Pubdate: Thu, 01 Apr 2004 Source: National Post (Canada) Copyright: 2004 Southam Inc. Contact: http://www.nationalpost.com/ Details: http://www.mapinc.org/media/286 Author: Adrian Humphreys, National Post POLICE 'LOSING WAR' ON DIRTY MONEY Criminals using banks, other institutions to launder money, RCMP probe finds Criminal money laundering is so pervasive and gangsters so adept at corrupting and deceiving bankers, lawyers, realtors and insurance agents that policing it seems doomed to failure, according to a detailed probe conducted for the RCMP and obtained by the National Post. The investigation is the most comprehensive examination of money-laundering cases ever undertaken in Canada, and resulted in a 98-page analysis of virtually every major proceeds of crime cases solved by the RCMP over six years. It shows that vast sums of dirty money are being slipped into the legitimate economy by both sophisticated drug barons and petty crooks. The movement of ill-gotten gains appears to be undeterred by anti-money-laundering laws and tighter internal controls by major commercial institutions. "The police win a few battles, but they're losing the war," said Dr. Stephen Schneider, author of the report for the RCMP, when contacted by the Post. "It is an inherently uneven playing field in favour of the bad guys." Dr. Schneider, a criminologist with both St. Mary's University in Halifax and the Nathanson Centre for the Study of Organized Crime and Corruption at York University, was given unprecedented access to RCMP files. He was able to directly track money from crime scenes to offshore banks and from drug dealers to the retailers of luxury goods. His report, completed this month and not yet released, is national in scope, with cases drawn from every province except Prince Edward Island. It paints an alarming picture of the business of crime. Crooks like to spread their dirty money around, but banks and trust companies are by far the most popular way to sneak illicit money into the legal economy, the report says. More than 75% of the cases saw a deposit institution used to process criminal profits -- usually cash brought into one of the Canadian chartered banks. The insurance industry took in dirty money in 64% of the cases, motor vehicles were bought in 60% of the cases and real estate bought in 56% of the cases. The report highlights the myriad ways criminals move "dirty" money -- the proceeds of crime -- to make it appear legitimate, or "clean" -- which is the purpose of money laundering. In one case, the operator of a brothel in France deposited his cash receipts into a local bank account jointly controlled by his wife. The funds were then wired to an account at a caisse populaire in Quebec. A portion of that money was withdrawn and used to purchase and renovate a $300,000 cottage in Ontario. In another case, an Ontario cocaine trafficker deposited more than $2-million into chartered banks between 1994 and 1997. Police found he had signing authority for 32 different bank accounts, including 11 foreign accounts; all of them were active with cash deposits, withdrawals and wire transfers. And in one of the most egregious cases, members of the Caruana-Cuntrera family, a powerful Mafia clan, used personal and commercial bank accounts in Ontario and Quebec to launder more than US$30-million between 1978 and 1984. At one point, the mobsters were bringing so much money to a Montreal bank that the cash was stuffed into tote bags and placed in the back of a pick-up truck. The truck was then backed up to the bank's front doors and the money bags tossed down to staff. Once deposited, the money was quickly wired or transferred out. "Because of their very nature, banks and similar financial service providers are highly conducive to satisfying the objectives of the laundering process," the report says. "Deposit institutions not only serve as the ultimate destination of dirty money, they frequently constitute an integral first link in a potentially long and complicated money laundering chain; in fact, this sector represents the single largest portal for cash moving from the underground economy into the legal economy." The same things that make banks popular with legitimate customers make them a destination of choice for crooks. "Chartered banks in Canada -- in particular the 'big five' -- dominate the financial services industry in this country and thus, like legitimate customers, criminal entrepreneurs tend to gravitate to these institutions," the study says. Insurance is frequently bought with the proceeds of crime but the report notes that in most of these cases the criminals did not seek out insurance to specifically repatriate their dirty money but merely to protect their property. "Because motor vehicles, homes, companies, and marine vessels were purchased with the proceeds of crime, it was often necessary to purchase insurance for these assets," the report says. Peter Lamey, spokesman for the Financial Transactions Reports Analysis Centre of Canada (FINTRAC), the federal government's financial reporting and intelligence operation, disputes Dr. Schneider's contention that the war against dirty money is lost. "It is too early to say that. Over the last three years regulatory change within Canada has made it more difficult to launder money and the effects of those regulations will have to be borne out over the next few years," he said. Investigators do have a difficult task, he said. "[New laws] make it more difficult, it raises the bar in terms of what money launderers have to do. They will have to seek out new and different ways of doing it. Traditional avenues will start to close on them and they will have to be creative. "There will always be a race to keep up with them. It is a battle worth fighting," said Mr. Lamey. Gangsters could not be successful in laundering money if it were not for the help of professionals, from bankers, security brokers and lawyers to accountants, travel agents and car dealers, the report shows. In 93% of the cases, the crook or an accomplice conducted a transaction with a legitimate company and as such, would have encountered a professional. Mostly, it is believed to be ignorance that led them to move gangster's money but, in some cases, corruption was evident. "In a smaller number of cases the transaction was clearly suspicious, such as the use of large amounts of cash to purchase big ticket items; using multiple bank drafts from different banks to personally finance the purchase of a home; requests that lawyers purchase assets on behalf of a client through cheques issued from legal trust accounts; and the incorporation of numerous companies that carried out no legitimate businesses yet have significant amounts of cash deposited into corresponding bank accounts," the report says. "In most of the cases involving suspicious transactions no reports were made to police, indicating that the professional was either uneducated on suspicious transactions or was wilfully blind to the suspicious circumstances." As an example, the report flags a 2000 case of an Edmonton man who amassed considerable assets through drug trafficking. Although he had no legitimate source of income, he was able to launder his drug money through banks, bogus companies, legal trust accounts set up with lawyers, and real estate purchases made with cash directly from drug sales. In Quebec, the report says, an informant infiltrating the drug empire of the Hells Angels caught a conversation on tape of a biker recommending a dirty accountant to an associate, saying: "He's one hell of a good guy. "He worked 25 years for the government. And he was Rizzuto's accountant -- he's always worked for that Italian clique. You give him cold cash -- 'Here, wash this for me' -- and he will play with your money," the biker said, according to the report. (The biker was likely referring to Vito Rizzuto, described by police as the head of the Mafia in Montreal.) The use of corrupted professionals will likely get worse because of increasing pressure from new laws and the efforts of dedicated police, the report says. "One should... anticipate an increase in efforts by criminal organizations to corrupt industry professionals in order to by-pass or manipulate the transaction reporting requirements," the report says. FINTRAC's Mr. Lamey agrees. "It speaks to the corrosive influence [dirty money] has on businesses, society, the structures of our economy and institutions," said Mr. Lamey. Canada enacted anti-money laundering laws in 2001, requiring many institutions to report suspicious transactions. The following year, mandatory reporting of transactions of $10,000 or more was imposed and, last year, mandatory reporting of such transfers across Canada's borders were imposed. Dr. Schneider, a former researcher for the Solicitor General of Canada, culled through almost all cases successfully closed by RCMP between 1993 and 1998 that included a proceeds of crime seizure or money laundering charge involving more than $10,000. The cases also had to involve more than 40 hours of investigative time. Dr. Schneider found 371 such cases that were whittled down to 149 cases that offered complete information allowing for study and comparison. For these cases, the actual RCMP files were examined by Dr. Schneider, including sworn affidavits, search warrants, court transcripts, police reports, court briefs and intelligence reports. [SIDEBAR] 1993-98: Where the cases come from: Ontario: 47 cases (31.5% of the total) Alberta: 24 cases (16.1%) British Columbia: 18 cases (12.1%) Nova Scotia: 18 cases (12.1%) Quebec: 14 cases (9.4%) New Brunswick: 13 cases (8.7%) Saskatchewan: 6 cases (4%) Manitoba: 5 cases (3.4%) Newfoundland: 4 cases (2.7) Prince Edward Island: 0 cases Source: Money Laundering in Canada: An Analysis of RCMP Cases, 2004 [SIDEBAR] Criminal Techniques: Gangsters are nothing if not ingenious, especially when their motivation is enjoying their ill-gotten gains. To do that, they first have to hide the nasty secret that their cash comes from drugs or other criminal activity. Cleaning up this dirty money is what money laundering is all about. "A number of techniques -- some rudimentary, some more inventive -- are used to facilitate the money laundering process," says a new RCMP report on money laundering obtained by the National Post. Here are some them: Smurfs: 1 Find a number of trustworthy people -- called "smurfs" -- to help you sneak money into the banks without raising suspicions. Give each smurf a big chunk of change. 2 The smurfs fan out across a city and visit numerous banks and trust companies and make a series of deposits -- all under $10,000 to avoid the reporting rules. 3 The money can later be gathered together through bank drafts, account and wire transfers and used to buy items or invest. Casinos: 1 With cash in hand, visit a casino and purchase playing chips. Don't buy too many, or you'll attract suspicion. 2 Play with your chips at the gaming tables for a bit, just like every other casino guest. You'll win some and lose some, but that's OK -- it's just the cost of doing business. 3 Take your pile of chips to a cashier's wicket and cash them out. Ask for the money in a cashier's cheque. 4 Take the cheque to a bank and deposit it -- with a big grin on your face, saying you just won big at the casino. Co-mingle: 1 Establish a cash-intensive legitimate business or corrupt the owner of an already established enterprise. Restaurants are good picks. 2 Open a bank account in the name of the business and develop a relationship with the bank as a known businessman. 3 Start mixing your illicit money into the receipts from the businesses. 4 Slowly ramp up the amount and proportion of dirty money being deposited while bragging to the banker how business is really picking up. - --- MAP posted-by: Jackl