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Bill C-22, Proceeds of Crime (Money Laundering) Act

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Speaking notes prepared for the
Commissioner's Appearance before
the Standing Senate Committee on Banking, Trade and Commerce

June 7, 2000
Ottawa, Ontario

Bruce Phillips
Privacy Commissioner of Canada
(Check Against Delivery)

Thank you for inviting me to be here today to speak to you about this important piece of legislation.

One aspect of my mandate is to act as Parliament's window on privacy issues. This is the capacity in which I appear before you today. My interest in this legislation is clear; the legislation authorizes the collection, use and disclosure of large amounts of highly sensitive personal information. If passed, the legislation will result in significant amounts of information being made available to law enforcement and government agencies and a corresponding erosion of Canadians' privacy rights.

I appreciate that this is an important piece of legislation that is intended to deal with a serious problem-the laundering of money generated by criminal activities. As laudable as this goal is, I am concerned that it lacks clear rules to protect the privacy of Canadians.

In considering the merits of this legislation I would like you to consider two questions: first is this legislation necessary-is it a major improvement on existing legislation? And second, if you decide it is necessary, are there ways to reduce the loss of privacy that will result from the passage of the legislation in its current form?

On the first point, money laundering is already an offence in Canada under the Criminal Code. Money laundering offences are also found in the Controlled Drugs and Substances Act and of course, we have an existing Proceeds of Crime Act.

We need to keep in mind Canadians do not lose their privacy rights just because they are suspected of a crime. Relying, in part, on section 8 of the Charter of Rights and Freedoms, the Supreme Court of Canada has ruled that people suspected of a crime have "a reasonable expectation of privacy against governmental encroachments." [Queen v. Dyment]

What are the privacy concerns raised by Bill C-22?

Banks, trust companies, insurance companies, credit unions, investment counselors, other organizations providing financial services, and even casinos, are required to report "every financial transaction" where there are "reasonable grounds to suspect that the transaction is related to the commission of a money laundering offence." What are these reasonable grounds? We don't know-they are not part of the legislation. The legislation requires businesses and individuals to make subjective and speculative assessments of the character and activities of their clients without providing any statutory or regulatory guidance about what constitutes reasonable grounds.

In fact, the legislation encourages over reporting of information. Given that organizations and individuals required to report suspicious transactions can be fined as much as $500,000 and imprisoned for up to six months, reporting organization are more likely to err on the side of submitting too much information. The lack of clear definitions of "reasonable grounds" and "suspicious transactions" invite excessive reporting and increase the likelihood that innocent citizens will have their privacy invaded.

The organizations required to collect and report this information will forward this to the Financial Transactions and Reports Analysis Centre (the Centre) without the client's knowledge or consent, on the basis of these as yet undefined suspicions. In some cases this information will never be used for criminal investigation purposes. We believe that without convincing evidence that notification of purpose would seriously undermine the reporting scheme, clients should be informed of the likelihood that their personal information may be transferred to the Centre.

Clause 54(b) of the Bill provides that the Centre may collect personal information "relevant to money laundering activities". Again, as in the case of reasonable grounds, the legislation does not attempt to define "relevant". This suggests that the Centre could amass information relating to an individual's employment history, income, professional relationships, travel patterns, in addition to the information provided by financial institutions and other organization covered by the legislation. The legislation allows the Centre to collect information to create a comprehensive profile of an individual's life and behavior.

We object to the breadth of the information which the Centre is mandated to collect and use. We believe that the types of information considered relevant to the proper assessment of whether a given transaction is suspicious, as well as the sources of those data elements, should be specified in statute or regulation. One of the fundamental principles underlying both the Privacy Act and the new Personal Information Protection and Electronics Documents Act (PIPED Act) is that organizations should only collect as much information as needed. The legislation needs limits.

The establishment of the Centre as an arm's length agency, subject to the Privacy Act, is certainly preferable to having the reporting organizations disclosing information directly to law enforcement agencies. However, the protection afforded by the Privacy Act is diluted by C-22. The public's ability to lodge complaints and the Commissioner's power to investigate complaints will be meaningless given the secrecy surrounding the collection of information by the Centre. As a result of this secrecy members of the public will not know that information is being collected about them or that they are being investigated.

Nor will citizens be able to use the Privacy Act or the PIPED Act to determine if information has been collected about them. Although the Centre is expressly subject to the federal Privacy Act, we have been informed that the Centre will routinely deny access requests pursuant to section 16 or subsection 22(1)(b) of the Act. As well, C-22 amends the PIPED Act to prohibit private sector organizations from informing individuals that they have provided information to the Centre. Without evidence of harm, access to personal information should not be denied to an individual as a matter of course.

Section 55 authorizes the Centre to disclose designated information to law enforcement organizations, the Canada Customs and Revenue Agency and other bodies without a warrant. However, 55(7) gives the Minister the authority to add to this "any other similar information that may be prescribed." This poses the risk that the Centre could simply become a conduit through which other information could be channeled to law enforcement bodies, circumventing the controls normally applied to the collection of evidence in criminal investigations.

In summary, our concerns about Bill C-22 relate primarily to four issues:

  • The lack of statutory or regulatory guidance about what constitutes "reasonable grounds" and "suspicious transactions". These terms should be defined in the legislation or in regulations, not in guidelines developed on an ad hoc basis between the Centre and interested parties.
  • The scope and the quantity of the information the Centre is authorized to collect. Again, "relevant" information should be defined in the legislation or in regulations.
  • Citizens should not lose their rights under the Privacy Act or the PIPED Act unless it can be clearly demonstrated that informing them that information may be sent to the Centre or that giving them a right of access would jeopardize the intent of the legislation.
  • Finally, we are concerned about the possibility that the information provided to law enforcement bodies will be expanded. The information made available must be kept to a minimum.

In the Supreme Court decision mentioned above, Justice La Forest stated "the restraints imposed on government to pry into the lives of the citizen go to the essence of a democratic state.. where privacy is outweighed by other societal claims, there must be clear rules setting forth the conditions in which it can be violated. This is especially true of law enforcement, which involves the freedom of the subject." What I am asking you today to ensure that Bill C-22 contains clear rules. If you feel that this legislation is needed then I urge you to ensure that it contains clear rules that minimize the intrusiveness of the legislation.

Thank you

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