Canada makes it easy for the Mob

Lax bank rules make it a prime money-laundering location.

Adrian Humphreys / Ottawa Citizen

The Mob loves Canada. But not because of the billions of
dollars the global mafias make here each year from illicit
activities. That's a drop in the bucket compared to what gets raked
in around the world.

Why does the Mob love Canada? Let us count the ways: Weakened
banking regulations, close proximity to the United States, a
generous parole system, the presence of large casinos, a diverse
ethnic population, stable economy, absence of laws banning organized
crime association, and lack of reporting rules for money crossing
our borders.

It's a potent mix that makes the Great White North a pretty good
place for laundering massive profits from the drug trade and other
dubious deals around the world.

Selling tonnes of dope through connections in Venezuela? Launder
that dirty drug money in Montreal.

Smuggling booze and cigarettes across the U.S. border? Recirculate
the cash in Toronto.

Part of a large cocaine cartel? Wash out your profits in Vancouver.
And why not? Canada has what it takes.

Just ask the U.S. government.

"Canada's advanced financial sector, lack of mandatory reporting
requirements and proximity to the U.S. make it attractive to drug
money launderers,'' says the U.S. State Department's report on the
international drug trade.

Or ask police: "This is a very soft country with respect to our
immigration laws, with respect to our money transfer laws.
Money-laundering is an easy feat here,'' says London police Chief
Julian Fantino, head of the organized crime committee of the
Canadian Association of Chiefs of Police.

And why not look at the very clear evidence in our streets? Canada
is now home to about 18 different global crime groups. There are
members of La Cosa Nostra (the American Mafia), `Ndrangheta
(Calabrian Mafia), Sicilian Mafia, Asian triads, Colombian cartels,
Eastern European mafias, Mexican mafia, Nigerian mafia, the Yakuza
from Japan, Jamaican posses and major motorcycle gangs.

"We know for sure that Canada is a criminal microcosm. You can
find here any kind of organized crime group operating in the world
today. This is a multicultural crime area,'' says Antonio Nicaso, an
internationally recognized expert on organized crime. "Everyone is
coming to Canada because this country is open for business. We make
this place a haven for them.''

Canada has long been an attractive destination for Mafiosi when
things get too hot in their homeland, either from police or rival
gangsters. And it's irking Canadian and U.S. law enforcement agents
who want stiffer laws to help them tackle the Mob.

"There are tremendous advances being made by organized crime in
many different areas and we just haven't been able as a nation to
deal with these threats efficiently and effectively.''

Money laundering is becoming one of the most important features in
the new face of the Mafia as well as other organized crime groups.
The U.S. State Department estimates the annual worldwide value of
laundered funds at between $300 billion and $500 billion. An RCMP
official pegs the Canadian content at between $3 and $10 billion.

The most successful Mobsters are trading in the proverbial violin
case for accountant's books. And laundering is the final, and
ultimately most important, step in the drug trade's business.

"The drug industry would probably collapse if it didn't have a way
to get its money to market,'' says Lee Lamothe, editor of the Report
On Crime And Profiteering, a Toronto-based newsletter.

"There are people in the underworld who specialize only in the
movement of money. Getting rid of money requires a fair degree of
sophistication and it is much easier to get money into play in
Canada than in the United States.''

Getting money "into play'' means getting it back into circulation
so the Mob can reap the benefits of its cash-only deals. Money is
sometimes harder to deal with than drugs. Heroin, for instance,
generates about three times its weight in currency when it is sold.
After a successful deal, a crime boss is left with a few million
bucks in $5, $10, $20 and $50 bills. Now what?

Honest business people want cheques, and that requires a financial
institution's co-operation. Says Mr. Lamothe: "There really isn't
much you can do with it like that. How do you buy a house with small
bills? How are you going to buy a car without someone noticing?''

There are some regulations now in place; banks and trust companies
must keep signature cards and account agreements, and confirm the
identity of people opening new accounts with a driver's licence or
passport. These records then become available to the RCMP if they
obtain a subpoena as part of an investigation, says Bill Randle,
legal counsel for the Canadian Bankers Association. Banks also have
"know your customer'' policies and generally report suspicious
transactions to their head office and the RCMP may be alerted.

"It's a bit like a preliminary investigation. It saves police a
bit of time,'' says Mr. Randle. "The development of the more
detailed procedures is done voluntarily to make it as difficult as
possible for the bad guys to get into the system.''

But the money end of crime is rapidly changing. Money-laundering is
moving away from banks and towards non-traditional areas. The
Financial Action Task Force, an initiative of the G8 group of
nations, says banking regulations around the world are tightening up
to the point where criminals are turning to lawyers, accountants,
casinos, gold, and Internet banking as new ways of laundering money.

There is an important role in money laundering for some legitimate
people in the financial world -- bank managers, lawyers, real estate
agents, insurance agents or stock brokers.

Big bucks in dirty money creates temptations too great for many to
resist. Legitimate business people doing dirty deals can channel
money into real estate, the stock market, bank accounts and lawyers'
trust accounts by turning a blind eye or knowingly participating for
a fee.

In the U.S. there is an ongoing police task force targeting the
laundering of money through Wall Street stocks. Given the size of
the Toronto Stock Exchange and the demand for money-laundering, it
is hard to imagine laundering isn't happening here also.

"Without the overworld -- without the people on the clean side of
things -- the underworld would choke on its own profits,'' says Mr.
Lamothe.

Organized crime author James Dubro says a partnership between
criminals and otherwise legitimate workers in financial circles
opens more than just profitable opportunities. It is also dangerous.
"You can't expect the same kind of loyalty. There is much less
loyalty and less reliance on tradition.''

Mobsters know their partners are people who did not grow up with
the culture of omerta, the Mafia's code of silence compelling
members to take a jail stint rather than ratting out a boss, and to
always treat police as the enemy.

At casinoes, dirty money is converted to chips, which are later
returned to the casino's cashier in exchange for a cheque. Gold is
sometimes used instead of the de rigueur American dollars because it
retains its value and is internationally recognized, but not as
closely monitored, as money markets.

Some off-shore banks doing business over the Internet are promising
anonymous banking, which could revolutionize the money-laundering
business in the criminal's favour.

Crime groups are also starting to turn to the old barter system to
maximize profits and eliminate the paper trail. You've got too much
coke and I've grown too much pot? Let's swap!

There are other techniques:

- Bogus businesses

Ever sat in a restaurant that never seems to have any customers and
wondered how it stays in business? Well, the restaurant could be
there for the sole purpose of laundering money.

Each night someone rings up on the cash register dozens of dinners
that were never really sold. Then dirty money is trotted down to the
bank and deposited as the day's take. The restaurateur then becomes
known as a business person and the bank no longer views large
deposits as suspicious.

- Smurfing

Banks flag amounts of $10,000 and up for special attention, but are
almost wide open to deposits smaller than that. There are people
called Smurfs who go around buying financial instruments -- Canada
Savings Bonds, stocks, cash deposits -- all less than $10,000. They
keep three per cent or more off the top for themselves.

"All they do all day is go from bank to bank making smaller
transactions,'' says Mr. Lamothe. The term "Smurf'' derives from
the skittish, cartoon-like manner in which these people operate.

Visiting 14 banks, stock brokers or money exchanges a day for a
$7,500 transaction at each, more than half a million could be
laundered in a week.

- Money smuggling

Dirty money can be physically smuggled out of the country, but
that's risky and tricky. Says Mr. Lamothe: "That's why there are
people who specialize in the movement of bulk currency. This is a
new sub-specialty in the underworld.''

All of that means a lot of work, some risk, and a loss of profit.
The FATF's report says criminals who once laundered cash at a cost
of six per cent, now pay as much as 30 per cent.

Things used to be a lot easier. Although Canada's banking laws are
relatively weak, they are tougher than, say, a decade ago. Since
1993, legislation requires financial institutions to keep records
for five years on cash transactions over $10,000. And now the
government seems ready to finally listen to the hue and cry of law
enforcement agents and global organized crime experts to go further
faster.

On April 24, federal solicitor general Andy Scott met top law
enforcement officials to design a national strategy to combat
organized crime. He got an earful from police and civilian experts.
Mr. Scott promised new legislation to make the reporting of
suspicious transactions and cross-border currency movements
mandatory.

He will also consider amending the parole system that currently
allows non-violent, first-time offenders to be eligible for
fast-tracked parole. The current system means organized crime
figures involved in drug cases can end up spending little time
behind bars.

Justice Minister Anne McLellan announced legislation to overhaul
this country's 100-year-old extradition laws by simplifying the
process and broadening the grounds for extradition.

That will give cops a lot of ammunition. But Supt. Tim Killam, head
of the RCMP's proceeds of crime branch, says critics are being too
hard on Canada's war on dirty money. "Canada can stand up and be
proud of many things. Once we get the last two (mandatory suspicious
transaction and cross-border reporting), we will be first class.''

The new policing efforts are forcing the Mob to change geography as
well as techniques. Says Mr. Lamothe: "Toronto is hot, Vancouver is
hot and Montreal is hot. But people who are trying to launder money
are now going to places like Regina, Hamilton and Victoria.

"They'll send a guy in to try to corrupt a bank manager or get
involved with the local criminals on behalf of the rest of the
group.

"As the crackdown comes, the smaller cities will see an influx of
criminal money. It is a lot easier to invest in Hamilton than it is
in Toronto.''

With getting dirty money into play becoming increasingly important,
getting at the money people as well as the drug dealers becomes
crucial. Police sweeps that nab drug dealers are doing only half the
job.

"A successful investigation into the underworld means you get the
drug traffickers, you get all their assets, you get a banker, a
lawyer or an accountant. Then you know you've really made a move
against that organization,'' says Mr. Lamothe. But to tackle
organized crime, the government needs more than good laws.

Mr. Nicaso says Canada's crime fighters think like firefighters:
They leap from one high profile problem to the next trying to douse
hotspots. A decade ago the Italian Mafia was public enemy number
one. Then it was the Asian triads, and then the Russian mafia. Now
it is bikers.

"The government must establish a policy that deals with all issues of
organized crime,'' Mr. Nicaso says. "We need a national strategy.''

Adds Mr. Fantino: "I know we have the will, I know we have the
talent and capacity. What we don't have is the dedicated resources
necessary to do these very labour intensive, very specialized kind
of investigations.
June 8, 1998