Bill C-25: Proceeds of Crime (Money Laundering) and Terrorist Financing Act
Friday, November 10, 2006
Hon. John McKay (Scarborough—Guildwood, Lib.):
Mr. Speaker, as my hon. colleague, the member for Markham—Unionville, has said, we on this side of the House will be supporting the bill. It does improve on the work started by the previous government.
There are some things that have been learned over the course of the application of FINTRAC over the past number of years and the bill does address some of the concerns and loopholes identified by the Senate in its very able report under the chairmanship of Senator Jerry Grafstein. I want to start with a review of one of those recommendations, particularly with respect to the legal profession.
When we had witnesses before our committee, Mr. Horst Intscher showed us a chart of the path of the money. Unfortunately, rules prohibit me from showing members this chart, Mr. Speaker, but you would find it incredibly complex and incredibly detailed, following money from one bank account in Kingston. I am sure there are no terrorist or other kinds of suspicious activities going on in Kingston, but it was just a theoretical possibility that there might be. It follows the money from there to other countries, coming back into our country, going off into a country like the United States, then going off to another country, and then ultimately being used for terrorist-like or terrorist activities. Just following the chart was incredibly complex.
The Senate did a very able report on this legislation and, as I have said, made particular recommendations with respect to the legal profession, which was a bit of a gap in the previous legislation. I think that members on both sides of the House are somewhat satisfied that, with negotiations with the law societies of Canada, we have addressed that gap.
I would like to read for members from the views expressed by the senators:
--in their view, solicitors should be subject to the provisions of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. The Department of Finance told us that it “understands(s) (that the absence of coverage of the legal profession) is a serious gap in (Canada's) regime...Certainly the Auditor General has identified it and reinforced that point.
I want to commend the government for working on this issue. I know that in our government we were continuing to work on this particular issue, because it does pit this against a fundamental right of Canadians to assume that when they consult with their solicitor, their barrister or their legal representative they have a confidentiality that cannot be breached.
The Department of Justice told the committee that this was a great difficulty and that the imposition on lawyers would “fundamentally violate the right to counsel, solicitor-client privilege or even fundamental justice”. The RCMP commented that “the exclusion of the legal profession poses a significant gap in Canada's regime”. The Canadian General Accountants Association said “the biggest mistake made was...when the lawyers were not included”.
All members of the committee and all sides of the House actually agreed with those observations, I think, and in some measure the government has actually addressed that issue in the bill. What does concern me is taking it from 35,000 feet down to the average lawyer's office, so to speak. I will use my own community in Scarborough as an example.
As members know, particularly in real estate offices, lawyers flush a lot of money through their trust accounts over the course of a day, particularly over a heavy closing day. There is still some lingering concern. I hope that as this bill gains experience, so to speak, or some precedents, there will be some fleshing out with respect to what constitutes a suspicious transaction.
I do not recollect whether you practised law, Mr. Speaker, but I did. There were times when people would ask me do a particular transaction for them. Frequently, I did not know them, but they could produce identification.
The newspapers have recently reported stories about solicitors who have been taken in by fraudulent mortgage transactions, and it is a relatively easy thing to do. Let me use Mr. Jones as an example.
Mr. Jones gets a commitment from a bank. His lawyer innocently does what the bank has requested him to do. The lawyer prepares the documents, searches the title, gets the insurance in order, checks the taxes, et cetera. Mr. Jones then signs the documents and the lawyer advances the funds to him. A few months later Mrs. Smith, who is the real owner of the house, finds out that Mr. Jones has put a mortgage on her property and she now owes a huge amount of money to the bank. This is a relatively easy fraud to perpetrate upon the real estate system. The solicitor is just as much a victim as Mrs. Smith. There really is no way the solicitor can know who Mr. Jones really is.
The regime for the FINTRAC legislation contemplates that the lawyer knows his or her client. Having practised law for 20 years, that in theory sounds pretty good. At 35,000 feet that sounds pretty good. However, for a solicitor, that will be somewhat more difficult. The way I read the legislation, the lawyer will have a liability for the kind of transaction I just described to the House, which is fraud. It is a very important fraud to the person who owns the property, but there is no necessary connection to terrorist activities or money laundering or things of that nature. The Ontario government has had to move against these kinds of transactions.
I am a bit from Missouri with respect to so-called suspicious transactions. Suspicious transactions will be in the eye of the beholder. Does a law office get into things like profiling? For example, because a person is from a certain area of the world the lawyer should be more suspicious of the transaction that he or she asks the lawyer to do.
Are we going to get into other kinds of client identification? If an individual cannot produce a birth certificate showing he or she was born in Canada but can produce a resident visa or something of that nature, does this constitute a suspicious issue? Will lawyers be required to know their clients even better? Once the cheque is written by the solicitor pursuant to the completion of the transaction, how will he or she know that money will not be used for terrorist activities? How will a lawyer determine that a transaction is suspicious and needs to be reported?
At 35,000 feet, the legislation sounds like a good idea. Our party, the government and the other opposition parties support it. However, I am a little skeptical about how a solicitor in Scarborough, for example, can sufficiently protect himself or herself against the implications of this kind of transaction. How will the lawyer determine whether an individual or a transaction is suspicious? How will the lawyer determine whether the individual has provided real identification that will enable the lawyer to do a proper reporting?
I work on the assumption that if people are admitted to the bar, they are officers of the court and they have a fiduciary duty to not only their clients but a larger duty to society as well. I also work on the presumption that lawyers are not complicit in these kinds of transactions.
Members of the Liberal Party support the legislation. We look forward to the review of it by our Senate colleagues. We thank them for their work, under the chairmanship of Senator Jerry Grafstein, and appreciate any insights they may have with respect to any parts of the bill.