Money Laundering and Terrorist Financing Trends in FINTRAC Cases Disclosed Between 2007 and 2011

Common Characteristics of Suspected Terrorist Financing-Related Cases

Typical scheme Footnote 1

For years, the Smith family had supported the liberation efforts in their home country. They had an especially deep attachment to the cause as some of their close family members continued to live in that country and were affected by the ongoing conflict. They had become close with a number of individuals in their community who felt the same way and through this friendship the Smith family employed them in their family business. Together, they conspired to raise funds for this cause and attempted to develop ways in which to transfer funds to their country of origin without being detected. The following methods and techniques were employed:

By the time each individual conducted his own transactions over a period of time, the group had managed to transfer a significant amount of money indirectly (through nominees and businesses) and directly to the country where the terrorist group was active. Law enforcement informed FINTRAC of its suspicions and FINTRAC was able to identify numerous types of reports on these individuals. A number of STRs were submitted by multiple institutions, providing detailed information on the actions and suspicions relating to the individuals. STRs also provided information, based on keen observations from bank staff, that certain individuals were linked. A number of cross-border seizure reports were also received when individuals failed to declare having $10,000 or more when leaving Canada. Based on FINTRAC’s analysis of the financial transactions and other information received, FINTRAC reached reasonable grounds to suspect that the information would be relevant to the ongoing terrorist financing investigation.

Characteristics of individuals suspected of terrorist financing activities

Based on a review of a sample of suspected 2010-11 TF case disclosures, the following characteristics were noted:

Methods and techniques observed in cases involving suspected terrorist financing and money laundering

Structuring and smurfing

Precious metal dealers

Use of nominees

Commingling and the use of front companies

Use of credit cards to perpetrate “bust out schemes” in both TF and ML cases

Use of electronic funds transfers

Lawyer’s trust account

Real estate

MSBs

Prepaid cards

Use of various businesses and NPOs in suspected terrorist financing cases

The last decade has seen an urgent commitment to developing anti-money laundering and terrorist financing compliance regimes; in response, terrorists have evolved and found ways to adapt to these restrictions. The use of non-profit organizations (NPOs) and legitimate businesses quickly became exploited by these groups. However, in reviewing cases of the past four years, a notable decline in the use of businesses to move funds was observed, as shown in Table 4.

Table 4: Percentage of suspected terrorist financing cases involving the use of at least one business
  2007-08 2008-09 2009-10 2010-11
% of cases involving businesses 82% 84% 56% 64%

Table 5: Percentage of suspected terrorist financing cases involving the use of NPOs
  2007-08 2008-09 2009-10 2010-11
% of cases involving NPOs 29% 25% 24% 20%

Throughout the past four years, the following businesses and sectors have been commonly implicated in suspected terrorist financing cases:

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Return to footnote 1 The 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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