Duhaime's Anti-Money Laundering Law in Canada

Ottawa Professor ordered extradited to France to face charges over terrorist attack

By Christine Duhaime | April 5th, 2012

Canada’s Minister of Justice and Attorney General, the Honourable Robert Nicholson, has ordered the extradition of Canadian Sociology professor Hassan Diab to France to face charges of murder, attempted murder and destruction of property related to the 1980 terrorist attack on a synagogue in Paris that killed 4 people, and injured 40 others. The terrorist attack was anti-semitic and took place on the day of the celebration of Simchat Torah, the final day of a Jewish festival.

Under Canada’s Extradition Act, a hearing is held to determine whether a person can be extradited. At that hearing, the judge must be satisfied that there is sufficient evidence to establish a prima facie case that an extraditable crime has been committed. If committal is ordered, the Minister of Justice then decides whether the person sought should be surrendered to the requesting state. Although France’s case against Diab is largely circumstantial, an Ontario court ruled last year that the evidence against Diab was sufficient to establish a prima facie case. As a result, Diab was committed for extradition. He has appealed that decision to the Ontario Court of Appeal.

Diab is under house arrest in Ottawa.

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Canada seeks extradition of suspected human smuggler connected with MV Sun Sea

By Christine Duhaime | April 5th, 2012

Arrest of Markandu

Canada is seeking the extradition of the alleged organizer of the migrant ship, the MV Sun Sea, that illegally transported 492 Sri Lankan foreign nationals from Thailand to Canada in August 2010. Thayakaran Markandu, who is also a Sri Lankan foreign national, was arrested in France and is being held in custody by French authorities. Earlier this month, the RCMP issued a warrant for his arrest on charges of human smuggling under the Immigration and Refugee Protection Act.

The charges may be amended to include money laundering with respect to the proceeds of the smuggling operation. Examples of money laundering that may occur in human smuggling operations include the use of funds paid to smugglers or traffickers, the use of funds paid to procure supplies or boats for smuggling or trafficking, or the use of funds from terrorists or terrorist organizations. Those aboard the MV Sun Sea claim they paid between $20,000 to $40,000 to be smuggled into Canada.

Difference between Human Smuggling & Human Trafficking

There may also emerge evidence of human trafficking in the MV Sun Sea smuggling operation. Several of the migrants have told Canadian authorities that they owe “debts” to those who arranged their voyage on the MV Sun Sea and will have to pay their “agents” substantial sums to clear the debts in Canada. This suggests they were trafficked and not smuggled.

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Canada introduces nuclear terrorism law

By Christine Duhaime | March 27th, 2012

Canada has introduced anti-nuclear terrorism legislation to fully implement the Convention on the Physical Protection of Nuclear Material and the International Convention for the Suppression of Acts of Nuclear Terrorism. Australia enacted similar legislation a month ago.

Bill S-9 – the Nuclear Terrorism Act, amends the Criminal Code as follows:

it creates an offence of possessing or trafficking nuclear or radioactive material or a nuclear or radioactive device, or committing an act against a nuclear facility or its operations with the intent to cause death, serious bodily harm or substantial damage to property or the environment. On conviction, the offence carries a term of life imprisonment;
it creates an offence for using or altering nuclear or radioactive material or a nuclear or radioactive device, or committing an act against a nuclear facility or its operations with the intent to compel a person, a government or a domestic or international organization to do, or refrain from doing, anything (also, on conviction, a term of life imprisonment);
it creates an offence for the commission of an indictable offence for the purpose of obtaining nuclear or radioactive material or device, or to obtain access or control of a nuclear facility and is intended to criminalize, for example, theft of nuclear material or the use of violence to obtain such material;
it creates a specific offence of threatening to commit any of the offences above;
it gives courts in Canada extraterritorial jurisdiction to try these offences in situations where, for example, the offence is committed outside Canada by a Canadian or when the person who commits the act or omission outside Canada is present in Canada (similar to the extraterritorial jurisdiction that exists in relation to terrorism offences); and
it gives the Attorney General of Canada concurrent prosecutorial authority over nuclear terrorism offences, in the same way the AG assumes such authority over terrorism offences, in lieu of the provinces and territories.

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Omnibus crime bill receives Royal Assent and impacts anti-terrorism laws

By Christine Duhaime | March 13th, 2012

The Safe Streets and Communities Act, (Bill C-10), also known as the omnibus crime bill received Royal Assent today in Parliament and is significant from an anti-terrorism perspective.

Justice for Victims of Terrorism

Bill C-10 enacts the Justice for Victims of Terrorism Act (the “Act”) which creates a cause of action that allows victims of terrorism to sue natural and legal persons and listed entities for loss or damages suffered as a result of acts or omissions that are punishable under Part II.1 of the Criminal Code (the terrorism offences). It also allows victims to sue foreign states that supported terrorist entities. Claims are available whether the loss occurred inside or outside Canada after January 1, 1985, however, if the loss occurs outside Canada, there must be a real and substantial connection to Canada. The U.S. is the only jurisdiction to have similar legislation.

The Act also suspends certain limitation periods where the victims are incapable of commencing an action because of physical, mental and psychological conditions, or when the victim is unable to ascertain the identity of a perpetrator. Interestingly, the Act hinges significantly on listed entities and their terrorist activities. With respect to prospective defendants, under the Act a defendant is presumed to have committed the terrorist act if the listed entity caused or contributed to the loss or damage and the defendant committed the act for the listed entity.

Bill C-10 also amends the State Immunity Act to create a new exception to state immunity, the general rule that prevents states from being sued in Canada’s domestic courts. The exception serves to remove state immunity only when the state in question has been placed on a list established by Cabinet on the basis that there are reasonable grounds to believe that it has supported or currently supports terrorism.

International Transfer of Offenders Act

Bill C-10 also amends the International Transfer of Offenders Act by giving the Minister discretionary powers in deciding whether to approve the repatriation of Canadians incarcerated abroad. Formerly, the legislation required the Minister to consider certain factors in considering a transfer request. Now, the analysis is subjective and gives the Minister the discretion to consider factors such as whether the offender’s return would be a threat to the security of Canada; whether the offender left or remained outside of Canada with the intention to abandon Canada as his or her place of residence; whether the offender has ties to Canada; and whether the foreign prison system presents a threat to the offender’s security or human rights.

Additional discretionary factors have also been added such as whether the offender will endanger public safety; the offender’s health; whether the offender is likely to engage in criminal activity; whether the offender cooperated with law enforcement; whether the offender accepted responsibility for his or her actions; and any other factor the Minister considers relevant. The addition of factors will mean that fewer Canadian offenders will be repatriated, not more.

There is no doubt that these changes will be important for the transfer of persons convicted of terrorism or terrorist financing, and in particular, will likely be relevant with respect to the application for the transfer of Oman Khadr from the U.S. to Canada to complete his sentence for terrorism.

Restriction of Conditional Sentences

Bill C-10 also brings into law amendments to the Criminal Code that fundamentally change important aspects of Canada’s criminal justice system, including amendments to §742.1 which restrict the availability of conditional sentences (i.e., house arrest). Under the amendments, conditional sentences are not available for a person convicted of an offence prosecuted by way of indictment for which the maximum term of imprisonment is 14 years or life (such as treason, mutiny, passport forgery, sedition, piracy, seizure of aircraft, facilitating or enhancing the activities of terrorists and perjury whether by affidavit, oath or declaration) or for certain offences prosecuted by way of indictment for which the maximum term of imprisonment is 10 years (terrorist financing, dealing with terrorist property, providing services in respect of terrorist property that benefits the terrorist group and failure to disclose to CSIS and RCMP the existence of terrorist property).

Conditional sentencing, introduced in September 1996, allows for sentences of imprisonment to be served in the community, rather than in a correctional facility. It is a midway point between incarceration and sanctions such as probation or fines. With the coming into force of Bill C-10, a person convicted of certain serious offences can no longer serve a sentence in the community.

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Canada still a jurisdiction of concern for money laundering says U.S.

By Christine Duhaime | March 10th, 2012

Once again, Canada has been listed as a jurisdiction of money laundering concern by the U.S. Department of State in its annual International Narcotics Control Strategy Report, available here. Other jurisdictions of concerns include Columbia, Brazil, Afghanistan, Venezuela, Mexico Russia and Somalia. The findings are similar to those reported by the U.S. Department of State in its 2011 report and include the following:

Money laundering in Canada derives primarily from the trade in illegal narcotics, chemical precursors and psychotropic substances;
Among the drug-related findings:
- Canada is the leading supplier of ecstasy in North America and most of the supply is from British Columbia;
- Canada is a major producer and shipper of methamphetamine for markets around the world, particularly to the U.S., Australia, Japan and New Zealand;
- Marijuana is the most widely used drug in Canada and most of it is grown in British Columbia by Asian criminal gangs and associates of the Hells Angels;
- Although heroin use is shrinking in Canada, Canadian are among the heaviest consumers of illegal pharmaceutical opiates such as Ativan (lorazepam), Valium (diazepam), Ritalin (methylphenidate), Oxycontin (oxycodone), Klonopin (clonazepam), and Talwin (pentazocine);
Canada has an unacceptable conviction rate for money laundering;
FINTRAC takes too long to deal with suspicious transaction reports;
The failure of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to apply to lawyers is an impediment to the effectiveness of the anti-money laundering regime; and
Budgetary constraints reduce the effective of the anti-money laundering regime.

President Barack Obama noted in the Report that the stealth with which marijuana and synthetic drugs such as ecstasy and methamphetamine are produced in Canada an trafficked to the U.S. was of concern.

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R. Allen Stanford found guilty of money laundering in U.S.

By Christine Duhaime | March 6th, 2012

Robert Allen Stanford, formerly one of the richest men in the world, was convicted in federal court in Texas today of money laundering and fraud in connection with operating a US$7 billion Ponzi scheme. The 61-year-old could face more than 50 years in jail at sentencing.

U.S. authorities are waiting for a federal jury to authorize the forfeiture of US$330 million once controlled by Stanford currently frozen in 29 bank accounts in Canada, Switzerland and Britain. The funds are proceeds of crime.

In October 2010, a federal judge in the U.S ruled that Lloyd’s of London was not liable for Stanford’s estimated US$20 million in legal fees to defend him against the charges because the pre-trial evidence led to the conclusion there was a substantial liklihood that Standford laundered money.

Stanford was once knighted by the Antiguan government for his economic development efforts there. Antigua’s parliament stripped him of that title in November 2009.

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Bodog indicted in U.S. for money laundering

By Christine Duhaime | February 29th, 2012

The U.S. Attorney for the District of Maryland, Rod J. Rosenstein, today announced that Bodog Entertainment Group S.A. has been indicted for money laundering conspiracy and operating an illegal gambling business that provided services to U.S. customers in the U.S. Also indicted were Calvin Ayre, James Philip, David Ferguson and Derrick Maloney, all apparently from Canada.

The U.S. Attorney is alleging that the defendants and their conspirators moved funds from Bodog’s accounts located in Canada, Switzerland, England, Malta, and elsewhere to pay winnings to gamblers, and to pay media brokers and advertisers located in the U.S. They are also alleged to have directed payment processors to send at least US$100 million by wire and by cheques to gamblers.

Acting IRS Special Agent in Charge Eric Hylton said: “Laundering money from illegal activity such as illegal internet gambling is a crime. Regardless of how the money changes hands – via cash, check, wire transfers or credit cards – and regardless of where the money is stored – in a U.S. financial institution or an offshore bank – we will trace the funds.”

The money laundering charges will facilitate the extradition of the four non-corporate defendants from Canada to the U.S. Under the FATF Recommendations, extradition requests for money laundering must be executed by Canada without delay. When a money laundering charge is involved, Canada should allow direct transmission of requests for provisional arrests to the U.S. and should extradite persons based only on warrants of arrests or judgments.

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FATF releases new standards for AML

By Christine Duhaime | February 16th, 2012

Today, the Paris-based Financial Action Task Force (FATF) released its long anticipated revised set of standards for anti-money laundering (AML) and counter terrorist financing (CTF) which replace the 40 Recommendations + 9 Special Recommendations, compiled in 2003. The revised FATF Recommendations integrate AML and CTF controls into one document and are quite expansive in that they purport to expand the mandate of the FATF into the supervision of international policy for proceeds of corruption, tax crimes and the financing of the proliferation of weapons of mass destruction.

The main changes are as follows:

Risk-Based Approach – Confirmation that countries are required to adopt a risk-based approach to their AML and CTF laws, and not a set of laws applicable to all reporting sectors regardless of identified risks. The FATF indicated that the implementation of the risk-based approach will require governments and the private sector (reporting entities) to work in partnership, to clearly understand the money laundering and terrorist financing risks that affect them, and to adapt their systems to the nature of these risks. The underlying principle, clearly stated in the revised Recommendations, is that enhanced measures should be applied where the risks are higher, and simplified measures applied where the risks are lower. The reporting sector guides previously produced by the FATF were meant to provide guidance with respect to those risks. Canada has not adopted a risk-based approach in its legislation thus far.
Proliferation of Weapons of Mass Destruction – Governments should implement economic sanctions to address the proliferation of weapons of mass destruction and the financing thereof. This Recommendation is consistent with the UN Security Council Resolutions relating to the prevention, suppression and disruption of the proliferation of weapons of mass destruction and its financing that require countries to freeze the funds and assets of those identified as associated with the proliferation of weapons of mass destruction.
National Policies on AML – Governments will have to undertake reviews and assessments of risks of AML/CTF in reporting sectors and based on those reviews, adopt national AML/CTF policies. This will require the working cooperation of reporting entities, FIUs, the government and law enforcement. Each country will have to designate an authority that is responsible for the oversight of the policies, and their periodic review and revision.
Politically Exposed Persons – Clarification that PEP rules apply to domestic, and not just foreign, PEPs. Some countries, such as Canada, have no AML/CTF measures in place with respect to domestic PEPs, even though there is no evidence that foreign PEPs are any more corrupt than domestic PEPs or pose a greater money laundering or terrorist financing risk. A PEP will now also include close associates of the PEP. A PEP is a person who holds a prominent public position (i.e., head of state, head of government, member of legislature, judge, ambassador, military officer, president or CEO of Crown corporation). PEPs represent a greater money laundering risk because of the possibility that they may abuse their position to carry out corrupt acts, such as accepting an extorting bribes or misappropriate state assets, and use the financial system to launder those proceeds.
Transparency as to Legal Persons – The Recommendations contain several changes that will require the transparency of corporations and trusts; specifically, governments need to ensure that reporting entities can easily access incorporation information and information as to trusts, including names of shareholders of private and public corporations, their directors and offices, and names of trusts and their trustees and beneficiaries. This Recommendation will be impossible to be complied with in Canada, given the current securities and corporate law regime, and the way in which corporations are established and corporate records maintained. The same applies to trusts in this country, the existence of which are only known to the trustees, their lawyers and, in some cases, the CRA if there are tax implications with respect to a trust.
New Technologies – Countries and banks should identify and assess the money laundering and terrorist financing risks with new products and services (such as prepaid access) before offering those products and services, and take measures to mitigate any risks associated with new products or services.

There are several additional changes as well. The FATF Recommendations are available on the FATF website.

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Cross border currency exports or imports – a primer

By Christine Duhaime | January 15th, 2012

The government is introducing measures that would allow Canada Border Services Agency officers to question people arriving in or departing from Canada with respect to their responsibilities under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (“PCMLTFA”) and would require FINTRAC to disclose to CBSA, information relevant not only for immigration purposes, but also for the purposes of determining money laundering or terrorist financing.

Under the PCMLTFA, every person must report without delay to the CBSA the importation into Canada or exportation out of Canada of currency or monetary instruments equal to or that exceed $10,000. Monetary instruments include shares, bonds, debentures, bank cheques or bank drafts, promissory notes, travellers’ cheques and money orders, provided they are in bearer form and title passes upon delivery.

Every year, approximately $8.2 million is seized from Canadians and travelers to Canada by the CBSA because of a failure to report the importation or exportation of currency or monetary instruments. Most of the funds seized are forfeited to the government. A person may import into Canada or export from Canada any amount, however, amounts equal to or greater than $10,000 must be reported to CBSA.

When a person is suspected of importing or exporting currency or a monetary instrument equal to or greater than $10,000, the CBSA officer may search the person, their luggage and any conveyances. If funds are located, the CBSA may seize them if the officer has reasonable grounds to suspect that the reporting requirements of the PCMLTFA have not been complied with. The CBSA uses “sniffer dogs” at airports and other points of entry that can detect money.

Several recent cases have confirmed that a person can be convicted of a failure to report under the PCMLTFA without having formed the intent to commit the act. For example, in 2004, a truck driver, Van Phat Hoang, was driving across Canada and mistakenly exited to the U.S. border in the middle of the night in his truck. He had $70,000 cash with him. He turned around before reaching the U.S. checkpoint and upon re-entering Canada, his funds were seized and forfeited to the Crown because he had failed to complete a report with CBSA. The Federal Court of Canada held, based on numerous previous cases, that there is no requirement to establish intent for the offence to be proven. It is also irrelevant who legally owns the currency or monetary instrument – the person in possession of the currency or monetary instrument is the person who is subject to the PCMLTFA reporting obligations. With respect to a conveyance, the person who controls the conveyance is the responsible party for the purposes of reporting. Several recent cases have dealt with private jets entering Canada with unreported currency. The funds are routinely seized and the controller of the jet, usually the captain, is unwittingly implicated in an unreported importation of currency into Canada.

Between 2003 and 2007, most of the seizures at the border involved undeclared currency, followed by travellers cheques, bank drafts, regular cheques, money order and share certificates.

Cross border currency reports are shared between Canada and the U.S. In the U.S., over $107 million is seized from travelers or Americans in undeclared or illicit currency every year.

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Mexico losing billions of dollars from trade-based money laundering

By Christine Duhaime | January 14th, 2012

According to a new report by Global Financial Integrity, approximately US$872 billion flowed illicitly from Mexico during 1970 to 2010 from money laundering, tax evasion and corruption. The flow of funds represents about 5% of Mexico’s GDP. The report noted that trade-based money laundering was the most common method used to remove money from Mexico illicitly.

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