Money Laundering and Terrorist Financing Trends in FINTRAC Cases Disclosed Between 2007 and 2011
Common Characteristics of Suspected ML Drug Cases
Typical schemeFootnote 1
Tony, age 35, had worked at his family’s car dealership (which his father owned) since he was young. After working there for several years, and having sold cars to numerous people, he also started to get to know members of the local organized crime group. They would often walk into the dealership with bags full of cash and purchase the latest flashy car. Tony was happy, as the commission he made was great. Then they started asking him for favours. They told him that they would give him a bag of cash which would “buy” a car, but the car would actually just sit there on the dealership lot. Six months later, they would return to “sell” the car back and pick up a cheque from the dealer – after paying Tony’s commission. This is how Tony, unbeknownst to his father, became the “banker” of choice for this organized crime group.
The banks started to suspect something when Tony started to deposit large amounts of cash on a regular basis. He told them it was from the sale of vehicles; however, bank staff knew how unusual it was for someone working for a car dealership to walk in with a bag of cash (and for it to come from a legitimate source). Tony started to ask his wife to deposit cash in order to draw less suspicion to himself. He figured that if they split the deposits between themselves under the $10,000 reporting threshold, the bank wouldn’t be suspicious. However, the banks quickly picked up on this trend, linking Tony and his wife to the same address on file, and submitted multiple STRs to FINTRAC regarding the couple.
At some point, the police were tipped off that Tony was providing money laundering services for an organized crime group. In order to gather more intelligence, the police informed FINTRAC of their suspicions through a VIR and FINTRAC quickly made an ML disclosure to the police force. After finalizing their investigation, the police charged Tony, who was eventually sentenced to jail for money laundering.
Characteristics of individuals suspected of ML related to drug offences
Based on a review of a sample of 2010-11 ML case disclosures related to suspected drug offences, the following characteristics were noted:
- The majority of suspected offenders are middle-aged males
- While participation of females in ML activities is generally less frequent than that of males, females were mostly involved in ML cases related to drugs
- Females are often linked in cases through familial relationships and they hold jobs in a variety of sectors, including food, retail and the services sector; otherwise, they are either homemakers or unemployed
- It is not uncommon to find an entire family taking part in the suspected criminal activity
- Business ownership is the most common “declared” occupation, second to individuals employed in the service sector, i.e. trades (e.g. carpenter, electrician, plumber, etc.), restaurants/bars, travel or the beauty industry
- The businesses owned are also often classified as being part of the service sector, i.e. restaurant, real estate, financial, etc.
ML methods and techniques observed in suspected drug-related cases
Structuring and smurfing
- Cash purchases by one or many individuals of EFTs that fall under the reporting threshold
- Currency exchanges under $10,000 from CAD to USD or vice versa
- Cash purchase of money orders or bank drafts under $1,000 (which does not require identification) that are payable to third parties
- Depositing a large number of $20 bills totaling under $10,000.
- Exchanging small-denomination bills for larger ones (e.g. $20 bills for $100 bills).
- Financial transactions suspected to be a mix of legitimate business revenue with criminal proceeds
- Businesses acting as fronts to make financial transactions appear more legitimate, indicated by multiple entities sharing a common address
- Holding numerous business bank accounts and conducting various transfers between accounts. Funds are then moved to one account and bank drafts are purchased.
- Cash purchase of casino chips, with minimal play, followed by the redemption of chips for either cash or cheque.
Electronic funds transfers
- Large funds transfers from a business account to individuals located in countries of concern.
Foreign exchange transactions
- Currency exchanges from CAD to USD or vice versa
- Large cash deposits, converted to USD, then wired to a country related to drug trafficking
- Currency exchanges followed by purchases of EFTs.
Types of businesses used in suspected drug-related cases
Over the past four years, 68% of drug-related cases consistently involved at least one business that was not necessarily a cash-based business. Examples of businesses and sectors observed in drug-related cases were:
- Construction/development industry
- Shipping/freight companies
- Import/export companies
- Travel agencies
- Real estate
- Convenience/grocery stores
- Food and entertainment
- Auto industry
- Hydroponics/indoor gardening
- Trucking companies
- Gas stations
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Return to footnote 1The details of the scheme represented here are not taken from one particular case disclosure; rather, they are based on observations made in a number of similar cases.
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