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MacDonald Laurier Institute

Peterson’s case demonstrates where professional regulators have gone astray

Published

10 months ago

15 minute read

From the Macdonald Laurier Institute

By Stéphane Sérafin

Professional regulators are losing sight of the purpose their disciplinary authority is supposed to serve, to protect society by preserving professional competence.

Members of restricted professions – doctors, lawyers, accountants and psychologists, among others – are subject to the disciplinary authority of their respective professional regulators. This arrangement is intended to ensure a minimum level of professional competence and to protect those relying on these professional services.

This has obvious advantages over purely market mechanisms, at least in theory, owing to the fact that professional regulators can set standards for members that apply before a member has engaged in serious professional misconduct. However, professional regulators have attracted significant controversy in Canada over the past few years as attempts to police members’ off-duty speech and conduct have become a recurring news item.

The problem is that professional regulators are losing sight of the purpose their disciplinary authority is supposed to serve – to protect society by preserving professional competence – and are policing members values for the sake of perceived reputational interests.

While it is tempting to conclude that the difficulties in these controversial cases arise from straightforward regulatory overreach, the problem is more complex. The fact is that regulators have always had the ability to police off-duty conduct, and for good reason, since such conduct may bear directly upon member competence. It is not that regulators are suddenly policing off-duty conduct which used to fall entirely outside their purview, but that the kinds of expression they are trying to censor are no longer focused on protecting society from an incompetent professional but on protecting themselves and their colleagues from association with political views which they find distasteful.

Professional regulators should reverse course, return to their mandates, and focus on ensuring professional competence, not political alignment, among their members.

Consider the best-known Canadian controversy concerning former University of Toronto professor-turned-social-media-influencer Jordan Peterson. As a member of the College of Psychologists of Ontario, Peterson was ordered to undergo social media training following complaints that his social media posts were discriminatory and unprofessional. The College felt that it could make such an order against Peterson without subjecting him to a full disciplinary procedure. It also felt that it could do so solely on the basis of complaints that did not originate with his clients, but arose out of positions that he had publicly staked out on controversial political and cultural issues.

When Peterson challenged the decision through a judicial process, the Ontario Divisional Court found that the College’s decision was reasonable. The Court was of the view that professional regulators had always held the requisite jurisdiction to police member expression, even when that expression did not arise in the context of a member’s strict professional activities. This included the capacity to police expression considered “discriminatory”. Moreover, it was thought to be enough that the expression might adversely impact the reputation of the psychology profession.

The principles invoked by the Divisional Court in this case are difficult to contest in the abstract. To recognize the authority of a professional regulator over a given profession, rather than relying on market mechanisms to ensure basic competence, means that the professional regulator must take a broad view of the kind of conduct that could fall within its ambit.

It would be difficult to claim that the off-duty conduct of a member is entirely without interest for professional regulators, since such conduct can be relevant to determining whether a particular person is fit to remain a member in good standing. An individual who commits a sexual assault outside of work hours, for example, is probably not fit to act as a clinical psychologist, just as someone who embezzles funds in a context divorced from his or her work should probably not be allowed to operate a trust account as a lawyer. No doubt, certain forms of expression that are not directly connected to the member’s professional activities – defaming others, threatening violence, or airing confidential information other than client information – raise similar concerns.

Criminal and civil court processes are not designed to address these concerns, since their purpose is to establish a criminal infringement of community norms and civil liability towards another person, respectively. Not all criminal acts or civil wrongs necessarily impugn a member’s professional competence, and conversely, there may be grounds to sanction a member where the threshold for criminal or civil liability has not been met.

But to say that professional regulators ought to have jurisdiction over the off-duty conduct of their members is one thing; to determine what type of off-duty conduct, specifically, properly attracts their disciplinary jurisdiction is another. The trouble with the Peterson case, as with many of the other recent Canadian controversies, is that the justification offered for the exercise of professional regulatory jurisdiction does not fit the paradigm offered by the examples just referenced, in which the off-duty conduct, including off-duty expression, can be taken to cast doubt on the member’s ability to carry out his or her profession. Instead, these cases present the regulation of off-duty expression by regulators in a manner analogous to the employment context, where the concern is not with the protection of the public interest, but in allowing employers to preserve their own reputation and to avoid vicarious liability for the acts of subordinates.

The view suggested by the Divisional Court in the Peterson case – that professional regulators are simply doing what they have always done – misses the widening focus of regulators beyond professional competence. This widening focus has been precipitated by at least two factors.

First, technological shifts have significantly altered the balance of power between professional regulators and individual members of the public. In an era of social media, an opinion that would have once been expressed to a small audience now finds itself exposed in some cases to an audience of millions. The possibility that someone, somewhere, will find offense, or decide to find offence, with the expression of opinions grows with the scope of the audience. Moreover, the nature of social media is such that any member of that audience can react, in real time, individually or in concert with others, to the opinion being expressed. This means that potentially every public utterance, whether reasonable or not, creates a reputational risk not just for the individual member, but also for the broader profession. Professional regulators are unsurprisingly concerned by this possibility, which affects their own vested interests.

Second, and perhaps more importantly still, broader cultural shifts have also significantly altered the kinds of expressive content that regulators are likely to treat as “unprofessional” or otherwise raising reputational concerns.

Consider another decision, Simone v. Law Society of Ontario, which was narrowly decided by the Law Society of Ontario Tribunal (the body charged with adjudicating complaints against Ontario lawyers and paralegals). In that case, Lisa Simone, an individual seeking membership in the Law Society of Ontario as a paralegal, was subject to “good character review” because of social media posts that she had made which were, among other things, critical of vaccine mandates, the Black Lives Matter organization, and “pride” events. While the Tribunal ultimately decided in favour of the candidate’s good character, and thus her admission as a paralegal, a majority did so apparently on the sole basis that the candidate had expressed remorse for the social media posts in question.

As with the Peterson case, the comments that landed Simone into trouble were associated with positions on the “right” of the political spectrum. They were also brought to the attention of the Law Society through complaints by members of the general public, and were used against her outside of a formal disciplinary proceeding. In other words, this was also not a classic case involving a disciplinary proceeding brought for off-duty conduct that undermined confidence in Simone’s ability to work as a paralegal. Rather, the concern was that the social media posts themselves reflected poorly upon the profession, not just because of their tone (though this was the formal argument made against Ms. Simone’s accreditation) but also, ostensibly, because of their content. This appears to be why the majority in that case repeatedly reaffirmed Ms. Simon’s obligation to comply with human rights laws, as though the mere expression of views critical of vaccine mandates, the Black Lives Matter organization, and “pride” events might infringe those obligations.

To say that professional regulators appear increasingly concerned with the reputational interest of their profession is, in this context, to say that professional regulators appear increasingly concerned with the appearance of complying with narrow cultural and political orthodoxies. These are “orthodoxies”, since they are views that are now largely taken for granted among much of the professional class, or at least among those individuals who are most likely to staff professional regulators and make decisions concerning member conduct.

Where a member of a restricted profession expresses personal viewpoints at odds with these admissible perspectives, the concern is not that the member lacks the requisite competence to exercise their role. Rather, the concern is that the mere expression of these views is “unprofessional”, in the sense that they are potentially damaging, or at least embarrassing, to the profession. That is, the expression of this views is “unprofessional”, owing to the fact that the member’s personal opinions are at odds with the values that the regulator thinks the profession should embrace.

That said, while the opinions that have run afoul of professional regulators have typically been associated with the “right” of the political spectrum – as in the Peterson and Simone cases – there have also been cases in which the authority of professional regulators has been invoked to punish those expressing views more typically associated with the “left”. In one particularly notable incident after the October 7 attacks on Israel by Hamas, students enrolled at the Faculty of Law at Toronto Metropolitan University (formerly Ryerson University) circulated a letter that purported to express solidarity with Palestinians, but also included language referencing a right of “resistance”. Many in the legal profession interpreted the letter as condoning the October 7 terrorist attacks. This prompted calls to deny the students articling positions (a requirement of lawyer licensing in Ontario) and potentially to deny them accreditation altogether.

This and similar cases that have arisen since October 7 may well suggest that the phenomenon that has until recently targeted mostly “right”-coded political opinions may now be weaponized by either side of the political spectrum.

What each of these cases undoubtedly serve to highlight, in any event, is a need to recover the importance of professional competence as the aim of regulators. Ensuring professional competence is the very reason for which professional regulation exists, and why determinations as to who can exercise these particular professions are not left solely to the market.

Canadians need professional regulators to return to their mandate: ensuring a minimum level of professional competence and protecting those relying on professional services. Regulators should not concern themselves with whether the opinions expressed by members are potentially embarrassing because they happen to fall outside the “values” that regulators believe professionals should embrace.

Stéphane Sérafin is an assistant professor in the French Common Law Program at the University of Ottawa.

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Canada needs to get serious about securing its border

Published on December 19, 2024

By

From the Macdonald Laurier Institute

By Todd Hataley for Inside Policy

US President-elect Donald Trump has made clear his intention to call out Canada on weak enforcement on migration, money laundering, and the cross-border trafficking of narcotics, especially fentanyl.

Until just very recently, Canada has remained largely silent on these issues. Security agencies, such as the Royal Canadian Mounted Police (RCMP), Ontario Provincial Police (OPP), Sûreté du Québec (SQ) and the Canada Border Services Agency (CBSA), have tried to secure the border via memorandums of understanding, framework agreements, and legislated agreements that allow them to share information and even work together.

However, resources are limited for cross-border law enforcement co-operation. CBSA remains  understaffed and RCMP Integrated Border Enforcement Teams (which work with US security agencies) have limited geographic reach, leaving much of the enforcement between ports of entry left to police of jurisdiction, who already are hard pressed to provide services to the communities they serve.

The Canadian government’s apparent strategy of largely ignoring the problem is becoming more difficult to maintain. With the United States Border Patrol intercepting increasing numbers of illegal migrants crossing into that country from Canada, it’s clear the porous border is a concern. Exacerbating the situation is the recent discovery of illegal narcotic super labs in Canada – where production far outstrips the market – and Canada’s unfortunate, albeit well-deserved reputation as a haven for global money launderers.

Thanks to Trump’s 25 per cent tariff threat, the crisis is now endangering Canada’s relationship with its largest and most-important trading partner. This announcement sent all sectors of government and the private sector into a frenzy, prompting Prime Minister Justin Trudeau to fly to Florida to seek out an early audience with Trump at his Mar-a-lago resort home. Trudeau’s team spun the trip as proof that the federal government is serious about working with the US to address its border security and public safety concerns.

But with political crises piling up, it will be difficult for Trudeau to also manage the political optics of kowtowing to Trump, who is widely unpopular among Canadians. Spending extra money to appease Trump during the ongoing housing, immigration, and health care crises could make the Trudeau’s popularity nosedive even further. Adding insult to injury, Trump is essentially demanding that Canada do America’s work by stopping illicit goods and people from entering the United States: customs and border security officials generally work on the principle of stopping goods from entering their country.

Trudeau faces many practical challenges, including the need to ramp up the number of border and law enforcement agents who have the skill sets and training required to police offences such as drug production, money laundering, and the cross-border smuggling of goods and humans. Purchasing helicopters and drones to conduct surveillance will do little to aid enforcement, since most goods smuggled across the border pass through legitimate border crossings. RCMP Commissioner Mike Duheme even suggested putting RCMP cadets along the border – a challenging proposition since vast swathes of the border are either wilderness or water. Surveillance is one thing, but the act of enforcement takes skilled people with the capacity to investigate, gather evidence, and articulate that evidence into something that can be used by the courts for convictions. These concerns are not being addressed in this current frenzy to spend money on border security.

There is also good evidence that fortifying the border, or what has become known as forward deployment along the border, does nothing to stop the cross-border transit of contraband goods and people. One need only look as far as the United States-Mexico border to see the failure of forward deployment.

As authorities increase border enforcement activities, the costs of smuggling goods and people mounts for criminals. Eventually, it drives out amateurs, leaving only the professional, skilled, and well-equipped criminal groups. This, in turn, often leads to increasing levels of violence along the border, making interdiction and disruption far more difficult for law enforcement agencies.

Canada has several clear options to address Trump’s border concerns. It can increase the staffing of frontline CBSA officers, including border agents, inland enforcement units that actively investigate and remove individuals from Canada, international liaison officers, and customs processing staff. It can also create a plan for CBSA to take over enforcement between ports of entry. Currently, CBSA enforces entry into Canada at the ports of entry and the RCMP are responsible for the areas in between. Having a single agency manage the border builds capacity and expertise, avoiding inter-bureaucracy competition and confusion.

Canada can also work to better integrate law enforcement, intelligence units, and border services at all levels of government and across international boundaries. Cross-border crime operations are often planned and execute far from the border.

Some of this already takes place, as noted above, but it needs to go much deeper and be more supportive at both institutional and individual levels. This process must also include private sector stakeholders: companies such as FedEx, UPS, and Amazon, as well as freight forwarders, trucking companies, and customs brokers, are all involved in cross-border trade. Their participation as partners in reducing cross-border criminal activity is essential.

Finally, the government needs to designate laws specific to cross-border crime and include meaningful penalties as a means of deterrence.

Hyper-focusing on the border while ignoring other aspects of cross-border crime may be good political optics, but it is a bad strategy. What we really need is functional enforcement – including an integrated process extended vertically and horizontally across all sectors of border stakeholders, at and away from the border, supported by strong policy and legislation. This is the path forward to better cross-border crime enforcement.

Dr. Todd Hataley is a professor in the School of Justice and Community Development at Fleming College. A retired member of the Royal Canadian Mounted Police, he worked as an investigator in organized crime, national security, cross-border crime, and extra-territorial torture. He is a contributor to the Macdonald-Laurier Institute.

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Canada can – and should – crack down on trade-based money laundering

Published on December 8, 2024

By

From the Macdonald Laurier Institute

By Jamie Ferrill for Inside Policy

Neglecting to take decisive action enables organized criminal networks whose activities cause significant harm on our streets and those of our international partners.

Financial crime bears considerable political and economic risk. For the incoming Trump administration, the threat that transnational organized crime and the illicit financial flows pose to global financial stability is a top priority. The threat of tariffs by the Trump administration makes the costs to Canada in enabling global financial crime all too apparent. In addition to the cost of tariffs themselves, the associated reputational risk and loss of confidence in Canada’s financial system has implications for investments, credit, supply chains, and bilateral co-operation and agreements.

Canada’s proximity to major international markets, stable economy, high standard of living, and strong institutions and frameworks make it an attractive place to do business: for both legitimate and criminal enterprises.

Trade is a key contributing sector for Canada’s economic security. It represents two-thirds of Canada’s GDP, and exports alone support nearly 3.3 million Canadian jobs. Trade is also highly vulnerable to criminal exploitation. Ineffective oversight, regulatory complexity, and lagging technology adoption, coupled with a lack of export controls, make it possible to move vast proceeds of crimes, such as those from drug trafficking, human trafficking, corruption, and tax evasion through the global trade system.

These vulnerabilities are well-known by transnational organized crime groups. They are able to effectively move billions of dollars of dirty money through the global trade system every year, a method commonly referred to as Trade-Based Money Laundering (TBML).

While any statistics must be interpreted with caution, evidence shows that TBML is a prevalent method of money laundering.

What is it?

There are several types of Trade-Based Financial Crimes such as terrorism financing through trade, sanctions evasion, and simply trade fraud. However, the TBML definition is necessarily specific. Essentially here, TBML is a money laundering method: the processing of criminal proceeds to disguise their illegal origin. TBML involves the movement of value through the global trade system to obfuscate the illicit origin. This is usually done through document fraud: undervaluing, overvaluing, phantom shipping, or multiple invoicing. Different techniques employ different aspects of the supply chain. And TBML may be just one method used within larger money laundering operations.

By way of example, US authorities allege that two Chinese nationals living in Chicago laundered tens of millions of dollars for the Sinaloa and Jalisco Cartels. Drugs were smuggled into the United States and sold throughout the country. The proceeds from these sales were collected by the Chinese nationals. Those proceeds were used to purchase bulk electronics in the United States, which were then shipped – with a falsified value – to co-conspirators in China, who sold them locally. The legitimacy provided by the electronics sales and the trade transaction provide cover to “clean” proceeds from precursor crime.

Either the importer and/or the exporter of the goods can shift value. Chances here are the electronics shipped were undervalued: on leaving the country, they are declared at a (much) lower value than they are actually worth. The importer in China pays the undervalued invoice, then sells the goods for what they are worth. The profit from those electronics now appears clean, since it was used for a “legitimate” sale. The ensuing value gap can be transferred informally or stored as illicit wealth. The value has now shifted, without fiat currency leaving the country of origin.

But the cycle does not stop there. The value and money itself continue to traverse around the world, through various intermediaries such as financial institutions or cryptocurrency exchanges. It then goes right back into the system and enables the very crimes and organized crime groups that generated it in the first place. It is, in short, the business model of organized crime.

The Canadian problem

Ultimately, the proceeds of crime that have been legitimised through TBML (and other money laundering methods) supports the criminal enterprises that generated the value in the first place. In the example, these are prolific cartels who have been behind the fentanyl crisis, migrant trafficking and abuse, corruption, and widespread violence that destabilizes communities and undermines governments across North America and beyond.

With new actors, drug routes, and ways of doing business, the cartels are very much active in Canada. The Sinaloa cartel in particular has established a significant presence in Canada where it controls the cocaine market, manufactures and distributes fentanyl, and is embedded in local criminal networks. This increases Canada’s role as a strategic location for drug trafficking and a base to export abroad, notably to Europe, the US, and Australia.

Hells Angels, Red Scorpions, ’Ndrangheta, and other organized crime groups are also exploiting Canada’s strategic location using their transnational links. These groups are active in criminal activities that generate proceeds of crime, which they launder through Canadian institutions. From drug trafficking to extortion to human and sex trafficking, the foundation of organized crime relies on generating and maximizing profits. The proceeds generally need to be laundered; otherwise, there are direct lines back to the criminal organizations. They are, without a doubt, exploiting the trade sector; the very sector that provides so much economic security for Canada.

Canada’s regulation, reporting, and prosecution record for money laundering is notoriously weak. Its record for regulation, reporting, and prosecution for trade-based financial crimes, namely here TBML, is even weaker.

As financial institutions and other regulated entities face increased scrutiny following the TD Bank scandal and the Cullen Commission’s inquiry into money laundering in BC, more criminal activity is likely to be displaced into the trade sector and the institutions it comprises.

TBML is difficult for financial institutions to detect, especially given that 80 per cent of trade is done through open accounts. It exploits established trade structures that are meant to protect the system –like documentation and invoicing processes – by manipulating transactions outside traditional payment systems, which requires more sophisticated anti-money laundering strategies to address these hidden vulnerabilities.

Addressing the problem

Trade is a gaping vulnerability. Yet, it attracts minimal attention in countering transnational financial crime. Containing the fentanyl crisis for one requires a collaborative effort to bolster supply chains and the trade sector against financial crime. This means global cooperation, technological advances (such as blockchain technology), appropriate resourcing, more scrutiny on high-risk countries and shippers, and regulatory innovation.

But political will is in short supply. The federal government’s Budget 2024 and the resulting proposed Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorism Financing Act will grant CBSA new authorities to counter TBML, but limited resources to make good on them. And CBSA cannot do it alone.

Transnational organized crime and the illicit financial flows that support it poses a threat to global financial stability. The enabling of financial crime hurts Canada’s reputation abroad. With a new political regime emerging in the US, Canada cannot afford to be seen as a weak link. Loss of confidence in a country and its financial system has implications for investments, credit, supply chains, and bilateral cooperation and agreements.

By neglecting to take decisive action, we inadvertently enable organized criminal networks whose activities cause significant harm on our streets and those of our international partners. With profits as their primary driver, it is imperative that we scrutinize financial pathways to disrupt these illicit operations effectively.

Organized crime groups are not bound by privacy laws, bureaucracy, political agendas, and government budgets. They are continually evolving and staying many steps ahead of what Canada is equipped to control: technologically, geographically, strategically, logistically, and tactically. Without appropriate regulations, technological advances, and resources in place, we will continue to be a laggard in countering financial crime.

More systematic change is needed across regulatory frameworks, law enforcement coordination and resourcing, and international partnerships to strengthen oversight, close loopholes, and enhance detection and disruption.  It would be a low-cost signal to the Trump administration that Canada is committed to upping its game.

Jamie Ferrill is senior lecturer in Financial Crime at Charles Sturt University and co-editor of Dirty Money: Financial Crime in Canada.

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