US identifies Canada as major money laundering country, and notes concern over its low prosecution rate

By Christine Duhaime | April 2nd, 2019

Canada once again a “Major Money Laundering” country

The 2019 “International Narcotics Control Strategy Report” (INCSR) published on Friday by the U.S. Department of State identifies Canada once again as a “major money laundering country” along with a host of risky countries for financial crime.

A “major money laundering country” is one whose banks and financial institutions engage in financial transactions involving significant amounts of proceeds from international narcotics trafficking. For several years in a row, Canada has been identified as such.

Canada has also been identified as a “major precursor country” which means it is a leading country that produces precursors or essential chemicals used in the production of illicit narcotics.

Low Prosecution Rates

Key findings for Canada this year include the fact of its low prosecution ability for money laundering and gaps in the law, such as for Bitcoin, and the continued substantial size of Canada’s illegal drug trafficking ecosystem and transnational organized crime.

Bitcoin Concern for organized crime

The Report notes the growing concern of digital currencies like Bitcoin, and the use of Blockchain for money laundering and drug trafficking and its gaps for AML compliance purposes. It also notes the growing concern of beneficial ownership with AML, which is important in the context of corruption because organized crime and corrupt officials use shell companies to launder money and evade sanctions.

Bitcoin Concern for Fentanyl

The Report specifically mentions the use of Bitcoin for fentanyl purchases overseas, as a global concern for all countries. It notes that fentanyl is responsible for the surging number of deaths in the US, claiming the lives of over 30,000 Americans. Carfentanil, which is 100 times more potent is not approved for human use but is being cut into drugs and sold on the street. The presence of carfentanil poses a serious threat to public health.

The Report notes that money launderers use offshore gambling companies (online illegal companies) and offshore centres (Guernsey, Jersey, Cayman Islands, Cook Islands) to anonymously launder funds.

Key Findings

Volume 1 - The key findings of Volume 1 on drug trafficking vis a vis Canada are that:

  • Canada is a source of fentanyl to the United States.
  • Canada is a primary source country of high-potency marijuana and MDMA to the United States.
  • Canada exports illegally, synthetic opioids to the United States.
  • Canada exports, illegally, synthetic drugs and amphetamine-type stimulants to Asia and Australia.
  • Cannabis destined for the US is produced mostly in British Columbia.
  • Methamphetamine continues to be produced in large quantities in Canada.
  • Canadians buy cocaine mostly from South America, and some of that transits through the US.
  • Afghanistan is the primary source of heroin for Canadians.
  • Canada says imports of fentanyl from China via mail decreased.

Volume 2 - The key findings in respect of money laundering  in Volume 2 for Canada are:

  • Canada needs to enhance its money laundering prosecution capabilities, given its low conviction rate.
  • The illicit drug market is the largest criminal market in Canada.
  • Transnational organized crime represents the most threatening and sophisticated actors in Canada.
  • Transnational organized crime has access to professional money launderers in Canada.
  • Laundering methods in Canada primarily involve cash smuggling, money services businesses, casinos, real estate, wire transfers, offshore companies, credit cards and digital currencies, like Bitcoin.
  • Money laundering activities in Canada involve drug trafficking, fraud and corruption.
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