PRESERVING FINANCIAL INTEGRITY AND PROMOTING COMPLIANCE.

• Position: Proceedings of the 41st Annual Canada-United States Law Institute Conference on the State of Our Nations; The Canada-United States Relationship: Canada-United States Perspectives on Law, Policy and Politics in Tumultuous Times - Discussion

Moderator: Theodore V. Parran III

Speaker: Diane Francis

Speaker: Richard Gordon

Speaker: Josee Nadeau

ASSOCIATE PROFESSOR PARRAN: Thank you all for persevering through the day. It's a long day, but it has been a great day, and we're going to have one more final great panel. The topic for this is going to be financial integrity and compliance, and we have three people who are very knowledgeable on this subject and who have also a lot to say about it. So we are very excited to hear from you all.

I will give some brief introductions. Carmina Hughes, who is from TD Bank, one of their senior leaders, was not able to make it because of the snow storm that hit around Lake Ontario last evening.

First, we are very happy to have Josee Nadeau, who is, has spent much time with the Government of Canada, was most recently senior chief of Financial Crime International, where she led a delegation for the Financial Action Task Force [("FATF")] and to its regional bodies in the Caribbean, South America, and Asia Pacific region. In this capacity she coordinated up to twelve departments and agencies. In 2012, she led the review of the international standards for anti-money laundering, countering finance to terrorism and proliferation. She also led the ongoing assessments of the FATF countries, high-risk countries for compliance with their standards, and led the ongoing policy development in those areas after the assessment. She also worked in support of Canada at the G7/8, the G20, United Nations and the Organization of American States in respect to financial crimes and financial integrity. So somebody with a lot of experience in this field, and now that she is recently moved on from the Government of Canada, is able to share her views without filter, or so I'm told.

Many of you know Diane Francis. She is one of the members of our Executive Committee, a very strong supporter of CUSLI, so we thank her for all of her efforts. She's an award-winning columnist, author, investigative journalist, as well as television commentator on all things Canadian, American, and really across the world. But one of her particular areas of interest is financial compliance integrity, money laundering, and it is something that she has written extensively about, so we are very excited to hear what she has to say on that topic.

Finally, we have one of our own Case Western professors, Richard Gordon, who's the director of our Financial Integrity Institute. He's been a professor here for quite a while and before that had a long and distinguished career in public service. He's a graduate of Harvard Law School and practiced international tax law in Washington, D.C. in private practice. He joined the staff of the International Monetary Fund, where he was senior counsel and senior financial sector expert, and in particular, he worked on sovereign debt restructuring and financial integrity matters there. After 2001, September 11th, he served on the IMF Task Force on Terrorism, to finance and coordinate the IMF and the World Bank's involvement in anti-money laundering and terrorism financing. So they are three people with breadth and depth of experience on this topic. Since I am not the one with the expertise, I will turn it over to them right now. Thank you.

MS. NADEAU: Thank you very much, Ted. Well, first, I want to say that I feel very privileged for being here today among all of you and with my colleagues here as panelists, but I have a little secret to tell you, a little disclaimer. I'm not a lawyer. Okay? So I have been invited to this Canada-U.S. Law Institute thing, but I'm an economist, just so you know, but I did marry a lawyer. So we will see. We'll come back to that.

The other thing I want to say, like Mr. Weekes said so nicely this morning, is that I'm not speaking on behalf of the Government of Canada. You know, I do say "we" sometimes, and "we as Canada," but also, I'm going to leave without pay from the Department of Finance. So I can say a little bit of what I think among friends, but I'm still a civil servant with the federal government. So I will be a little bit careful, but I am known to usually say what I think, so what you see is what you get.

But, so, I want to say that I really, really enjoyed the day so far, so hopefully, we'll continue to enjoy the rest of the day together, and hopefully, you can learn a little bit, too, about financial integrity in this wonderful world that's quite big.

I will be the moderator, and I will also be a panelist, especially now that Carmina could not make it. There were also thunderstorms in Cleveland that delayed some of the planes, anyway, she had been having a real problem coming here. But what I'm going to do real quickly is go over five slides that I have, and hopefully, that's going to give all of us the same facts and a bit of background on this topic internationally but also from a Canada-U.S. bilateral relations perspective. And then I will let the two panelists say a few words as well, and then we have identified a couple of issues for discussion, we'll take your questions.

So financial integrity, maybe you think, oh, why bother? This is boring. This is a bit technical. You know, it is all about money. Well, it's all about money actually and very importantly, how do we prevent the bad money entering into and circulating in our hard working economy? So it's all about following the money. The key issue, you know, stepping back 30,000 miles, kilometers, whatever system you want to use, the key issue is really, are we really effectively tackling money related to terrorist financing, money laundering, tax evasion, and also fraud, corruption, and you name it? Those crimes have huge costs in our societies, and they can very negatively affect a country's reputation. You know, we have seen it recently and even before that. The problem with those financial crimes is really global in nature, and the solutions are also global in nature.

But sometimes, you know, we'll have national sovereignty, is how can we maintain that and still be a good corporate citizen in the world of fighting financial crime? It's complex. The expectations are high. The challenges are quite broad, but they're quite important. So I am going to start in giving you some of those little facts and background.

So since the financial crisis of 2008, financial integrity has been more and more on the international agenda, and in the last seven years, systematically, mostly finance ministers and central banks, when they need an issue to communicate, they have been calling on this FATF, on issues related to financial market integrity, transparency, terrorist financing, and so on.

So what is this FATF? The Financial Times actually, in one of its articles, said a couple of years ago the Financial Action Task Force is probably one of the least known international bodies but probably one of the most influential on national policies. So I'll tell you a little bit more about FATF now. It's the standard setter for fighting money laundering and financial terrorist financing, so they officially say "anti-money laundering, countering the financing of terrorism." It's a policy task force. It's not operational in nature. There are no cases being discussed per se. It was created at the end of the '80s under the leadership of the G7 by the French. It was at the French G7 Summit. This is just the same year, I think, or the year after the UN convention, I always forget, Richard ...

PROFESSOR GORDON: Palermo.

MS. NADEAU: The Palermo, was the first one or the ...

PROFESSOR GORDON: The Vienna.

MS. NADEAU: The Vienna convention that made--requested countries to criminalize money laundering, so you think that's not that long ago, and at the end of the '80s, money laundering was not even a criminal offense in many of the countries, including Canada. I think it was in the U.S. already. So originally, it was really the leaders of the G7 that tasked their finance ministers to do something about the financial integrity of the financial sectors because they were worried about the huge amount of money from drug trafficking infiltrating our legitimate financial system.

After 9/11, the FATF was given the mandate to deal also with terrorist financing, and in 2012, the FATF also included a couple of standards related to proliferation financing, weapons of mass destruction. So the FATF standards are very comprehensive, and they give you kind of a nice toolbox of how to follow the money. As I said it's very helpful also to fight corruption, tax evasion, organized crime groups, and terrorism. Currently, there are 37 members at the FATF but, globally, through regional bodies, over 190 or 180 something countries are recognizing the FATF standards and are also committed to implement them.

The FATF is housed, just a little history, is housed at the [Organisation for Economic Co-operation and Development ("OECD")] premises in Paris, but it's a totally separate body with members. The BRICs are all members of the FATF officially. You have all the European countries, of course, the NAFTA countries, so just sometimes Europeans are a bit Eurocentric, and they discuss issues that really get to the European Union. So sometimes us and the Mexicans and the Americans like to refer to and discuss an issue that is related to the North American union. So we like to show a bit of counterbalance there with the Eurocentric approach, sometimes with respect to those global issues.

So the FATF, as I said, is a policy body but also does counter-reviews of the enforcement of the implementation of those international standards. There are formal assessment peer reviews, and all the reports of the FATF are public, and they're found on its website. It's easy to find on the website.

Next slide. To bring you back a little bit more to the FATF language, the standard since 1989 has been revised, at least, three times formally in the grander schemes. Right now there are 40 recommendations, which...