Criminal finance a focus of budget

Mar 29, 2023

Despite the fact that national security concerns have figured prominently in federal politics lately, notably alleged Chinese interference in Canadian electoral processes, it didn’t rate a single mention in Finance Minister Chrystia Freeland’s March 28 budget speech. However, other security measures were buried within the 255-page main budget document.

A proposed National Counter-Foreign Interference Office within Public Safety Canada would get $56 million through to the 2026-2027 fiscal year. Relatively petty cash in the context of $2.3 billion in expected total program spending over the next five years, most of it would be allocated to the RCMP within the first four years – to tackle interference, threats and covert activities.

The government also wants to give the Office of the Superintendent of Financial Institutions (OFSI) more authority to determine whether Canada’s banks “have adequate policies and procedures to protect themselves against threats to their integrity and security, including protection against foreign interference.” Proposed legislation would broaden the OFSI’s authority to take control of a bank “where the integrity and security […] is at risk, where all shareholders have been precluded from exercising their voting rights, or where there are national security risks.”

Amendments to Proceeds of Crime (Money Laundering) and Terrorist Financing Act would give the Finance Department “enhanced due diligence” to protect the domestic financial system against security threats. They also would enable the Financial Transactions and Reports Analysis Centre (FINTRAC) to share intelligence analysis with the Finance Minister when banks face national security or financial integrity risks.

Another amendment would expand the range of circumstances in which the OSFI could take control of a bank, including situations of national security or even where shareholders’ voting rights are at stake.

On a related note, other amendments would beef up the government’s programs to counter money-laundering used to fund terrorism. This evidently flows from an internal assessment the budget document says not only “found weaknesses in how departments share information” but also the fact that few prosecutions were pursued as well as “gaps” in how the rules apply to lawyers.

Money laundering and terrorist financing can threaten the integrity of the Canadian economy, and put Canadians at risk by supporting terrorist activity, drug and human trafficking, and other criminal activities. Taking stronger action to tackle these threats is essential to protecting Canada’s economic security.

The plan to improve investigation of money laundering flows from a June 2022 report by a British Columbia government’s commission of inquiry, headed by Austin Cullen, Associate Chief Justice of the provincial supreme court. The federal government was among the participants in the inquiry which heard from 199 witnesses from the gaming, legal, accounting, labour and real estate and other sectors in 133 day of hearings.

The inquiry found that casinos in Vancouver, Las Vegas and Macau had been involved since at least 2009 in channeling funds into Vancouver from transnational Asian crime syndicates through Chinese banks. Laundered through gambling, the flow was stemmed only when new federal regulations took effect in 2015.

The commission said that the head of the B.C. Lottery Corporation and the province’s finance department had disregarded federal anti-money laundering rules by raising visiting Chinese high-roller betting limits so as to maximize casino revenues. That “senior-level intervention” in the rules came to light in 2015 when David Eby, now the province’s Premier, was a New Democratic Party opposition critic in the legislature.

Cullen’s first interim report, in December 2020, noted that the federal government had obstructed commission lawyers’ access to key records and that any which were provided were “redacted to the point that they provide no meaningful information.” Cullen also noted that the commission was not allowed to interview federal prosecutors involved with FINTRAC, evidently due to a complex web of federal legislation amended over two decades.

“The federal regime in Canada has encouraged defensive reporting, a practice under which reporting entities err on the side of making a report wherever there is some uncertainty,” Cullen said in his final report. This has led to high-volume, low-value reporting…. On a per capita basis, reporting entities in Canada submit 12.5 times more reports than similar entities in the United States, and 96 times more reports than those in the United Kingdom.

Stating in the 2023 budget document that Cullen’s final report had “highlighted major gaps in the current […] regime, as well as areas for deepened federal-provincial collaboration,” the federal government clearly wants to consign that conflict to the history books.

“Between measures previously introduced and those proposed in Budget 2023, as well as through consultations that the government has committed to launching, the federal government will have responded to all of the recommendations within its jurisdiction in the Cullen Commission report.”

Ken Pole