Jessica Davis: The entirely new police force that Canada rather quietly unveiled
Everything you wanted to know about the financial fraud fighters but were afraid to ask.
By: Jessica Davis
Something rather remarkable happened in Canada last month. Mark Carney’s government tabled legislation to establish a new federal police force in Canada. Bill C-29 lays it out explicitly, saying: “This enactment establishes the Financial Crimes Agency as a specialized federal law enforcement agency whose mandate is to investigate financial crimes and to contribute to the recovery of proceeds of crime.”
If you’re wondering why Canada needs a specialized police force to tackle financial crimes, it’s because Canada has a $44 billion financial crimes problem. Annually, that is. This is the value of transactions that FINTRAC, Canada’s financial intelligence unit, provided in its most recent publicly available estimate. These transactions were all disclosed because FINTRAC had reasonable grounds to suspect that they would be relevant to a money laundering or terrorist financing investigation. Now, that’s not to say that all of those transactions were, technically, money laundering or terrorist financing. Some almost certainly were not; but FINTRAC deemed them relevant to an investigation, and they are our best estimate of the scope of the financial crime problem in this country. If these transactions contributed to Canada’s licit economy, they would be in the top 20 industries in Canada. (Yes: there is a lot of nuance required to really understand these numbers, and I suggest you read my analysis of that here.)
The creation of the agency might also be, in part, driven by Canada’s ongoing review by the Financial Action Task Force (FATF), the global standard-setter for anti-money laundering and counter-terrorist financing. Unfortunately, the agency is being established too late to meaningfully contribute to that evaluation (where we are likely to get poor marks for demonstrating effectiveness at combating money laundering and terrorist financing). At the same time, it will be useful to be able to point to during any follow-up visits by FATF and to help address any concerns the review raises (of which I’m sure there will be many).
The agency is also being established because the RCMP, which has historically been responsible for these investigations, has proven ineffective. This is due to many reasons: a lack of leadership and interest in financial crimes, structural issues like the resource draw that contract policing has on the force, and the prioritization of “threat to life” investigations (which there are certainly many, particularly in today’s threat environment). Many other challenges (cultural, legislative, and financial) have also contributed to a lack of outcomes from Canada’s anti-money laundering and counter-terrorism financing regime. The agency will solve some, but not all, of these problems.
But while it may have seemed to have dropped out of nowhere as part of a spring economic update, this agency has been in the works for years. It was first announced as part of the Liberal Party’s platform in 2021. Since that time, policy work has been ongoing (I’ve contributed to some of it), debates have been had, and ultimately, choices about structure and mandate were made, resulting in the introduction of Bill C-29 in late April.
What I think is really telling is that, even as the government cuts back the public service significantly, it is willing to invest $352-million, over five years, to stand up an entirely new agency. This illustrates the importance of tackling this issue.
There remain many unknowns, but two key documents that tell us about the new agency: the bill itself, and the spring economic update.
So far, we know it will be a federal law enforcement agency focused on money laundering, serious fraud, major capital market crimes, and the recovery of the proceeds of crime. The legislation is broadly drafted to allow the agency to investigate any financial crimes, so the agency’s focus could shift over time.
Financial crimes are any offence under an act of Parliament relating to financial assets (including digital financial services or markets), including laundering the proceeds of crime, and the security or integrity of Canada’s economy or financial system. This includes the Criminal Code of Canada, but also the Proceeds of Crime Money Laundering and Terrorist Financing Act, as well as many other acts.
The Minister also has the power to direct the Commissioner of the Agency, and this direction is to be made public. Ultimately, the Commissioner establishes what matters should be investigated, but at the direction of the Minister.
The agency will focus on investigating serious and complex financial crimes and on participating in international efforts to counter financial crimes. This is an important precision: this does not sound like the agency will just take on all financial crime files in Canada. Instead, it will be focused on the most serious and complex crimes, most of which will have an international component and require partnerships across jurisdictions. This is also important: international investigations are complex (and time-consuming), so developing this expertise will be a skill in and of itself.
The agency will be headquartered in Ottawa, but could have offices across Canada. Again, regional representation and integration with local police forces will be critical for ensuring that files are successfully transferred to the new agency and that knowledge and skills are not lost. Having regional representation might also help facilitate the recruitment of skilled investigators and professionals, an area that is likely to be a significant challenge for the new agency.
There is also a provision for the RCMP to provide services and assistance to the new agency. This will be critical: many — most? — of the agency’s files will come from the RCMP. The RCMP also provides specialized police services (such as training, forensic science, and other services) to many police forces in Canada, and presumably, the Financial Crimes Agency will also need some of these services.
In terms of its relationship with FINTRAC, because the agency is being established as a law-enforcement agency, it will automatically be able to receive disclosures from FINTRAC. (“Police” in Canada are all disclosure recipients.) Interestingly, this changes very little for FINTRAC, except that they will likely establish a very close working relationship with this new agency — possibly their closest relationship, even surpassing that with the RCMP.
There are a lot of challenges ahead for the agency. These primarily involve coordination with the RCMP and other police forces. In this context, it’s worth remembering how the Canadian Security Intelligence Service was established from the RCMP’s Security Service. While the new organization was up and running within a few years of the McDonald Commission, it has taken decades and multiple rounds of “One Vision” deconfliction efforts to create a workable relationship between the two services.
It remains to be seen whether the RCMP and the new Financial Crimes Agency can improve on this track record of cooperation, or whether institutional in-fighting will plague both organizations.
The Financial Crimes Agency will also face significant challenges recruiting skilled staff. To be sure, there are many skilled financial crimes investigators and experts in Canada. But the new agency will face an uphill battle recruiting them from other agencies, other provinces, and even the private sector. The new agency will have to figure out a unique and compelling value proposition to recruit the best talent Canada has. (This goes well beyond offering a competitive salary: money is not everything for individuals interested in this kind of work, and an important mission, combined with a good organizational culture and minimizing bureaucracy, can go a long way towards keeping a workforce happy.)
The bottom line is that the proposed Agency is an important step for Canada in getting serious about fighting financial crime. However, there are many challenges ahead for the new organization. Anticipating these challenges, and creating legislative remedies (where appropriate) will be critical as the bill moves through committee. However, many of the most significant challenges facing the new organization will occur after the bill becomes law, and the realities of having to navigate Canada’s complex anti-money laundering and counter terrorist financing framework settle in.
Dr. Jessica Davis is president & principal consultant of Insight Threat Intelligence
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Excellent article. Great to see Jessica Davis contributing to The Line.
I have one major concern with this new agency:
"The Minister also has the power to direct the Commissioner of the Agency, and this direction is to be made public. Ultimately, the Commissioner establishes what matters should be investigated, but at the direction of the Minister."
This is vaguely written and puts target selection and focus of effort in the hands of the Minister, and therefore the PM of the days. Is this a reasonable cure to what is seen in Ottawa as excessive independence of the RCMP Commissioner? Can politically powerful groups pressure the Minister to look the other way in matters such as terrorist financing? What is to prevent targeting of political opponents?
There are very good reasons we put investigative decisions in the hands of independent decision makers. This is a significant change to law enforcement practice in Canada, and we should be wary - do we really want a political police force directed by the PM of the day? This can go very badly - just look at the current state of the FBI in the US. Is this something we should seek to imitiate?
One wonders how effective this agency will be in tracking money laundering derived from offshore real estate activity in the lower mainland of B.C. for example and in casino operations throughout Canada but particularly those run and operated either on FN property or by FN groups. Lots of opportunity there never mind the billions of dollars that have disappeared into the T&R guilt trip.