Financial intelligence agency sheds light on criminal risks of underground banking


OTTAWA — Canada’s Financial Intelligence Agency is warning that unregistered money transfer services are ripe for abuse by criminals trying to launder money and finance terrorist activities.

OTTAWA — Canada’s Financial Intelligence Agency is warning that unregistered money transfer services are ripe for abuse by criminals trying to launder money and finance terrorist activities.

In a new advisory on the risks of underground banking, the Financial Transactions and Reports Analysis Center of Canada, known as Fintrac, says everyone from students to the elderly could be duped into helping hiding shady money through such services.

Fintrac identifies money linked to illicit activities by electronically filtering millions of pieces of information each year from money services businesses, banks, insurance companies, stock brokers, real estate brokers, casinos and others.

In turn, it releases information to the police and other law enforcement agencies on suspected cases.

The new notice cites trends and patterns in Fintrac’s analysis of transactions and disclosures to law enforcement related to underground banking.

It focuses on unregistered money services businesses primarily in Metro Vancouver and the Greater Toronto Area and, to a lesser extent, in the Calgary-Edmonton corridor.

Many people in Canada use money services, which often operate outside of the conventional banking system, to send money overseas. Benefits can include lower fees and exchange rates, faster transactions, and the ability to transfer funds to places without formal banking services.

These companies could operate within diaspora populations, providing informal transfer services to community members and expatriate workers, the notice notes. Sometimes no money is actually transferred, with intermediaries settling accounts through various other means.

Individuals and organizations that offer such money services must register with Fintrac and face administrative or criminal penalties if they fail to do so.

“The limited visibility and lack of transparency associated with clandestine banking transactions pose inherent risks of money laundering and terrorist financing,” the advisory said.

Based on its analysis, Fintrac suspects that some of the funds transferred through underground banks and unregistered money services businesses were proceeds of crime or funds transferred illegally, for example to evade restrictions imposed by international sanctions. .

“We recognize that Canada is home to many diaspora communities and that people want to maintain their ties to their home countries, and part of that involves financial support,” said Annette Ryan, Deputy Director of Policy and analysis at Fintrac.

At the same time, Ryan said in an interview, Fintrac wants people “to be aware of the risks” and that those who operate these types of businesses have a responsibility to register them.

Professional money launderers use a variety of techniques to transfer value and conceal the identity of those in control of the funds, the notice said.

Financial mules – people who transfer questionable money or transport the proceeds of crime – could knowingly cooperate or unwittingly work on behalf of a money laundering network.

“Students, housewives, the unemployed, the elderly and migrant workers are frequent targets for recruitment by financial mules,” the notice states. “Victims of fraud can be exploited or coerced into becoming financial mules. Criminals can use the victim’s bank account to place and transfer illicit funds.”

Fintrac discovered that the suspect money mule accounts were receiving a high volume of third-party cash deposits and email money transfers that did not match the customer’s profile.

The money was quickly depleted, mostly through email money transfers and bank drafts to unrelated third parties, the notice said. “These funds were also used to purchase investments, real estate and vehicles shipped to West Africa and Asia.”

A number of the alleged financial mules were international students receiving wire transfers from individuals and entities in China and Hong Kong, as well as email money transfers and bank drafts from third parties in Canada, the report found. agency.

“While these transactions do not necessarily demonstrate a direct link to money laundering, the lack of details that would define the transactions as legitimate is concerning.”

Cuckoos lay eggs in the nests of other birds, prompting them to raise their hatchlings. In this vein, money launderers use a technique called peekaboo smurfing to make it appear that the proceeds of crime come from legitimate sources and to transfer funds between jurisdictions, the notice says.

This technique relies on the bank accounts of unwitting third parties – typically those of members of diaspora communities awaiting remittances – to make illicit cash deposits.

Businesses controlled by professional money launderers can issue invoices for real or fictitious trade, misrepresenting the true value of goods crossing borders, Fintrac says. Also, they could mix receipts with business payments and remittances through money service businesses.

Individuals owned convenience stores, holding companies, construction and general contracting companies, and import-export businesses that shared addresses or phone numbers with money-services businesses and appeared to mix personal accounts and professionals related to the activity of money services.

Fintrac believes some money services operators may be misrepresenting the nature of their business with banks in order to access financial services, and the federal agency suspects they are front or front companies to receive illicit money.

“A number of these companies have received funding from entities linked to organized crime, drug trafficking, or law enforcement investigations into money laundering and sanctions evasion.”

Suspicious transactions highlighted a general flow of funds from Iran and China, primarily via the United Arab Emirates, Hong Kong and Qatar, to Canadian companies. “These entities, in turn, transferred the funds to multiple individuals and entities in Canada through bank drafts, checks and account transfers.”

Fintrac says people transferring funds to and from overseas can protect themselves by exercising caution and dealing only with registered and reputable financial institutions and money services businesses.

“To avoid becoming a financial mule, beware of unsolicited phone calls, text messages, emails or social media messages asking for personal information and offers that seem too good to be true,” the statement says. ‘notice.

“In addition to direct overtures, false commercial advertisements can entice potential financial mules into unwittingly participating in money laundering schemes. quick and easy money and attractive lifestyles.”

This report from The Canadian Press was first published on May 5, 2022.

Jim Bronskill, The Canadian Press


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