Presentations and Speeches

Notes for Remarks by Mr. Horst Intscher Director, Financial Transactions and Reports Analysis Centre of Canada, to the Second Public Private Sector Summit on National Security

Ottawa
May 10, 2006
 

Detecting and Deterring Money Laundering and Terrorist Financing

Thank you Margaret. It's my pleasure to be here today to speak about a subject close to my heart. And let me welcome my former colleague, Ray Protti, back to Ottawa. I also want to say how pleased I am that Mr. Donahue is here to share with us his experience in the United States financial sector.

I have been asked to speak about detecting and deterring money laundering and terrorist financing. It is a broad and complex subject, so, in the limited time available to me, I will try to give you an overview of the progress Canada has made in the last several years and then give you a glimpse into the future.

First off, there are two key goals underpinning Canada's anti-money laundering and terrorist activity financing program. They are detection and deterrence. I will deal with these two concepts separately, and present the case that Canada has advanced remarkably in both areas, effectively changing the climate in this country much for the worse for those that would undertake financial crime.

In a word, it has become harder to launder money in Canada than it was six years ago — quite a lot harder.

Since 2000, Canada's anti-money laundering initiative has undergone tremendous change for the better. A great deal of credit must go to Canada's banks, credit unions and others in the financial services sector.

I am pleased to have this opportunity to single out their sterling contribution and compliment them for the great efforts they have made on both the detection and deterrence fronts.

The national initiative to combat money laundering and terrorist financing continues to be carried forward by the committed participation of the financial services sector. Working with law enforcement, regulators and government agencies such as ours, their contribution has fostered greater integrity in our financial sector and made it considerably more difficult for criminals to launder the proceeds of crime.

I am referring to the way financial transactions take place and the level of vigilance that has been added in a variety of business sectors. Deterrence is a big and under-appreciated part of the anti-money laundering regime, and it begins at the front line, where the transactions take place. Client identification is more thorough and rigorous. Many financial transactions, such as large cash transactions and electronic funds transfers over $10,000 now have to be reported.

These changes have resulted in both clients and transactions being scrutinized much more closely, thus making it more difficult for crooks to gain access to the financial system for their illicit purposes. These changes have also driven a continuous growth in the number of transactions reported to FINTRAC.

Detection of financial transactions linked to criminal activity is an obvious objective for us. By receiving financial transactions from many sectors and regions, FINTRAC has a unique capacity to carry this out. By drawing together many sources of information, we are able to detect activity that might otherwise have gone unnoticed. It is this that allows us to see farther and to see more clearly the unusual patterns of financial activity.

The results of our analysis and data matching are brought together by FINTRAC as a package of financial intelligence that is disclosed to police, or to CSIS, or to other financial intelligence units around the world, shedding light on new targets and larger networks of suspected criminal activity.

Here is an interesting and unknown statistic concerning these reports that illustrates why countries need financial intelligence units. Nearly half our case disclosures to police involve suspicious transactions reported by two to five separate financial entities. Another quarter involve between six and 10 entities on average. Criminals try to spread their activity across several, and sometimes more than 15 financial entities in an attempt to disguise their laundering activity.

In last year's Annual Report, FINTRAC reported that its output of financial intelligence increased in both the size and complexity of the cases that we disclosed to law enforcement and to CSIS. In 2004-2005, we disclosed 142 cases where we suspected money laundering, terrorist financing or other threats to the security of Canada. The total value of the transactions involved in these 142 cases was just over $2 billion.

FINTRAC's disclosure cases are often large packages of financial intelligence that, on average, involve the financial activity of 7 individuals and 5 businesses, carrying out 136 transactions worth more than $14 million. While there is no typical case, this should give you an idea of the size and scope of an average disclosure. Some are remarkably large, 7% of FINTRAC's disclosures involved transactions valued in excess of $50 million per case.

FINTRAC's contributions of financial intelligence are sometimes on the margins of investigations, sometimes they are significant and sometimes they are central. Feedback we receive from law enforcement and CSIS indicates that the financial intelligence that FINTRAC provides them can identify new suspects in existing criminal investigations. It can identify hidden assets that have been derived from crime. It can also break new ground and trigger an investigation.

Regardless of how it is used, I am pleased any time that our intelligence is of value to investigators. Ultimately, the credit for any successful investigation belongs with the investigators that carry them out.

I am conscious of keeping to my time limit out of respect for my colleagues, but let me say just a few words about terrorist activity financing, which differs from money laundering and which has been part of our mandate since 2002.

I believe that drawing attention to the financial component of terrorist activity can shed much needed light on the organizational structure of terrorist groups, the means and extent of their support and, possibly, their operations. Financial intelligence on terrorism can shed light on the relationships and the networks of people that may have been previously unknown or only partly known. It can provide a perspective that is not readily available from other forms of intelligence.

Most importantly, it can complement these other forms of intelligence, giving CSIS and the RCMP another piece of the puzzle, providing new leads, revealing linkages and verifying suspicions.

As the international community collectively grapples with identification of terrorist activity financing, Canada is being sought out for its insight and its knowledge in this area. Financial intelligence units in other countries have recognized that we have three key strengths: our technology, our analytic technique and, perhaps most important, our collaborative relationship with the financial services sector and with law enforcement, CSIS and others.

To conclude, let me note that the Government does not intend to stand still. Looking to the future, as stated in the Federal budget just tabled, Canada's anti-money laundering and anti-terrorist financing regime needs to evolve to meet enhanced global standards and risk. The budget devoted considerable increased resources to FINTRAC, the RCMP, the Canada Border Services Agency and the Department of Justice to increase capacity.

At the same time the Government announced it would be introducing legislation to make the necessary enhancements to the regime. This is great news. And this is essentially the common approach across the G-7 states. Together, we will continue to create an environment in Canada and around the world that is increasingly hostile to money laundering and terrorist financing.

Thank you for your attention.