Organized crime alleged to control some ATMs in Canada for money laundering

By Christine Duhaime | October 31st, 2013

Organized Crime & Private ATMs

According to a report by the RCMP reported by Radio-Canada, organized crime in Canada is using private ATMs to launder proceeds of crime. The RCMP estimates that at least $315 million is laundered each year by private ATMs and some of those are connected to the Hells Angels in Quebec.

In order to test whether ATMs were being used for money laundering, a journalist from Radio-Canada spoke with several private ATM vendors and asked about the prospect of laundering money.

One ATM vendor’s response? “Let’s say you want to just wash $2,000 per month. For that, there’s no problem. A person gives you a cheque, the money goes in your bank. You…you take that money from the bank, then you put it into the ATM. That’s how you do it.” (Translated verbatim by us).

Private ATMs, are also known as white label cash machines, because they are not owned by financial institutions.

ATMs & strip clubs

In Canada, private ATMs tend to be located in strip clubs, massage parlours, bars and other cash-intensive businesses, such as casinos.

It has long been suspected that the reason for that is precisely to facilitate money laundering in respect of strip clubs and massage parlours. In Canada, strip clubs and message/escort parlours are known venues for prostitution. There is likely not a strip club or escort parlour in Vancouver or Toronto that does not have an ATM on its premises, or right outside the front door. That’s no coincidence.

Private ATMS are also used for tax evasion and fraud because some merchants who operate strip clubs and massage / escort parlours encourage clients to extract cash for services that are not invoiced or recorded. The amount of money lost in tax revenues from tax evasion and fraud through private ATMs is more significant than the amount laundered.

Micro-structuring by organized crime

With respect to money laundering, private ATMs are often used to “microstructure” – a money laundering law term that means the depositing and withdrawing of small sums of money that are consistent with normal ATM withdrawal amounts, and thus are not flagged. And because they are not flagged, they go undetected by anti-money laundering specialists at banks. Organized crime members will make voluminous small daily cash deposits totaling hundreds of thousands of dollars into 100 or more bank accounts using private ATMs to avoid triggering anti-money laundering reporting requirements.

The difficulty in opening numerous bank accounts by organized crime is cured by paying people on the street, or teenagers, to open numerous bank accounts with fake ID. Private ATMs are preferred because of the lack of regulatory oversight.

Private ATM companies are not required to be vetted or registered to provide services and nor are there limitations on ownership or regulatory monitoring involved in respect of the services or the service providers.

Private ATM companies pose an increased risk to banks and should be treated as high-risk in money laundering compliance risk assessments. The risks for banks are not just financial but reputational.

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