Canada ill-equipped in the fight against money laundering
A three-year investigation into money laundering in British Columbia Canada has revealed that provincial and federal authorities are ill-equipped to stop the proceeds of crime from flowing into the province’s economy.
Cullen CommissionAn 1,800-page report by Commissioner and former BC Supreme Court Justice Austin Cullen came in the wake of significant public concerns about money laundering in the province.The
Cullen’s task was to assess the extent to which money laundering had infested various sectors of the British Columbia economy as well as to assess the effectiveness of regulatory and law enforcement agencies in their anti-money laundering efforts.
He concluded that “an enormous volume of illicit funds are laundered into the British Columbia economy every year.” The commissioner cited a model that indicated C$6.3 billion (US$4.8 billion) was laundered in the province in 2015, with a further C$7.4 billion (US$5.7 billion). ) laundered in 2018.
Cullen further sought to present money laundering as not just an example of white-collar crime that only affects the elite and wealthy. He noted that this is never the first link in the criminal activity; proceeds are first generated by crimes that destroy communities, such as drug trafficking, human trafficking and fraud.
“These crimes victimize the most vulnerable members of society,” wrote the former justice of the Supreme Court of British Columbia.
Canadian agencies tasked with analyzing information about money laundering threats were heavily criticized in the 1,800-page report.
One criticism focused on the Financial Transactions and Reports Analysis Center of Canada (FINTRAC), which concluded that the agency had failed to disclose thousands of intelligence reports to law enforcement agencies, whose investigations would have could benefit from access to this information.
Cullen noted that in 2019-20 FINTRAC received more than 31 million individual reports, but only disclosed 2,057 to law enforcement authorities in Canada and only 355 to authorities in British Columbia.
“British Columbia law enforcement agencies cannot rely on FINTRAC to produce timely and useful intelligence on money laundering activities that they can initiate,” the commissioner noted.
Chen Runkai, a Chinese property developer who transferred tens of millions of dollars in hundreds of wire transfers without arousing the suspicion of Canadian banks, is a notable example of money laundering activity that went unnoticed by authorities.
A previous OCCRP report noted that before moving to Canada in 2006, Chen earned a modest salary of CDN$41,000 ($31,658) a year, but no red flags were raised about the sums. that Chen had transferred and the country’s financial regulator was not even notified. his activities.
“All kinds of alarm bells should have been ringing,” said Garry Clement, a former Royal Canadian Mounted Police superintendent who focused on proceeds of crime investigations. “It almost feels like they’re sleeping at the switch… It just shows the system is down.”
Chen has also been the subject of further investigation by OCCRP into money laundering activities originating from China in the Vancouver real estate market.
What was discovered was that not only had C$114 million ($87.9 million) been deposited in Chen’s bank account a few years after he moved to Canada, but he was also wanted by the Chinese government on corruption charges for its alleged role in a major corruption scandal involving a senior military official.
The scandal has raised serious concerns about the due diligence employed by Canadian banks in their efforts to properly detect money laundering activity and then report it to the appropriate authorities.
When asked to comment, the banks cited privacy concerns when talking about individual customers.
Canadian politicians, meanwhile, spoke more about the country’s shortcomings in its fight against money laundering.
“Canadians are struggling to afford housing in cities across Canada, but the government still allows illicit foreign funds to make matters worse,” the MP said. Alistair MacGregor in an address to the House of Commons.
“For eight years,” the MP said, “Chinese real estate developer Runkai Chen used wire transfers to launder tens of millions of dollars in Canadian banks. Canada has a flawed money laundering tracking system. This government’s inaction only adds to the hardship of ordinary Canadians.
Immediately after the publication of the Cullen Commission, the Department of Finance Canada published a statement on its commitment to protect Canadians and the country’s economy against money laundering.
“The Federal Government takes the issues of money laundering and terrorist financing very seriously,” the statement said. “The government will carefully review the report and will continue to work with all partners, including the Government of British Columbia, as part of its efforts to review and improve Canada’s anti-money laundering regime and the financing of terrorist activities.
Cullen’s investigation shed light on the risks banks face when dealing with potential money launderers. He explained that banks are responsible for handling so much of the country’s assets that it is impossible for them to perform due diligence on every transaction.
“In 2015, banks held more than 60% of financial sector assets, the vast majority of which was held by the six largest national banks,” the commissioner wrote. “Provincial credit unions and caisses populaires also handle huge sums of money – $320 billion in assets in 2014.”
Cullen offered recommendations in his report on how the country could better identify money laundering threats in the future. One of these recommendations was the creation of a provincial money laundering investigation unit with a well-equipped intelligence division.
“If the province is to succeed in the fight against money laundering,” he wrote, “it must develop its own intelligence capacity to better identify money laundering threats.”
Canada’s federal government was quick to name this new agency and ensure that its oversight and law enforcement agencies receive the investments they need to combat money laundering in the coming.
The country’s 2022 budget will allocate C$89.9 million ($68 million) to FINTRAC over five years, according to the Finance Ministry statement.
In addition, the government revealed its intention to create a new Canadian Financial Crimes Enforcement Agency, which it says will strengthen the country’s ability to respond quickly to complex and fast-paced cases of financial crime.