# Archived - 10-Year Evaluation of Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime

Archived information

Archived information is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please contact us to request a format other than those available.

FINAL EVALUATION REPORT

Presented to
Department of Finance

by
Capra International Inc.

Contact:
Gunter Rochow
Capra International Inc.
Telephone: (613) 833-2494, FAX (613) 833-1989, email: grochow@capra.net

December 7, 2010

List of Acronyms

Executive Summary

1. Background

2. Evaluation Context

3. Evaluation Methodology

4. Evaluation issues and Findings

5. Conclusions

6. Recommendations

Appendix 1: Evaluation Question Matrix

Appendix 2: Logic Model

## Executive Summary

Canada’s AML/ATF Regime (or the Regime) consists of the activities of the funded and non-funded partners as well as those of contributing provincial/regional/municipal regulatory and law enforcement bodies, and the private sector entities with obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its regulations. The operation of the Regime is governed by the terms of the PCMLTFA and other laws such as the Criminal Code of Canada, Customs Act, Charities Registration (Security Information) Act, Income Tax Act, among others. The interests of the Canadian Regime are represented internationally at the Financial Action Task Force (FATF) on ML and TF.

This evaluation, which covers the period 2000-2010, is mandated by Treasury Board. The evaluation findings are needed to contribute to decision-making regarding the ongoing funding of the Regime partners. They will also contribute to the upcoming five year parliamentary review of the PCMLTFA. Two core issues are addressed in the evaluation through the use of multiple lines of evidence: (1) Relevance of the Regime (need for the Regime, its alignment with the Government’s priorities, and its alignment with federal roles and responsibilities); and (2) Performance of the Regime (effectiveness [achievement of expected outcomes], Regime implementation, and efficiency and economy).

Data were collected by several means and from several sources, and were subsequently integrated in a triangulation of findings to support conclusions and recommendations. The data collection methods were:

• Document and file review, in which some 166 documents and files were reviewed;
• Database review and analysis involving the collection of performance data from the Regime partners, provision of budget information, and the conduct of a financial expenditures survey among Regime partners;
• Interviews with 34 individuals considered to be key informants about Regime operations;
• Conduct of 10 focus groups (six in the public sector and four in the private sector);
• Completion of 13 detailed case studies on Regime operations; and,
• Administration of a web survey, for which there were 256 respondents.

## Conclusions

Based on the analysis of the information gathered, the following conclusions were reached regarding the evaluation issues:

1. Canada’s Regime is needed to combat the threat from ML and TF, which has not diminished since the Regime was implemented in 2000. The Regime is an appropriate response to the global threat from ML/TF. The Regime continues to be relevant because its operations support the Government of Canada’s (GoC) priorities related to justice, financial systems, national security and privacy, and the Regime’s objectives are perceived to be in alignment with the mandates of the Regime partners, although the mandates of all partners except for FINTRAC are broader than AML/ATF.

2. The Regime has made progress in achieving the expected outcomes by:

a. Meeting its international obligations to the United Nations (UN) and commitments to the FATF (Canada is considered to be compliant or largely compliant with 36 of the 40+9 Recommendations on AML/ATF made by the FATF);

b. Meeting its AML/ATF responsibilities while respecting the balance between enforcement, and privacy and the provisions of the Canadian Charter of Rights and Freedoms (Charter);

c. Enhancing the Regime’s coordination and intelligence networking and improving its exchange of information with international partners through: extensive partner participation and leadership in international activities and fora; the provision of education and training in the AML/ATF area; and continued execution of mutual legal assistance (MLA) and extradition requests;

d. Improving domestically the Regime’s levels of liaison, cooperation and information sharing over the past five years through: secondments of staff from one partner to another; joint operations; memoranda of understanding (MOUs) on compliance information sharing; and MOUs on database access;

e. Improving the quality of data that is reported to FINTRAC under the provisions of the PCMLTFA;

f. Increasing the number of disclosures made by FINTRAC to Regime and international partners by some 200 percent from 2006 to 2010; and,

g. Continuing to seize and retain funds related to ML/TF.

3. The Regime likely contributed to the creation of an environment that is hostile to ML/TF and/or that has been effective in deterring ML/TF and that has reduced the profitability of crime and the likelihood of terrorist activities.

4. The Regime is considered to be economical, to the extent that economy can be determined from the available financial and performance information, because direct Regime funding has leveraged the use of funds from other sources by Regime partners, and more economical alternatives to the current Regime were not conclusively identified.

5. The efficiency of the Regime has improved, particularly since 2008, but inefficiencies were found related to the full use of FINTRAC proactive disclosures. These stem from organizational mandates and perhaps the allocation of Regime funds, and limitations in information sharing attributable to certain legislative and regulatory provisions.

6. Conclusions regarding changes over time in the number of investigations leading to the laying of charges and attainment of convictions for ML offenses cannot be made because the kind of data required for such a determination are not available.

7. It cannot be determined if the public’s awareness of AML/ATF initiatives has increased over the past 10 years because the public has not been surveyed on this issue. The public was surveyed in 2006 to gauge their impressions of the extent and threat to society of ML and TF, but the public’s knowledge and views about the Regime’s AML/ATF activities were not sought.

8. The question of unintended impacts was assessed in the conduct of this evaluation. The evaluators found no unintended impacts during the study of this program.

## Recommendations

Based on the findings and conclusions of this evaluation, the following recommendations are made.

1. The Regime should be continued as a horizontal initiative with at least the same level of resourcing provided as currently exists. In addition, Finance, in consultation with the Regime partners, should conduct a review and provide recommendations regarding the funding allocations for the Regime partners that include a detailed assessment of the appropriateness and use by the partners of the current funding levels relative to their responsibilities for AML/ATF activities.

2. Finance should lead an Interdepartmental Working Group with representation from Regime partners to determine future steps for continuing to improve the Regime’s compliance with international commitments and to examine the following key issues:

a. Regime-related legislation and regulations (PCMLTFA and related enabling legislation of Regime partners) that may be constraining information sharing with the aim of identifying possible solutions that may require either legislative/ regulatory amendments or operational changes to remove barriers to effective and efficient Regime operations;

b. Concerns raised by reporting entities, as cited in this evaluation report, with a view to addressing their issues, as appropriate, regarding how requirements under the PCMLTFA are being complied with;

c. The inconsistencies identified in the Regime performance data and statistics to facilitate the Regime’s ability to accurately report on its achievement; and,

d. Whether updates are required to the Regime’s management and accountability framework and Logic Model, particularly in relation to the Regime roles and responsibilities of OSFI, Justice (as it now exists after the creation of the PPSC), and the RCMP-ML unit, and in relation to the current expected outcomes that do not include reference to measures of the number of ML/TF charges laid and the number of convictions obtained.

3. Finance should consider conducting a public opinion survey to determine the level of public awareness of the ML/TF threat and of the AML/ATF actions of the Regime. This survey would provide a baseline of information to be used in future evaluations, and to assess the extent of public acceptance of the Regime.

## 1. Background

### 1.1 Program Origins and Development

Money laundering (ML) and terrorist financing (TF) are global problems requiring a concerted international response. Consequently, the G-7 established in 1989 the Financial Action Task Force (FATF) to help countries coordinate their anti-money laundering efforts. In 2001, the FATF’s mandate was expanded to include the combating of terrorist financing. The FATF is an inter-governmental body whose purpose is the development and promotion of policies, both at national and international levels, to combat ML and TF. The FATF is a "policy-making body" that works to generate the necessary political will to bring about national legislative and regulatory reforms aimed at combating ML and TF. To date, 180 jurisdictions have pledged to comply with the FATF 40 Recommendations on anti-money laundering and Nine Special Recommendations on anti-terrorist financing.[1] As well, the FATF regularly reviews the compliance of members with the 40+9 Recommendations and suggests areas for improvement.[2]

The FATF monitors members' progress in implementing necessary measures, reviews ML and TF techniques and countermeasures, and promotes the adoption and implementation of appropriate measures globally. In performing these activities, the FATF collaborates with other international bodies involved in combating ML and TF.

In 2000, Canada adopted the Proceeds of Crime (Money Laundering) Act (PCMLA). It created a mandatory system for reporting suspicious financial transactions, large cross-border currency and monetary instruments transfers, and certain prescribed transactions. The legislation established the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to collect and analyze these financial transaction reports and to disclose pertinent information to law enforcement and intelligence agencies. In December 2001, the PCMLA was amended to include measures to fight TF activities and was renamed the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).

The National Initiative to Combat Money Laundering (NICML) was established in 2000 and was later expanded to what is now known as Canada's Anti-Money Laundering and Anti-Terrorist Financing Regime (referred to as the Regime). In December 2006, amendments to the PCMLTFA received Royal Assent that upgraded Canada's legislation to be more consistent with international AML/ATF standards, as set out by the FATF, and that addressed areas of domestic risk. Amendments included enhanced customer identification requirements, the creation of a registration scheme for money services businesses, and the establishment of administrative monetary penalties that deal with serious and minor compliance violations as an alternative to a criminal penalty. The bulk of the regulatory changes went into effect in June 2008.[3]

In 2010, further to the federal budget, consequential amendments were made to the PCMLTFA to reflect amendments to the Criminal Code Regulations that now make tax evasion a predicate offence for money laundering in Canada. Additionally, a new part was added to the PCMLTFA (which has not yet come into force) to allow the Government to take action to safeguard the Canadian financial system from ML/TF threats emanating from foreign jurisdictions and entities that lack sufficient and effective AML/ATF controls.

### 1.2 Program Structure

The Regime embraces the legislative, regulatory and policy framework that underpins the AML/ATF mandates and activities of the Regime partners. It includes the AML/ATF activities of the Regime partners, as well as those of contributing provincial regulatory and law enforcement bodies, and those entities with reporting and other obligations under the PCMLTFA and its related regulations. Regime partners are also responsible for reporting annual performance measurements related to AML/ATF activities to Finance.

Canada is an active member and participant in the FATF and the Asia/Pacific Group on Money Laundering (APG) and an observer to the Caribbean Financial Action Task Force (CFATF) and the South American Financial Action Task Force (GAFISUD). The Regime partners also have the responsibility for participating in international activities and sharing their knowledge and expertise with respect to the FATF standards, emerging ML/TF trends and typologies, and AML/ATF best practices.

#### 1.2.2 Role of the FinancialTransactions and Reports Analysis Centre of Canada (FINTRAC)

FINTRAC is Canada's financial intelligence unit (FIU). Its mandate is set out in the PCMLTFA. Its principal purpose is to collect and analyze financial transaction information that can be used to detect, apprehend and prosecute individuals involved in ML/TF activities.

FINTRAC was established as an independent agency, operating at arm’s length to the police and other departments and agencies of government to whom it can provide financial intelligence, for example, the Canadian Security Intelligence Service (CSIS). Its mandate and powers were designed, among other things, to safeguard individual privacy and Charter rights. It reports to the Minister of Finance, who is accountable to Parliament for FINTRAC’s activities. FINTRAC operates within the scope of the PCMLTFA and its regulations. FINTRAC:[4]

• Collects and analyzes information on financial activities reported as suspicious, and also information on large cash transactions and large electronic funds transfers;
• Ensures compliance with customer identification, reporting, record keeping and other compliance obligations;
• Makes case disclosures of financial intelligence to the appropriate law enforcement agency, CSIS, or other agencies designated by legislation in support of investigations and prosecutions;
• Enhances public awareness and understanding of matters related to ML/TF;
• Conducts its activities while ensuring the protection of the personal information under its control;
• Registers money services businesses; and,
• Administers monetary penalties for non-compliance with the PCMLTFA.

Reporting Entities

A large number of entities across a diverse range of financial and non-financial business sectors have obligations under the PCMLTFA and its regulations, including reporting suspicious and other prescribed financial transactions to FINTRAC, and are required to assess the risk of ML/TF through their organizations’ operations. These entities comprise:[5]

• Authorized foreign banks within the meaning of section 2 of the Bank Act in respect of their business in Canada, or banks to which that Act applies;
• Cooperative credit societies, savings and credit unions and caisses populaires regulated by a provincial Act and associations regulated by the Cooperative Credit Associations Act;
• Life insurance companies or foreign life insurance companies to which the Insurance Companies Act applies or life insurance companies regulated by a provincial Act;
• Companies to which the Trust and Loan Companies Act applies;
• Trust companies regulated by a provincial Act;
• Loan companies regulated by a provincial Act;
• Persons and entities authorized under provincial legislation to engage in the business of dealing in securities or any other financial instruments, or to provide portfolio management or investment advising services;
• Persons and entities engaged in the business of foreign exchange dealing, of remitting funds or transmitting funds by any means or through any person, entity or electronic funds transfer network, or of issuing or redeeming money orders, traveller’s cheques or other similar negotiable instruments except for cheques payable to a named person or entity;
• Persons and entities engaged in a business, profession or activity described in regulations made under paragraph 73(1)(a) of the PCMLTFA;
• Persons and entities engaged in a business or profession described in regulations made under paragraph 73(1)(b) of the aforementioned Act while carrying out the activities described in the regulations;
• Casinos, as defined in the regulations, including those owned or controlled by Her Majesty;
• Departments and agents of Her Majesty in right of Canada or of a province that are engaged in the business of accepting deposit liabilities, that sell money orders to the public or that sell prescribed precious metals, while carrying out the activities described in regulations made under paragraph 73(1)(c) of the aforementioned Act; and,
• Employees of a person or entity referred to in any of the preceding categories.

#### 1.2.3 Role of the Royal Canadian Mounted Police (RCMP)

As the national police force, and as the provincial or local police force in many jurisdictions across Canada, the RCMP plays a fundamental role in Canada’s AML/ATF Regime. The RCMP investigates ML/TF cases, lays ML/TF charges, makes arrests, and seizes funds or assets suspected of being proceeds of crime (POC) or used (to be used) in support of terrorist criminal activity. The RCMP acts as a liaison in exchanging criminal intelligence with international police forces. RCMP liaison officers around the globe assist in pursuing AML/ATF cases.

The Money Laundering Units (MLUs) of the RCMP are major recipients of suspected ML intelligence, or what is referred to in the PCMLTFA as “disclosures” from FINTRAC. The MLUs also receive intelligence from a number of other sources (e.g. from CBSA in relation to the CBSA’s Cross Border Currency Reporting Program; from reporting entities that provide voluntary information; from other RCMP units, law enforcement and intelligence agencies; and from financial institutions and the public). Upon receipt of intelligence, the MLUs make an investigative assessment to determine if a criminal investigation is warranted. Where further action is deemed appropriate, the units will refer the matter to the appropriate Integrated Proceeds of Crime (IPOC) Unit. The MLUs can also provide Voluntary Information Records (VIRs) to FINTRAC to be analyzed alongside other information in FINTRAC’s database. A VIR is a record of information voluntarily submitted to FINTRAC about suspicions of ML or TF activities. If the VIR, along with other information, causes FINTRAC to reach a legal threshold of reasonable grounds to suspect that the information would be relevant to an investigation and/or prosecution of ML or TF offences, FINTRAC will disclose the relevant information to the RCMP.

The Anti-Terrorism Financing (ATF) Units of the RCMP are another recipient of disclosures from FINTRAC, domestic and foreign law enforcement and intelligence agencies. These units receive disclosures from FINTRAC and provide VIRs to FINTRAC regarding suspected TF, and conduct investigations using the disclosures where appropriate. They detect and identify persons or entities involved in raising and moving terrorist funds, obtaining evidence where possible for prosecution. They also assist foreign TF investigations in this regard. The ATFs may identify gaps or weaknesses in the financial system. In cases where charities appear to be involved in TF, the units refer cases to the CRA (Charities Directorate). The ATFs play an important role in supporting: the training and certification programs related to AML of the International Compliance Association (ICA); the Criminal Code listing regime; and the UN listings of terrorist organizations.

Finally, the RCMP plays a significant training and awareness-raising role among AML/ATF partners and the private sector, and in international and regional fora including the FATF, APG, and CFATF. Indeed, the RCMP has provided direct technical assistance and training to police forces in developing countries to help them conduct AML/ATF investigations and enhance their investigative techniques.

The CBSA is responsible for the administration and enforcement of Part 2 of the PCMLTFA which requires every person or entity to report to a CBSA officer the importation or exportation of currency or monetary instruments valued at $10,000 or more. Under the PCMLTFA, or any other legislation, there are no restrictions on the amount of currency and/or monetary instruments that a person can bring into or take out of Canada. The obligation to report under the PCMLTFA resides with the individual or entity importing or exporting currency/monetary instruments. To facilitate these reporting requirements, the CBSA has created the following forms: • The Cross-Border Currency or Monetary Instruments Report [Individual (E677) form] - this form is used to report situations where the importer or exporter physically carries the currency or monetary instruments into or out of Canada; • The Cross-Border Currency or Monetary Instruments Report [General (E667) form] - this form is used to report all other situations such as mailing, shipping by courier, or transporting on someone else's behalf; and, • The Cross-Border Currency or Monetary Instruments Report Made by Person in Charge of Conveyance (E668) form - this form is used to consolidate all currency and monetary instruments transported by the person in charge of a conveyance. In addition, the importer or exporter also has to complete an E667. Border Services Officers (BSOs) have the responsibility to enforce the physical cross-border reporting obligation including the examination of baggage and conveyances, and to question and search individuals for unreported or falsely reported currency and monetary instruments. BSOs can seize currency and monetary instruments if they are not reported and are greater than the reporting threshold. Seized non-reported currency and monetary instruments are forfeited with no terms of release when the BSOs suspect that the seized currency or monetary instruments are proceeds of crime or funds for use in TF activities. In all other instances, the seized amount will be returned upon payment of a penalty. BSOs are trained to recognize various monetary instruments and potential instances of non-compliance. Under the Regime, the CBSA enforces the Cross-Border Currency Reporting (CBCR) program, and has the responsibility of transmitting information from reports and seizures to FINTRAC. The organization also passes intelligence on to the RCMP and other appropriate police forces (e.g., provincial police services and those of other countries). CBSA works closely with Citizenship and Immigration Canada (CIC) to prevent the entry into, or effect the removal from Canada of non-citizens who engage in ML or TF activities. #### 1.2.5 Role of the Canada Revenue Agency (CRA) In numerous instances, ML/TL activities involve the evasion of taxes as imposed by the Income Tax and/or the Excise Tax Acts. These Acts are administered by the CRA. The Enforcement and Disclosures Directorate (Income Tax-GST/HST) of the CRA receives disclosures from FINTRAC when analysis indicates there is reasonable grounds to suspect that the information would be relevant to an investigation and/or prosecution of ML/TF offences, and if FINTRAC determines that the information is relevant to a tax or duty evasion offence. The Directorate initiates compliance actions based on FINTRAC disclosures that are provided with a view to determining whether or not attempts to evade taxes administered by the CRA have taken place. As a result of the compliance actions that are initiated, CRA-Enforcement provides statistical results, general information and disclosure feedback to FINTRAC. Another part of the CRA, the Charities Directorate, administers the scheme for the registration of charities under the Income Tax Act. While all non-profit organizations (NPOs) in Canada, including registered charities,[6] are subject to the terrorism provisions of the Criminal Code of Canada, the CRA is responsible for the detailed regulation only of charities that are registered for the purposes of the Income Tax Act. The CRA-Charities’ screening and review activities are aimed at preventing organizations with ties to terrorism from obtaining registration and detecting and revoking already registered charities with ties to terrorism. CRA-Charities makes the fullest contribution it can to the overall Government effort to combat TF through appropriate sharing of program information. In particular, the CRA-Charities Directorate may disclose to the RCMP, CSIS and FINTRAC, either proactively or following receipt of a request for information, specified information related to national security criminal investigations, subject to prescribed circumstances set out in Section 241 of the Income Tax Act. The Directorate receives information from the RCMP, CSIS and FINTRAC that complements its consideration of the denial or revocation of charitable status as appropriate. The CRA, in collaboration with Public Safety (PS), is also responsible for specific aspects of Regime operations under the Charities Registration (Security Information) Act (CRSIA) that aims to prevent the use of charities for TF. #### 1.2.6 Role of Canadian Security Intelligence Service (CSIS) CSIS has a mandate to collect, analyze and report to the GoC information and intelligence concerning threats to Canada's national security. Information collected by CSIS may also be disclosed to other Regime partners to assist in the performance of their activities within the Regime. For example, CSIS works closely with domestic partners such as CRA Charities Directorate to prevent the exploitation of registered Canadian charities to finance terrorist activities. CSIS provides VIRs to FINTRAC on activity suspected to be a threat to the security of Canada and receives disclosures from FINTRAC on this activity. As well, CSIS liaises with the RCMP on a regular basis on ATF-related issues. #### 1.2.7 Role of the Department of Justice Canada The Minister of Justice/Attorney General of Canada heads the Department of Justice Canada (Justice). Justice is responsible for the drafting and amending of statutory provisions dealing with criminal law and procedure based on directions from the executive branch, as well as the necessary consultations within Canada in relation to such drafting and amending. In that capacity, Justice provides legal advice on ML/TF offences to the other Regime partners. The Minister of Justice and his designated officials, the International Assistance Group (IAG), are responsible for operations under the Mutual Legal Assistance in Criminal Matters Act and the Extradition Act, the two main statutes in relation to Canada's ability to provide international cooperation to Canadian Regime partners on the one hand, and to Canada's international treaty partners on the other. The IAG negotiates and administers Canada's treaties for mutual legal assistance (MLA) and extradition. The IAG provides (both to Canadian partners and to foreign authorities) both MLA, which consists of providing evidence for use in criminal cases, and extradition, which is the transfer to or from Canada of individuals wanted for prosecution in Canada or abroad, as the case may be. MLA and extradition operations accomplish two important objectives of the Regime: (1) Support for Canadian investigations and prosecutions involving evidence and/or individuals located abroad; and (2) Fulfillment of Canada's international commitments in AML/ATF. The need for MLAs is also incorporated into the FATF Recommendations, specifically Recommendation 36, which calls on jurisdictions to provide the widest range of mutual legal assistance in relation to ML and TF investigations and demonstrate the effectiveness of the MLAs. There has been a significant change within the Department of Justice Canada during the evaluation period. In December 2006, the Public Prosecution Service of Canada (PPSC) was created. It assumed the mandate of prosecuting criminal offences under federal jurisdiction, but it did not take on the international aspects of Justice’s activities. These remained with Justice under the IAG. Before 2006, the IAG’s role was not considered distinctly, but was incorporated within the general “prosecution” function of Justice. Justice is also responsible for annual reporting of its MLA activities in support of the Regime. As well, the Criminal Law Policy Group provides support to the Regime through attendance and contribution to the FATF, while the National Security Group provides advice and support in relation to terrorism and ATF. #### 1.2.8 Role of the Public Prosecution Service of Canada (PPSC) The PPSC is a federal government organization, created in December 2006, pursuant to the Director of Public Prosecutions Act. The PPSC fulfills the responsibilities of the Attorney General of Canada in the discharge of his criminal law mandate, by prosecuting criminal offences under federal jurisdiction and by contributing to strengthening the criminal justice system. The PPSC is an independent organization, reporting to Parliament through the Attorney General of Canada. The PPSC also provides Charter and constitutional legal advice, and if needed, litigation assistance. It is responsible for providing legal advice to enforcement agencies over the course of their investigations, and for undertaking prosecutions that arise out of those investigations. #### 1.2.9 Role of Public Safety Canada (PS) PS’s support to the Regime is multi-dimensional and touches on many aspects of the Regime. PS contributes to the development of AML/ATF policies and programs. The RCMP, CSIS and CBSA are united under a single portfolio in PS and report to the same Minister. In addition, PS works with the RCMP, CSIS and CBSA on issues of horizontal or mutual interest. PS chairs the Interdepartmental Coordinating Committee on Terrorist Listings, in support of the Minister of Public Safety’s statutory responsibilities to recommend terrorist entities to be listed pursuant to the Criminal Code of Canada. PS, in collaboration with CRA, is also responsible for a critical aspect of Regime operations under the Charities Registration (Security Information) Act (CRSIA) that aims to prevent the use of charities for TF. #### 1.2.10 Role of the Office of the Superintendentof Financial Institutions (OSFI) OSFI derives its mandate from the Office of the Superintendent of Financial Institutions Act (OSFI Act) and legislation governing federally regulated financial institutions (FRFIs) (the Bank Act, the Insurance Companies Act, the Trust and Loan Companies Act, and the Cooperative Credit Associations Act). OSFI regulates and supervises FRFIs, which comprise banks, federally regulated insurance companies, cooperative credit associations, and federally regulated trust companies and loan companies. FRFIs comprise roughly 80 percent of the regulated financial sector in Canada. All FRFIs except for federally regulated property and casualty insurance companies are subject to the PCMLTFA. Under the OSFI Act, OSFI’s objectives are to supervise FRFIs to determine whether they are in sound financial condition and are complying with their governing statute law and supervisory requirements under that law; to promote the adoption by financial institutions of policies and procedures designed to control and manage risk; and to monitor and evaluate system-wide or sectoral events or issues that may have a negative impact on the financial condition of FRFIs. OSFI is a member of the Basel Committee on Banking Supervision, which includes in its Core Principles provisions requiring supervisors to be satisfied that banks have adequate policies and processes in place, including strict “know-your-customer” rules that promote high ethical and professional standards in the financial sector and prevent banks from being used, intentionally or unintentionally, for criminal activities. Similar provisions formulated by the International Association of Insurance Supervisors apply to the life insurance sector. OSFI and provincial financial regulators are not mentioned in the PCMLTFA and accordingly have no direct authority to ensure compliance with or otherwise enforce it in their respective sectors; this is entirely within the mandate of FINTRAC. However, OSFI issues guidance to FRFIs on the adoption by financial institutions of policies and procedures designed to control and manage risk, and has issued AML/ATF guidance as part of a series of guidelines outlining sound business and financial practices. OSFI plays a supervisory role for the Regime by assessing FRFIs’ risk management controls, and in doing so addresses issues that weaken their procedures for complying with the Regime’s legal requirements. OSFI[7] and FINTRAC are authorized under the PCMLTFA to exchange information with each other for the purposes of FRFI compliance with Part 1 of the PCMLTFA, and have entered into an MOU with each other to operationalize this authority. OSFI supports the terrorist listing process (under the United Nations Act as well as the Criminal Code of Canada) by creating, posting and updating consolidated lists of names described in section 1.2.11 below, including notifying the financial sector of updates. OSFI is not under a legal obligation to do these postings, but does so voluntarily to ensure that financial institutions understand their importance. Financial institutions to which these measures apply are required to screen their customers on a continuing basis, and report monthly to their financial regulators (which, in the case of FRFIs, is OSFI) on the aggregate amounts frozen. #### 1.2.11 Role of the Department of ForeignAffairs and International Trade (DFAIT) DFAIT has responsibility for implementing elements of Canada’s efforts to combat TF. DFAIT is responsible for the designation of entities and individuals in Canada associated with terrorist activities listed by the United Nations 1267 Sanctions Committee or under Resolution 1373 of the United Nations Security Council. This designation is implemented in Canada through the United Nations Act and its regulations, and effectively freezes an entity’s assets and prohibits fundraising on their behalf. DFAIT is also the primary interlocutor and negotiator for Canada in respect of UN Conventions and treaties that Canada has ratified. [8] Some of these address ML, TF and other related public safety issues, such as bribery, corruption or illicit drugs. Since 2005, DFAITs Counter-Terrorism Capacity Building Program (CTCBP) has responded quickly and effectively to the needs of recipient States lacking the laws, policies, plans, training, or operational expertise to prevent and mitigate acts of terrorism. More than 15 federal departments and agencies collaborate to advance the best capacity-building programming possible for eligible states whose counter-terrorism interests intersect with Canada’s. CTCB funding has been directed to AML and ATF projects supported by Regime partners in key jurisdictions and organizations in the Caribbean and Asia-Pacific. #### 1.2.12 Role of Provincial Entities A number of provincial departments and agencies, regulators and self-regulatory organizations contribute to the AML/ATF Regime. Provincial, territorial and municipal law enforcement agencies, such as the Ontario Provincial Police, la Sûreté du Québec, and municipal police forces participate as part of various Integrated Proceeds of Crime (IPOC) units. Provincial Crown prosecutors and courts may participate in prosecutions of AML/ATF cases. Provincial and territorial financial sector regulators, such as the Financial Services Commission of Ontario, the Ontario Securities Commission, and L’Autorité des marchés financiers du Québec provide support in policy and regulatory development and advice on operational enforcement. As well, self-regulatory organizations such as the Investment Industry Regulatory Organization of Canada and the Canadian Institute of Chartered Accountants may provide assistance with education and liaison activities related to AML/ATF. #### 1.2.13 Related Legislation and Bodies The Regime, along with its underlying legislation (the PCMLTFA and regulations, and federal and provincial financial sector legislation and regulations) must be considered within the context of other legislation and initiatives at the national and international level that contribute to the achievement of the longer-term objectives of the Regime. At the national level, there are a number of other initiatives and legislation that link to the Regime. • The National Coordinating Committee (NCC) on Organized Crime (1997) and the National Agenda to Combat Organized Crime (2000) - the NCC and its five Regional/Provincial Coordinating Committees (RCCs) work at different levels to a common purpose (i.e., to create a link between law enforcement agencies and public policy makers to combat organized crime). The NCC is the primary forum that reviews progress of the National Agenda to Combat Organized Crime. This agenda was adopted by federal, provincial and territorial ministers. ML was identified as a specific priority. • The RCMP Integrated Proceeds of Crime (IPOC) initiative is an interdepartmental initiative that aims to contribute to the disruption, dismantling and incapacitation of targeted organized criminals and crime groups. Public Safety provides policy coordination and chairs the IPOC Senior Governance Committee, and coordinates the working level IPOC Partners Advisory Committee. • The Public Security and Anti-Terrorism (PSAT) Initiative and the Anti-Terrorism Act (ATA) and Public Safety Act (PSA) — following September 11, 2001, an ad hoc Cabinet Committee on Public Security and Anti-Terrorism was established and tasked with developing a response to possible terrorist threats. Funding was allocated to heighten border security and undertake a number of initiatives to enhance the security of Canadians. The ATA and PSA introduced measures to amend key legislation. The ATA aims to combat terrorism through provisions that are intended to support the detection, disruption and disabling of terrorist activities and groups. The PSA introduced amendments to the PCMLTFA to provide FINTRAC with the ability to collect information relevant to ML or TF that is stored in national security databases and to exchange information with sector regulators on compliance with Part 1 of the PCMLTFA. • The Charities Registration (Security Information) Act (CRSIA) was enacted in December 2001 under Part 6 of the Anti-Terrorism Act. There are three objectives of the CRSIA, including to demonstrate Canada’s commitment to participate in international efforts to deny support to those who engage in terrorist activities; to preserve the integrity of Canada’s registered charities system by preventing organizations that support terrorist activities from obtaining or continuing to have registered charity status under the Income Tax Act; and to maintain the confidence of Canadian taxpayers that the benefits of charitable registration are only available to organizations that operate exclusively for charitable purposes. The legislation was specifically designed to protect the use of sensitive information in the decision-making process as to whether to grant or revoke a charitable registration. • The Amendments to the Criminal Code of Canada in 1989, which created Part XII.2 and the various procedural tools to deal with possession of POC and ML - There have been a series of related amendments, each of which builds on, or significantly improves upon the criminal law’s authority to investigate, prosecute and address POC and criminal instrumentalities. These amendments deal with all aspects of POC including the identification of specific offences, special search warrants, restraint orders and a confiscation regime. The legislation provides the authority to seize or restrain the proceeds of certain crimes and provides immunity to people who voluntarily report suspicious transactions to the police. • The Immigration and Refugee Protection Act stipulates that a permanent resident or a foreign national cannot be admitted to the country for engaging in criminal activities such as ML across national borders. • Market entry measures to prevent criminals or their associates from holding a significant or controlling interest or holding a management function in a financial institution are contained in federal and provincial financial legislation (for example, section 27 of the Bank Act). These measures also include the evaluation of directors and senior management of financial institutions subject to the Core Principles on the basis of “fit and proper” criteria, including those relating to expertise and integrity. For example, in the federal sector, such measures are contained in the Bank Act, the Trust and Loan Companies Act, the Insurance Companies Act and the Cooperative Credit Associations Act. • The CBSA is responsible for providing integrated border services that support national security priorities and facilitate the free flow of persons and goods that meet all requirements under the program legislation. The Customs Act is one of the key pieces of legislation governing the CBSA’s mandate and also provides legislative authority to administer and enforce the collection of duties and taxes that are imposed under separate taxing legislation, such as the Customs Tariff, the Excise Tax Act, the Excise Act and the Special Import Measures Act. The Customs Act was revised in 1986 to maintain the original Act's three purposes and to allow for greater flexibility in new transportation, communication, trade and business practices. Since 1986, the Customs Act has been amended several times in response to free trade and other related international agreements. In June 2009, amendments were made to support the GoC’s strategy to strengthen security and facilitate trade. With these changes to the Customs Act, the CBSA is able to strengthen the systems used for obtaining advance data on goods and people arriving in Canada and better manage risk at air and sea ports. In addition to the FATF, the GoC is committed to a number of international initiatives and organizations that contribute to, or are consistent with, the Regime (the key ones were referenced in the section describing the role of DFAIT). ### 1.3 Program Objectives The detection and deterrence of the laundering of criminal proceeds and the financing of terrorist activities is vital to the public safety of Canadians and the integrity of their financial system. Given the real threat from ML/TF, the GoC established the AML/ATF Regime and set out its objectives, which are to:[9] • Implement specific measures to detect and deter ML and TF activities, and to facilitate the investigation and prosecution of ML and TF offences; • Respond to the threat posed by organized crime by providing law enforcement officials with the information they need to deprive criminals of the proceeds of their criminal activities while ensuring that appropriate safeguards are put in place to protect the privacy of persons with respect to personal information about themselves; and, • Assist in fulfilling Canada’s international commitments to participate in the fight against transnational crime, particularly money laundering, and the fight against terrorist financing activity. ### 1.4 Program Logic Model The Evaluation Framework and Logic Model for the Regime were updated in December 2007. The updated Logic Model outlines the outputs and outcomes for the Regime’s six identified activities: 1. Operationalizing National and International Obligations and Commitments; 2. Liaison, Cooperation and Education; 3. Facilitating and Monitoring Compliance; 4. Intelligence Gathering and Analysis; 5. Investigation; and, 6. Adjudication and Sanctioning. The Logic Model illustrates the relationships between each of these elements. The framework contains detailed performance indicators and issues, and specifies the appropriate data source. The framework also proposes a set of evaluation issues and questions to be addressed in the 10-year evaluation.[10] These evaluation issues and questions were modified to ensure their compatibility with the requirements of the Treasury Board 2009 Policy on Evaluation.[11] The modified evaluation issues and questions are shown in Appendix 1. The Logic Model is included as Appendix 2. ### 1.5 Expected Results The ultimate outcomes expected from the implementation of the Regime are to contribute to the control and deterrence of ML, organized crime and TF activities, and to facilitate the investigation and prosecution of ML and TF offences. The intermediate outcomes are:[12] • Enhanced detection of ML and TF activities; • Increased public acceptance of the Regime; • Enhanced protection of the integrity of the financial, economic and charitable sectors; • Creation of an environment hostile to ML and TF; and, • Reduction in the profitability of crime. The achievement of the intermediate outcomes is dependent on the achievement of a number of immediate outcomes from key activities. These key outcomes fall within the six activity areas mentioned in the previous section (1.4). ### 1.6 Program Reach - Target Population The Regime directly involves all of the funded partners in the operational delivery of the Regime or in a supporting role. It also requires support from the non-funded partners. Further, a variety of financial and non-financial entities have obligations under the PCMLTFA,including customer identification and the requirement to report certain financial transactions to FINTRAC. All of these entities constitute the target population of the Regime. Regime partners, as well as the international and regional organizations with whom they cooperate, benefit from the Regime. The Regime is expected to provide protection to the Canadian financial and charitable sectors from abuse by criminal elements, leading to enhanced integrity and stability of these sectors. All Canadians are presumed to benefit from the Regime in that it provides a hostile environment to ML, organized crime and TF, resulting in an enhanced ability to attract investment, and enhanced integrity of the financial and charitable sectors and the detection and prevention of crime. ### 1.7 Program Governance An interdepartmental ADM-level group and a working level group, consisting of Regime partners and led by Finance, have been established to advise the Government's efforts to combat ML and TF activities. In addition, the Public/Private Sector Advisory Committee, which is comprised of Regime partners and private sector entities covered by the PCMLTFA, is a high-level discussion forum tasked with addressing emerging issues and providing general guidance for Canada’s overall AML/ATF policy. ### 1.8 Program Resources The resources applied to a program are an element of the overall program description that helps the audience of a program evaluation to understand the breadth and depth of the program. The Regime funding grew from$26 million in 2000-01 to over $66 million in 2009-10. However, the budget figures do not tell the whole story, as Regime partners made use in their Regime operations of funding from other sources such as the Public Safety and Anti-terrorism (PSAT) funds, as well as funds from their own internal (A-base) sources. This is discussed later in section 4.4.1. Table 1.1 provides the Regime funding and actual expenditures of those funds for each funded partner over the last five years. Table 1.1 AML/ATF Regime Funding by Partner (in thousands of dollars)1 Departments Fiscal Year 2005-06 2006-07 2007-08 2008-09 2009-10 Five Year Total Finance5 Available Regime Funding 300 300 300 300 300 1,500 Actual Expenditures (DPR) 300 297 296 316 295 1,504 FINTRAC Available Regime Funding 21,300 37,500 38,600 37,400 37,500 172,300 Actual Expenditures (DPR) 23,000 27,200 35,800 40,256 40,315 166,571 Justice3 Available Regime Funding 1,200 2,304 100 100 100 3,804 Actual Expenditures (DPR) 1,200 2,304 100 100 100 3,804 PPSC3 Available Regime Funding - - 2,154 2,154 2,154 6,462 Actual Expenditures (DPR) - - 2,000 2,269 3,028 7,297 CBSA Available Regime Funding 4,500 7,791 7,727 7,727 7,727 35,472 Actual Expenditures (DPR) 4,300 7,500 7,500 7,432 7,745 34,477 CRA (Income Tax – GST/HST) Available Regime Funding 2,200 2,200 2,200 2,200 2,200 11,000 Actual Expenditures (DPR) 2,200 2,174 2,228 2,200 2,413 11,215 CRA-Charities4 Available Regime Funding - - - 2,453 4,976 7,429 Actual Expenditures (DPR)2 - - - 2,123 3,631 5,754 RCMP-ML Available Regime Funding 4,900 8,182 6,872 6,872 6,872 33,698 Actual Expenditures (DPR) 4,100 7,805 6,704 6,481 5,165 30,255 RCMP-TF Available Regime Funding - 7,463 5,158 5,158 5,158 22,937 Actual Expenditures (DPR) - 4,505 3,258 4,102 5,579 17,444 All Funded Regime Partners Available Regime Funding 34,400 65,740 63,111 64,364 66,987 294,602 Actual Expenditures (DPR) 35,100 51,785 57,886 65,279 66,763 278,321 Notes 1. Sources Available funding levels are taken from the Evaluation Framework (Table 2 on page 14), updated to account for funding provided to CRA-Charities starting in 2008-09. This excludes re-profiling of FINTRAC’s AML/ATF Regime funding subsequent to the Evaluation Framework (published in December 31, 2007). Actual expenditures are taken from the DPRs on the NICML Horizontal Initiative. For FINTRAC, expenditures for the last three fiscal years reflect additional resources made available from re-profiled NICML funding, Strategic Review Reinvestments, Secretariat adjustments for Paylist requirements (Vote 30), and Employee Benefits Plan for year-end adjustments. 2. Expenditures for 2008-09 were provided by CRA Charities. 3. Additional funding to bolster prosecution capability was reported by Justice in 2006-07 and by PPSC in subsequent years. 4. Financial data for 2008-09 were provided by CRA-Charities. 5. Excludes funding for the FATF Presidency in 2006-07 and 2007-08 and for the evaluation of the Regime in 2009-10. 6. Available funding for Justice revised to$100,000 starting in 2007-08.
7. Expenditures in 2009-10 exclude allocated overheads ($1.41M in 2008-09). The RCMP received$6,872,000 under Regime funding in 2009-10. However, as a result of internal re-allocation of resources within the RCMP, the actual budget for direct expenditures under the AML/ATF Regime for the RCMP-ML program consisted of \$5,165,000. This difference between funding and direct expenditures does not reflect a program lapse.

## 2. Evaluation context

The objective is to conduct an evaluation of the Regime using the 2007 Evaluation Framework and Logic Model as a base while ensuring adherence to the 2009 Treasury Board Policy on Evaluation.[13]  The evaluation is mandated by Treasury Board. The evaluation findings are needed to contribute to decision-making regarding the on-going funding of the Regime partners. They will also contribute to the upcoming five year parliamentary review of the PCMLTFA.

There are multiple clients for the evaluation including (chiefly) the Department of Finance, the Regime partners and Treasury Board. Other government departments and agencies will also be interested in the evaluation (e.g., Privy Council Office, Office of the Privacy Commissioner, etc.) in addition to international partners and bodies. The private sector, provincial regulars and self regulatory organizations will also be interested in the evaluation findings.

The evaluation is to include the inputs (e.g., resources used, activities undertaken) and the achievements relative to expectations expressed in the 2007 Evaluation Framework and Logic Model of the funded and non-funded Regime partners, as well as of the provincial, regional and municipal Regime participants and the reporting entities. The period covered by the evaluation is 2000 to 2010. This evaluation study was conducted between the period of March and November 2010.

Two core issues are addressed in the evaluation:

1. Relevance of the Regime (need for the Regime, its alignment with the Government’s priorities, and its alignment with federal roles and responsibilities); and,

2. Performance of the Regime (effectiveness [achievement of expected outcomes], Regime implementation, and efficiency and economy)

The questions addressed in the evaluation that guided data collection and analysis are shown in Appendix 1.

## 3.0 Evaluation Methodology

### 3.1 Overview of the Methodology

The aim of the evaluation is to address the preceding two core issues through research that utilizes multiple lines of evidence. This approach is expected to provide decision-makers with as much evidence-based information as possible about the implementation of the Regime. Data on results achieved are expected to help Regime partners to determine if changes are needed in the design or approach to delivery of the Regime in view of environmental changes since the Regime’s introduction in 2000 and the last update of the Regime objectives and structure in 2007. Data collected in the evaluation are to provide evidence on what has taken place in the implementation of the Regime, what has worked best, and on the extent of achievement of results.

Data were collected by several different means and from several sources. These data were recorded in an Evaluation Question Matrix (a template of evaluation questions listed against the data collection methods). The data were subsequently integrated in a triangulation of findings to support conclusions and recommendations. Triangulation involves the cross-checking and validating of data from one source with data drawn from the other sources for each of the evaluation questions included in Appendix 1. Findings from a particular method that deviated from those obtained using the other methods are investigated with the objective of uncovering the underlying reasons for the deviations (e.g., the presence of bias; legitimate differences in perceptions of the same evidence). This approach adds a level of rigor to the evaluation that is recommended by the Treasury Board of Canada Secretariat. [14]

### 3.2 Limitations of the Evaluation

In this evaluation, there are significant constraints to attributing and demonstrating results directly to the Regime. The most significant constraints follow.

• It is difficult to attribute outcomes observed in the areas related to Regime activities to the Regime itself as one progresses from immediate expected outcomes (e.g., enhanced coordination and expansion of intelligence networks) to the ultimate expected outcome (contributing to the control and deterrence of money laundering, organized crime and terrorist financing activities). Attribution is complicated by the fact that many people who will have participated in, or benefited from the Regime may not be able to delineate the extent of the contribution made by the Regime as many factors contribute to the outcomes (e.g., the AML/ATF actions within other countries; changes of technologies used in financial transactions). This is a challenge faced in most evaluations of government programs as longer-term outcomes are multi-factorial with many being outside the direct influence of the Regime.
• To determine causality, the outcome of an intervention has to be compared to the outcome that would have occurred in the absence of the intervention. This requires a comparative evaluation design that cannot be implemented in this case because the initiative cannot be experimentally manipulated. For example, it is not feasible to form a comparison group of those engaged in ML/TF activities that have not been exposed to the Regime’s activities and requirements. In addition, many of the causal effects that related to deterrence/prevention are not directly observable. For example, it is difficult to measure the extent to which compliance requirements encourage effective implementation of the PCMLTFA and thereby prevent criminal activities.
• For the Regime, a statistical approach that includes pre- and post-test measures is not feasible because of the absence of baseline data on ML/TF activities. Legislative and policy changes since the inception of the Regime would influence criminal statistics, making before and after comparisons problematic. Moreover, it is recognized that the extent of ML and TF cannot be accurately determined.
• Statistics on ML/TF are not maintained in a single database, or in the same format based on common categories, among the different organizations involved in AML/ATF. Audit trails are not maintained on individual ML/TF cases from suspicion, to investigation, to charges laid, to prosecution, to conviction. Thus, the use of departmental/agency or even national criminal statistics will not give an accurate picture of the success of the Regime.
• Some information on Regime operations and outcomes could not be made available for reasons of national security, the protection of investigative methods of law enforcement and intelligence agencies, and because of privacy issues. This has not, in the view of the evaluators, detracted from the veracity of the findings or conclusions, but did reduce the extent of explanations and examples that otherwise might have been provided in this report.
• A snowball sample was used to recruit respondents to the online survey used as a data source in this evaluation. Snowball sampling is a non-probabilistic method for developing a research sample whereby potential respondents, that are not selected randomly, are asked to recruit future subjects from among their associates. In this case, the total population was unknown or hidden and was not available to the researchers to ensure privacy. When using a non-probabilistic sampling technique such as snowballing, the degree to which the sample differs from the population remains unknown and therefore, a margin of error cannot be calculated. Snowball samples are also subject to bias. For example, respondents who have many associates are more likely to be recruited into the sample and can be recruited more than once. This is why the letter sent out to the total list of potential respondents asked them to fill out the survey only once. The principal advantage of this technique is that experts in a particular field are quickly found as potential respondents and often know other experts in their field. This facilitates the inclusion of experts in the sample of respondents.

To address the attribution issues, particularly those related to the longer-term outcomes, evidence of achievement of immediate and intermediate outcomes is used as fully as possible in this evaluation to indicate the likelihood of the achievement of the longer-term outcomes.

### 3.3 Data Collection and Analysis Methods

The following data collection methods were used. Each is discussed in detail in the subsequent sub-sections:

Document and File Review;

• Database Review and Analysis;
• Key Informant Interviews;
• Focus Groups;
• Case Studies; and,
• Online Survey.

#### 3.3.1 Document and File Review

Documents and files were provided to the evaluators by Finance (the Project Authority). They were reviewed using a Document Review Template to standardize the types of information collected and reported. Some 166 documents and files were reviewed.

The documents reviewed fall into the following categories:

1. Public documents relating to the context of the Regime;

2. Relevant Treasury Board documents;

3. Documents relating to the role in the Regime of each Regime partner;

4. Summaries of Regime operations and activities produced by the Regime partners and included in various annual and special reports, as well as those provided directly to the evaluators by the Regime partners;

5. International agreements and resolutions to which Canada is a signatory; and,

6. External reviews and reports.

#### 3.3.2 Database Review and Analysis

Two types of program/statistical data were available for use in this evaluation. They were performance data and financial data. Access to the performance data was limited for security reasons as well as practical reasons of data availability. For these data, the Department of Finance Canada provided the evaluators with data files from those submitted by the Regime partners. Financial data were compiled from the Regime’s Department Performance Report and Treasury Board Submissions that describe those expenditures directly drawn from the Regime budget. In addition, financial data were obtained from the Regime partners by surveying them.

#### 3.3.3 Key Informant Interviews

The interviews were semi-structured in nature and typically ranged from 30 to 60 minutes in length, depending on the type of organization represented. The interviews were conducted face-to-face in the National Capital Region (NCR) and by telephone elsewhere. A total of 34 key informants were interviewed with representation as shown in Table 3.1. The Project Authority provided an initial list of proposed interviewees, from which the evaluator selected the interviewees based on representation and availability. All interviewees were considered by the Project Authority and the represented Regime partners as key informants: in other words, experts in their fields.

Interviewees were provided with a copy of the questions in advance to allow them time to prepare for the interviews. Each interviewer recorded responses in an approved template without recording the name of the respondent. All of the responses were subsequently summarized and integrated into the Evaluation Evidence Matrix.

Five versions of the key informant questionnaire were required because the key informants represented five categories of roles in the Regime as follows: (1) for Regime partner staff; (2) for representative(s) of the Office of the Privacy Commissioner; (3) for representatives of organizations involved in the Regime at the provincial/territorial level (e.g., Provincial Attorneys General, financial sector regulators other than OSFI, provincial law enforcement, and Crown prosecutors); (4) for representatives of Regime reporting entities; and (5) for academic and other independent experts, including international officials. All questionnaires were pre-tested and revised as necessary before use.

For analysis purposes, it was necessary to break out the Group 1 respondents into four sub-groups as follows: (1) policy – Finance, Justice, Office of the Privacy Commissioner (included in Group 1 interviews using the Group 1 questions as they turned out to be more applicable to the respondent than a separate set of questions that had initially been prepared for the Office of the Privacy Commissioner and labeled as Group 2 questions); (2) law enforcement and intelligence service – RCMP, CBSA, CRA, CSIS; (3) operations – FINTRAC, PPSC; and (4) non-funded partners – OSFI, PS, DFAIT.

Table 3.1
Number of Key Informant Interviews by Interview Questionnaire Version and Group
Target Group Number of
Respondents
Group 1 (Interview Questionnaire 1) Regime Partners 19
1.1 Policy (includes previously assigned Group 2 respondent) 5
1.2  Law Enforcement and Intelligence Service 6
1.3 Operations 5
1.4 Non-Funded Partners (OSFI, PS, DFAIT) 3
Group 3 (Interview Questionnaire 3) Provincial/Territorial Entities 4
Group 4 (Interview Questionnaire 4) Reporting Entities and Financial and Non-financial Entities 9
Group 5 (Interview Questionnaire 5) Academic and Other Experts Including
International Officials
2
Grand Total 34

#### 3.3.4 Focus Groups

Focus groups were conducted with homogeneous groups of Regime partners to discuss issues of importance related to Regime design, operational practices and results achieved. Discussions also revolved around potential solutions to problems that were identified.

A total of 10 focus group sessions were conducted, as shown in Table 3.2. Six of the groups consisted of public sector participants with key operational roles in the Regime (e.g., ML/TF prosecution, compliance with PCMLTFA and its regulations, provision of FINTRAC disclosures, and ML/TF law enforcement in the context of an integrated law enforcement [with proceeds of crime] strategy). The other four groups consisted of representatives from reporting entities and their associations. In the National Capital Region, the focus groups were conducted face-to-face with a maximum of 11 participants in any session. Outside the National Capital Region, the focus groups were conducted by teleconference with a maximum of eight participants in a session. Some sessions lasted up to 90 minutes.

Table 3.2
Focus Group Sessions by Regime Participant Type
Group Type Number of
Participants
Private Sector 26
Conglomerate Banks 5
Smaller Banks 8
Investment and Securities Dealers 8
Life Insurance Companies 5
Public Sector 46
Crown Prosecutors of IPOC Units (2 sessions: PPSC and Justice; PPSC) 10
FINTRAC Compliance Officers 11
FINTRAC Financial Analysts 9
CBSA 8
Law enforcement of IPOC Units (RCMP) 8
Grand Total of Participants 72

The evaluators facilitated the sessions, made a written record of participants’ responses to the issues addressed by the various groups, and derived listings of effective practices, key themes, challenges and solutions from the discussions.

#### 3.3.5 Case Studies

Thirteen cases were selected on the basis of the situations they represented. The aim was to ensure that typical situations encountered under the Regime were represented. The evaluators, in collaboration with Regime representatives, listed the types of situations that might be included in the case studies. The Regime partners were asked at the inception of the evaluation to write up descriptions of situations and cases that represented their operations and those draft descriptions were reviewed by the evaluators to determine the extent of fit with listed situations. Where gaps were observed, Regime partners were asked for clarification of existing case study write-ups or agreed to provide an additional case study draft.

A Case Study Template was supplied to the Regime partners for the purpose of standardizing to some degree the content of case studies and soliciting information not provided in the original write-ups. Evaluators also interviewed Regime partner representatives to gather additional information related to the cases.

#### 3.3.6 Online Survey

Two groups were invited to respond to the survey: (1) entities required to report under the Regime; and (2) provincial/territorial entities involved (through law enforcement or public/ private sector financial regulatory activities) with AML/ATF efforts.

A single survey questionnaire was used for internet administration. It was hosted by the evaluator in a secure folder that was password protected. The survey was available on-line for at least four weeks. A reminder email was also sent out to all potential respondents after the survey tool had been online for two weeks to encourage a higher response rate. Respondents were able to take the survey in English or French. By using skip patterns, the questionnaire contained different sets of questions that were relevant to the two different groups of respondents.

The survey was formally launched with a letter sent in June 2010 by Finance to their researched list of 1,839 potential respondents informing them on when the survey would be on-line and providing the web address, username and the password to log on. The letter included a statement inviting potential respondents to circulate the letter with the log-on information to other possible respondents that would be interested in participating in the evaluation survey. The letter asked potential respondents to only complete the survey once, as there was recognition that they may receive multiple letters inviting them to complete the survey from multiple sources.

The 1,839 survey invitations were sent to the following:

• 1,359 reporting entities;
• 130 individuals that included the Public/Private Sector Advisory Committee (PPSAC) members and their contacts;
• 300 Federally Regulated Financial Institutions; and,
• 50 law enforcement contacts at the provincial and municipal levels.

Overall, a total of 256 respondents completed the web questionnaire. Given that the sampling method used was based on the snowball technique, whereby known survey respondents are asked to recruit other respondents, the total population is unknown. However, based on the number of potential respondents, the response rate was calculated to be 14 percent.

1 FATF Annual Report, July 2010

2 Evaluation Framework for the AML/ATF Regime, Financial Sector Division Department of Finance, prepared by Goss Gilroy Inc. Dec 2007

3 FINTRAC Annual Report, March 2009, http://www.fintrac-canafe.gc.ca/publications/reports-rapports-eng.asp#1

4 FINTRAC Annual Report, March 31, 2009

5 PCMLTFA

6 It should be noted that in Canada, "charity" and "non-profit organization" (NPO) are not synonymous or interchangeable terms, but are legally distinct entities. The CRA regulates charities (as defined by the common law and the Income Tax Act) in some detail for the purposes of the Income Tax Act, which offers tax-exempt status to registered charities and tax benefits to their donors. CRA (Charities) has a regulatory role only in relation to registered charities, not other NPOs. Registered charities must be non-profit, but not all NPOs are eligible for registration as charities under the Income Tax Act. While neither registered charities nor NPOs pay tax on their income, only registered charities can issue official donation receipts for income tax purposes. The CRA receives annual returns from other NPOs (just as it does from individuals and businesses), to ensure that they remain non-profit and therefore exempt from income tax, but otherwise has no regulatory role in relation to them. Both registered charities and other NPOs are also subject, to varying degrees, to a variety of federal or provincial/territorial supervision depending on where and how they are established.

7 The Public Safety Act introduced the measures in the PCMLTFA to authorize FINTRAC to exchange information, relating to compliance with Part 1 of the PCMLTFA, with provincial regulators.

8 Note that the Department of Finance remains the primary interlocutor and negotiator for Canada with respect to FATF Standards.

9 Departmental Performance Report (DPR) – Horizontal Initiative: Canada's AML and ATF Regime (2008-2009), and 10-yr Evaluation of Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime For the Department of Finance, Financial Sector Policy Branch, Jan 2010

10 Evaluation Framework for the AML/ATF Regime, Financial Sector Division Department of Finance, prepared by Goss Gilroy Inc. Dec 2007

11 Treasury Board of Canada, Directive on the Evaluation Function, April 2009

12 Evaluation Framework for the AML/ATF Regime, Financial Sector Division Department of Finance, prepared by Goss Gilroy Inc. Dec 2007

13 Treasury Board of Canada, Directive on the Evaluation Function, April 2009

14 Treasury Board of Canada Secretariat, Program Evaluation Methods, Measurement and Attribution of Program Results Third Edition - March 1998