Chair and Members of the Committee, thank you for inviting us to be here with you today to contribute to your review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). On behalf of our member banks we welcome this opportunity to provide you with our comments on this important piece of legislation.

My name is Bill Randle, and I am the Assistant General Counsel of the Canadian Bankers Association. With me today is Stephen Harvey, Vice President and Chief Anti-money Laundering Officer with CIBC. Mr. Harvey is also a member of the of Finance Department’s Public/Private Sector Advisory Committee and has been actively involved in the development of the international Anti-Money Laundering /Anti-Terrorist Financing (AML/ATF) Standards established by the Financial Action Task Force (FATF).

Canada's AML Regime was established in 2000, with the ATF mandate being added in 2001. From the beginning, the financial industry has worked closely and co-operatively with the Department of Finance, law enforcement agencies and the Financial Transactions and Reports Analysis Centre (FINTRAC) on the development and implementation of the AML/ATF Regime. All of our member banks have enterprise-wide policies covering AML and ATF, including key elements such as Client Due Diligence, also known as “know your customer,” and the reporting of large cash transactions, electronic funds transfers and suspicious transactions. These policies are designed to help protect the safety, soundness and reputation of the Canadian financial system and ensure compliance with Canada's legislation and with the various anti-money laundering laws and regulations in any foreign jurisdiction in which they operate. We welcomed, therefore, the comment by FINTRAC officials when they appeared recently before this Committee that “the banks are actually doing a very good job and have a very strong regime of compliance in place.”

As the Committee is aware, the Department of Finance has recently released for comment two Consultation Papers, the first in November and the second last December, and though the content of both papers is at a high-level, the CBA has provided detailed comments. We recognize that one of the primary goals of the proposed changes is to ensure Canada is in compliance with the evolving international AML/ATF standards, as established by the FATF. We also accept, and support, the desire of the Canadian Government to safeguard the international reputation of Canada’s financial system and institutions, and promote their continued integrity and strength. We note, however, that to achieve this objective, Canada’s financial institutions need to be able to operate and compete on a level playing field in an increasingly global economy.

In the second Consultation Paper it also states that:

“The proposals in the Consultation Paper seek to maintain the balance between the need to deter and detect money laundering and terrorist financing activities while protecting the privacy rights of Canadians. The Government also recognizes the need to minimize the compliance burden on the private sector. “

We are pleased that the government acknowledges that the existing AML/ATF Regime imposes a regulatory burden on reporting entities and that there is a need to continue to protect the privacy rights of Canadians. A balance must be maintained between implementing further measures to deal with money laundering and terrorist financing, and the incremental costs of complying with new requirements, given the significant costs and operational burdens caused by the existing requirements. Any new measures should not place undue or unnecessary incremental burdens on reporting entities, and must not undermine the risk-based approach that is generally accepted to be the fundamental principle of the Canadian AML/ATF Regime. In addition, it is important to allow flexibility in the requirements, both today and in the future.

We also want to take this opportunity to raise one specific matter. In our view consideration needs to be given to permitting FINTRAC to disclose information to reporting entities. The Act and Regulations currently include provisions to address the exchange of information among Government of Canada departments and agencies, including FINTRAC and law enforcement, and there are proposals in the second Consultation Paper that are intended to expand upon those existing disclosure provisions. Neither the current legislative regime, nor any of the new proposals in the Consultation Paper, makes any specific provision for the sharing of information between financial institutions, or between FINTRAC and reporting entities. We believe the government should consider allowing enhanced disclosure in these areas.

Current privacy legislation, with limited exceptions, restricts the disclosure of personal information without the knowledge or consent of the client. This situation makes it challenging for the financial system to effectively restrict a customer, who is considered to present higher risks for money laundering or terrorist financing activity, from having access to services. If one financial institution, for instance, believes that one of its customers may be involved in such activities, and accordingly terminates its relationship with the client, there is virtually nothing that prevents that client from obtaining the exact same services from another financial institution.

By creating measures that would allow for the sharing of information between financial institutions, the AML/ATF Regime as a whole would be strengthened. We recognize, however, that safeguards are required and, therefore, any measures taken to enhance information sharing clearly will need to be balanced with legitimate privacy concerns.

Finally, we wish to note, that once the new amendments are finalized, reporting entities will need sufficient time to make the internal changes that will be necessary to ensure full compliance with the new and revised AML and ATF requirements. This will mean that operational processes, employee training and computer systems will have to be updated and new policies and procedures will have to be developed. All stakeholders, therefore, will need a transition period to implement system changes before the new requirements come into force.

In closing, we would like to reiterate the strong support of the banking industry for the AML/ATF Regime. We are pleased to have an opportunity to work cooperatively with the government and parliamentarians to ensure that Canada’s AML and ATF system is thorough and effective. Thank you once again for providing the CBA with this opportunity to offer our views. We would be pleased to answer any questions.