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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 issues of
all organized crime,'' Mr. Nicaso says.
``There is a lack of a
national strategy, a lack of a global
vision.''
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.
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