US cross-border drug strategy to cover new ground in British Columbia
Let’s Talk Bitcoin has an interesting article here on the US drug initiative to reduce the cross-border drug trade between Canada and the US with a focus on targeting the use of Bitcoin and other digital currencies for laundering proceeds of crime. The announcements on the focus on Bitcoin in drug enforcement initiatives involving Canada seems to centre around illegal drug manufacturing and exports in and around British Columbia.
US plans to reduce drugÂ trafficking from Canada
On August 19, 2014, the Obama Administration issued a press release announcing the 2014 National Northern Border Counternarcotics Strategy (the “Strategy“) to reduce illegal drug trafficking across the Canada-US border.
The press release says that this years drug plan will, inter alia, focus on eliminating public corruption in the Canada-US drug regime and target digital currencies, electronic payment devices and trade-based money laundering used in Canada-US drug trafficking.
The Canada-US drug problem
According to the Strategy, transnational criminal organizations (“TCO“) exploit the Canadian border to smuggle illegal drugs and proceeds of crime. The key drugs are marijuana, ecstasy (MDMA), methamphetamine (crystal meth), and cocaine.
The Strategy aims to disrupt TCOs to curb the flow of proceeds of crime across the Canadian border and the trafficking of drugs. Part of the Strategy involves addressing critical infrastructure and cybersecurity, trade facilitation and protection of jobs, all Â of which are threatened by illegal and gang activities that are international in nature.
According to the Strategy, Canada is a high risk jurisdiction for the production, distribution and trade of illicit drugs. It notes:
- British Columbia is the primary source of ecstasy in North America, supplying Mexico as well as the US.
- Illegal drug production in Canada mostly involves ecstasy and marijuana, produced both for Canadian and US trade.
- Ecstasy and marijuana are the two most significant drug threats facing the US from Canada.
- Cocaine is transited through the US and destined for Canada.
Transnational criminal gangs
In term of TCOs the Strategy authors believe:
- They are mostly Vietnamese-Canadian, Indo-Canadian, Irish-Canadian or Italian-Canadian.
- Outlaw motorcycle gangs (“OMG“) are also key TCOs of concern in drug manufacture, distribution and trade with the US.
- Most of the criminal activity is concentrated in British Columbia, and to a lesser extent in Ontario and Quebec.
- Ethnic Chinese groups from British Columbia are primarily manufactures and traders of ecstasy to the US.
- Vietnamese-Canadian TCOs in British Columbia have the market share of marijuana production and trade and have moved to the US to reduce border crossing scrutiny.
Funds transported to Canada for laundering
According to the Strategy, funds from drug trade sales are laundered frequently at Canadian banks and money services businesses (“MSB“). Drug traffickers that are American, travel to Canada deliberately to deposit bulk cash and proceeds of drug crime into Canadian financial institutions, the implication being that it is easier to do so in Canada because anti-money laundering compliance is not as robust compared to US financial institutions.
Maritime smuggling to the US from Vancouver docked boats to Washington State is a concern for law enforcement.
Intercepting texts, emails
According to the Strategy, an important goal is the increased sharing among the US and Canada of emails and texts obtained from their respective citizens. Those records are obtained from electronic communications service providers (in Canada, such as Rogers Communications, Bell, Cogeco, Shaw) and social media service providers (such as WhatsApp, Facebook, Instagram).
The Strategy also calls for expedited sharing of financial information for those persons suspected of criminal involvement so that investigations can proceed quickly and assets forfeited where warranted.
Targeting AML compliance at MSBs
The Strategy calls on Canada and the US to target the financial infrastructure of TCOs in Canada, where mostly MSBs in British Columbia are used for money laundering purposes. It also calls for greater enforcement of MSBs and increased fines for AML non-compliance.
Bitcoin and online payment processors
The Strategy calls for targeted efforts by US and Canadian law enforcement on online payment processors and digital currencies that facilitate money laundering. There is a stated concern in the Strategy that digital currency exchanges are operating without registration and therefore outside the scope of regulatory oversight.
A second report, the Congressional BudgetÂ Submission from the Office of National Drug Control Policy, noted that TCOs use MSBs to launder proceeds of crime from drug trafficking, and that Bitcoin is likely to emerge as a “major moneyÂ laundering tool” for traffickers. The report also noted the connection between prostitution and drug trafficking in the Northwest. Investigations into drug trafficking usually result in prostitution charges and vice versa. The same is true for interceptions and monitoring of texts (as noted above) in the sense that monitoring prostitution communications usually leads law enforcement to illegal drug trafficking activity, and vice versa.