Canada a Major Money Laundering Country but A Lot Less So
The 2014 International Narcotics Control Strategy Report (“INCSR“) published this month by the U.S. Department of State identifies Canada as a “major money laundering country” along with, among others, Afghanistan, Brazil, Cambodia, Cyprus, Dominican Republic, Guernsey, Jersey, Hong Kong, Libya, Mexico, Macau and Somalia.
A “major money laundering country” is one whose financial institutions engage in currency transactions involving significant amounts of proceeds from international narcotics trafficking. For several years in a row, Canada has been identified as such (see our other annual reviews here and here).
Overall More Favourable For Canada
However, the INCSR is much more favorable to Canada than previous reports, partly as a result of amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (“PCMLTFA”) and also as a result of criminal law amendments and FINTRAC obtaining additional financial resources to fulfill its mandate. The improvements in Canada aren’t expressly noted but the more favorable review arises from the reduction in negative findings in respect of financial crimes in Canada, particularly over the 2012 INCSR.
What’s New in the 2014 INCSR for Canada
What’s new is that the 2014 INCSR identifies lawyers as vehicles for money laundering in Canada. The 2014 INCSR also notes that corruption in Canada’s law enforcement agencies is rare, a valid point. And new payment methods are mentioned as one of several new money laundering vehicles affecting Canada (along with lawyers as noted above), as well as stored value cards and offshore tax havens.
The key findings of Volume 1 on the drug trade vis a vis Canada are:
- Canada is still a major producer of precursor chemicals used in the production of illicit narcotics, along with Afghanistan, Columbia, Iraq, Hong Kong and several other countries.
- Canada obtains large volumes of chemical imports from Asia imported as goods falsely identified, some cases as “soy sauce”.
- Canada remains a substantial producer of ecstasy for domestic use and remains the primary supplier to the U.S.
- Most of the ecstasy is manufactured in British Columbia and less so in Ontario and is destined for the U.S.
- Canada also supplies ecstasy in large quantities to Japan, Australia and New Zealand.
- High potent cannabis is produced in significant quantities in British Columbia for domestic use and for export to the U.S.
- Cocaine in Canada is from Columbia and is transited through the U.S. but that is shifting and traffickers are attempting to bypass the U.S. due to greater enforcement and import directly into Canada by air and parcel conveyances.
- A drug called Khat is frequently imported from UK to Canada by ship.
- Canadians are among the heaviest consumers of opiates in the world and have a preference for diazepam, clonazepam, lorazepam, methylphenidate, pentazocine, oxycodone, and steroids.
And on law enforcement:
- “Corruption among law enforcement in Canada is rare.”
- The DEA, CBP, HSI, USCG interact with CBSA, OPP, Toronto Police, Vancouver Police and RCMP to pursue illegal drug trafficking.
The key findings in respect of money laundering and financial crimes in Volume 2 for Canada are:
- Money laundering activities in Canada are still primarily from illegal drug trafficking and financial crimes (securities fraud and credit card fraud).
- Laundered methods in Canada are now primarily from money services businesses, casinos, smuggling, real estate, wire transfers, offshore tax havens, stored value cards, new payment methods and professionals such as lawyers and accountants.
- Canada has weak enforcement of money laundering and financial crimes.
- Prosecutors plea away cases on money laundering because of its perceived complexity.
- Police departments are under-staffed and it can take years in Canada to investigate a money laundering case as a result.
- Despite recent amendments to PCMLTFA, Canada needs to do more to strengthen its anti-money laundering legislation.