Dionne Labelle: Thank you very much for your
answer.
I would like to come back to Mr. Tupman and discuss selffinancing.
You know that we, as Canadian parliamentarians, were victims of
an alleged terrorism-inspired attack that was fairly easy to finance.
The individual took a rifle, which may have belonged to his
grandfather for all I know, and came to Parliament. We were victims
of another terrorism-inspired attack, where an individual used his
own vehicle to run someone down.
Terrorist financing is broken down into two streams for the
purposes of this study—the international stream and the national
stream. Regarding the international stream, I will come back to what
Mr. Therrien said about FINTRAC.
The matter of funding is important, as we do not want to finance
terrorists. However, that's not the only important aspect, if we look at
how radicalization happens and how few means are needed to
commit a terrorist act.
Since regulations were adopted for the reporting of electronic
funds transfers of $10,000 or more, FINTRAC has received 2 million
reports. The figure should reach 10 million this year. If the
transaction limit for reporting to FINTRAC was lowered, the amount
of information would be huge.
[English]
How can we make sure that the accumulation of information will
not be done at the expense of people's privacy?
Mr. Daniel Therrien: As I explained previously, objective
standards can create a filter—such as the limit currently set at
$10,000—before financial institutions could pass information on to
FINTRAC.
I am not an expert in this area, but I think it is entirely possible for
the limit to be deemed unreasonable or to become meaningless
because of how terrorists operate. Under those conditions, if the
monetary threshold for obtaining more information was eliminated,
objective thresholds would have to be established before FINTRAC
could check all the information in its databases. The goal is to make
sure only suspicious transactions are investigated, and not people
who have done nothing wrong.
● (0945)
Mr. Pierre Dionne Labelle: Here is what you say in your
document: “I would conclude by reminding the committee that the
lack of dedicated review for FINTRAC was last raised...”.
Prof. Bill Tupman: That's quite correct. The international terrorist
organizations are encouraging individuals to plan their own solo
raids. These need very little funding indeed. The smaller groups have
been instructed to engage in credit card fraud, theft of debit cards,
ATM fraud, skimming of bills in restaurants and garages—very lowlevel white-collar crime. That has occurred quite frequently in
western Europe. We had the Tamils in the eastern parts of England.
This is why I started off by saying that organized crime and
terrorism are networking together. If you look at the Charlie Hebdo
attack, those guys fell off the radar of French intelligence because
they thought they had reverted to criminality. In fact, they were using
their criminality to put the money together to buy their guns and gain
access to the people who could provide them with guns. It's quite
important to be involved with the illegal armourers to get hold of
guns in that sort of way.
What I was trying to say right at the start was that we need to look
very closely at the interaction between terrorism and organized crime
and be very careful not to put a huge boundary between the two and
between the investigators of the two.
● (0950)
[Translation]
The Chair: Thank you, Mr. Dionne Labelle.
What kind of a review would you suggest for FINTRAC?
Mr. Daniel Therrien: As I was saying, in terms of administration,
I am the only person with the authority to review FINTRAC's
activities, and only when it comes to privacy issues.
Mr. Pierre Dionne Labelle: Indeed.
Mr. Daniel Therrien: I think that what's missing is an
administrative body that could carry out a more general review of
the legality and effectiveness of FINTRAC's activities.
[English]
Some of my colleagues today have mentioned that FINTRAC did
a good job of obtaining and analyzing the information submitted to
it, but that this did not lead to concrete law enforcement activities. A
review body whose mandate would include assessing the effective-
Could you expand a little on your preamble? In your opening
comments you talked about a centre of excellence. I'm looking for a
recommendation we could include in our report. How would you
envision such a centre?
We'll go to Mr. Cannan, please.
Hon. Ron Cannan (Kelowna—Lake Country, CPC): Thanks to
our witnesses for providing their wisdom and expertise on this very
important subject, which we're investigating in order to come up
with some recommendations to provide to the Minister of Finance.
My first question is for Ms. Duhaime.
March 31, 2015
FINA-75
11
Ms. Christine Duhaime: I spent the last two years dialoguing
with the private sector mostly and with law enforcement on what
they view as some of the issues with respect to not just
counterterrorist financing and sanctions but anti-money laundering
as well. I think there is a consensus among the groups I've talked to
across the country that we need to have some sort of private and
public partnership and that what we have done so far hasn't worked,
for whatever reason, either globally or nationally, and that they feel
they want to participate in the solution.
Maybe you could elaborate for the committee a little bit what you'd
like to share in those notes, what you see as the link between
organized crime and terrorism, and what legislative change
recommendations you'd like to see in this report.
Dr. Christian Leuprecht: I would say that the link is tenuous,
because we don't exactly understand the empirical linkages, and that
this is an area that deserves much more attention by government,
especially with respect to research, because it is an area that is very
difficult to research and so requires heavy sunk costs.
That solution, in my mind, is something whereby we would
establish a financial crime centre of sorts and would have both sides
of the table, as it were, sit down to come up with solutions, to study
issues such as digital terrorism, which is new and which no one is
really looking at. Canada could take the lead on this and come up
with suggestions.
We know, for instance, that contraband cigarettes have been linked
to everywhere from eastern Europe through to ISIS, and in the
United States, for Hezbollah fundraising. I detail those in the report
and also have some articles on that particular issue. However, it's not
exactly clear what those linkages are, because it seems that the
fundraising and organized crime elements operate fairly independently from the actual terrorist elements and that the networks
themselves look somewhat different.
We also have a great need in this country for expertise to be
developed in counterterrorism, and in sanctions law especially. We
look to the United States for that type of expertise and we import it
and actually pay to go to conferences all across the country, whereas
we have people here and, believe it or not, we go to the United States
to teach this.
I think it makes more sense for us to decide that we're going to
keep that expertise in Canada and expand it and export it ourselves.
If we had some sort of national crime centre wherein we had the
expertise in the country, we could have conferences, we could teach
the banks, we could take a leadership role, and we could just keep
this in house.
I think that's a solution. It seems to be a solution that everyone I've
talked to wants to see happen.
Hon. Ron Cannan: Thank you for that.
You mentioned before that there has been a hole in the fight
against terrorism from the financing perspective and that you want
Canada to take a lead. From your perspective, how big a threat is
homegrown terrorism in Canada relative to the U.S. or Australia?
Ms. Christine Duhaime: Statistically speaking, and proportionately as well, we appear to have more homegrown terrorists in
Canada than elsewhere, not numerically, but just proportionately
speaking.
We gave a counterterrorism session in Toronto about a month ago
at which the OPP spoke. One thing they said which struck me was
that they have 200 persons of interest whom they are looking at in
the province and insufficient policing and other resources to monitor
them.
These could potentially be homegrown terrorists, just in Ontario. I
think that if all of those people come to fruition and end up being
potential terrorists, that's an issue in Ontario, and of course we
probably have some other situations in other provinces as well with
insufficient resources to deal with the problem. I think it's going to
be a bigger problem for us.
Hon. Ron Cannan: Thank you.
Mr. Leuprecht, you mentioned in your comments that finance and
recruitment are diverse and you mentioned the link between
organized crime and terrorism, but your notes were not bilingual.
I think it suggests the challenge of our needing to make sure we
recognize that what we do on the organized crime enforcement side
has concrete implications for public safety and national security. I
might point the committee to the Cornwall regional task force, for
instance, which was established in 1990, and 25 years later we're still
here.
We need to be asking some hard questions about why it is that we
pour money into task forces when, for instance, in the end they don't
seem to be able to get us the sort of payoff we need. Is it an
institutional issue, a legislative issue, a sociological issue, or do we
simply have the strategy wrong?
I think there is a lot more we can do, both within Canada and in
terms of international capacity building, on organized crime that will
help public safety in general and in fighting terrorist financing in
particular.
● (0955)
The Chair: You have time for an extremely brief question.
Hon. Ron Cannan: I have a quick question, then, for Mr.
Tupman.
On the international scene, do you think the UN is taking enough
action on ISIL, and on terrorist financing, for that matter, to deal with
this issue?
The Chair: That's a big question, and we have only about 20
seconds left, Mr. Tupman, so we'll have to return to this.
Prof. Bill Tupman: Okay, how about “no”.
Some hon. members: Oh, oh!
Hon. Ron Cannan: I like that.
The Chair: I appreciate it.
We'll go to monsieur Côté, s'il vous plaît.
[Translation]
Mr. Raymond Côté (Beauport—Limoilou, NDP): Thank you,
Mr. Chair.
I want to thank all the witnesses for being available even though
we have very little time to ask them questions.
12
FINA-75
Ms. Duhaime, if I understood your presentation correctly, you said
that the FATF has not kept itself sufficiently up to date and that it
was at least one step behind, especially when it comes to new digital
financing platforms. For all we know, it may even be two or three
steps behind.
Canadian organizations clearly rely heavily on the FATF to
combat terrorist financing. Do you think that trust, that hope, are
well founded? Can Canada take concrete action to support the FATF,
so that the organization can bring itself up to date?
[English]
Ms. Christine Duhaime: I'll have to give a bit of a complex
answer only because I don't really know what happens behind the
scenes at the FATF and why, for example, it's not as effective as it
should be. For sure, it has been effective in anti-money laundering
law. It tried to be on counterterrorism and sort of missed the mark
entirely on sanctions.
We are definitely a strong supporter of the FATF and we laud it, as
we probably should, for what it does. I think there needs to be some
sort of rethink on what it does. I think you noticed, for example, that
the U.S. and Saudi Arabia are leading a separate group that met in
Rome last week just to deal with counterterrorist financing, of which
the FATF is a member. That suggested to me that maybe there's a
little bit of lost confidence in the FATF. Why would they not simply
go to the FATF since they're all members and have that meeting
there?
It may be a suggestion that the FATF either.... Whoever's in charge
of it on an annual basis should retain its jurisdiction for a much
longer period to get much more accomplished, in a much more indepth way. We either devote more resources to it, or we cut off the
terrorist financing piece and just have a separate FATF, or a different
body that just deals with terrorist financing that is much more
specialized.
One of those two has to be the solution, but you know, 10 years
have gone by and we haven't solved counterterrorist financing.
Maybe it's time to find another solution.
[Translation]
Mr. Raymond Côté: Thank you very much
Mr. Leuprecht, unless I am mistaken, you said that the $10,000
threshold has led to too many false positives.
In the 14th recommendation issued as part of a study on terrorist
financing, the Senate review committee indicated that the threshold
for examining financial transactions did not necessarily have to be
excluded and that additional emphasis could be placed on the
strategic collection of information and risk-based analysis and
reporting.
Would you go as far as to suggest that terrorist financing be
tracked through risk-based analysis and reporting? If not, do you
think the $10,000 threshold remains valid for all transactions?
● (1000)
Dr. Christian Leuprecht: If I may, I will answer in English to be
more specific.
March 31, 2015
[English]
From a data mining perspective, it's inherently important that we
base what we do on adequate risk-based assessments that are firmly
grounded in evidence. There is too much investigation that happens
on someone's best experience or best hunch, and there's too little in
terms of the actual risk models.
As Mr. Brison pointed out, there's always the risk of being
perceived as targeting ethnic communities. What we actually need
are proper data-driven models to demonstrate that we are not
targeting any one person because of religion or background or area
of travel, but because we have an effective risk-based model.
I'd be happy to share with you some of the publications that we've
done, including a publication that's about to come out on risk-based
modelling within Correctional Services Canada, with a very large
data set within Correctional Services.
Part of this is a challenge of not just risk-based modelling, but that
we have some agencies that are more research-based than others, so
the research cultures, and being able to have departments and
agencies that are then driven by that research, rather than inductively
by people's investigative hunches.
There's a whole institutional culture issue that's separate from
actually being able to develop the adequate proper models. We don't,
for instance, have a very good way of currently sharing data with
researchers, something which the U.K. and the U.S. have done much
better.
This is not to say that government analysts aren't good at what
they do, but inherently, there are some things we can do in the
academic community with some of our algorithms and methods that
are perhaps a bit more advanced.
[Translation]
The Chair: You have 30 seconds left.
Mr. Raymond Côté: Mr. Therrien, in its latest annual report, the
CSIS review committee said that it was receiving information on
CSIS activities with significant delays. That seems dysfunctional to
me, and I think you have already noted that yourself. Considering
the potential increase of the powers exercised by the Canadian
Security Intelligence Service, it's fairly obvious that the committee
will be completely bypassed when it comes to monitoring those
activities.
Mr. Daniel Therrien: I have no particular opinion on its capacity
to analyze the information, but there is no question that it will
receive much more information.
Mr. Raymond Côté: Thank you.
[English]
The Chair: Merci, monsieur Côté.
Mr. Adler, please, for your round.
Mr. Mark Adler (York Centre, CPC): Thank you all for being
here today.
I want to begin with Mr. Leuprecht.
March 31, 2015
FINA-75
Sometimes fact is stranger than fiction. I don't mean to be glib
about this, but are we looking at something like we see in the James
Bond movies, where there's an organization like SPECTRE
operating, or in the old mob movies where we see them all sitting
around a conference table talking about the different revenues they're
bringing in from the different territories? Is this more a business than
it is an ideological issue? What is at the core of all of this?
Dr. Christian Leuprecht: Can you clarify, is this in regard to a
terrorist organization?
Mr. Mark Adler: Yes, terrorist organizations. We need to be
following the money here, right? This is about money.
Dr. Christian Leuprecht: Inherently there are always going to be
financial motives. I often compare security to a bit like studying
theology: there's a whole lot of propositions and very little evidence
to support any of them. As an academic, my work has always been
about getting concrete research and data behind this. As I point out,
some of the links are more tenuous, or more poorly understood, than
some individuals put forward.
Mr. Mark Adler: The network of all of this; it's like a spider's
web, isn't it? The more layers you peel back of this onion the more
layers there seem to be. It's all as you said, kind of tenuous with links
to to this and to that.
Are we forever going to be playing catch-up, or are we ever going
to be able to get ahead of this, in your estimation?
Dr. Christian Leuprecht: I think one important way of getting
ahead of this is that we need within our own government on the
security sector a comprehensive professional development program.
The only department in the Government of Canada that has a cradleto-grave professional development career plan is the Department of
National Defence. We need likewise on the security side for all the
security agencies so we can professionalize this entire apparatus. I
think Canada does not get enough credit for what it does on capacity
building, but we're only one country. Our international collaborations here are very important in staying ahead of the game, rather
than always playing catch-up.
● (1005)
Mr. Mark Adler: I understand. Thank you.
There's so much area I want to cover, but let me jump to another
topic here.
Organizations that we see on university campuses, like BDS and
movements like that, seem to be very well-funded slick organizations. Where are they getting the funding from?
Dr. Christian Leuprecht: I think there's inherently a challenge of
being able to track all the funding, but we do know that both
organizations and governments are active within Canada in trying to
build certain types of sympathizing organizations. Inherently,
university campuses are an attractive place to build that sort of
sympathizing and recruitment source.
Mr. Mark Adler: The money that's coming to fund these
organizations, is it foreign sourced, or is it domestic sourced?
Dr. Christian Leuprecht: I'll be happy to share some
documentation with you on that, without having to comment in
public on it.
Mr. Mark Adler: Thank you.
13
I want to follow up with Mr. Tupman.
You talked about the accounting profession. We have this
impression of accountants as being rather cerebral and boring kind
of people, but I was intrigued by your comment that we should be
paying more attention to the accounting profession. Could you speak
a bit more about that?
Prof. Bill Tupman: We know that in the areas where the al Qaeda
offshoots and the Islamic State operate, one of the ways in which
they fund the operation is by asking for a per cent of turnover from
the individual businesses within those areas, and there are teams of
accountants who go into the businesses and work out what their
annual turnover is. This appears to have come out of al Qaeda's
operations back in Afghanistan after an Egyptian ran off with $10
million from the central fund. From that moment onwards, they've
gone for auditing and accounting, and as they developed a team, that
team has gone out and looked at other branches of the organization
and estimated what their turnover is so that if you signed up to al
Qaeda, whether it be al Qaeda in Yemen, al Qaeda in Mali, or
whatever, you are supposed to repatriate money to the central
organization. That money is audited. That money is accounted for.
Those accountants will also look at the companies operating within
the area.
What I'm trying to say is, the relationship between organized
crime and terrorist organizations over a certain size needs to be
understood in the same sort of way that organized crime can
sometimes just be another business. It's just an illicit business and it's
expected to pay its share of turnover as a revolutionary tax, or
whatever you want to call it, in the same way as legitimate
businesses.
If you're interested in this, just this week my colleagues and I
produced a special issue of the journal Global Crime, which covers a
number of case studies in different countries on the interface
between organized crime and terrorism. We've done quite a bit of
work on this and encouraged other people.
The Chair: Professor, if you'd like to send that to the clerk, we'll
ensure all members get that. That goes for any of the witnesses here
today. If you have any additional information, we will ensure that all
members get it.
Prof. Bill Tupman: Sure.
The Chair: Thank you, Mr. Adler.
We'll go to Mr. Mayes, please.
Mr. Colin Mayes (Okanagan—Shuswap, CPC): Thank you,
Mr. Chair.
For our guests, I'm just filling in today so maybe my questions
won't be quite as informed as those of my colleagues.
One of the things that strikes me is...how they track my money is
through accounting and reporting, and then the other one is the banks
and the transactions.
14
FINA-75
I just wondered if there is a centre of financial intelligence where
there is some forensic accounting and a framework of reporting for
banks internationally, and even with credit cards, for instance,
whether a transaction goes to a certain individual and the red light
comes on and says that the person is a person of interest, or
whatever. Is there any way there could be a framework that could be
put together to monitor and better catch these people who are
financing terrorism internationally?
Mr. Kennedy, do you want to answer first?
● (1010)
Mr. Paul Kennedy: That was the whole purpose for the creation
of FINTRAC here in Canada. There's an obligation upon banks and
these financial institutions proactively to look at, in this case,
transactions of $10,000 or more, and for various criteria in those
training programs put in place. When they look at that, then they
ship that off to FINTRAC, which is under the Department of
Finance, and they do financial intelligence analysis to ascertain if
these are suspicious transactions. They have, clearly, the expertise
there through accountants and so on, and they then take that, as I
pointed out, into actionable intelligence to share with CSIS and with
the RCMP, as well as with provincial and municipal police forces in
Canada who share information with them.
They do that analysis that you're talking about. That's a
partnership between the public sector and a government institution,
financial intelligence—
Mr. Colin Mayes: I'm talking about transactions globally. They're
not really financing maybe terrorists within Canada; they're
financing—
Mr. Paul Kennedy: There are agreements between FINTRAC
and other—
Mr. Colin Mayes: Is there a central...?
Mr. Paul Kennedy: It has agreements with similar bodies in other
countries and they exchange information back and forth.
Yes, there is that collaboration, and it is networked so that we
might get a heads-up from another government that something is
happening that impacts us, and then that is shared with our
enforcement partners.
Mr. Colin Mayes: Mr. Leuprecht, go ahead.
Dr. Christian Leuprecht: Arguably, the most effective financial
intelligence agency we have in Canada is the Bank of Canada,
because the central banks actually have a very good intelligencesharing network among themselves, in part because in many cases
they don't actually trust their own national governments to provide
them with necessary and timely intelligence. I can provide some
evidence on how the Bank of Canada has been ahead of the game in
a number of cases where subsequently governments came on board.
More cooperation with the Bank of Canada is one thing that I think
might be helpful.
Mr. Colin Mayes: Professor Tupman, is there anything the U.K.
government has done to put a framework together to work
internationally, and how is that framework set up to monitor these
transactions?
Prof. Bill Tupman: Well, we have just changed our whole
operational system. We have introduced the National Crime Agency,
March 31, 2015
and that is taking a partnership approach, an approach to partner
universities, the private sector, and other agencies. There is a whole
new set of ideas coming down.
One of the things we are worried about is.... I can't remember if it
was you or your previous colleague who asked the question, are we
ever going to catch up? We are beginning to try to think 15 years
down the road. We are trying to look at what is coming over the
horizon, trying to think the unthinkable. There are those sorts of
things going on.
I think you would find the same sorts of complaints that your
colleagues are making. We are not studying the suspicious activity
reports properly, and we are not putting them together. We have a
strong feeling that we need to train compliance officers in banks and
business to screen transactions better so that they don't just send any
old thing, but they send stuff that is genuinely suspicious.
There is a lot going on, but it's a work in progress. I can't pull out
best practice right here and now. We are dissatisfied with what we
have done so far, and we are rethinking.
Mr. Colin Mayes: That's all I have.
The Chair: Thank you, Mr. Mayes.
We'll go to Mr. Cullen, please.
Mr. Nathan Cullen: I am not sure I've seen that at the finance
committee before. That was impressive, Mr. Mayes. We scramble for
time, and that was generous.
I have several questions, starting with you, Ms. Duhaime.
You were quoted as not being overly optimistic about this
committee's study into this particular theme. I am not taking it
personally, by the way, but why were you uncertain as to whether
this committee could study this topic effectively?
● (1015)
Ms. Christine Duhaime: Well, it wasn't necessarily about this
committee. Let me blame the media.
Mr. Nathan Cullen: It's all right. We totally—
Ms. Christine Duhaime: I was misquoted.
Mr. Nathan Cullen: We totally sympathize. We blame them all
the time as well.
Ms. Christine Duhaime: Okay, thank you.
It's more that I feel that Canada has undertaken a number of
studies and actually nothing has changed. I guess it's the hope that
this committee might be different and it might take the job to task
more comprehensively, and perhaps listen to fewer professors. No
disrespect to professors, but we seem to listen to a lot of professors
and to nobody who has ever actually worked in a bank. I am happy
to see that you have different types of people as witnesses, and I
think obviously this will create some change.
March 31, 2015
FINA-75
Mr. Nathan Cullen: This idea of international terrorist financing
is nothing new. Prior to 9/11, but certainly since 9/11, terrorism has
been much more central in the hearts and minds of policy-makers
here and abroad.
Why is there so little effectiveness? Aside from a better array of
witnesses we are hearing here, what would be one of the particular
things that would give you confidence that the government was
actually serious, not just speaking about the seriousness of it but
actually acting upon the seriousness of it?
Ms. Christine Duhaime: One of the things we've heard, and
we've even heard this repeated today, is that there is a lack of training
and expertise among compliance people at the banks. That hasn't
changed for a number of years, and I don't know why that is. It has
changed in the United States, but not necessarily here. I think what
the United States does well is it prosecutes and fines heavily. I am
not suggesting we necessarily go that way, but I think we need to
begin to think about how that might be effective.
Mr. Nathan Cullen: Do we prosecute in Canada, in comparison?
Ms. Christine Duhaime: Not very much.
Mr. Nathan Cullen: Not very much.
Do you agree with that statement, Mr. Kennedy?
Mr. Paul Kennedy: Oh, yes, that is my complaint.
Since this is a finance committee, I assume you have financial
backgrounds. If you conceived a company to produce a product and
viewed all this information as streams of ingredients for a product
going down to a cook, the ingredients all come in, and that stuff is
spilling on the floor. Nothing is happening to it. In order to do that,
you have to have someone who knows what the ingredients are,
appreciates them, and knows how to put them together and produce a
product.
We have money going into a system and no product. We need to
have investigators who know how to use this and investigate it
effectively, and prosecutors who know how to do it. These are far
different kinds of criminal activities we are talking about, and far
different skill sets that are required. This is a wasted effort by all of
us unless we have people at the end to turn that into something
concrete.
I can't find anything concrete. That tells me something is wrong.
Mr. Nathan Cullen: Quickly, Ms. Duhaime, and then I want to
move on.
Ms. Christine Duhaime: I was just going to say that I think from
the banking perspective, too, we fail to ask the banks how much this
is costing them. The U.K. did a number of studies, and in 2005 the
cost to the U.K. banking system was, I think, something like £200
million for compliance. Now it's about £5.8 billion.
Mr. Nathan Cullen: Per year?
Ms. Christine Duhaime: Yes, per year. That's a lot of money that
we ask the banks to invest in compliance for counterterrorism
sanctions and anti-money laundering law, yet there's no result, as we
were saying, that gets spit out in terms of prosecutions and results.
They just seem to be spending a lot of money, and we can't keep
spending that amount of money in the private sector and not get
anything out of it.
15
Mr. Nathan Cullen: Thank you.
Mr. Leuprecht, just in the last moment you said something about
the central banks not trusting the intelligence authorities or the
governance. You had some hope or an expression that the central
banks had a great deal of information and ability to share that with
other central banks and are, I think you said, ahead of the game.
I want to come back to that question of trust. Did you mean what
you said, that from your evidence the central banks don't have a great
deal of confidence in sharing that information with other agencies
and authorities?
Dr. Christian Leuprecht: The Bank of Canada and the
Department of National Defence are entities of the government
where failure is not an option, and I think this is what drives these
institutions, so they have to be ahead of the game. I think this is the
sort of mindset we need to instill in the rest of the security sector.
Mr. Nathan Cullen: You don't think that mindset is there in the
rest of the security sector.
Dr. Christian Leuprecht: I think there are some very dedicated
individuals, but I think overall this is perhaps not the priority of what
drives the overall security bureaucracy. With entities such as the
private sector, where the bottom line ultimately matters and where
their business model relies on the legitimacy of being able to provide
a consistent and secure product and convey that to Canadians, I think
there's a sense that perhaps government, especially in this country,
has been behind the ball, and that they have had to move forward by
themselves, because government has not been...and this is not this
government; I think this is, I would say, a general perception of
government. Look at Public Safety Canada's priority sectors, for
instance, and how little progress we've been able to make with
partnering between the public and private sectors on this.
● (1020)
The Chair: Thank you, Mr. Cullen.
I'm going to take the next round.
I want to start with you, Mr. Kennedy, and your recommendations.
Your third recommendation says that the government should
reallocate the 30% federal subsidy. Perhaps you could expand on
that and flesh that out a little bit for us.
16
FINA-75
Mr. Paul Kennedy: Since the 1950s, we've found ourselves in a
model of government contracts with various provinces to provide
policing at the municipal and federal levels. If it's a small
community, there's a different formula. It could be up to 30% where
the federal government subsidizes the provincial policing there.
Usually at the provincial police level it's about 10%. The historical
reason for that is that the western provinces were lightly populated
and so on.
We've now found ourselves in the position where there are about
7,000 RCMP in British Columbia. Now we have the have provinces,
we'll call them, Alberta, except for the little blip in oil, but it will be
back up, B.C., Saskatchewan, and Manitoba. They also used to use
those, and Saskatchewan leads the three of them. They were funded
by tax dollars nationally through this 10% and 30% formula. That
funding is coming from, let's say, Ontario and Quebec, which have
their own municipal and provincial police forces. The RCMP doesn't
do that role there, so taxpayers here in Ontario pay for their local
police, their provincial police, and the RCMP federally, and their tax
dollars subsidize policing in these other provinces. That's the model.
What I'm saying is that two-thirds of the RCMP resources are
dedicated to that kind of policing, and you heard references, whether
it's in the north and small communities, that that skill set cannot be
called upon by the federal government to enact federal enforcement,
so there's a small cadre of the total resources that are used for federal
policing.
There is also pressure to rededicate federal resources frequently to
backfill those contracts. You saw recently on terrorism where the
RCMP had to reallocate organized crime resources to fight terrorism,
because here they are moving the peas under the shell. Regarding the
Treasury Board statement with reference to the resources given for
terrorist financing—and I saw the last one to Treasury Board—those
funds will now be pooled with other federal resources, a new form
and part of federal serious and organized crime. They're being
moved out of silos into a general thing, so there's the capacity to be
further drawn down.
The Chair: Thank you.
I do want to follow up. With respect to your first recommendation
on rededicating itself to its federal policing role, is the RCMP trying
to do too many things? Should the committee consider the RCMP
becoming similar to the FBI, including provinces like mine, Alberta,
looking at an OPP model?
Mr. Paul Kennedy: I think we're at that point and we've gone
there because crime has changed.
By the way, I have also chaired the National Coordinating
Committee on Organized Crime for five years and the Canada-U.S.
Crime Forum for five years, and it was obvious that the type of crime
that society is now confronted with has changed because of
globalization and technology. It requires a completely different set
of skill sets from the officers. They're long-term, complex,
sophisticated crimes. Yes, we should look at that, otherwise you
are going to be passing legislation in the expectation that it's going to
be enforced and it won't be enforced. Those 7,000 officers in the
RCMP in B.C. are accountable to the minister in B.C. In each of the
provinces they're in, that's the warm body and accountability is to
that person. That's extreme pressure.
March 31, 2015
Two-thirds of the budget is dedicated to contracting. If we don't
get out of that, we will not be able to fight the new kinds of
sophisticated crime that this country is confronted with.
The Chair: I did want to get to digital terrorist financing, but I
don't think I'm going to be able to in this round.
I'll again go to you, Mr. Kennedy, and then I'll go to Professor
Tupman, because you as well said that the most important thing is
better trained investigators.
Which countries do a good job in terms of training their
investigators? What should we be looking at as a committee in
terms of other countries that do this well?
● (1025)
Mr. Paul Kennedy: You mentioned the FBI and I think that's a
classic example. When you see the large stock frauds that are going
on with insider trading, we're talking billions and billions of dollars.
The Americans take that task upon them and they can do it because
they have higher skill levels from the officers and they are trained
from the outset to do that. It is not a job where you need to carry a
gun. If you do need those investigators, you can recruit them from
provincial and municipal police forces by paying a higher packed
salary dollar because you're focused on a higher skill set. That would
definitely be a model to look at.
The Chair: I appreciate that.
Professor Tupman, I have about 30 seconds. Do you want to add
anything to what Mr. Kennedy said?
Prof. Bill Tupman: Germany, the Netherlands, the European
Police College, and the new British College of Policing all have new
models that are worth looking at.
The Chair: Thank you, I appreciate that very much.
We'll go to Mr. Brison, please.
Hon. Scott Brison: Mr. Leuprecht, you used the terms risk-based
modelling and evidence-based assessments as opposed to the nature
of risk based on perceptions. On March 15 it was reported that CSIS
internal data shows that extreme right-wing and white supremacist
threats are rated ahead of radical Islam threats within Canada. The
reason I point that out is that the perception might be quite different.
If we start with the wrong perception, we may compromise the entire
investigation.
I lived in New York when the Oklahoma City bombing occurred.
The first instinct of ABC and NBC at that time was to point to Islam
and not to ultimately Christian fundamentalist and white supremacist
Timothy McVeigh, as an example.
March 31, 2015
FINA-75
If the source of leads is banks, or in some cases the general public,
or financial institutions, what should we be doing to better inform
them as to the nature of real threats and to improve the quality of
input in terms of the nature of threats from those forces?
Dr. Christian Leuprecht: Inherently, this is a controversial
question because it hearkens at the ability to pull and to share data,
both within government and between government and the private
sector. I would suggest that better arms'-length work with...we have
some very talented academics, both in this country and internationally, and there are mechanisms.... We have some initial mechanisms
for instance with Simon Fraser University that has an agreement with
Treasury Board Secretariat and gets real-time data downloads from
PRIME and PROS RCMP data. That has been able to do some
significant work that has significantly affected policy and strategy.
I think we need to find more creative ways of being able to have
effective research, but we also need to be able to make sure that.... It
seems that the people who do analysis don't understand data and the
people who do data aren't allowed to do analysis. I think we have a
profound misunderstanding and a profound mistrust among many
agencies of data-driven work, in part because they don't understand
data. The one exception to that is CSE.
Hon. Scott Brison: Is it a question of more resources or of the
machinery of the organizations involved?
Perhaps Mr. Kennedy may have some input on this as well. Is it a
question of resources, or is it a question of how we're actually...?
Mr. Paul Kennedy: I think it is a complex structural problem.
One is one boss, one task as opposed to multiple tasks in the case of
the RCMP. It's clearly skill sets and recruitment for it.
My friend here referred to the CSE. They'd be a world rival
obviously in their ability to collect data and know what to do with it.
We have strengths, but they are dedicated. That's why they have that
expertise.
The RCMP is a multi-tasking organization and that's why I think
it's failed. It has people who are accountants and so on who can do
commercial crime, but then we say, “Yes, but we don't want you
doing that commercial crime over there; we want you doing
sophisticated crime here”. We don't have enough people; we don't
have enough skilled people, and we don't give them the ability to
focus on tasks that they have to do.
I don't think you'd ever find anything coming out of Canada that
would identify someone playing around with LIBOR in terms of the
rates and the trillions of dollars that are there. We don't look there. If
you don't look, you don't find. We need people with the right skill
sets, with a specific focus, dedicated, using other partnerships as
well, but looking for the kind of crime that we're not looking at now.
I had a presentation done in 2004, just to show you how dated it is
—10 years ago—with Americans and Canadians. We were looking
at identity theft and various frauds on the Internet. We were talking
in terms of tens of billions of dollars. That was then. Now God
knows what's going on in terms of that particular environment of
electronic frauds and thefts.
We're not looking at it and we don't have the skills to see it. If you
don't have the eyes to see it, you're never going to investigate it. We
have to sit back and say, what's out there? Intelligence tells us...we
17
read the intelligence reports, but no one ever actions it. Why tell me
about it if you're not doing anything about it? If it is there, let's
structure ourselves to go after it.
● (1030)
The Chair: We have time for another brief question.
Hon. Scott Brison: You mentioned somebody fiddling with
LIBOR and examples of other financial malfeasance. To what extent
is there an overlap with the kinds of governance and approaches to
terrorism financing that would also apply to other types of financial
malfeasance, including for instance, tax evasion and offshoring
money? Is there a significant overlap? Does that augment, perhaps,
the importance of placing resources and increasing resources?
Mr. Paul Kennedy: Clearly you have multiple options. When
they had the Colombians going strongly in terms of the cocaine
trade, they were obviously anxious to look for ways to move their
money out because they had warehouses filled with dollar-bill
equivalents rotting. They looked for new technology in terms of how
to transfer money.
Yes, if you get your money illicitly and haven't reported it for tax
purposes, if you're a Russian oligarch you're looking to get it out and
hide it in some way. If you're a drug cartel guy, you're doing it too, or
if you're a terrorist you're doing it.
As my colleagues pointed out, there is an overlap between
organized crime—drug trafficking or whatever you want—and
terrorism. They're the first ones to adopt new technology and to use
it to hide their funds for different purposes. So, yes, the lessons
learned in one are applicable to the other, because these are
techniques that people use.
The Chair: Thank you, Mr. Brison.
We'll go back to Mr. Saxton, please.
Mr. Andrew Saxton: I have a question for Professor Tupman.
Professor, you talked about the deep web. Can you explain what
the deep web is, and how does one access it?
Prof. Bill Tupman: It was set up apparently by U.S. naval
intelligence as a special experiment. It's been used to keep dissidents
in touch with each other in the west and allow them to invade the
controls put upon them by their government.
Like a lot of things, it originated as an intelligence tool and as a
piece of information interaction that benefited western desires to
change the world. It has slowly been abused.
If you want to access it, you have to get the software. The problem
is you can access the browser, but you don't know where any of the
sites are unless somebody actually tells you.
18
FINA-75
You need to be very, very careful going down there, because there
are an awful lot of pedophile sites. That's where they have
disappeared to.
I can send you the software, and I can send you various other
things, but I can't tell you where to go.
What I would recommend is to ask—
Mr. Andrew Saxton: That's fine. I think we're just interested in
the explanation.
Prof. Bill Tupman: Oh, okay. Was that a good enough
explanation?
Mr. Andrew Saxton: I think it was fine, thank you.
Prof. Bill Tupman: It's exactly the same; it's just very difficult to
access.
Mr. Andrew Saxton: Thank you very much.
My next question is for Mr. Kumar.
Can you explain the difference between dealing with ISIL and
dealing with al Qaeda? How has financing changed, and how does
dealing with these two groups differ?
Dr. Amit Kumar: Thank you, sir, for your question. It's an
excellent question. We keep on wrestling with this day in and day
out.
ISIS' origins are with al Qaeda in Iraq. ISIS is the new name of al
Qaeda in Iraq, as a matter of fact.
We've had problems dealing with al Qaeda financing. Obviously,
the U.S. and Canada and all the international partners have been
attacking al Qaeda central and trying to choke off its finances with a
good degree of success. But what that led to was the splintering of al
Qaeda, the rise of al Qaeda affiliates, cells, and smaller groups, and
so on which to a large extent were self-sustaining. We were just on
the verge of dealing with that problem, and then we had ISIS,
formerly called al Qaeda in Iraq, spring up.
What is happening within the financial and logistical relationships
among affiliates, thanks to technology in a great measure and to
YouTube and social media and so on, is that there has been an
increasing level of interaction between affiliates. Our measures of
targeted sanctions, while they may have been successful in some
measure against al Qaeda central, are difficult to apply against al
Qaeda affiliates and ISIS, which is an al Qaeda affiliate of sorts but
has relationships across the board with many affiliates.
That's why you see Boko Haram aligning with ISIS, and a
segment of the Tehreek-e-Taliban in Pakistan and Afghanistan
aligning with ISIS. ISIS is in a way the new al Qaeda, but in my
research and my sense of this terrorist organization, they are not too
different. It's just that, going with the times, ISIS has adopted, as one
of the witnesses said, a more outsourced financing paradigm.
One thing that I want to mention and bring to the committee's
attention is the shift, whether in FATF or at the national level, and
even within the UN, to risk-based application of anti-money
laundering and countering the financing of terrorism, and also the
stress on effectiveness.
March 31, 2015
I think Ms. Duhaime very rightly said that we lack convictions
and lack prosecutions. What has to happen really is.... The banks
need information from the government also. It can't be a one-way
track, whereby the financial sector has to give information to the
government.
As I mentioned, one of my recommendations is that, if there is a
two-way information flow, the banks are better informed to look for
what is suspicious and what is not. Going by the risk-based
modelling, banks know their vulnerabilities and the government
knows the threats, and risk is a function of vulnerabilities, threats,
and consequences. If the public and private sectors come together,
risks can be, I would say, compared with vulnerabilities. We can
have a risk mapping, a vulnerability mapping, and a threat mapping.
That way a risk-based, more informed, and more focused effort
could ensue.
Thank you.
● (1035)
Mr. Andrew Saxton: Thank you very much.
The Chair: Thank you, Mr. Saxton.
[Translation]
Mr. Dionne Labelle, go ahead.
Mr. Pierre Dionne Labelle: Thank you, Mr. Chair.
Several layers of crime are involved. We have organized crime,
tax evasion and, now, we are dealing with another layer—terrorist
financing.
I noted a few of your recommendations, which are very relevant.
For instance, you recommended creating a review committee for
FINTRAC and a centre of excellence for anything that has to do with
technology and money transfers on technological platforms, such as
analytical grids and so on.
I think the boldest suggestion came from Mr. Kennedy, who
proposed a complete overhaul of Canadian police services. Is that
pretty much what you are asking us to do?
[English]
Mr. Paul Kennedy: Yes, definitely. There is a famous expression,
I think by Will Rogers, which says that you might be on the right
track, but if you don't start moving, you're going to get run over.
What we had was a model from the 1950s with the RCMP out
west. The western provinces at that time, as they were lightly
populated, were not necessarily prosperous. Ontario and certainly
Quebec have their own policing. You have to ask yourself, why, in a
prosperous province such as British Columbia, do we still have
7,000 RCMP officers out there doing this kind of work? Some of the
unfortunate problems the RCMP has had are due to the poor
financing that is there.
March 31, 2015
FINA-75
As chairman of the commission dealing with public complaints
against the RCMP, I dealt with a shooting case that resulted in a
fatality. Mr. Cullen, I am sure you are very familiar with the Ian Bush
case. When the officer went into his station, there was no one there at
that time, not a soul. The officer had somebody he had arrested, and
he was talking to him. To record what happened, he had to take, at
the time, a video cassette recorder, put it in, and activate it, which
hadn't been done. It only looked one way.
In another model, in Burnaby, B.C., when you walk into that
station, there are motion detector cameras, CCTV, that record
everything that transpires. There is a shooting and a lengthy inquiry
as to what happened. Why? Because not only are they frequently
undermanned there, but they are underfinanced and don't have the
latest technology. You'll probably see other comments in terms of
shootings that occur where they do not have the proper equipment.
19
What are the impact metrics? What impact have the 1373
measures and the 1267 measures had on stemming or controlling
terrorist financing? That's one.
The other is in terms of asking the 1267 monitoring team, the al
Qaeda-Taliban monitoring team, as well as the counterterrorism
executive directorate, for information on the effectiveness of
implementation. Effectiveness of implementation and impact are
very important. With all these tax dollars spent, the people, as well as
the government and the people's representatives, deserve answers to
that.
Those are two committees, and two questions to ask of each
committee.
Thank you.
[Translation]
The RCMP's reputation is attacked in many areas. The resources
are being rededicated to visible crime, which is crime on the street
that people are concerned about. The officer you hire and train to do
that is not an officer you can use for the sophisticated crime that I am
talking about.
The Chair: Thank you, Mr. Dionne Labelle.
[English]
Unfortunately, we are bumping up against time here.
If you can have municipal policing in Edmonton, Calgary, and
these places, why is the RCMP in some of these areas? Get them out
of there. Don't distract them. Let's have a national police force that
deals with complex crime that can't be addressed. It can be done. It
has been done. We should be doing more of it. We have to save the
RCMP from itself, because it is wedded to this model that, I think, is
killing it.
Ms. Duhaime, I want to follow up with you on your comments on
sanctions law as the third pillar that is not operating well.
● (1040)
The sanctions regime in Canada is its own separate animal, but it's
still what we include in our analysis of financial crime with the
banks, screened for when they are looking at transactions. Because
it's its own separate little animal, for lack of a better word, it isn't
heavily scrutinized in terms of compliance with the enforcement
agencies and there aren't a lot of prosecutions.
[Translation]
Mr. Pierre Dionne Labelle: Thank you, Mr. Kennedy.
I would like to wrap up by asking a question about the United
Nations.
Mr. Kumar, you question the effectiveness of the UN action in
terms of combatting terrorist financing. What kind of a role do you
recommend Canada play within the UN to make its counterterrorism efforts more effective? Does Canada have a clear role to
play in that area? Is there somewhere we should be focusing our
energy such as a specific committee or framework?
[English]
Dr. Amit Kumar: Thank you so much, sir, for the question. It's a
great question.
I would advocate essentially two committees to look at. One is the
1267 al Qaeda committee and its related Taliban committee, which is
the 1988 committee, and the other is the counterterrorism executive
directorate, which is the 1373 directorate.
Canada, by virtue of the funds and expertise that it has lent to the
UN counterterrorism efforts over many years, and its active support
for that, has to be asking the questions. The people of Canada and
the people's representatives really deserve answers, and the
Government of Canada does, too, from the UN in terms of two
metrics.
We don't have a lot of time. Can you briefly expand on your
criticism there and what should be done? If you want to follow up in
writing to me, you can certainly do that as well.
Ms. Christine Duhaime: I'd be happy to follow up.
Fortunately though, our sanctions laws are a really effective tool
and they too have a listed entity type of regime like we do for
terrorist organizations. If we were to actually implement that a bit
more effectively, we would see a decrease in terrorist financing and
money laundering, quite frankly.
● (1045)
The Chair: I appreciate that. If there is anything further you want
to add to that, I would be pleased to receive that and distribute it to
all the members. That goes to all of our witnesses. If there's anything
further, and a number of you mentioned reports, please do submit
them to the clerk, and we will ensure that all members do receive
copies.
I want to thank you so much for this very interesting session. To
the witnesses here in Ottawa, thank you, and to those in the U.S. and
the U.K., thank you so much for joining us by video conference.
Colleagues, very briefly, you have a motion in front of you. I'm
sorry, I should have given you more notice. We don't have to deal
with it today unless it's okay with everybody, but I'm happy to deal
with it after the break if members would rather deal with it after the
break.
20
FINA-75
Mr. Saxton.
Mr. Andrew Saxton: I think the most important thing is that the
people who actually gave those statements are okay with it.
The Chair: Absolutely, they are okay with it, yes.
Mr. Nathan Cullen: That was my question as well and if they are,
then I think the committee should be fine with this for our report.
The Chair: All in favour of this motion?
(Motion agreed to)
The Chair: The meeting is adjourned.
March 31, 2015
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