Fare thee well, Canadian Financial Crimes Agency

Canada's fall economic statement

Hello, Insight Monitor subscribers! Welcome to the hundreds of new subscribers and followers we’ve picked up over the last few days. I’m not sure where you’re all coming from, but welcome! Here, we talk about global security and money a lot, so I hope you’re interested in that. Today, I’m doing a quick overview of the security and illicit finance components of Canada’s fall economic statement. I include an assessment of whether we’ll see some of these promises come into force. Please have a read, and share this with a friend to help grow our community!

This week, the Government of Canada unveiled the Fall Economic Statement. There was some unusual drama: the day the statement was set to be released, the Minister of Finance (Chrystia Freeland) abruptly resigned from Cabinet. The statement was also much delayed: it has traditionally been released (for the last few years, anyway) in November. We were starting to wonder if we would see one at all this year. There was also some other drama that would have been funny if it weren’t so telling about the state of governance in Canada.

Photo by Caio Fernandes on Unsplash

Anyway, I finally tracked down the full text of the FES and had a read-through with an eye on security issues. The top line was money ($1.3 billion) allocated to securing Canada’s border with the US, directly responding to President-elect Trump’s concerns. Few details were released in the FES, but we’ve since learned that the plan will involve artificial intelligence tools, detector dogs, aerial intelligence, and a chemical detection tool. Part of the border plan also includes action against illicit finance, which I’ll get to now.

Editorial comment: I’ve been disappointed with the government’s inability to seize on Trump’s comments as a means to shore up our fight against illicit finance. While the border has been the focus, the profits from the fentanyl trade are a huge money laundering concern in Canada, as are the proceeds of crime from all kinds of organized crime. Trump’s comments created a policy window to advance serious change in Canada’s ability to fight financial crime. But that window won’t be open forever….

Elections Canada to receive FINTRAC information

One of my recommendations to the Public Inquiry into Foreign Interference was included in the FES: to have Elections Canada become a disclosure recipient for FINTRAC. This will close a gap in our foreign interference financing framework by helping Elections Canada detect foreign money donated to political candidates in violation of Canadian law. This is a minor tweak to our FI framework but one that helps rationalize the responsibilities for foreign interference disruption in Canada with reasonable capabilities.

Bigger Fines for Non-Compliance

The government will also significantly increase the administrative monetary penalties (40x!!) administered under our anti-money laundering act. This would allow FINTRAC to administer monetary penalties up to 40x in size.

For instance, instead of facing a $9 million fine, TD Bank could face a $360 million fine. While nothing compared to the US's billion-dollar penalties, this is far more meaningful than our current framework. This is, however, limited to either $20 million or 3% of gross worldwide profit.

There are other proposed enhancements to FINTRAC’s powers and greater criminal liability for serious non-compliance also in the FES.

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The missing link: Canada’s Financial Crimes Agency

In recent budgets and fall economic updates, Canada has received updates on this promised agency (it was part of the Liberals' platform in the last election). This fall, it's missing entirely from the FES. This is deeply disappointing. Canada desperately needs ring-fenced funding, resources, and expertise to combat all kinds of illicit finance. While there are several different models that such an agency could adopt, I was hopeful that we’d see something sustainable. It’s unclear what’s happening with this, particularly given the political turmoil in Ottawa.

Will these changes be adopted?

Some of these promises require new money, and others require legislative amendments (particularly to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. This would require the House of Commons to pass a bill. Given the state of Canadian politics today, I have doubts about that happening anytime soon. On the other hand, many of these are fairly straightforward amendments, so it’s possible that the House could be convinced to vote them through. Further, I also think that the next government will likely pursue these changes. Much of the policy work has likely already been done, and there’s a strong non-partisan case for strengthening Canada’s fight against illicit finance. (And the FATF mutual evaluation starts next year, and that’s a train that can’t be stopped, regardless of who is in power in Ottawa.) These changes will be implemented as soon as Canada has a government willing to govern.

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