Canada: Tighter money laundering rules on deck

Fiona Anderson , Canwest News Service
Published: Thursday, June 19, 2008
Drug dealers and other criminals will have a tougher time disposing of their ill-gotten gains as new federal anti-money laundering legislation cracks down on real estate purchases and currency exchange operations and adds other rules aimed at hindering disposing of large amounts of cash.

Under the new law, which comes in force Monday, real estate agents will have to take more steps to ensure they know who they are dealing with. They will also need to keep the information identifying their client for five years.

"We know organized crime buys houses and they buy houses on a regular basis," said Ken Fraser, executive director of investigations with the Financial Institutions Commission of B.C.

Some of the purchases are to carry out more illegal activity, such as marijuana grow operations or amphetamine labs, he said. Others are just to launder the money to turn proceeds of crime into a legitimate asset.

And to date, those purchases have often been made using fake identification, Fraser said.

"It's not that onerous to assume another identity and purchase property," he said.

Under the new rules, real estate agents have to "ensure the person they are dealing with is the person whose ID is produced," Fraser said.

Last November, police in B.C. froze $6 million worth of real estate they claim was owned by Yong Long Ye, the alleged mastermind behind a drug syndicate charged with importing thousands of kilograms of cocaine from the United States and supplying local methamphetamine and ecstasy labs with ingredients. At the time of Ye's arrest, police seized $168 million in drugs, $2.1 million in cash and $300,000 worth of cars and declared they had "chopped the head off the snake."

Most of the properties were not in Ye's name, and police would not say how they traced the homes back to Ye.

Currency exchanges and money transfer operations - but not cheque-cashing companies - are also targeted in the new legislation.

Starting Monday, money services businesses will have to be registered with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), the organization that collects reports on suspicious transactions.

Now these businesses will have to make sure that people depositing cash have a legitimate business that can generate that amount of money on a regular basis, said Kim Marsh, managing director of the Vancouver office of IPSA International, Inc., a company that helps others comply with anti-money laundering legislation.

In the past, a person could deposit cash using fake ID and say he had a car wash, Marsh said. Now money services businesses will have to get more information and be satisfied that the story, and the ID, are real.

The point is to prevent people from depositing large amounts of cash that come from crime, he said.

"Grow-ops generate huge amounts of cash," Marsh said. "And (the criminals) have to get that cash into the system. If they can get it into an MSB (money services business) who can get it into a bank account, they're halfway there."

Marsh advises companies to get more than one piece of identification and ask for documents on the company. A particularly useful document to request is a credit report "because that's a hard thing to generate."

"If you don't have a credit history that's a huge red flag," he said.

The new laws - which have been adopted to bring Canada in line with the international standards set by the FATF, created by the Group of Seven industrialized countries in the early 1990s - also now require companies to report attempted suspicious transactions, where an individual aborts a transaction that would otherwise have to be reported.

In 2006-2007, FINTRAC referred close to 200 cases, involving almost $10 billion to law enforcement for further review based on reports received. Three of the cases involved money transactions worth more than $1 billion.

Source: Vancouver Sun 2008