Canada was one of the world’s major money-laundering jurisdictions last year and, while the country has adequate intelligence on how this dirty money is being washed, more work is needed on the way this sophisticated crime is investigated and prosecuted, according to a recent U.S. State Department report.
The 2019 International Narcotics Control Strategy Report, the annual assessment of how key countries are fighting the illicit drug trade around the globe, found transnational organized crime groups and professional money launderers are operating in Canada, laundering cash from “drug trafficking, fraud, corruption, counterfeiting and piracy, and tobacco smuggling” as well as ill-gotten gains from other countries.
Much of this dirty money likely comes from the illicit drug trade, as the report also labelled Canada one of the globe’s three dozen countries that are “major sources of precursor or essential chemicals used in the production of illicit narcotics," along with others such as Brazil, China, Colombia, India, Indonesia, Mexico and Britain. In its report, the State Department analyzed the money-laundering threats in Canada and roughly 80 other countries around the world.
The report, released last month, comes as Ottawa is strengthening its anti-money laundering regime by spending an extra $29.1-million annually over four years, with much of those resources going to British Columbia, where information about specific cases has emerged in the past year pointing to billions being laundered through the province’s gambling and real estate sectors.
The U.S. analysis stated that federal anti-money laundering laws allow for police agencies and the Financial Transactions and Reports Analysis Centre of Canada (FinTRAC) to effectively share information on money laundering gleaned through the country’s “rigorous detection and monitoring process.” But not enough criminals are facing jail time for this crime, the report concluded.
“The government should take steps to increase enforcement and prosecution,” the report stated. “As noted by international experts, when the magnitude of the identified money laundering risks are taken into account, Canada’s money laundering conviction rate appears to be low.”
The report noted only 169 trials on charges of money laundering have led to a conviction in recent years, citing official data from 2010-14, which the report stated was the most recent available. The related offence of possessing proceeds of crime netted 17,191 convictions on at least one charge in 2014, the report stated.
The State Department analysis noted that key amendments to the Canada’s anti-money laundering and terrorist financing law are coming later this year that could close the loopholes to force foreign-owned money services businesses as well as cryptocurrency dealers to begin reporting to FinTRAC.
There is no reliable data on how much money is laundered in Canada each year, but a confidential FinTRAC analysis looked at five different ways of estimating the problem and found these “reference points” pegged it at anywhere from $5-billion to $40-billion.
Last month, The Globe and Mail reported how FinTRAC was warned as far back as 2014 that the country’s banking, real estate and casino sectors were vulnerable to sophisticated criminals washing vast sums of illicit cash.
James Cohen, executive director of the non-profit Transparency International Canada, said the new State Department report appears hopeful many loopholes will soon be closed with the coming amendments to the federal regime, but a glaring need will remain: Canada must create a national beneficial ownership registry so that the authorities – and the public – know who the true owners of any given piece of property are.
“From this analysis I would probably be even more harsh,” he said Tuesday.
He also welcomed the increase in federal funding for law enforcement agencies, but worried that Ottawa may focus its efforts too much on B.C.
“I just hope the federal government doesn’t ignore the rest of the country and think this is a geographically confined problem,” Mr. Cohen said. “People move where the gaps are, we need to make sure Canada as a whole isn’t a gap."