1. Opening Remarks

Bill C-47, Budget Implementation Act, 2023, No. 1 (Senate pre-study)

Standing Senate Committee on Legal and Constitutional Affairs

May 2023

Mr. Chair, I am pleased to be here today to discuss how the Government is fulfilling the commitments it has made for criminal law reforms in two distinct, but equally important, areas. The first is our commitment to strengthen Canada’s anti-money laundering and anti-terrorist financing regime to support the investigation and prosecution of these serious crimes. The second is our commitment to crack down on predatory lending by lowering the criminal rate of interest.

Money laundering and terrorist financing threaten the integrity of the Canadian economy and enable terrorist activity, human trafficking, and other criminal activities, thereby increasing the risks to our communities and their residents.

In Budget 2023, our Government committed to strengthen measures to detect, and prosecute financial crimes including money laundering: Bill C-47 proposes changes that would do just that.

The first amendment would establish a special warrant for the search and seizure of digital assets that may be forfeited as proceeds of crime. Crimes involving digital assets have grown in recent years. They include the use of cryptocurrencies as payment in fraud schemes, to launder proceeds of drug trafficking, or to purchase illegal firearms.

Digital assets, including cryptocurrencies, have a number of unique features, and this special warrant provision aims to overcome some of the challenges that law enforcement have encountered in relying on existing legal authorities to seize cryptocurrencies.

The warrant is designed to enable the electronic searches required to reconstruct a digital wallet, and the transfer of digital assets such as cryptocurrency from a suspect’s wallet to a secure law enforcement wallet. A management order would be available for digital assets seized under this warrant, to ensure that the seized digital assets could be securely maintained for the duration of an investigation and possible criminal proceedings.

This targeted measure is an initial step towards ensuring that the Criminal Code is well adapted to the realities of crime involving digital assets. The government is continuing to assess the need for additional reforms.

The second proposed reform to support the investigation and prosecution of money laundering is to add several offences to the Criminal Code provision (section 462.48), which enables the disclosure of tax information for the purposes of a criminal investigation. This amendment would provide law enforcement with an important tool to carry out financial investigations into the accumulation of wealth as part of a criminal investigation, and to trace how suspects are laundering money, including through corporate structures.

The provision is only available for drug trafficking offences, possession and laundering of property obtained from drug offences, terrorism offences and specific organized crime offences. In recent years, however, additional offences have been assessed as posing a high risk for money laundering in Canada, and a number of these offences have become serious concerns for Canadians.

The Government is therefore proposing to enable the disclosure of tax information for the following offences: fraud over $5,000, fraud affecting a public market, extortion, corruption and foreign bribery offences, human trafficking, and possession or laundering of property obtained from the full list of offences in the provision. Related offences of conspiracy, attempt and accessory after the fact would also be included, as is the case for existing offences.

The disclosure of tax information raises important questions relating to the privacy interests of Canadians. This provision contains robust safeguards. These include prior judicial authorization, a threshold of reasonable grounds to believe that the disclosure would be in the public interest, and the need to demonstrate that the information would make a significant contribution to an investigation. The decision to add only those offences for which there was a strong case for disclosure of tax information also serves to maintain the privacy interests of people in Canada while recognizing the needs of law enforcement to investigate crime.

Before turning to the criminal interest rate changes, I would note that the Cullen Commission’s final report made a number of recommendations regarding operational actions that law enforcement could take to increase investigations into money laundering, and to increase efforts to pursue the recovery of proceeds of crime. I believe that the proposed Criminal Code reforms would support the implementation of these recommendations.

I will turn now to the Government’s commitment, announced in Budget 2023, to make amendments to the Criminal Code to crack down on predatory lending, which takes advantage of some of the most vulnerable people in Canada.

Mr. Chair, section 347 of the Criminal Code makes it an offence to enter into an agreement or arrangement to receive interest at a criminal rate, or to receive a payment or partial payment of interest at a criminal rate.

The original policy objective of section 347 was to target loansharking and its links to organized crime. It was thought that using a fixed rate, which was set at an effective annual rate of 60%, would make the offence easier to prove. Despite this policy objective, the offence applies to virtually all lending arrangements or agreements in Canada.

Bill C-47 proposes to replace the current rate with a 35% annual percentage rate. This rate is consistent with the province of Quebec and was supported by consumer advocacy groups who were consulted by Finance Canada in the lead up to these changes being proposed.

As I have just said, section 347 applies broadly, including to agreements that were never the target of this offence, such as bridge financing. That is why Bill C-47 proposes a regulation making authority that would allow the Governor in Council to exempt legitimate lending arrangements, similar to how the Criminal Code already exempts payday loans from section 347 in certain circumstances. This will respond to long-standing concerns from the business community.

Bill C-47 also proposes to strengthen the Criminal Code provisions governing payday loans. Payday loans are typically short-term low value loans but because of the way that interest is calculated, the rate charged can very easily fall afoul of section 347.

In 2007, the Criminal Code was amended to exempt payday loans from the criminal interest rate provisions in cases where a province or territory enacts legislation regulating the industry, has set a maximum cost of borrowing, and where the loan is offered by a licenced vendor.

The amendments proposed in Bill C-47 would further protect borrowers by adjusting the Criminal Code’s payday lending exemption by providing the Governor in Council the ability to set a limit, through regulation, on the total cost of borrowing.

In closing, I appreciate the opportunity to be here with you today to discuss these important issues and I look forward to answering your questions.