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Publications - October 25, 2001




[Recorded by Electronic Apparatus]

Thursday, October 25, 2001

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The Chair (Mr. Andy Scott (Fredericton, Lib.)): I'd like to call to order the 35th meeting of the Standing Committee on Justice and Human Rights.

Today we'll be considering Bill C-36, An Act to amend the Criminal Code, the Official Secrets Act, the Canada Evidence Act, the Proceeds of Crime (Money Laundering) Act and other Acts, and to enact measures respecting the registration of charities, in order to combat terrorism.

This morning we are very pleased to have appearing before us Jim Peterson, the Secretary of State. Mr. Peterson, I would invite you to introduce your very competent supporting cast.

Hon. Jim Peterson (Secretary of State (International Financial Institutions)): Thank you very much, Mr. Chairman. I can say that it's a delight to be with you. It's the first time I've ever had the privilege of appearing before the justice committee on a very important bill.

At the table with me is Superintendent Dave Beer from the RCMP. From the Department of Finance I have Horst Intscher, the head of FINTRAC; Yvon Roy, ADM and counsel; Charles Seeto; and Richard Lalonde. We also have a host of other experts, including tax expert Brian Ernewein. We have OSFI representatives here. All of these people are here to answer your difficult questions. I'll take the easy ones.

The Chair: Although you may never have been here before, we've seen Monsieur Roy.

Mr. Jim Peterson: Mr. Chair, I could make some opening remarks if you wish, or, if it's the pleasure of this committee, we could go directly to questions.

The Chair: No, it is expected that you would wish to make some opening remarks, and you're invited to do so.


M. Jim Peterson: Thank you dear colleagues. I appreciate the opportunity to appear before your committee today to discuss those aspects of Bill C-36, the Anti-terrorism Act, which deal with terrorist financing.

I will focus on how the Bill expands the scope of the Proceeds of Crime (Money Laundering) Act (PCMLA) and the mandate of the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). I will comment on new measures that affect charities and will mention our international efforts.


At the outset, let me assure honourable members that the government is committed to depriving terrorists of the ability to finance their activities. We believe that cutting off their funding is a key step in reining in the capacity of terrorists to function. Achieving this objective, however, will not be easy. It requires both strong domestic measures and a unified international effort.

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As you know, the government has been working with its international partners to develop a coordinated global response to dealing with terrorist funding. Canada and its G-7 partners have moved quickly to develop and implement action plans to combat the financing of terrorism, doing so by blocking the assets of terrorists and their associates.

We're also an active member of the Financial Action Task Force on Money Laundering. We support the organization's efforts to develop and implement international standards to prevent the use of the global financial system for terrorist financing. The Honourable Paul Martin, chair of the G-20 group of finance ministers and central bank governors, has begun the task of broadening the base of support for effective and coordinated international action through that group.

Our goal is that all jurisdictions will join with us in adopting strong domestic regimes against terrorist financing and will cooperate with us internationally to track down and deny a safe haven anywhere for terrorist funds.


Canada's participation in international efforts has already translated into domestic action, primarily through the implementation of United Nations Security Council Resolutions.

Regulations in force since February 2001 freeze property owned or controlled by the Taliban, and Osama ben Laden or his associates.

New regulations, in force since October 2nd, go further by giving the government the authority to freeze assets of other terrorists and terrorist organizations that are listed either by the U.N. or by the Governor in Council.

The government listed individual terrorists and terrorist organizations under these regulations on October 2nd, and added to that list on October 12th. These new regulations have allowed the government to work closely with the international community to ensure that any terrorist assets are subject to sanctions.


The federal regulator, OSFI, has on several occasions since September 11 reminded financial institutions of their obligations under these regulations and urged them to cooperate fully with law enforcement in their investigation. OSFI has also used its website to provide financial institutions with the most up-to-date information about listed terrorists.

The new regulations require financial institutions to report monthly to their regulator on whether or not they have terrorist assets in their possession and, if so, to aggregate the information about those assets. The Minister of Finance has committed to making regular reports on the terrorist assets that are identified by our financial institutions.

These regulations were an important step in our efforts to thwart the financing of terrorist activities through our Canadian FIs. They establish key terrorist financing countermeasures and provide a bridge to the anti-terrorism plan that will be accomplished, we believe, through the passage of the bill before you.


Among other things, THIS Bill introduces changes to the Criminal Code that put into law various measures set out in the United Nations Regulations of October 2nd. Most importantly, the changes make it a criminal offence to finance terrorist activities.

In addition to criminalizing terrorist financing, it is important that effective means be found to deter and detect these illicit activities.

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To this end, changes to the Criminal Code require all persons to report to the RCMP and CSIS if they have property in their possession or control that they know belongs to a listed terrorist.

In addition, the Criminal Code amendments include monthly reporting requirements for financial institutions modeled on those established in the U.N. Regulations of October 2nd.


This bill also strengthens Canada's existing anti-money laundering regime both to guard against abuse of the financial system by terrorist groups and to provide law enforcement and intelligence authorities with information about terrorist financing activities. Under the current Proceeds of Crime (Money Laundering) Act, financial intermediaries must meet consumer identification and record-keeping standards and report transactions related to the identification of money laundering.

At present FINTRAC is mandated to receive and analyze reports that may be relevant to money laundering activity and to disclose key information to law enforcement authorities. The scope of FINTRAC and this bill are both expanded to encompass terrorist financing.

Let me provide a brief overview of the key measures.


FINTRAC's role will now extend beyond money laundering to include terrorist financing.

Financial intermediaries will have to report to FINTRAC any financial transactions they suspect are related to terrorist financing offences. They will also be required to report if they are in possession of terrorist assets or have knowledge about a transaction, or proposed transaction, involving such assets.

At the same time, FINTRAC will be responsible for disclosing identifying information to law enforcement agencies if the Centre suspects the information is relevant to the investigation of terrorist financing activities.


As well FINTRAC must report to CSIS if this information is relevant to threats to the security of Canada.

To further combat terrorist financing, FINTRAC will be allowed to share key identifying information with its international counterparts. However, new safeguards will be built into the law to ensure that the information is treated confidentially and also to limit disclosure of this information by foreign law enforcement agencies.

I would also like to assure members that the PCMLA was designed in a way that respects the privacy of individuals by ensuring that reported information is treated with the utmost care. The fundamental safeguards that were written into the law with regard to money laundering are also maintained with regard to terrorist financing. For example, the operation of FINTRAC remains at arm's length from law enforcement and is subject to the Privacy Act.

The final issue I want to mention concerns the registration and tax treatment of charities. Your bill includes income tax provisions that prevent terrorists from exploiting the tax privileges associated with charities. The bill enacts the new Charities Registration (Security Information) Act and amends the Income Tax Act to prevent organizations that support terrorist activities from enjoying the tax privileges granted to registered charities.

The Solicitor General and the Minister of National Revenue will now be empowered to issue a certificate denying charitable status to an organization. The Federal Court will be mandated to review that certificate to ensure that it is reasonable.

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Beyond the measures in the charities legislation to deny tax privileges, other elements of Bill C-36 relating to the criminalization of terrorist financing would support additional steps by the government. If an organization willfully provides financing for terrorist activity, then there would be grounds for proceeding with criminal sanctions and the forfeiture of assets

These new measures will protect the integrity of the registration system for charities under the Income Tax Act, and maintain the confidence of Canadian taxpayers that the benefits of charitable status are available only to organizations that operate exclusively for charitable purposes.


Terrorism, honourable colleagues, must and will be fought on many fronts. Canada will continue to work with its international partners in the G-7, the G-20, and the Financial Action Task Force on Money Laundering to develop and promote global standards to fight terrorist financing. Canada will see that tough laws are put in place, see that they are enforced, and see that there is a seamless web of international cooperation to deny funding to terrorists.

I mentioned earlier that strong domestic measures are needed if we are to deprive terrorists of funding and fulfill our international responsibilities. With the key elements of Canada's new money laundering regime already in place, the measures in Bill C-36 will help us achieve this objective by further strengthening and expanding the new regime. The amendments to the PCMLA in this bill will assist law enforcement agencies and CSIS by providing them with additional information to detect, investigate, and prosecute terrorist activities and to deprive them of their finances.

I thank you.

The Chair: Thank you very much, Mr. Peterson.

Now we'll turn to Mr. Toews for seven minutes.

Mr. Vic Toews (Provencher, Canadian Alliance): Thank you, Mr. Chair.

I want to commend the government for finally moving ahead on this file. Prior to September 11, it was clear that the federal government simply didn't have any interest in complying with international UN conventions. I refer not only to the suppression of terrorist bombing but to the suppression of terrorist financing, where Canada was not complying with its UN obligations. That, frankly, was a disgrace, and I'm very pleased that the government is moving ahead in this direction. We all know that money is the lifeblood of terrorist organizations, much as it is for organized crime. Unless we make concerted efforts to stop the flow of money, we will not stop the flow of arms, nor will we stop other terrorist activities throughout the world.

Now, I listened with interest to your comments. I appreciate the briefing and your appearance here. It's clear now that FINTRAC has additional responsibilities, and I'm concerned about the financial institutions that are providing the information to FINTRAC in terms of tracking the relevant information. Are our resources, that is, the federal government resources furnished, sufficient to expeditiously analyze the information our financial institutions are providing us? Clearly, with the added responsibilities, there's going to be more information. What we don't want to see is the business of our country, particularly that of the financial institutions, bogged down because of too much paperwork. I think we have a concomitant obligation to provide appropriate resources and personnel for our agency. Has the administration by the federal government of this program received additional resources, Mr. Peterson?

Mr. Jim Peterson: Thank you very much, Mr. Toews.

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It's a very important point, and the answer is, in short, yes. Let me just say that, yes, Bill C-36 does expand our capacity to freeze and also to seize the funds of terrorists. Prior to it, we did have in place regulations here in Canada that allowed us to freeze assets of the Taliban and assets of those associated with bin Laden. Even before this bill was in place, we were able, again by regulation, to pass another one that allowed us to expand the web beyond the Taliban and bin Laden to other terrorist assets—

Mr. Vic Toews: Thank you, Mr. Peterson.

I appreciate the fact that you're moving ahead on that, and certainly Bill C-36 is very important. What I want to know, if I could get an undertaking from you, is specifically the needed increase in resources and personnel. If you can't provide me with that today, at least undertake to provide it. That's all I require, for you to produce that in a timely fashion.

Mr. Jim Peterson: I will ask Mr. Horst Intscher, the head of FINTRAC, to outline what he's done in terms of expanding his personnel.

Mr. Horst Intscher (Director, Financial Transactions and Reports Analysis Centre of Canada, Department of Finance): Thank you, Mr. Chair.

We have begun work on creating the capacity to undertake this additional work by identifying the resources we would require. This is in terms of both analytic capacity and of information technology resources and infrastructure for the protection of the sensitive information that would be flowing to us. I understand that we expect we will require some additional resources, and I'm fairly confident that we will be able to obtain those resources through the Treasury Board.

Mr. Vic Toews: If you could then undertake to provide this committee with that information, I would certainly appreciate it.

Also, is there a liaison that goes on with the bank in determining exactly how much additional resources in terms of personnel or otherwise we require? We don't want the government going off in some direction without proper input from the financial institutions.

Mr. Jim Peterson: I think you have raised a very important point—and I'm glad you have—about the obligation imposed on our financial institutions to increase their surveillance and their reporting. Yes, the onus on our private sector institutions has increased considerably because of this. I also want to say to you that I am very proud of and grateful for the way they have responded, particularly the speed. It's not an easy task for them. I expect that in the future it'll be made slightly easier because of new computer technologies, the new IT they will bring in. We will certainly be coordinating matters with them on this front. You're quite right, there is an added onus there, and certainly an added onus on government.

Let me assure you, Mr. Toews, and the other honourable members that we will make these resources available to FINTRAC.

Mr. Vic Toews: Thank you.

The Chair: Thank you very much.

Monsieur Bellehumeur, you have seven minutes.


Mr. Michel Bellehumeur (Berthier—Montcalm, BQ): Thank you very much.

Mr. Peterson, the Bloc Québécois has been concerned about the whole issue of money laundering for a long time. I remember asking the government about it in 1994. They were the first questions I asked during my first term and I remember very well that in 1994 the government's answer was that there were no money laundering problems.

I also remember having talked about international agreements. I was told there were no problems and that everything was fine in Canada. Today, you are singing a different tune; I'm very happy to hear you do it.

But even though we have whatever law we want, we need the political will to enforce it and the financial resources to apply it correctly.

Speaking of political will, before even looking at Bill C-36, we know very well that since the 11th of September many countries have frozen assets. Many countries have followed some money movements step by step.

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We also know that in Canada during the last two years more than $100 billion, it seems, have left the country for certain tax havens recognized by the OECD and the Canadian government. You know all that.

We also know that it seems that Canada has now frozen about $125,000 that was being used by terrorists or terrorist groups. Before even looking at Bill C-36, I want to know the extent of the political will within the government to act in the case of money laundering. Have you done some audits to see if the hundreds of billions of dollars that have left Canada towards tax havens are going to terrorist groups?

M. Jim Peterson: Mr. Bellehumeur, you have had a number of good initiatives in this area over the last few years. We have accepted some of your suggestions, including the one on the $1,000 bank note, which was canceled. It was a good idea, we thank you for it, and we have accepted it.

The issue of money laundering and tax havens is a difficult one. We cannot solve it alone. To do so, we need the cooperation of other countries all over the world. That is why we are now working with the international community at this tie, including G-7. Certain discussions have already started with the Finance ministers of G-7. We have also, through Mr. Martin, used our relationships within G-20 to promote the adoption of standards by each of these countries and the creation of international cooperative links.

It should also be noted that we are in a good position with other countries, for example in the Carribean because we represent...

[Editor's note: Inaudible]

...the International Monetary Fund and the World Bank. We have worked with them already to establish information exchange systems and to fight money laundering. But it will need more work.

We will continue. We have already supplied technical assistance to Carribean countries to help them improve their systems. Our objective is that after cooperating with all the other countries in the world there will be no more tax havens that terrorists could benefit from.

Mr. Michel Bellehumeur: Mr. Peterson, thank you for your answer but we see that at this time, when Bill C-36 has not yet been adopted, billions of dollars are leaving the country and we seem to have no control over this. It is true that it is a complex issue. However, if we really want to fight terrorism, we have to invest a lot because money is the fuel of war for them also. At this time, Canada has not invested enough in this area.

Bill C-36 is before us. My question is as follows: how will Bill C-36, and especially its clauses on money laundering, and the implementation of international agreements, guarantee us as parliamentarians, Canadians and Quebeckers that you will be able to trace the money that will leave Canada for those tax havens and that you will be able to ensure that this money will not be used by terrorist groups? That was my first question.

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Here is my second question. To work effectively, you need technology, experts, training and people to work on the issue. I imagine that if the government is serious and has the political will to act on this, it has already foreseen how much money it will need to fight effectively against crime, money laundering and terrorist groups.

Currently, we are in limbo. In virtually all departments, we don't know how much it will cost. You, who are used to working with numbers in the Department of Finance, do you have, within your department, evaluated the price of an effective fight, and especially the implementation of Bill C-36?

M. Jim Peterson: Thank you. We have not yet announced the exact costs but we will do so shortly. If in the beginning we do not allocate enough resources to fight terrorist financing, we will make adjustments. We will increase these resources and take your committee's suggestions into account if you have any ideas to improve our work in fighting terrorism.


The Chair: Mr. Blaikie.


Mr. Michel Bellehumeur: But I don't have any guarantee.


The Chair: You only get your seven minutes. You don't get Bill's.


M. Jim Peterson: There are never any guarantees, but we will do everything possible and I know you will help us.


The Chair: Mr. Blaikie, you have seven minutes.

Mr. Bill Blaikie (Winnipeg—Transcona, NDP): Thank you, Mr. Chairman.

I don't have so much a question as a comment. There seems to be an interesting theme developing here with respect to Bill C-36, and that is the need for international or transnational uniformity when it comes to dealing with unethical behaviour. We don't want to create havens for various kinds of activity, in this case terrorist activity, through a lack of uniformity.

We heard the argument yesterday that when certain laws were toughened up in the United States, terrorists moved to Canada in order to use Canada as a base for their activity. At least, that was the claim of one of the witnesses yesterday. We have heard that argument today, that it's very important to have the same or relatively the same laws in all jurisdictions so that unethical behaviour cannot move itself around, so to speak, looking for the most favourable circumstances.

I agree, Mr. Chairman, but to take another example, some argue that there needs to be some kind of uniformity with respect to poor labour standards around the world and that this needs to be enforced so that unethical business activity can't go around the world looking for the most favourable circumstances. Now, I find it passing strange, Mr. Chairman, that when this argument is made with respect to labour standards, it is regarded as a heinous notion, unrealistic—I could name a host of adjectives that have been used over the years to describe calls that have been made by the NDP and others for this kind of international uniformity when it comes to restricting unethical activity.

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I hope this might be a conceptual breakthrough. I will certainly try to ensure that it is, Mr. Chairman. If we can act internationally to constrain unethical behaviour, in this case the unethical behaviour we call terrorist activity, then surely we don't want to have havens for other kinds of unethical activity, whether it be the exploitation of working people through lack of labour standards or whether it be the exploitation of the public purse through tax havens.

It's not just havens for terrorists' money we might want to address. Perhaps we should be looking at some kind of international harmonization or international regimes so that corporate interests can't shelter their money from legitimate tax imposition, period. It doesn't have to relate to terrorist activity. I just make this point, Mr. Chairman, because I find it odd to sit and listen to all these arguments that I agree with but that fall on deaf ears when I make them myself in respect of other issues.

I have one question related to your submission, Mr. Minister, and that has to do with... You talk about banks or financial institutions having to report with respect to terrorist assets they may have. Now, I'm presuming these are already frozen assets. If they aren't, they should be, and if they are frozen, how can people add to them if they're frozen?

Mr. Jim Peterson: You're quite right. Any funds of listed terrorists that have been identified are in fact frozen and cannot be touched by the owner of that account or the institution itself.

Mr. Bill Blaikie: What would they be reporting?

Mr. Jim Peterson: They would be reporting on where they've found accounts and assets, which would in effect be frozen under the regulations now in place. Bill C-36 will give us additional rights with respect to those assets and funds, such as the ability to seize them.

You make a very interesting point on the harmonization of standards, not just those for money laundering and terrorist funding. One of the quintessential problems that has always plagued us as Canadians is the overlap, the duplication, and the contradiction of laws we have among provinces and between the federal government and the provinces.

We know that interprovincial barriers to trade in goods and services cost us an enormous amount, anywhere from $4 billion to $7 billion a year in lost growth, so I take your point about the need for good laws and perhaps for fewer laws in many cases.

The Chair: Mr. Blaikie.

Mr. Bill Blaikie: I'm not sure the minister did take my point; in fact, I'm not sure he got my point at all. Nice try. That was a nice little diversion into federal-provincial stuff, but I was talking about the international situation, core labour standards, and the WTO. Then the minister wants to rap on about interprovincial trade and the need for...sorry, but that's not what I was talking about.

Mr. Jim Peterson: You also mentioned the taxation of funds that are outside a country's border or jurisdiction. We have worked very closely with the international community to develop common laws with respect to that, and we have done so by following the OECD model draft convention for the prevention of international double taxation and tax escape or avoidance. This has been a good model to work from. It is in place with many different jurisdictions. There will have to be a lot more work done with the so-called tax haven countries, which have traditionally been involved in a lot of offshore banking, to make sure they're not laundering money—

Mr. Bill Blaikie: And ship flagging.

Mr. Jim Peterson: —and're missing my point, Mr. Blaikie. I was talking about international tax avoidance.

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The Chair: Thank you very much, Mr. Blaikie and Mr. Peterson.

Mr. MacKay.

Mr. Peter MacKay (Pictou—Antigonish—Guysborough, PC/DR): There's a real breakdown in communications on the entire spectrum here.

Speaking of information sharing, I'm interested, Minister, if you could give us perhaps some concrete examples of what it means, in the grand scheme of things, to ensure the seamless web of international cooperation. That's very powerful language, but I'm interested to know what pragmatic, concrete steps are in place to ensure that the information sharing is taking place not only between ourselves and our G-7, G-20 allies, but also within departments here in Canada. It's a question that's been asked of every minister who's appeared before us. How is the Solicitor General of Canada, CSIS, and the RCMP working closer, as a result of this legislation, to ensure that information is passed on?

Further to that, I would like to know, in, again, a very practical way, if you foresee difficulties in proving this element of terrorist fundraising as part of the criteria that the crown will bear the burden of proving. Is this ideological, religious, or political purpose behind the fundraising activity? I believe this is going to be a very difficult and tough threshold to meet in many instances. I wonder how the Department of Finance has contemplated, in real terms, how you prove this element, this purpose, this mens rea behind the actual fundraising activity.

Mr. Jim Peterson: With your permission, Mr. MacKay, I would like to have Yvan Roy answer the question about the religious belief, and then call on Inspector Beer to talk to you about the efforts at international cooperation.


Mr. Peter MacKay: There is no problem. Mr. Roy, you can answer in French.

Mr. Yvan Roy (Assistant Deputy Minister and Counsel to the Department of Finance): With pleasure.

The clauses in this Bill that are related to terrorist financing are of a criminal nature. You have worked in this area since you are a former solicitor. You know that the standards are high in such circumstances and that the proof must be beyond a reasonable doubt.

As for any infraction that requires a specific intent or motivation, the motivation and the specific intent will be deduced from the proof offered. In such circumstances, the proof will most often be of a circumstantial nature. It is possible that in such cases we may have direct proof, because, as you know, such infractions may be subject to electronic surveillance. You also know that we often learn a lot about people's intentions in this area.

The Bill tries to provide the state with all the tools available in this regard, but at the same time it must balance the various interests. I have read the transcripts of the Minister of Justice before this committee and of the public servants that have appeared before you and I know that the government does not intend to attack groups that have nothing to do with terrorism. That is why you have a definition of "terrorist activity" that is in some way limited and requires a high level of proof. It is the government's wish, and it believes that it would be possible to find sufficient proof to make the appropriate deductions or, through surveillance or informers, determine the reasons for which this money is collected.

We are therefore talking about a balance of interests, of not attacking the wrong groups and of having a high standard while having the means to take the appropriate legal action.

The minister of Finance obviously has a secondary interest in this matter since the application of criminal law does not come under that department's jurisdiction, but it does have an interest as it wants those clauses to work. We believe that it will be possible to see that the right people are brought before the courts in due course, as you say in English.

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Mr. Peter MacKay: I have a question about proposed section 83.02, specifically under the heading of “Financing of Terrorism”. It talks about:

    directly or indirectly, wilfully and without lawful justification or excuse,

It's absent the word “knowingly”. It says “wilfully”. Certainly banks in particular and other financial institutions could willingly be in possession of funds that came from a nefarious group.

I'm wondering if the addition of “knowingly” is something your department has contemplated here. I can foresee instances where money could be held, assets could be held, wilfully, and yet the excuse of might add clarity to that proposed section.

Mr. Yvan Roy: Mr. MacKay, if an institution, a bank, actually anyone in this country, is knowingly in possession or control of assets related in some fashion to terrorist activities, they are under obligation, by law, to freeze those assets, that is, to refuse to deal in any way, shape, or form with those assets. I would refer you back to proposed section 83.03 to that effect.

Those who knowingly continue to deal with those assets are guilty of an offence that is itself very significant in that it is punishable on summary conviction with respect to an institution by a fine of $100,000. If the state were to prosecute that case by indictment, the fine is open-ended. There is no limit that can be imposed. So the sense is that those who are dealing with money that they know is owned or controlled by terrorists are very well captured by that provision. When you're talking about the financing, which is now doing wilfully what you should not be doing, that is, giving money to these people for that purpose, this is a different offence.

The landscape is well-covered with those two provisions, with all due respect.

Mr. Peter MacKay: What's the length of time you can freeze and hold these? I haven't found any provisions that refer directly to where those assets would go upon seizure. Is there any provision that would funnel those assets to law enforcement, for example?

Mr. Yvan Roy: Here is how the scheme is supposed to be working. You have the provision in here that says you freeze those assets, that is, you are not moving them. You have to sit on them, basically. You cannot deal with the property in any way, shape, or form. There is then an obligation in law to advise the RCMP and CSIS—the law says forthwith, immediately—about what it is you have done. These people are then tasked under the law to conduct an investigation. Once you are advised of something like this you conduct an investigation and they will then be, in due course, in a position to seize, refrain, and eventually forfeit that property.

If at the end of the day the investigation shows that actually we have been wrong, it should be the duty of the institutions—and I know they will do it—to basically stop the freezing that has taken place. The investigation having been conducted, they will be then in the position to say, we do not have suspicions any more about that property and therefore we will, from now on, continue to deal with that property.

To answer your question directly, there is not a limit on how long that property will be frozen, because of the nature of what it is we're talking about, which is an investigation. The process is you freeze, you investigate, you seize, refrain, and confiscate.

The Chair: Thank you very much, Mr. Roy.

John McKay.

Mr. John McKay (Scarborough East, Lib.): The thesis of your presentation, Minister, is that you are standardizing reporting requirements around the world.

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Last night on CBC Carol Off did a piece on Saudi banks. To telescope the presentation, it is essentially that the Saudi banks are highly cooperative in covering for Mr. bin Laden and his colleagues. There's reasonable likelihood that most of the money that finances these operations is in Saudi Arabia.

I'm not putting that forward as evidence; I'm putting that forward as a media statement.

Not to put too fine a point on it, my recollection of moneys collected so far, essentially, is that it's chump change. So the real question is what the reach of this bill is.

I see in proposed section 83.11 that there is a requirement that authorizes foreign banks within the meaning of section 2 to report their activities.

This is my first question. If there is a Saudi bank that is listed or operating in Canada or in any of our other allies' jurisdictions, and presumably our legislation is harmonized with those other jurisdictions, are those Saudi banks, either through this proposed section or parallel sections in other legislation, required to report as would Canadian banks? I'm using Saudi Arabia as an example. Similarly, if a Canadian bank is operating in Saudi Arabia, is there a reporting requirement that would obligate our bank to report back?

Secondly, what happens when you get it wrong? Inevitably, the crown will seize and freeze assets, which it shouldn't have done. I'm interested in knowing what will be the extent of claims for a crown immunity. What will be the access to recourse for those citizens who are aggrieved by wrongful seizures and freezings? Will there be an exposure on the part of the crown to damages?

Mr. Jim Peterson: Foreign banks operating in Canada will be subject to the disclosure provisions. Canadian banks operating abroad, through a branch in that foreign jurisdiction, will be subject to the disclosure provisions. Canadian banks operating abroad through a foreign subsidiary will not be.

On the issue of crown immunity and wrongful seizure and damages, I turn again to an expert.

Mr. Yvan Roy: Thank you, Mr. Minister.

The government has taken and will continue to take great care in making determinations on who is going to be subjected to some of these provisions. There are a number of ways where the government is going to be involved; the listing of people is certainly one of them. Another one is how these different provisions will continue to apply.

Basically, the regime you have with respect to money laundering found in the Criminal Code finds application here, and that is, if the government is going to be making some mistakes, the same regime that applies now will continue to apply in the future. Therefore, in cases where the government, for instance, has been negligent, there is a way of getting relief before the courts. The courts will always be there to stop this from happening and to obtain the appropriate damages in appropriate circumstances.

The law, as it existed before, continues to apply here, and there is no special immunity that the government will try to seek in cases involving this. This is not the goal of this new legislation. And we continue to be governed by the same laws with respect to negligence and other things of that nature.

Mr. Jim Peterson: Very simply, if you feel you're wrongly listed, you can apply to the Solicitor General, and if that doesn't work, you can apply to the court. Also, the Solicitor General is required to review the list of listed persons every two years.

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But do you know what, Mr. McKay? There are going to be mistakes. The difficulty when there may be so many people having the same name or just a slightly different name, and things like that... It is not possible to run this system without making mistakes.

Mr. John McKay: Going back to a Canadian bank operating in a jurisdiction where we think there are terrorist assets, and in the course of normal business a transaction occurs that the Canadian subsidiary reports, what will be the follow-up on that?

Mr. Jim Peterson: If it is a foreign branch of a Canadian bank, those assets would be reported to FINTRAC; they would be reported to OSFI. Then, if the appropriate standards were met at FINTRAC, they would be reported to the RCMP and/or CSIS, if there was a threat to the security of Canada.

I'd like to call on Inspector Dave Beer to talk more about it.

Superintendent Dave Beer (Proceeds of Crime Branch, Royal Canadian Mounted Police): Thank you, Mr. Chair.

I think it's important to understand that the essence of the terrorist funding portion of this legislation is essentially to add the act of fundraising and providing funds for terrorist activity into the existing Proceeds of Crime (Money Laundering) Act.

From that perspective, and from an investigative perspective, which I think is the essence of your question, what agencies like FINTRAC and the investigative agencies are being asked to do is to recognize proceeds for crime, utilizing the legislative and investigative tools and investigative branches that were created for proceeds for crime. It's actually simply a reversal of the process.

In your particular example, where a suspicious transaction or a transaction attributed to a listed person would be reported through FINTRAC, FINTRAC would make a determination of the nature of the activity, whether or not it was suspicious, and if so, according to the Proceeds of Crime (Money Laundering) Act, for which amendments are being considered here, it would be reported to the appropriate police agency and would be investigated accordingly.

The Chair: We'll now go to Mr. Cadman.

Mr. Chuck Cadman (Surrey North, Canadian Alliance): Thank you, Mr. Chair.

To follow up on a question that I believe my colleague Mr. Peter MacKay brought up, regarding the final destination of any asset seized or forfeited, will it be returned to law enforcement? Out of the proceeds, are there going to be moneys available to law enforcement to continue the fight, and more importantly, is there any indication or any provision in this bill for restitution to victims?

I cite the Air India bombing, where we had 329 victims. I have a large Indo-Canadian community in my constituency, and many Canadian families were impacted by that. I'm sure they'd be very interested in your answer.

Are some of the proceeds and the forfeitures from terrorist funding going to be directed back towards the victims?

Mr. Yvan Roy: The legislation, as crafted, is simply an add-on to what is already in place. What I mean by that, with respect to the two areas you're referring to particularly, is the fact that the money or the assets, once they have been forfeited, are not forfeited to anyone in particular. It is the crown, whether the provincial crown in cases that will be handled by provincial attorneys general or the crown in right of Canada in cases involving the Attorney General of Canada, that will be the beneficiary of the money or the assets that have been forfeited. In other words, that goes into the federal treasury.

A voice: The general revenue.

Mr. Yvan Roy: Yes.

Regarding victims, the provisions that exist in the code—you are very familiar with them—continue to apply with respect to those offences, because these are offences that are found in the Criminal Code. So if there is to be restitution or compensation that fits within the parameters of what is already in the code, that will apply to them too. But there is nothing special, specific to the situation that is created in this legislation.

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Mr. Chuck Cadman: Thank you.

The Chair: Mr. Paradis.


Mr. Denis Paradis (Brome—Missisquoi, Lib.): Thank you very much for you presentation, Minister.

The comments that spring to mind are related to... Minister, you mentioned in your presentation that the amendments to the Criminal Code will make it necessary for financial institutions to present monthly reports. But when we think of financial institutions, we think of certain categories of professionals who will also have to make reports I would imagine. These categories must include accountants, notaries, brokers and lawyers.

My comment is not necessarily related to legal professional privilege because I think it is important that privilege not be absolute in cases of terrorist crimes, among others, that are committed or being committed.

The first part of my question is about the necessary balance between divulging information on money held in areas where privilege applies and its disclosure to implement the law.

Here is the second part of my question. In certain parts there is mention of monthly reports. A large chartered bank can easily make monthly reports, but for a small broker or notary in Saint-Hyacinthe, it is a duty that can be a fairly onerous obligation. Have you considered dealing with the professional associations in each province to find disclosure methods that would impose less on small professionals.

M. Jim Peterson: I think that is a good suggestion. We will always be open to ideas that lessen the burden of disclosure. It is true that it would be more difficult for small businesses because they do not have the resources of major institutions. If there were to be suggestions to alleviate that burden, I would like to hear them. You may have other suggestions for us.


Mr. Richard Lalonde (Chief, Financial Crimes, Financial Sector Policy Branch, Department of Finance): I would simply like to add that the Proceeds of Crime (Money Laundering) Act affects many financial institutions and that the scope of this Act is not quite the same in cases of reporting transactions and frozen accounts.

In the latter case, yes the financial institutions must report certain information to law enforcement authorities and to their regulatory agency, but if we look at the list of financial institutions that are subject to this, we see that it does not cover, for example, accountants, lawyers and other small businesses.

That being said, it is true that in some cases, small life insurance companies would be subject to this but most companies subject to this provision are major ones.

I do not know if I have to also answer the question regarding privilege. In this case, about the proceeds of crime the Act provides, in section 11, I believe, that nothing related to the reporting of transactions or doubtful operations removes anything from professional privilege.

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Therefore the common law privilege that protects certain communications between a lawyer and client is well recognized in this Act. That being said, it is important that all financial intermediaries be subject to this law, otherwise there would be a...

[Editor's note: Inaudible]

The Chair: Thank you, Mr. Paradis and Mr. Lalonde.

Mr. Bellehumeur, three minutes.

Mr. Michel Bellehumeur: I will not ask the question I wanted to ask. Instead I will comment on your answer to Mr. Paradis' question.

I know small law firms that make big transactions. If we look at very recent history, even if it only at gangsterism in Quebec, we see that there is a lawyer whose name I will not mention because I am not sure of it, who was convicted of money laundering. There were large sums involved, millions of dollars. Are you telling us that such people are not covered?

M. Jim Peterson: We know very well that there have been cases where a few lawyers committed an infraction. I will not...

[Editor's note: Inaudible] the bar for what we do here. It is absolutely necessary that all financial intermediaries respect the provisions of the act on money laundering and supplying terrorists with money. As lawyers, they can respect the lawyer-client privilege. They have a right to do that. But when they are not acting as lawyers, but as financial intermediaries, that is another matter. In such cases, they would be obligated to report.

Mr. Michel Bellehumeur: I mentioned a number a while ago. Currently, since September 11th, how much money has Canada seized?


Mr. Jim Peterson: The latest figure is $150,000. There will be further reports coming in to us, and they will have to be refined. As I've said, it's very difficult often to find out for sure whether an account that's been seized is the one that was intended to be frozen. The minister will be giving a report in the not-too-distant future. OSFI is working on refining some of those numbers for us right now.


Mr. Michel Bellehumeur: Would an amount of $150,000 justify that? Do you think you will get more than that?

M. Jim Peterson: Certainly. Even if there wasn't a penny frozen in Canada, we would still have to be in the forefront of the nations to protect people, including Canadians, from terrorism.

Mr. Michel Bellehumeur: But not only on paper; in reality also.


The Chair: Thank you, Mr. Peterson.

Mr. Owen, for three minutes.

Mr. Stephen Owen (Vancouver Quadra, Lib.): Thank you, Mr. Minister and officials, for appearing before us and giving us your thoughtful comments.

Perhaps I could just ask further questions with respect to the impact this has on lawyers. I think it's true—I think we've mentioned—a lawyer's trust account would be caught under clause 49, under the definition of entity. Under clause 51, lawyers would be caught under the professional category. I heard the answer that professional confidences would remain.

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I'm just having a little difficulty understanding how you could retain professional confidence at the same time as reporting on a financial transaction. I think there was a suggestion that if you were acting as a conduit for a funding transaction, it would be something different from your solicitor-client privilege. Is that what is being suggested? I'd like to have a bit of a better explanation of why that is so, if that is the intent.

Mr. Jim Peterson: I guess the one possibility would be to say that anything a lawyer does is beyond the reach of the law, with respect to money laundering, helping to fund terrorists, or moving terrorist funds around the world. We don't believe that should be the case.

If a client comes in to a lawyer and says, “I want you to take this $1 million in ten-dollar bills, put it in your trust account and issue me a cheque,” should the lawyer be exempt from that or not, simply because of the privilege we've always accorded to lawyers in dealings with their clients? In that case, the lawyer could say, “Yes, I will deposit this, but I have to report it.” At that point, the client could walk out of his office and the solicitor-client privilege would be respected.

If this committee is telling us that type of transaction should not be caught by this bill, I would like a very clear signal from you.

Mr. Stephen Owen: Okay. Thank you.

I think it is very important to clarify, on the record, that this act already creates, and this amendment bill will create, an exception to the solicitor privilege or confidence with respect to the flow-through of funds that are suspicious by their nature, exceed a certain amount, or are clearly directed toward the financing of crime.

Mr. Jim Peterson: That is not denying anyone the right to get important legal advice from a lawyer. The privilege is still maintained when they do that. But when the lawyer steps beyond the bounds of giving that advice and serves as the financial intermediary, they must report it, as anybody else would have to.

The Chair: Mr. Roy,


a brief answer.


Mr. Yvan Roy: I'll be very brief, Mr. Chairman. I thank you very much.

The view that is taken by the government is that the solicitor-client privilege is perfectly protected by these provisions. Indeed, section 11, as referred to by Mr. Lalonde, states that clearly, in the Proceeds of Crime (Money Laundering) Act.

What you have, however—and you can refer if you want to the regulations—are the parameters that are given to the transactions a counsel should be able to conduct, without being subjected to the legislation. Let me read very briefly what that is.

The PCMLA includes, according to the regulations, the receiving or paying of funds other than—these would be covered by the privilege—those received or paid in respect of professional fees. So you don't have to disclose professional fees. You don't have to disclose either disbursements, expenses, or bail.

In other words, as the minister is stating, once you're acting as a financial intermediary you're covered; when you're acting as a lawyer, you're protected. That is the view that has been taken by the government. We think that is the state of the law, at least as we understand it.

Thank you, Mr. Chairman.

The Chair: Peter Mackay, for three minutes.

Mr. Peter MacKay: I have just a very brief follow-up question, Mr. Roy, on that point.

I guess it becomes blurry when you're acting as a financial intermediary if you, for example, engage in the setting up of an account for a client. That, to me, falls somewhere in-between the definitions you've just described. I suppose, particularly then, it comes down to the knowledge the lawyer had of the reasons for the account and the source of the funds.

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I want to thank all of you for being here and for your expertise in this area. I think it is absolutely critical in the war against terrorism to get at the lifeblood and the source of this activity, although I think, sadly, we've all learned that the cost of terrorism is not as high as we thought it might be when it comes to the types of activities they can engage in. Weapons of mass destruction are not necessarily the same as we thought they were before September 11.

More generally, to the minister, does your department envisage the necessity of greater technology in terms of surveillance? What accounting is there for that in your plans? What new powers do you foresee in this information gathering? On the use of electronic eavesdropping through satellites and wiretaps, is that something you can foresee FINTRAC engaging in directly, or will it be entirely left in the hands of the RCMP, CSIS, and Defence?

Mr. Horst Intscher: Thank you, Mr. Chairman.

We have no authority, and seek no authority, to conduct investigations. We are entitled to receive and analyze certain information that financial institutions are obligated to report to the government. We can also access, under arrangements, databases maintained for law enforcement purposes. We are also free to receive voluntarily provided information by law enforcement, or by citizens for that matter. But we are not entitled to go out and seek information through overt or covert investigation. We were created as an analytic body. That's our mandate, and we certainly are not seeking to expand that aspect of our mandate.

The provisions of this bill make it possible for us to look at this same data, not only through the optic of the search for money laundering, but also through the optic of the search for terrorist financing. The provisions in the bill that relate to FINTRAC are simply intended to provide us with the authority to look for a different type of activity in the same data that's already being reported to us.

The Chair: Thank you very much.

Mr. Grose, three minutes.

Mr. Ivan Grose (Oshawa, Lib.): Thank you.

My question may only serve to prove how difficult this is going to be. We talk about confiscation and lifting exemptions for charities. At the moment, the United States and Britain are bombing Afghanistan, in the hope of hitting a few terrorists, I understand. But the United States is also dropping food. The United Nations is supplying food, and half a dozen well-recognized charitable organizations are supplying food.

Inasmuch as we don't know what the terrorists look like, with a couple of exceptions, they are probably benefiting from this food. Food is often used as a weapon of war. How in the world do you separate the wheat from the chaff?

Mr. Jim Peterson: Mr. Grose, you raise one of the very difficult questions we're called upon to face. These are tough calls. The law deals with financing terrorists; it does not proscribe humanitarian efforts to help other people. So one would have to look very closely at every transaction, to make sure that line is drawn.

Mr. Ivan Grose: But it's going to be a very difficult line to draw.

Mr. Jim Peterson: I'm sure the person you should talk to on this is the CCRA minister, Mr. Cauchon. We have about 76,000 to 77,000 registered charities in Canada today, and a lot of these involve those very difficult types of distinctions.

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Our effort here is to make sure a charity that funds terrorists, or directs money to terrorist activities, is de-certified, has its tax status removed, and has its funds forfeited to other charities or to the crown. Our effort here is to deny tax status to it and the capacity to exist.

In the case where a charity is supplying food to refugees in Afghanistan, I have no doubt the CCRA would tell you that is not financing a terrorist activity.

The Chair: Thank you, Mr. Grose and Mr. Peterson.

At your suggestion, we'll see if we can arrange to have Minister Cauchon here at 11:30.

Some hon. members: Oh, oh!

The Chair: Mr. Fitzpatrick.

Mr. Jim Peterson: I didn't realize I had such power. I've never had that before.

Mr. Brian Fitzpatrick (Prince Albert, Canadian Alliance): Thank you, Mr. Chair, and thank you, gentlemen, for taking the time to come here.

I have some difficulties with the reporting requirements under this legislation. I think Mr. Blaikie raised the point already. Under proposed section 83.1 it's mandatory that you report to the Commissioner of the RCMP and the Director of CSIS if you have funds or assets. I'm sure there are provisions where they have to be frozen as well. Then we have the money laundering requirements, which I'm not totally familiar with, but I imagine they impose burdens and obligations on third parties that are holding assets, and so on.

The question that comes to mind is if we have those two requirements, why do we have proposed section 83.11, where on a monthly basis these institutions have to report to their regulatory agencies with these monthly reports?

I'm going to try to put this in perspective. In Ontario there are probably thousands of financial planners, insurance agents, and small independent operators. They're going to be filing monthly reports, I presume, with the Ontario Securities Commission. I doubt whether the Securities Commission has anybody who's going to monitor and go through these reports. They have lots of obligations already.

What are they supposed to do with these things? By that stage the assets are frozen, this has been reported to the RCMP and CSIS, and the money laundering thing has already kicked in. Now they must also have somebody in business continuously monitoring these accounts and sending these reports to the Securities Commissioner, or, if you're in the insurance business, the Superintendent of Insurance.

So they are getting thousands of pieces of paper every month, and I'm sure they're not going to look through these things. What are they supposed to do—box them up and ship them to the Commissioner of the RCMP, CSIS, or the intelligence community? What's the purpose of this mountain of paperwork that I think you're really creating under proposed section 83.11?

Just as another point, two experts on terrorism were here yesterday. I think they basically said the cattle were out of the barn. This legislation should have been in place a long time ago. The al-Qaeda network is probably underground, and they're three steps ahead of us on this sort of thing.

What's the purpose of the mountain of paperwork under proposed section 83.11?

Mr. Jim Peterson: Look, if this committee today, or after the law is enacted, as you may amend it, has better and less onerous ways to do this, then we welcome those suggestions. We will, I can assure you, be working with financial institutions to try to alleviate that burden as much as possible.

It's obvious why FINTRAC would want this information. We don't want to duplicate its activities. Our financial intermediaries are already reporting to FINTRAC on money laundering, so we think it just makes sense to add one more report, i.e. on terrorist financing. We think that helps the institutions that have to report, as opposed to reporting to a different institution.

You may ask why we want them to report on a monthly basis as well to the Superintendent of Financial Institutions—

Mr. Brian Fitzpatrick: The Securities Commission also.

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Mr. Jim Peterson: OSFI, which is where we will be getting the reports federally.

Part of the role of OSFI is not to act as a cop but to ensure that these institutions are safe and sound. Part of that investigation into whether an institution is safe and sound, protecting depositors and policyholders, is their system of governance. That goes into OSFI's calculation.

If they get information on the types of activities that are coming through, and can monitor the information that comes in, then that is again one of the aspects of the governance of a particular institution. So that is part of the reason we think it's important that they report to the regulator as well.

I'm not particularly as worried about the big institutions, because they have the capacity to do this, but I think it will be a factor in a lot of smaller institutions being told, “We want you to be very prudent and we want you to adhere to the law as well.”

The Chair: Your time is up, Mr. Fitzpatrick.

Mr. Lee, three minutes.

Mr. Derek Lee (Scarborough—Rouge River, Lib.): Thank you.

Mr. Peterson, as you know, Parliament has a constitution based in unfettered power to send for a person's papers and records, and although that can only be changed explicitly by statute by Parliament, in clause 70, which deals with proposed subsection 59(1) of the proceeds of crime act, the PCMLA, there is wording that refers to the case of an order for production of documents. On the face of it, it might be interpreted to actually impinge on Parliament's constitutional right to send for a person's papers and records.

So my question is, is this why the change in wording to insert conditions on responding to orders for production of documents? Why the change in wording?

Secondly, was it intended to bushwhack Parliament's constitutional right? The answer to that question is either a simple yes or no. If it is yes, we have another set of issues. If it is no, then could we have that confirmation today, or later in writing in due course, so it can be confirmed on the record that it is not the intention of the statute to impinge on Parliament's PPR authority?

Mr. Jim Peterson: I can't imagine, Mr. Lee, that it would be, but I shall ask Mr. Roy to respond to your very precise question.

Mr. Yvan Roy: I would like to give you a precise answer to your precise question, but I'm not sure I would be in a position to do so, because I'm not sure I got the question as clearly as I should.

Section 59, as it is to be amended, simply, by my way of reading it at least, refers to an addition with respect to the financing of terrorist activities. In the production orders, it is with respect to judicial orders that can be issued for the purpose of getting information. I do not see anything in it that would touch in any way, shape, or form the privilege of Parliament to seek information and documents. But I should hear you more.

Mr. Derek Lee: To clarify this, if I may, the wording says that an official at the centre shall reply to an order for production of documents only if there if there is a CSIS act or a certificate referred under section 60.1. There must be a certificate.

If the order for production of documents includes orders that Parliament would make under PPR, then it is arguable that Parliament would have to ensure some kind of a section 60.1 certificate. Of course, that is not the case now, and in my view never should be.

I'm asking for clarification. Why the change in wording to require the certificate? I'm going to assume that no one ever thought of this. The government was not thinking of this—and that's good, ignorance is bliss—but if they were, if someone in government was thinking of parliamentary orders for production when they wrote this, then they're trying to bushwhack Parliament and I want a confirmation of the intention—not just for now but in case this issue comes up later. I want it very clear on the record that it is no one's intention, around this table, in the House, or in government, to impinge on Parliament's PPR. If you read the wording of the section, and consider my words now, I think you'll understand what I'm getting at.

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Mr. Jim Peterson: Mr. Lee, I can assure you that as we poured through the minutiae of these very detailed amendments, the thought never crossed our minds. But I think it's a very good point you've brought out. I think we owe you a response, and we'll get it to you as soon as possible. Thank you very much for your stellar sweeping.

The Chair: Thank you very much, Mr. Peterson and Mr. Lee.

Mr. Bellehumeur, three minutes.


Mr. Michel Bellehumeur: The current provisions of the Criminal Code have allowed the seizure of $150,000 related to terrorism. We know that in Canada billions of dollars are laundered annually. Even if we increase the infractions, the applicable penalties, and if you get the power to freeze these sums for longer, if there is no political will to conduct inquiries and go the distance, you won't necessarily seize more money. That's what I want you to understand. I'm not saying that it is not necessary. I understand that it is necessary to do so and in fact we are asking that it be done, but we need more than information and powers that are on paper. Political will is needed, and I don't feel that the federal government has it. That was not a question but a comment.

I will now ask my question. It touches on something else that concerns me. Does the proposed section 83.28 apply to lawyers? Can you tell me if subsection 83.28(8) applies to lawyers? If that is not the case, we have a problem.

Mr. Jim Peterson: Thank you Mr. Chairman.

You are right. When we started working on the money laundering bill, we believed that between $5 and $17 billion were being laundered annually. So we have succeeded.

I will let Mr. Roy answer the specific questions you have asked.

Mr. Yvan Roy: Thank you Minister.

Your questions, Mr. Bellehumeur, bring me to a clause in the bill that allows for a specific kind of inquiry.

Mr. Michel Bellehumeur: You are forcing someone to testify.

Mr. Yvan Roy: We are forcing someone to testify. I believe that the Minister of Justice said to you that this means of inquiry is already allowed under other acts. In fact, because here it can be used in cases of mutual assistance.

You are asking if a lawyer could be called to testify before this committee. The answer is yes since there are no limitations in this area.

A lawyer can be called upon to testify before any court of law but there are limits as to what he can say during his testimony and the court will recognize those limits. What are they? The lawyer-client privilege.

If you are a lawyer, that does not mean that you can't testify or be forced to do so, but there are impassable limits, in other words that privilege we all know.

The Vice-Chair (Mr. Denis Paradis): Thank you very much Mr. Roy and Mr. Bellehumeur.

We will move on to Mr. McKay.


Mr. McKay.

Mr. John McKay: The way in which money is traditionally transferred from jurisdiction to jurisdiction in certain countries is a fairly informal network. Literally, somebody will walk into a shop on the Danforth, write a cheque for $1,000, the individual will charge a fee and phone somebody in another country, Afghanistan, Pakistan, you name the country, and the transaction is completed.

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The British bill I think—and I'm not absolutely certain, having gone through it—provides for seizure of cash really in any form, and there's no $10,000 threshold or anything like that.

I don't really know whether this is a large item or a small item. I do know it is a traditional way of doing transactions in certain kinds of cultures. I would expect that at least criminal activity takes place in these kinds of transactions. Certainly it's not all criminal activity by any means—there may not even be large percentages of criminal activity—but I should imagine it would be a way of doing transactions that defeats the intention.

Can you give to this committee any assurances, either within this bill or outside of this bill, that those kinds of transactions, if you will the nickel and dime transactions, are being monitored, and whether in fact... I'll put it dramatically: this bill seems to cover the big ones, but there's a whole bunch of fish swimming through the net because the net is not tight enough.

Mr. Jim Peterson: Thank you, Mr. McKay.

I have no terribly satisfactory answer for you on this. A Hawala-type operation is an alternative remittance system. It is, we believe, caught by the current money laundering law and will also be caught under the terrorist provisions that are brought in to the bill.

Having said that, we then go from a question of what can you do to stop these things to recognizing that they may be highly movable and portable, that they may not have a big infrastructure, and certainly are not registered.

One of the discussions we're undertaking with our international counterparts, and it will be a big part of the discussions of the Financial Action Task Force on Money Laundering on this is how can we deal with this type of informal, non-registered, highly mobile type of remittance system?

Dave, maybe you'd like to say something about this. Maybe, Horst, you have some thoughts on it.

Mr. Horst Intscher: I would note that, in our view, these types of remittance systems are caught under the definition of money services businesses, and therefore are subject to the record keeping and reporting requirements of the Proceeds of Crime (Money Laundering) Act. They will be subject to compliance audits by FINTRAC, as are other money services businesses.

In addition, to the extent that they do not reveal themselves to us as reporting entities, when their remittances in any way come in contact with the regular, the formal financial system, there will be an additional means of ascertaining what their activities are and taking steps to bring them into compliance with the act.

If they fail to comply with the record keeping and reporting requirements, they are opening themselves up to serious sanction under the provisions of the act that relate to failing to report. Perhaps Mr. Beer might have something to add.

The Chair: Mr. Beer.

Supt Dave Beer: The question is a very astute one, and there's no question that informal systems such as you described will pose quite a challenge.

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Let me revert to the question raised earlier by Mr. Peter MacKay about the importance of international communication and understanding. The extent to which these informal systems exist, and taking the opportunities to learn more about them; the extent to which they will be more difficult to trap, inasmuch as they're outside of the traditional banking sector or the traditional financial sector; the extent to which we can use other investigative techniques and powers, dealing with them more in terms of a substantive offence than purely a money laundering offence or a terrorist funding activity—these will be important to gaining some success. But you're absolutely right; it would be very challenging.

The Chair: Thank you very much, Mr. Beer.

Mr. Peter MacKay.

Mr. Peter MacKay: Thank you, Mr. Chair. To all of you again, I'm very heartened to hear the minister say, in a very frank way, that this is going to take some time. We're not always going to get it right. We're going to learn from the experience of other countries. I think that's a very healthy approach to take, Minister. This is something we're all going to be going through collectively, both here in this country and across the world.

I have two very quick questions, specifically to follow up my colleague, Mr. Bellehumeur. The first deals with the investigative hearings described at proposed subsection 83.28(8), in clause 4. I believe that is the specific subsection that talks about exemptions from disclosure of things that might otherwise be considered privileged, both as to demands for testimony and the production of documents, which might crop up in the case of a lawyer representing a client.

The other question I had relates specifically to instances where there has been a seizure, for whatever period of time. I think we can all foresee instances where, because of the complexity of cases involving financial transactions—and I've been involved in ones that dealt with vehicles or with incredible volumes of documents because of the attempts to avoid leaving a money trail... I'm wondering what safeguards there are for those whose assets have been seized.

Mr. Roy, you referred to the fact that cases may come to light—sometimes months or years down the road—where considerable sums of money have been frozen. Is there a compensatory scheme? Is there recourse for an individual to say, “Look, I've lost a great deal of money in interest while my assets have been tied up through this procedure”? Is there a fallback for them? God forbid that this happen, but it could, and it has in the past.

The Chair: Mr. Roy.

Mr. Yvan Roy: Thank you, Mr. Chairman.

As I indicated when I tried to answer a question from the other Mr. McKay, the law as it stands continues to apply in those circumstances. If there were, on the part of the state, negligence that could be ascribed to the behaviour, the law will continue to apply. Therefore redress would be available before the appropriate courts in those circumstances.

I also expressed, when I answered the question coming from Mr. McKay, the thought, and certainly the wish, that the guidelines given to government officials are to use provisions like this only in appropriate cases. We are not supposed to use provisions like this to go on a wild goose chase.

That is certainly not what is expected and not what has happened with respect to money laundering, for which we've had such provisions. We've had experience for the past 13 or 14 years, and it has not happened. It is not expected that it will happen with the provisions proposed to Parliament for adoption here. They are targeted to terrorism, but sit within the general context of the law. The protections that exist in that context continue to apply here. There is nothing removing governmental actions here from the general application of the law.

Mr. Peter MacKay: No, I appreciate that.

The Chair: Thank you very much. I have to go to Madam Allard.

Madam Allard.


Ms. Carole-Marie Allard (Laval East, Lib.): I have a question for Mr. Roy. Mr. Roy, you have often testified before our committee regarding the study of another bill that was very important for my constituents of Laval-East.

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In fact, you know that once again last weekend a young teenager was shot by a biker. That is very tragic.

Previously we studied an antigang bill and now we are looking at an antiterrorist bill. Can you tell us if the concept of participation in the antigang bill is related to the one in the antiterrorist bill? I know that this is not about finances, but I would like to benefit from Mr. Roy's knowledge.

Mr. Yvan Roy: Thank you madam.

I worked closely on the development of the bill to which you refer, C-24. My involvement in the preparation of Bill C-36 was not as great since I had changed jobs in the meantime. However I am happy to say that the concepts in Bill C-24 were used by the writers of Bill C-36. Incidentally, the participation and facilitation concepts that were studied by this committee in the context of Bill C-24 are in Bill C-36. If they were relevant for C- 24, they should also be for C-36.

Ms. Carole-Marie Allard: I would like to ask you another question Mr. Roy. We have the impression that the antiterrorist bill broadens the powers of the Federal Court, gives certain powers to the judges of the Superior Court and also to the judges of Court of Quebec to decide on releases. In the end, are we not diluting the powers of the judicial system by giving multiple jurisdictions to multiple courts? Have we considered the creation of a special tribunal for terrorists acts so that it could rule on a case from beginning to end?

Mr. Yvan Roy: As far as I know, there has been no question of creating a specific special court for this. It has been established—and you yourself have remarked that it is in the Bill—that there must be judicial supervision of many powers given to the State. That is why the judges of different jurisdictions have supervisory responsibilities.

The basic principle adopted is that when federal government measures are at issue, we use the Federal Court to decide and supervise the judicial powers, and when the case is more provincial in nature we use the provincial and superior courts to supervise everything.

We have created special tribunals in very special cases. I do not believe that this is something that we should favour. I prefer to have judges with an extensive knowledge of the law look at these questions and consider the numerous elements and interests that have to be taken into account in such difficult circumstances.

The Chair: Thank you Ms. Allard and Mr. Roy.


A last question goes to Mr. Sorenson.

Mr. Kevin Sorenson (Crowfoot, Canadian Alliance): Thank you, Mr. Chairman.

I want to thank you for coming. I found this very fascinating. When we talk about the war on terrorism, obviously travel and dollars—being able to limit their financing—are two of the key roles in fighting terrorism.

Part of what we're concerned with here is there are no institutions, I would imagine, here in Canada with “Al-Qaeda Inc.” bank accounts. We realize from witnesses there are many small cell groups active in Canada. CSIS has said there have been 50 organizations raising money for terrorist organizations in the past. So we know there are large organizations, but there are also these little cell groups. In the past week, in Fort McMurray, three terrorists were arrested with 15 different aliases and all these different credit cards.

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What I'm driving at is this. Various financial institutions are going to be required to determine if these larger organizations are active in their territory and using their banks as an institution. But how effective are little banks in Fort McMurray, with three individuals—and maybe another four individuals in a small little cell group—going to be?

And what is the cost to them going to be? Have we anticipated any administrative costs we can expect these administrations to have to come up with ?

We talk about summary convictions, and you also mentioned that larger institutions may be able to handle or absorb these. Summary convictions of $100,000 may be a fairly small conviction for a very large group, but these little cell groups... My concern is—though I never really thought I'd ever hear myself say this—for some of the institutions. Are they going to put someone in charge of that?

My other question, very quickly, involves the example where $150,000 has been seized. How many different groups are represented within this dollar amount, and how did it come about? Did it come about as a result of banking institutions coming to CSIS or RCMP, or did it come about through the RCMP saying: “These are individuals; let's seize their personal accounts”?

The Chair: Thank you, Mr. Sorenson.

Mr. Peterson.

Mr. Jim Peterson: Thank you very much, Mr. Sorenson.

On your second point, the $150,000 that was announced previously was the result of financial institutions coming forward, having recognized some of the terrorists who were listed.

On your issue concerning small financial institutions, maybe in smaller communities, not having the resources, to the extent they're linked into one of the major financial institutions I suspect it will not be long before they are online with certain types of communications systems that will hopefully alleviate this burden.

I know part of the work of FINTRAC and Horst Intscher is not to act as cops, but to work with all types of institutions on implementation. Maybe he could say a few words about that.

Mr. Horst Intscher: The approach we are going to take with all reporting entities, really, is to work with them in partnership to help them understand their compliance responsibilities and achieve compliance in as easy and unburdensome a way as possible.

To assist them in making some of the determinations they have to make, we have issued some guidelines. We will be continually revising the guidelines, to flag for them things they should keep in mind when they conduct transactions. Also, to help them report to us in a simple manner, we're establishing very simple electronic reporting means that they'll be able to use.

We will be calling on them periodically to ask if they have any problems and whether we can help them or help provide training materials.

Mr. Kevin Sorenson: Some of these are very small credit unions—

The Chair: Mr. Peterson wants to make another point, Mr. Sorenson, and this will be the final point.

Mr. Jim Peterson: Having been so graciously cut off, thanks, Mr. Chairman.

The Chair: Not at all.


M. Jim Peterson: I would like to answer Mr. Bellehumeur's question. Do we have the will to go after the money launderers and the terrorists?

I can assure all of you that there is a great will to do so within the government. We will do everything in our power, everything possible, which should be the duty of every one of us.


I want to thank you all very much, Mr. Chairman, and especially you, for this opportunity to appear before you. If you have other questions arising out of your deliberations that involve us, we'll be pleased to work with you. Good luck.

The Chair: I'm sure you've enjoyed your first appearance before the justice committee so much you'll be anxious to come back.

Mr. Jim Peterson: Certainly.

The Chair: I would also note, further to your suggestion earlier that we have the minister responsible for the CCRA drop by, that our staff here is capable of practically anything. We're going to suspend, to allow the opportunity to change cards, and we'll have the minister responsible for CCRA before us very shortly.

I suspend only momentarily.

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The Chair: I call to order the continuation of meeting number 35 of the Standing Committee on Justice and Human Rights.

Our next witness is the Honourable Martin Cauchon, Minister of Canada Customs and Revenue Agency. I will leave it to the minister to introduce the officials who accompany him.

Mr. Cauchon, we're anticipating opening remarks and an opportunity for members of the committee to engage in discussion around them.

With that, I welcome your being here.

For the record, I'd like everyone to know that the minister had in fact planned to come, even before Mr. Peterson brought it up.

Mr. Cauchon.

Hon. Martin Cauchon (Minister of National Revenue, Lib.): Thank you very much, Mr. Chair. We are pleased to be here.

I would like to ask the people with me today, who are experts in the field, to introduce themselves.

Mr. Ed Gauthier (Acting Assistant Commissioner, Policy and Legislation Branch, Canada Customs and Revenue Agency): I'm Ed Gauthier, acting assistant commissioner, policy and legislation, at the CCRA.

Ms. Donna Walsh (Director, Special Compliance Initiative Division, Charities Directorate, Canada Customs and Revenue Agency): I'm Donna Walsh, director, special compliance initiatives division, charities directorate, CCRA.

Mr. Paul Kennedy (Senior Assistant Deputy Solicitor General, Solicitor General Canada): I'm Paul Kennedy, Senior Assistant Deputy Solicitor General.

Mr. Ian Blackie (Chief, Counter Terrorism Division, Solicitor General Canada): I'm Ian Blackie, chief, counter-terrorism policy, Department of Solicitor General.

The Chair: Mr. Cauchon.

Mr. Martin Cauchon: Thank you very much, Mr. Chair.

As you said, I'll be starting with some opening remarks.


Mr. Chairman, thank you for having invited me here today to talk about this very important bill whose aim is to discourage and eliminate terrorist organizations and protect Canada, the Canadian way of life and the fundamental values that are dear to us.

Charities in Canada play an essential role in the care and support of the disadvantaged. Terrorist organizations seek to exploit the values we believe in as a compassionate society and abuse the benefits of our way of registering charities.


By making it difficult for such organizations to use charitable resources to support their causes, this legislation will help to eliminate the threats they pose to our nation and the world.

Countries around the world recognize terrorist fundraising as a global problem and a complex issue.

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No strategy or measure will put a stop to it, but through consensus building and cooperation, both here and at the international level, we can set up a broad range of practical, unified and effective measures to beat this problem, Mr. Chairman. That is why we need a comprehensive legislative framework that includes both penal and administrative measures.


The Charities Registration (Security Information) Act provides an important new tool to fight terrorism. It puts in place a fair and open administrative legal process to help prevent groups with terrorist affiliations from supporting their deadly acts by obtaining or keeping charitable registrations.

Under the current registration process administered by the Canada Customs and Revenue Agency, information that is classified for national security reasons is not used to deny or revoke charitable status. Because such information is not protected during the current appeal process, important information that could potentially connect a charitable organization with terrorist interests simply cannot be used. In the absence of a special legislative regime to protect such information, the information would be at risk of being disclosed if there is an appeal of the decision to revoke or deny charitable status.

The inability to use this key and critical information makes the integrity of the charity system vulnerable. A mechanism needs to be put in place that is specifically designed to allow the government to use and protect relevant classified information in its decisions to deny or revoke charitable status.


Mr. Chairman, these are necessary measures in addition to the amendments we foresee to the Criminal Code to make the financing of terrorist organizations and all other forms of terrorist support in Canada illegal.

The September 11th attacks have demonstrated very well that we cannot afford to close our eyes to any means used by terrorist organizations to get financing.

The measures proposed under the Charities Registration (Security Information) Act focus on a particular aspect of the problem. Like other measures adopted under Bill C-36, this special procedure will be applied only in exceptional circumstances.

Mr. Chairman, I would like to underline that the objective and the relevance of the Charities Registration Act have not changed since the tragic events of September 11. I remain convinced that the judicial review process that we are proposing meets the standards of equity and fair application of the law guaranteed by the Canadian Charter of Rights and Freedoms.


That is why the measures we are proposing under Bill C-36 are substantially the same as those proposed under Bill C-16, with the significant exception that they are now tied to the new provisions of the Criminal Code defining terrorist groups and activities.

The approach we are proposing mirrors provisions embodied in the Immigration Act, a model that has withstood the test of time and court challenges, respects the principle of fundamental justice, and conforms to the Canadian Charter of Rights and Freedoms.

The outlined process is one that reflects our commitment to maintaining a transparent and fair system while safeguarding public safety and national security. It also assures charities the protection of procedural fairness and due process in our legal system through a process of automatic and independent judicial review.

The judicial process obliges the Federal Court to provide the organization with a summary of the information available to the judge so the organization is reasonably informed of the case against it. It also provides the opportunity for the organization to challenge the case in open court.

The organization as well, Mr. Chairman, has the right to legal counsel to introduce evidence, call witnesses, and cross-examine. This would not be the case under the normal appeal rules, under which an appeal on a decision to refuse or revoke charitable registration is heard by the Federal Court of Appeal.

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The proposed process also allows an organization to ask for a no-publication order. If the court agrees to the request, no information, such as the fact that the no-publication order has been requested, will be communicated to a third party. The no- publication order will be lifted only if a Federal Court judge determines that the security clearance is reasonable. It is only after a decision by two ministers, approved by a Federal Court judge, that the Canada Customs and Revenue Agency can take steps to refuse or revoke the registration of a charitable organization.

Such a structure creates strict accountability. The clearance will be valid for a period of seven years, but could be reviewed earlier if an involved organization can demonstrate a significant change in the circumstances that lead to the revocation. This is a balanced and objective process based on facts.


In conclusion, Mr. Chair, I would like to reiterate that Canada is not immune from terrorism. Terrorist-support activities, including fundraising, lead directly to deadly terrorist attacks. This is an issue of concern to all Canadians, an issue on which the government must take action.


Canadians want and deserve an efficient system of charitable organization registration that does not give rise to exploitation. To maintain public confidence in charities, we must ensure that terrorist organizations receive no support and that our system is protected from abuse.

Thank you for your attention.


Thank you very much.


The Chair: Thank you, Mr. Cauchon.


The first question is to Vic Toews, for seven minutes.

Mr. Vic Toews: Thank you, Mr. Chair.

Thank you, Mr. Minister, for your attendance here and for the attendance of your officials. We appreciate the cooperation your department and the other departments have been showing in this difficult, time-consuming, but very necessary, review.

Canada has a very long border with the United States. It's no secret that it's relatively undefended. We have numerous crossings in Canada between Canada and the United States. We simply don't have the manpower or the personnel to watch every trail that crosses over.

For example, in my riding of southeast Manitoba, there must be hundreds of trails back and forth between the United States and Canada. I know the police and border officials work very hard to target specific people perhaps or issues to ensure safety and that our laws are respected.

One of the issues, of course, for you, as the minister responsible for the Canada Customs and Revenue Agency, is the issue of our customs officers. There has been some controversy over the last while. I don't think it's unique to your department. Certainly, we hear some of the same kinds of concerns from the national parks officers. Although they are peace officers of a sort, they do not have side arms and other protective equipment that their union, or collective bargaining agent, thinks is necessary for their safety and the safety of Canada.

You've indicated Canada needs to take criminal legislative steps or administrative measures. Mr. Minister, wouldn't you also say we need to take enforcement steps? We need to stand with our officers, our men and women, who have peace officer status and various powers and yet are helpless to stop people coming into Canada, even when they detect them coming in illegally. Essentially, the responsibility is put on the RCMP for the actual arrests and detentions.

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Similarly, with the national parks officers, we see the same kind of thing. It's clearly a safety hazard for these individuals to not carry side arms. Workplace Safety, Health, and the Ministry of Labour have made the determination that this is a safety and health issue. Yet our federal parks officers are still not armed. Our Canada Customs officers don't have the proper equipment.

We've gone through this provincially in Manitoba. When I was involved in the government there, we decided to train our parks officers and provide them with side arms so they could meet new and increasing challenges.

Mr. Minister, are you reconsidering your decision not to provide officers with the appropriate training and side arms? They can relieve some of the incredible burden the RCMP officers are under. They're obviously short-staffed for a number of reasons. I don't want to get into the reasons. I think they could use the help of the competent people we have in the Canada Customs office.

Do you have any comments, Mr. Minister.

Mr. Martin Cauchon: Of course, I have comments. I have many comments.

To start with, Mr. Chair, regarding Canada Customs, it's part of my department.

Mr. Vic Toews: You are here.

Mr. Martin Cauchon: I always like to talk about the customs organization, as well as the reform we started some time ago.

The mandate of Canada Customs is of course to make sure we keep the border open and keep protecting our society. We make sure we have a safe society and safe communities. We have the mandate at the official ports of entry.

At the beginning of your speech, you were referring to not only the remote ports but in between the ports. In between the ports is more or less the responsibility of the RCMP.

Through part of the reform we've tabled, and of course Bill S-23, we intend to use more technology. When we look at the management of the customs organization at this point in time, with increased volume and commercial shipments, if we want to keep making good risk assessments, we have to use technology such as INSPASS and NEXUS.

I guess it will be part of our discussions with the States, as to the situation in between the ports. Is there any technology we can use there? Certainly, it's something we're going to look at.

Regarding the question of side arms, some time ago a decision was taken by the department not to provide customs officers with side arms.

First of all, we're no one's force. We've said it many times. Lately we've been given what we call additional power. We call it official power for the customs organization. People are going through training at this point in time. Some have been trained. Official power has been implemented in some places. I do believe, with the training, they've been provided with the necessary tools to fulfill their duties.

Over the past decade, we've been working jointly with police forces. We have to bear in mind, of course, that part of our mandate is the safety of our community, as well as the safety of our officers and employees. Based on what I've seen, and the information I have, at this point in time it's not necessary to provide customs officers with side arms. We are reviewing, and proceeding with, risk assessment on a regular basis. There's something underway at this point in time.

I would like to point out that there are arguments on both sides. You've raised your concerns. You've made your point quite well. There are strong arguments to the contrary as well. Some say it would be even more dangerous to have customs officers with side arms at the border.

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Another point, in conclusion, is that, to me, not only is it not necessary but the first image you have of Canada is custom officers. It reflects what we are as a society, and giving them side arms would not reflect our values in a sense. Having said that, when facing that situation, we need a balanced approach. We need to see if indeed it's necessary, but at this point in time, my conclusion is that it's not.

The Chair: Thank you very much.

Mr. Bellehumeur, you have seven minutes.


Mr. Michel Bellehumeur: Minister, all of part 6 of Bill C-36 is about charities. I agree with you that we need a mechanism to prevent terrorist groups, under the guise of a very charitable name, from collecting money to finance their terrorist acts. I have no problem with that. However, I have a problem with the way you wrote it. It's not new for you since Bill C-16 went a little in the same direction and you have already heard these comments.

Do you believe there will an abuse of all these provisions about the secrecy around the judicial process and the proof brought forward by the security intelligence agency to refuse or revoke the status of a charitable organization? Do you believe there will be cases of errors against a person or organization because of the proof provided somewhat in secret and of the process used in one case or another? Do you believe that people and organizations will be treated inequitably? Do you think that is possible given the way part 6 is written?

Mr. Martin Cauchon: Mr. Chairman, there is no justice system in the world that will allow us to conclude what the member just alluded to. However, I believe that within the judicial system we know, given the imperatives of the Canadian Charter of Rights and Freedoms, and the rules of natural justice whose application must vary according to circumstances, I truly believe, Mr. Chairman, that the legislative framework we have set up and perfected with the Solicitor General is one that offers the most protection. I believe that the rules of natural justice are preserved especially since what we are setting up, Mr. Chairman, in essence is a framework that already exists under the Immigration Act and is a framework that has also already been recognized by other courts at the international level.

I would like to underline that not only must a certificate be signed by two ministers who decide independently, but that in addition it is necessary to go before a judge. Witnesses can be heard, documents tabled, and, in addition, when the certificate is deemed reasonable, since that is the legal test, it is possible to ask for a review before the end of the seven years.

Mr. Michel Bellehumeur: Am I wrong or are these broad powers that you will have henceforth in terms of inquiry, building proof and so forth? Once again, there is confidentiality. It's very well for you to say that witnesses will or can be heard, there is an lot done in secret in your department, perhaps also for national security reasons. Do you agree with me in saying that these are fairly broad powers?

Mr. Martin Cauchon: Mr. Chairman, first, this Bill has been the subject of consultations with a lot of interested parties, especially charities.

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These powers must always be analyzed through the prism of our society and national security. We must seek a balance that maintains Canadian values in terms of charities and protects these Canadian values against the risk of abuse, and also, on the other hand, ensures that we can protect the information for the sake of public interest and the protection of certain individuals.

When I look at the stakes before us, I think that we have succeeded in reaching the correct balance in this Bill.

Mr. Michel Bellehumeur: Precisely, Minister, I believe it is important to have a law that balances the rights of individuals and the collective rights on the one hand and national security on the other.

Would it bother you to state your position on this balance every three or four year in an act that would have a sunset clause? Don't you think parliamentarians should decide again on certain parts of the act that affect individual and collective rights, especially certain sections of part 6—maybe not all—and other sections that should be revised?

You are a lawyer and a minister, and certainly no fool. You know that the police have very broad powers. There are arrests without warrants, temporary detentions and so on. Given your personal experience, and as a parliamentarian and a member, you are there to protect and seek a balance between the laws and individual and collective rights. Would you accept sunset clauses in the act so that you could, as a parliamentarian, decide again on these sections that grant exorbitant powers according to some members of the judicial system?

Mr. Martin Cauchon: First, Mr. Chairman, I am not here in a personal capacity. I am here as the Minister of National Revenue. It is therefore obvious that I am addressing this committee in that capacity.

That being said, I also know that the committee is called upon to discuss the entire Bill and the famous issue of sunset clauses. When we look at the current situation as a whole, anywhere in the world, we see that the question of terrorism is a very serious problem. There are international agreements that ask the all the different countries take action. Relationships have been developed between different countries to fight against this scourge.

Mr. Chairman, I think that countries must enact laws to protect our societies, protect the public interest, laws that must seek the appropriate balance to which I just referred.

I believe that when we are analyzing a law, whatever its aim, we certainly have to seek that appropriate balance, but also look at its appropriateness in terms of the Canadian Charter of Rights and Freedoms. If the law passes the Charter test, it is justified, justifiable and appropriate in our free and democratic society.

From that point on, it is a law that is healthy for all of our Canadian society given the three-year revision clause that exists.

That is my opinion, Mr. Chairman.


The Chair: Thank you very much.

Mr. MacKay, for seven minutes.


Mr. Peter McKay: Thank you, Mr. Chairman. Thank you, Minister, for your presence here today and that of your officials.


Picking up on this issue, Mr. Minister, I find very heartening what you've just said about the need to protect certain rights, certain civil liberties, and if we tread on those, there very much has to be this application of the law and the charter to determine whether it is justified in a free and democratic society.

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That's why I find a bit of an inconsistency in the approach that's been taken by this legislation. It is specifically enunciated in these sections pertaining to your department that there will be judicial consideration of a certificate; yet we find that the issuance of a certificate from the Department of Justice, the Attorney General, in instances pertaining to matters of privacy and information in the possession of the government... Not to pre-empt you, but I'm sure you will come back and tell us that this may come under the scrutiny of a charter challenge.

Do you not see this as inconsistent, in that your department has this judicial oversight capacity, the process in which a judge can review the appropriateness of a certificate, and yet there is the complete exemption of that for the issuance of a certificate in the Department of the Attorney General when it comes to information in the possession of the government?

Mr. Martin Cauchon: What we're talking about here, first of all, is a different part of the legislation.

We're dealing with what we call the Income Tax Act here, and a very specific provision, the charity provision of the Income Tax Act. We put in place a process in order to make sure the organization will have, as we used to say, its day in court, while making sure we protect our society.

Of course it's always important to make sure that those who could fund a terrorist group don't have access to our system, but there's still time for due process. Within that legislation we're looking at the balanced approach, at making sure we do respect due process and they do have their day in court in the best way possible.

I should refer to people from the Department of the Solicitor General for other comparisons and comments on this.

Mr. Paul Kennedy: If I have taken the question correctly, you're referring to the provisions under the Canada Evidence Act, the certificates—

Mr. Peter MacKay: The certificates of exemption that can be issued by the Attorney General.

Mr. Paul Kennedy: This regime here obviously was designed before that legislation was introduced, because it was in Bill C-16. It's intended to be a comprehensive regime in and of itself, just as section 40.1 under the Immigration Act, Bill C-11, has a regime in it too.

This legislation uses the following technique: if there is evidence going to the judge, and the judge on review looks at it and says—and let's use foreign-source information as an example because it's the classic one we hear about—this is relevant, I have to disclose it to the other side for it to be part of the hearing, for them to hear it. The state counsel at this stage can say, all right, if it has to be heard, because of our international obligations wherein it is not supposed to be disclosed, we'll ask that the information be returned to us and that the judge disabuses his or her mind of it.

In other words, what we've consciously done is said if it has to be disclosed, because of our overriding long-term obligations to continue information sharing, we will take that back. This effectively weakens our case, because the judge won't consider it. This is the option we followed in that particular model instead of an override.

The override provision you have in the Canada Evidence Act deals with a situation where you have a trial judge over here and a Federal Court judge who may order disclosure, for it to be used on the other side. It's at this stage that the Attorney General can file a certificate.

In effect, then, trial judges are given a series of powers to sanction or punish the state for having done this. Amongst their various powers they can say to the crown lawyer who is reliant upon it that they will strike a witness's testimony, stay a particular count, or stay proceedings. No matter how you do it, a sanction is imposed upon the state through recourse to this particular technique.

If that assists...we have used one model. There's the other model. In either case, there's a sanction to the state because the evidence is not used. In our particular case—I know the member is a former prosecutor—it would be akin to a statement that the judge has looked at it and ruled it inadmissible on a voir dire and the evidence is never heard.

Mr. Peter MacKay: It's done in camera.

Mr. Paul Kennedy: That's right. It could be a wiretap application where the judge looks at an affidavit. The source information says you have to disclose the nature of the source. The human source, as a privilege, can't's the privilege of the individual. The state, in that case, has to bear the consequences. Those are the models and principles at play.

Mr. Peter MacKay: I appreciate that further explanation, Mr. Kennedy, and to the minister.

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Even granted that this came from a previous piece of legislation that obviously didn't anticipate the events of September 11, I still submit to you that there is an inconsistency in approach, wherein you're taking the right approach by putting in a safeguard and an oversight capacity to your legislation that doesn't exist in the Attorney General's ministry. I don't expect you to comment on this decision. I'm only pointing it out.

With respect to the practical implications of this legislation—and this may go a bit far afield of the act itself—I would like to ask the minister what new equipment and technology he foresees his department requiring as a result of some of the security measures.

Surely, there will be a necessity in the future to make every effort to coordinate any new equipment or technology that might be put in place at our border—the longest undefended border in the world—to ensure there is a synergy. That is, if we were to have a process where we gave an individual, a Canadian citizen or a landed immigrant, a certain type of card or electronic pass, this process would be comparable to, would work cheek by jowl with an American system, which they may similarly be looking at.

Is this contemplated? Is this something your department is moving towards? Could you give us some indication as to what the future might hold for that type of process?

The Chair: Mr. Cauchon.

Mr. Martin Cauchon: Broadly, Mr. Chair, of course what we will put in place is basically a new vision of the question of managing the customs.

Today we're working based on a transaction-by-transaction system. In our reform we're looking for more a pre-clearance system, and of course technology would have to be involved. As you quite rightly said, we're going to have to work in cooperation with the States. For customs, if harmonization is needed, we'll do it.

As a matter of fact we have already in Ontario what we call a NEXUS program, for example. With NEXUS, people on both sides of the border have access to the very same card. They're using the card when they cross the border. We gave them cards because, after obtaining information from them, we decided they don't represent a high risk for our communities.

So this type of technology will be used. Of course, as you can see, we have already started to go forward with what I call harmonization with the States since NEXUS has come into existence.

Mr. Peter MacKay: And Mexico as well, I suspect.

Mr. Martin Cauchon: I don't know how it works exactly with Mexico, but for the northern border, we have that technology in place.

We have CANPASS on our side as well. They have a type of pass that is a bit like CANPASS on their side, so obviously we're going in the very same direction. We have basically the same vision. We're about to see more use of technology on the land border and also for international airports and seaports.

The Chair: Thank you very much.

Mr. Paradis, you have seven minutes.


Mr. Denis Paradis: Thank you very much, Mr. Chairman. Thank you very much also, Minister, for you presence and your opening remarks. I would also like to congratulate you on your performance since the events of September 11, especially in the areas of customs and security.

My first comment is about the registration of charities. There is a lot of discussion about the means of removing the rights of an organization whose activities are not in accordance with its objectives, but less about doing good audits for the registration. If I worked for an organization whose rights were being taken away, it would probably be easier not to challenge the decision and to re-register my organization under another name. In other words, it would be easier to resubmit or re-register under another name. I would like more explanations about the type of examinations at that level.

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My second comment is about customs. Based on the data, we can see that we intercepted more people at the border who had a criminal record and were trying to enter Canada from the United States than the Americans intercepted people with a criminal record coming from Canada.

The American ambassador, Mr. Paul Cellucci, whom you have met, mentioned in a speech yesterday that if we harmonize our rules in ports and airports, among other things, there would not necessarily be a loss of sovereignty by Canada. We should explore this idea further. If we define a global access plan for North America, we could perhaps get fast-track procedures between Canada and the United States, which would ease commercial transactions that are so disrupted now. I would like to hear your comments on this matter.

My third comment is about the Income Tax Act. It talks about criminal organizations. Let us remember that in the case of Al Capone, the United States used the tax act to beat him in some way. Could the Income Tax Act be useful in our case? These terrorists or terrorist cells are surely not the first to file a proper income tax form but could the Income Tax Act, as it stands, and its application, perhaps be of some use in catching these terrorist cells?

Mr. Martin Cauchon: Your first question is one of enquiry. I will therefore refer it to my colleague.


Mr. Paul Kennedy: It's an excellent question.

Clearly, on organizations deregistered under this, the only effect of our legislation is to take away their status as a charity. Once this is done, the provisions of the Income Tax Act kick in. Then the organization has in effect one year in which to correct its situation. In other words, it has to transfer its assets to another bona fide registered charity.

If it does this within one year, there are no problems. If it fails to do it within the one-year period, there is a penalty imposed equal to 100% of the value of the assets of the charity. You have to bear in mind that the charity accumulated those assets using its charitable status to get tax deductions.

The individuals could clearly go on to try to refashion themselves into another organization. If they create a new organization, they would have to apply for charitable status. If that was their goal, this legislation would apply, because it deals with deregistration but it also deals with new people who are applying. So we'll know who the individuals are.

The other provisions are...if you chose not to come back and apply for charitable status, but wanted to go as a non-profit organization and raise funds that way, then you'd be caught by the provisions of part II.1 of Bill C-36. It deals with entities. An entity is defined on page 12 as “a person, group, trust, partnership or fund or an unincorporated association or organization”.

So if they went on in some other fashion then without charitable status and engaged themselves in the same activities, They would fall afoul of the provisions of terrorist activities and those who are either facilitating, supporting, and doing other activities. If you do that, you can leave yourself open to the civil forfeiture provisions, as well as the criminal provisions of part I of this bill.

Clearly we would be reliant upon intelligence in the possession of CSIS and the police in order to help us identify organizations that did those things, but there are mechanisms here that would capture those activities if they tried to come back and repeat them.


Mr. Denis Paradis: I would like a clarification, Mr. Chairman.

Is there currently a mechanism that is more severe than previously and that is used when someone or some group wants to register and is suspected of terrorist activities? Is there such a mechanism that would allow detection and further questioning?

Mr. Martin Cauchon: Every time an organization makes a request, it is addressing an autonomous agency that makes its own decisions and the minister does not intervene. Obviously there are a certain number of conditions to be met and a certain number of questions to be asked, but what is important here—the question is relevant—is that there is already information on a certain number of organizations from everywhere in Canada. Obviously we are speaking hypothetically because I do not personally have access to that type of information. But it is true that it exists in Canada and elsewhere in the world.

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Currently, we cannot use the information related to charities. The Bill would allow the gathering of information related to charities and the use of that information in the judicial process that we are setting up.

Mr. Denis Paradis: Yes, but I would add a brief point if I may Mr. Chairman. The list of friends of ben Laden has been published. I imagine it came from what we know of these charities, from recordings that you talked about. We don't need the Bill for the people who record new charities to find out about the friends of ben Laden.

Mr. Martin Cauchon: But we need the tool we are asking you for today because the legislation is such that we cannot use, as we speak, the information from SIRC or the RCMP.

Therefore the legislative framework that we are asking for today is necessary despite the fact that the list has been published. It is also necessary because it could happen that the information may come from SIRC or even the RCMP and may not include those organizations yet.

The Chair: Thank you, Mr. Paradis and Mr. Cauchon.

Mr. Denis Paradis: Mr. Chairman, I had asked a question that had two other elements.


The Chair: Well, seven minutes it is.

Mr. Sorenson, three minutes.

Mr. Kevin Sorenson: Thank you, Mr. Chair.

Thank you for coming, Mr. Minister and staff.

I have not a long preamble but three basic questions. First of all, do you foresee a large number of groups losing their charitable status? How big a problem is this?

In the last group of witnesses that were here, we talked about the importance of fundraising for terrorism. We realize that they do a number of things: identity theft, the ones in Fort McMurray with 15 different aliases; credit card theft; credit card fraud; bank fraud; fundraising; and legitimate businesses that are siphoning money into terrorist organizations.

In order to have a charitable status already, it has to be an organization that does a lot of very good, positive things. In other words, there is a criterion for having charitable status. We're talking about taking away charitable status from groups that are involved. If a group highly represented in numbers was part of perhaps a religious organization, and in that organization there is a group of 5, 10, or 15 individuals who are expounding with conviction, or perhaps they're expounding the conviction of that organization, could or would that organization lose its charitable status?

The Chair: Was that your short preamble?

Mr. Kevin Sorenson: Those were two questions, Mr. Chairman, and those are really the ones to touch on first. But the last one would be to the minister.

Do you believe the responsibility of the peace officers or border police, or whatever—we don't have them now—the police officers, should be taken out of your portfolio and put into the Solicitor General's?

The Chair: Thank you, Mr. Sorenson.

Mr. Kennedy.

Mr. Paul Kennedy: I'll handle the first question.

I think ministers, in other instances, had indicated that if you look at our experiences with section 40.1 of the Immigration Act, approximately once or twice per year, or in about 22 instances in the past decade, the provisions have been used to identify someone who has been a member of a terrorist organization and to have them removed from the country. The indication on other occasions was that we expect this to be used with that same kind of strategic advantage.

Part of this will be a prophylactic effect. If you have the powers, people will cease to do things because they know you now have the capacity to do something about it. Currently we don't have the capacity, and they're sheltered from any action by the state.

The other thing, in the example you gave—and I think that's the unique advantage in terms of the tools available to the state—is that part 6 gives the state the ability to recognize the kind of circumstance you've talked about, where you may very well have a religious institution that is carrying on valid social purposes in a community. If you're looking at the provisions under part 1, you would go in and you would freeze and forfeit the assets to the state.

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Under the charities portion of the income tax regime, if the facts allow us to, we can go and talk to some of the people and say, we think you have a problem; try to clean the problem up. The information, though, may be not of a nature that allows us to carry on that kind of dialogue, and ministers then have to have recourse to the certificate.

Once the certificate is filed and the charity is on notice, and assuming it's upheld by the court, the charity then has one year in which to correct its situation. So it could take the assets, which might very well be religious or community buildings, and transfer them to another bona fide charity, and the assets are not touched. All we care about is that those assets not be abused for purposes to fund or support terrorist activities. So it allows them to take those assets and put them under a proper charity and allows that proper community activity to continue.

Within that period of time, if the same organization wished to remain in place, it's also possible to clean house, if I can call it that, and if it has directors or officials in charge who are abusing their status and using it for that purpose, maybe put a new executive in and come back and say, there has been a material change; will you review your action and withdraw your certificate? That is a possibility as well.

Those are the two routes.

The Chair: Thanks you very much, Mr. Kennedy and Mr. Sorenson.

Now, John McKay, for three minutes.

Mr. John McKay: Thank you, Mr. Chairman.

I want to direct a question concerning, if you will, charity chill. The legislation reads:

    83.01(2) For the purposes of this Part, a terrorist activity is facilitated whether or not

      (a) the facilitator knows that a particular terrorist activity is facilitated;

Is it within the realm of possibility that a charity that funds a foreign agent, and in turn unintentionally finances terrorist activities, may itself become unwittingly part of a terrorist group?

I'll use as an example World Vision. World Vision operates in Palestine. Presumably, nothing goes on in Palestine without the knowledge of the PLO or the Hamas, recognized terrorist groups.

A mosque in my riding, for instance, raises funds for relief efforts in Afghanistan. They put the money through an agent in Afghanistan. That agent in Afghanistan has to cooperate with the Taliban. I assume nothing happens without the cooperation of the Taliban in Afghanistan.

Are you casting this net so broadly as to, in effect, chill out what would otherwise be considered to be charitable activities, because these charities, particularly the respectable ones, particularly the good ones, will receive legal advice that they may be caught up in this net? How are you as minister, and you as officials, going to give assurances to those charities that are otherwise legitimate, otherwise doing proper activities, that they should have no fear of this legislation?

The Chair: Thank you, Mr. McKay.

Mr. Cauchon.

Mr. Martin Cauchon: First, as I said, that piece of legislation has been crafted in order to make sure we would give organizations due process, while making sure as well that people wouldn't be able to abuse the system.

Secondly, the item you are referring to is the notion of mens rea. The mens rea is not part of the bill. It's a factual analysis we're making in order to proceed on reasonable grounds with the certificate.

Maybe you could add to that.

Mr. Paul Kennedy: I would just comment that, in my understanding, currently if you are a charity, you have in fact a positive obligation imposed upon yourself to ensure that your assets and activities are not used for other than the strict purposes of the mandate for which you've been given charitable status. So you bear a continuing obligation of due diligence.

My other comment is that you've made reference to the definition of “facilitation” on page 15, I assume. The facilitation aspect there is a definition for that part, part 1, so it gets imported back into terrorist activities.

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What you have to be aware of here is the knowledge element that is talked about for that purpose. You don't know that the organization is going to do a particular act, but you do know you're dealing with a terrorist organization that involves itself in that range of terrorist activities we saw there. So it has to be read that way.

The Chair: Monsieur Bellehumeur.


Mr. Michel Bellehumeur: Minister, a while ago you spoke about the Canadian Charter of Rights and Freedoms with such conviction that my question will be about that.

Everyone we have heard, and even Minister Peterson, has talked about the possibility of abuse. All the other witnesses we have heard up to now say that there are exceptions to certain principles recognized in the Charter: arrest without a warrant; breaking the right not to speak; the increase in electronic surveillance; having one's name put on a list without one's knowledge; the suspension of the Access to Information Act; the new principle of suspicion. We no longer need only a reasonable belief to something will happen; if we have suspicions, we can do this or that. There is therefore a departure from the Canadian Charter of Rights and Freedoms.

Since you are talking to me about the Charter, I will ask you the following question. In the Charter itself, it says that if a parliament uses the notwithstanding clause, it is only for a period of five years. It must be voted on again to remain in force. Therefore the sunset clauses were not invented by the Bloc Québécois. That is known in Canada. Even in the most important law, the Canadian Constitution, there is a provision for a revision every five years of certain departures that a parliament may have put in laws.

Why do we not put such sunset clauses in this class legislation? You are here to represent your government and not yourself as an individual, as though you could have no personal opinions. How can your government refuse to put sunset clauses in certain clauses that allow departures from the rights recognized under the Charter of Rights and Freedoms and not give clear reasons for doing so?

Mr. Martin Cauchon: Mr. Chairman, I believe that the issue was abuse. I have spoken about that and explained it. There is not a single judicial system in the world that can give society a 100% guarantee against abuse. There is always that possibility, in all judicial systems, in all laws. What we are looking for here, and I have mentioned it, is a balance between private and collective interests on the one hand and public security and the protection of certain individuals on the other hand.

Mr. Chairman, I respectfully submit that we have the audacity to claim that what we are doing passes the test of the Canadian Charter of Rights and Freedoms but that what we are doing is aimed at fighting an international scourge and meeting certain obligations we undertook as a result of certain international agreements.

In this context, if we are serious about what we are doing, knowing full well that this Bill respects the criteria of the Canadian Charter of Rights and Freedoms, it is a tool that we should keep as a society, especially since there is a review mechanism in the Bill.

Mr. Michel Bellehumeur: You lack rigor, Minister.


The Chair: Thank you, Monsieur Bellehumeur.

Mr. Maloney.

Mr. John Maloney (Erie—Lincoln, Lib.): Minister, you have more or less 76,000 or so existing charities registered with you. Do you anticipate any initiatives to perhaps review those existing organizations, taking a proactive approach on whether there may be any terrorist connections?

On any new applications, I'm interested to know, do you do CPIC checks of the directors or any cross-references with CSIS or the RCMP on the bona fides of new applications? In the annual filings they have to do with you, do you in fact do spot audits to confirm whether or not their activities are legitimate and that the funds have gone where they should have gone, to the charitable activities.

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Mr. Martin Cauchon: I will pass on to the officials afterwards, but for the first question, they have to table a report on a yearly basis, as you know. In that report they have to provide some information as well. At this point in time, if there's information coming from police forces available, we said that with the legal system we have we actually can't use them.

The aim and goal of this bill is exactly to make sure we're going to be able to use them to refuse registration or simply to deregister an organization, so perhaps there's something else to add.

Ms. Donna Walsh: We do have an ongoing audit program. We audit between 500 and 600 charities a year normally, and those charities are selected on the basis of a number of indicators—some are random-sample selections, some are based on complaints. We review the annual returns, and we do have a system in place to take key factors off the information returns every year.

We also have a proactive approach in terms of trying to make sure that charities understand their obligations under the act. We have what we call a “road show”. We go out to communities all across the country every year and we invite charities from the area to come and attend sessions, to hear about their filing requirements, their general obligations under the act. We try to take that positive approach to compliance as well as to the enforcement end on the audit side of things.

The Chair: Thank you, Mr. Maloney.

Mr. MacKay.

Mr. Peter MacKay: Mr. Maloney has raised a very interesting point. Since everything we've been doing legislatively and otherwise has been concentrated on this renewed effort to combat terrorism, I would like to pick up on what Ms. Walsh has just shared with us. Is there going to be a necessity for more personnel and perhaps the production of a manual for federal and provincial crown attorneys who are involved in the prosecution and the investigation side of this? I know the RCMP have commercial crime units, but I would suggest this is a very specialized area of the law we're now getting into.

Mr. Minister, do you anticipate your department undertaking that effort to produce a manual or to provide any special training, and perhaps additional personnel, for those who are engaged in this effort to ensure compliance and enforcement of these new regulations?

Mr. Martin Cauchon: Do you mean the bill as a whole or the charity division?

Mr. Peter MacKay: I guess I'm asking you under your responsibilities whether or not these additional provisions will require that personnel response, as opposed to just the legislation.

Mr. Martin Cauchon: Mr. Chair, under my responsibility, the question of the charity division, part 6 of the bill, doesn't require any additional resources from other organizations, whether provinces, for example, or territories, because, basically, charity organizations are managed by their departments under the Income Tax Act. It's a special provision.

When we deal with the information within the department it's deemed to be confidential all the time. So I don't foresee any additional need with some stakeholders who could work with us, knowing as well that the information couldn't be provided to other organizations, because we're dealing, as I said, with the Income Tax Act.

Mr. Peter MacKay: I apologize for perhaps not being as direct as I should, but what I'm getting at is an increased diligence in this area of enforcement, of how charitable organizations might be used for an illegal purpose. Will that result in the necessity of the production of either a manual or working closer to train and ensure that police, who will be enforcing this under commercial crime, and prosecutors...will they be given any additional assistance by your department?

Mr. Martin Cauchon: Not from my department.

Mr. Peter MacKay: No?

The Chair: Thank you very much, and now to Madame Allard.

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Ms. Carole-Marie Allard: Minister, last week during the conference on money laundering certain practices by certain people were brought to light that are at the very least debatable, asking for refugee status. We know who these people are since they are making a request. We also know that many of these people disappeared after making the request. We do not know where they are in Canada. The numbers are out.

The Bill does not refer to the Income Tax Act except to target charities. Can we assume that with this Bill the government is increasing its powers to use the Income Tax Act to try and trace these individuals? Could we not try to link them?

Mr. Martin Cauchon: Obviously our audit division is very active. When we allude to a tax question, for example, we always work in terms of risk evaluation, somewhat like in customs. The audit division is re-centering its efforts where there is a higher risk of tax fraud. It is obvious that all this is done on a regular basis.

What is interesting, in terms of the Bill, is that we can effectively use certain tax information very specifically in the case of charities. We will be able to use the tax information before the courts to get a refusal to register or simply a deregistration.

Ms. Carole-Marie Allard: Yes, but I want to know if the Income Tax Act is being broadened simply for the registration of charities or if there are other things that could be done under this act to cross-check information. Therefore, is secrecy under the Income Tax Act still strictly limited to charities?

Mr. Martin Cauchon: I am not sure if I fully understood your question, but under the Income Tax Act it is obvious that a confidential element remains basic: that's section 241 of the Income Tax Act.

Ms. Carole-Marie Allard: We do not affect that with this Bill.

Mr. Martin Cauchon: Under this Bill, we could use the information in a very specific manner to get a refusal or a deregistration.

Ms. Carole-Marie Allard: But it's always related to organizations.

Mr. Martin Cauchon: Essentially, it will provide us with an additional tool. It is related to charities.

Ms. Carole-Marie Allard: Thank you.


The Chair: Thank you very much, Madam Allard.

Mr. Cadman.

Mr. Chuck Cadman: Thank you, Mr. Chair and thank you, Minister, for appearing. I'll take advantage of my opportunity to question you on your responsibility for Customs.

Recently, it was brought to my attention that at Pearson International, during peak arrival times, up to 25% of the front-line staff were essentially university students with just a couple of weeks of training. Also, at many of our land border crossings we have students doing secondary inspections.

Now, this isn't in any way questioning the motivation or the commitment of the employees involved, but in light of what happened on September 11, I think people are expecting a little more experienced and trained staff to be doing our primary and secondary inspections at Customs.

Are there any plans in place to do something about upgrading the experience, having more experienced people at the borders?

Mr. Martin Cauchon: First of all, in light of September 11, I think our reform of the Customs action plan is shown to be even more appropriate in the sense that the vision we put in place prior to September 11 is even more accurate today. As I said, my aim and goal today is to make sure we speed up the implementation of that reform using more technology, and therefore proceeding with a much better risk assessment.

But the question you're referring to is the use of students at the border. First of all, no matter what we do, I would like to tell you that the cornerstone of our organization will always be our customs officers. We need their experience. They've done wonderful work over the past decade. Since September 11, I'm just as pleased with the work they've done for Canada. And today, Mr. Chair, I would like to thank them and congratulate them for the wonderful work they've done.

• 1245

They receive good training, and they get trained on a permanent basis once in a while as well. For example, I referred earlier to the question of official power... They received training then.

On the question of students, we have more than 7,000 customs officers. If you include the student programs, it goes up to a little over 8,000 customs officers.

That program has existed within the department since 1962. It's been a good program, a fantastic program. It provides students with good work experience, and so far what I've heard is that people are quite pleased with the work they're doing. We have to take into consideration as well, Mr. Chair, that some of those students come back year after year throughout the time they spend at university. At the end of the two or three years, they have more experience. As well, they do work under supervision when needed.

Mr. Chuck Cadman: Thank you.

The Chair: Mr. Paradis, for three minutes.

This is the final question.


Mr. Denis Paradis: I would like to return to the point we were discussing earlier, the issue of customs and the access of Canadians to American soil and vice-versa. I mentioned that Ambassador Cellucci had talked about harmonization in his speech. He said there would be no loss of sovereignty if we could come to an agreement with the Americans. Our colleague Manley was in Washington yesterday. He asked what rules we could find to help trade between our two countries. In addition, there are American representatives who have held or will hold public hearings about the American borders.

All this is bubbling at this time. If we could streamline our procedures in ports and airports and harmonize them with those of the Americans without any loss of sovereignty for Canada, there might be a more fast-track way between Canada and the United States.

What is your position on this? Are there now negotiations with the United States and at what point are they?

Mr. Martin Cauchon: Obviously when we talk about the harmonization of certain programs we are not talking about sovereignty. Essentially, when we look at the two customs systems, in the United States as well as in Canada, we see that both countries have exactly the same mandate, even the same objectives.

What is important is to ensure that what we do on our side and what they do on their side serve the same objectives. From that point, I believe that working together we can jointly improve the customs system and be more efficient. For example, we can set up more preclearance systems.

The example I regularly give is the one of a container that arrives at the port in Montréal and that is going to Boston afterwards. If Canadian customs checks it in Montréal, why should it be checked again at American customs?

If we can reach an agreement on the objectives and learn what we do on each of our sides, there could be harmonization. That does not necessarily imply harmonization. There could be times when we develop our own programs. Since we are talking about harmonization, I must say that the NEXUS program that I alluded to earlier is a good example.

For example. In the last few days I have said that the customs situation was almost back to normal in terms of trade volume and is perhaps 10% below what it was before September 11. In terms of passengers, travelers, that is another matter. We are talking about a decrease of about 30%.

Now, as to waiting times, I have always asked people to consult the Web site that we have set up at the Canada Customs and Revenue Agency. When we analyze waiting time and ignore the issue of volume, we can see that things are back to normal at the trade level. If you analyze the waiting time on the Canadian side, you will see that things are going well but that the waiting time on the American side is too long. I think that could make things better.

At this time, my dear member, there are talks between Canadian and American customs to develop an action plan for managing the borders. In addition, I will soon be going to Washington, D.C. to discuss this issue.

• 1250


The Chair: Thank you very much, Monsieur Paradis, Monsieur Cauchon, and officials for assisting us.

Mr. Fitzpatrick has decided that his question was answered, so on that note, I'm going to suspend. We'll be reconvening promptly at one o'clock for our business meeting.

[Editor's Note: Proceedings continue in camera]