Canada's Money Laundering Initiative 'Doomed'

by Mike Godfrey, Tax-news.com, Washington

12 June 2001

At a recent meeting of Transparency International Canada, a report presented by one of the nation's leading experts on organised crime suggested that Canada's anti-money laundering initiatives may be doomed to failure. The report prepared by Margaret Beare, director of the Nathanson Centre for the Study of Organised Crime and Corruption at Toronto's York University, contended that new federal legislation, which will be phased in over the next year, and will require banks, trust companies, insurance firms, and casinos to report 'suspicious dealings' and transactions of over $10,000 is too contradictory to the goals of financial institutions. 'Front line banking officials are not police officers,' explained Ms Beare. 'A financial institution's objectives are to attract customers and make profits.'

Ms Beare also warned that the plans, which are being examined by the House of Commons, would catch 'clumsy novices', but allow more sophisticated money launderers to slip through the net. The government, however, insists that the initiative will help to prevent criminals from using banks and other institutions to disguise drug money and other illegal assets, and has set up a new federal body, the Financial Transactions and Reports Analysis Centre, to collect and analyse data, and disclose information about suspected cases to the police. Failure to report suspicious transactions on the part of the financial institution could lead to five year prison sentences, and fines of up to $2 million.

Although at present, there is some voluntary information provision in suspicious cases, Ms Beare found in her preliminary research that the efforts by the country's six largest banks to report dubious transactions were 'somewhat disappointing' and added that: 'There may be little reason to believe that the mandatory system of reporting will produce any better results.' The report also suggested that clarification was needed as to the exact definition of a suspicious transaction, and chastised the RCMP for failing to follow up on the outcome of previous cases. 'An increase in reporting does not in and of itself add up to better surveillance of the movement of drug money,' Ms Beare concluded.

The Royal Canadian Mounted Police recently announced that it would be welcoming delegates from over 50 countries to the Second International Money Laundering Conference in Montreal this October. Under discussion will be the need for harmonisation of legal regimes and international cooperation on organised crime, the effectiveness of existing international money laundering controls, and new trends in organised crime.

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