FAAE Committee Report

Supplementary Opinion of the Conservative Party

Conservatives support the Committee’s Report but wish to add the following observations and recommendations not captured in the Report.

Sanctions enforcement intersects with anti-money laundering and anti-terrorist financing enforcement. Canada’s sanctions regime is not as effective as it could be because of gaps in the legal framework related to money laundering and terrorist financing.

One gap is the exemption of lawyers from mandatory reporting requirements regarding suspicious financial transactions set out in federal legislation. This poses a significant threat to Canada's ability to combat sanctions evasion.

In February 2015, the Supreme Court of Canada struck down[1] provisions of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act on the grounds the legislation infringed on lawyers’ duty to their clients. The provisions required lawyers to collect and report suspicious financial activity involving their clients to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).

The Government of Canada declined to respond to the Court’s ruling by introducing constitutionally compliant legislation to amend the Act and subject lawyers to the mandatory reporting requirements. Instead, the legal profession’s self-regulatory bodies were allowed to create and implement anti-money laundering and anti-terrorist financing rules the profession.

These rules governing lawyers are not detailed and rigorous enough to ensure sufficient scrutiny of clients’ financial transactions relating to money laundering and terrorist financing. Several reports have highlighted the problems with the legal profession’s rules concerning money laundering and terrorist financing, including reports from the Financial Action Task Force,[2] the Department of Finance[3] and the Cullen Commission.[4]

Therefore, Conservative members on the Committee make the following recommendation:

That the Government of Canada introduce constitutionally compliant legislation to amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to subject lawyers to the mandatory requirements of the Act and require them to report suspicious transactions to FINTRAC.

The other gap in Canada’s sanctions regime concerns FINTRAC’s legislated mandate. The Committee heard that FINTRAC’s mandate limits it to undertaking an analysis of sanctions evasion only where that evasion intersects with money laundering or terrorist financing activities. This limited mandate restricts the ability of FINTRAC to identify sanction evasion trends, typologies and indicators that would be helpful in sanctions enforcement.

Therefore, Conservative members of the Committee make the following the recommendation:

That the Government of Canada introduce legislation to expand the mandate and legal framework of FINTRAC to allow it to better counter sanctions evasion and the financing of threats to national and economic security.