VZCZCXRO9579
RR RUEHGA RUEHHA RUEHQU RUEHVC
DE RUEHOT #2149 1952127
ZNR UUUUU ZZH
R 142127Z JUL 06
FM AMEMBASSY OTTAWA
TO RUEHC/SECSTATE WASHDC 3167
INFO RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCNCAN/ALL CANADIAN POSTS COLLECTIVE

UNCLAS OTTAWA 002149 
 
SIPDIS 
 
DEPT FOR WHA/CAN AND INR 
 
USDOC FOR 4310/MAC/ONA 
 
TREASURY FOR IMI (HOEK) 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PGOV CA
SUBJECT:  CANADA PLANS STRONGER LAW ON MONEY LAUNDERING AND 
TERRORIST FINANCING 
 
 
¶1. (U) SUMMARY/INTRODUCTION:  The GOC plans to introduce legislation 
this fall designed to tighten its protections against money 
laundering and terrorist financing.  The bill could allow greater 
information sharing by GOC tax and financial agencies with law 
enforcement, features which will no doubt be criticized by Canada's 
privacy advocates.  The new law is also likely to provide for closer 
monitoring of traffic in gems and precious metals (Canada is a 
leading producer of diamonds and gold). 
 
¶2. (U) U.S.-based financial services firms have complained to 
Embassy and others about the GOC's plans to introduce "know your 
customer" rules, which they say could impede the business of 
"non-face-to-face" credit card issuance.  END SUMMARY/INTRODUCTION 
 
¶3. (U) BACKGROUND:  Toronto was recently selected to host the 
secretariat of the Egmont Group, which coordinates international 
 
SIPDIS 
anti-money-laundering (AML) and anti-terrorist-financing activities. 
 The GOC will provide C$5 million to fund the secretariat's initial 
establishment in Toronto.  This month, Frank Swedlove, an Ottawa 
native and  former senior official responsible for financial 
services sector policy in the GOC's finance ministry, assumed the 
presidency of the international Financial Action Task Force (FATF). 
Also, Canada recently became a full member of the Asia/Pacific Group 
on Money Laundering, where it had held observer status since 2000. 
 
¶4. (U) FINTRAC:  The GOC's financial transactions monitoring agency, 
known as FINTRAC, collects and analyzes reports from financial 
institutions and intermediaries.  FINTRAC identifies suspicious 
transactions and passes on its intelligence to law enforcement 
agencies, intelligence agencies and/or FINTRAC's counterparts in 
other countries.  These flows of information are somewhat 
constrained by Canada's privacy laws and policies. 
 
¶5. (U) NEW LEGISLATION:  The GOC's Finance Ministry confirmed on 
July 7 that it "is planning to introduce legislation at the earliest 
opportunity that will improve monitoring and enforcement and 
strengthen FINTRAC's intelligence efforts."  While such legislation 
has been in the works since before the election of the present 
Conservative Party government in January, the next opportunity to 
bring a bill forward is when Parliament resumes on September 18. 
 
¶6. (SBU) "KNOW YOUR CUSTOMER":  Embassy has heard in recent months 
from U.S.-based financial services firms whose business includes 
"non-face-to-face" issuance of credit cards by mail, phone or 
online.  These firms are concerned that the GOC's new legislation 
will include rules requiring greater verification of customer 
identity, undermining their business models.  Embassy has so far not 
raised these concerns with the GOC, since (a) the firms appear to 
have abundant direct access to the Finance Ministry and 
Parliamentarians, (b) influential Canadian-based businesses share 
their complaints, and (c) we are reluctant to interfere with what 
otherwise appears to be a laudable legislative initiative. 
 
¶7. (SBU) OTHER MEASURES:  Information gleaned from contacts and 
various reports suggest that the GOC's bill could include measures 
in the following areas: 
 
-- REPORTING ENTITIES:  A wider range of entities (i.e. outside the 
financial services, insurance and real estate sectors) could be 
required to report certain transactions to FINTRAC.  Contacts say 
that players in the gem, precious metal and jewelry businesses are 
likely targets.  FINTRAC tells us that it would eventually like to 
Qlikely targets.  FINTRAC tells us that it would eventually like to 
cast the net still more widely (e.g. to dealers in works of art and 
motor vehicles), but that it is reluctant to see its mandate expand 
more quickly than its resources. 
 
-- FINTRAC DISCLOSURE RULES:  The list of data items that FINTRAC 
may disclose to law enforcement and international partners could be 
expanded somewhat.  While this list is identical for Canadian law 
enforcement and for international counterparts, and while it 
currently covers a wide range of data about each suspicious 
financial transaction, it does not include certain "personal" 
information such as the players' telephone numbers.  FINTRAC 
contacts note that, at least where such data can be obtained through 
open sources anyhow, FINTRAC should be allowed to disclose it. 
 
-- CHARITIES' REVENUE DATA:  A GOC consultation paper on this issue 
also suggests that Canada's income tax law be changed in order to 
allow Canada Revenue Agency to share data on registered charities 
with law enforcement officials. 
 
WILKINS