What is money laundering?

What is money laundering?

Money laundering is any method that disguises the source of money or assets earned through illegal activity.

Broadly speaking, there are three steps in the laundering process. The first is to introduce the money into the financial system, often by distributing it to various deposits and investments. The second is to move the money around to create distances between it and the perpetrators. The final step is to bring the money back to the perpetrators as legitimate income or “clean” money.

According to the RCMP, businesses commonly used for money laundering include casinos, banks, law firms, money service businesses/currency exchanges, real estate agencies, car dealerships and jewellers

What are common forms of money laundering?

• Smurfing involves breaking up large transactions into smaller ones to avoid detection. The name comes from the way Smurf cartoon characters divide up tasks. Financial institutions are required to report large deposits that exceed $10,000 or those they deem suspicious. Through smurfing, money launderers stay under the radar and make it look like the money they deposit is legitimately sourced.
• Mules are people who are enticed to open up bank accounts to deposit illegal money in exchange for financial payment or employment. Mules are usually financially vulnerable and do not have criminal records.
• Shell corporations don't have any business activity or operations, assets or employees. They can be legitimate business entities used to raise money and fund the operations of a startup company or to manage a merger or acquisition. But if they are created to hide illegal activities and/or avoid paying taxes, then they are illegal.
• Casinos can be used to launder cash anonymously. For example, someone could purchase $50,000 worth of casino chips using illicit cash. After they spend $10,000, they cash out the remaining $40,000 in chips. When the casino issues a cheque or makes a bank transfer for that amount, the illicit funds are effectively entered into the financial system. A news report notes that “Online gambling sites offer prospective money launderers opportunities to conceal the source of their funds by using multiple different deposit and withdrawal methods.”
• Cryptocurrency allows people to exploit the decentralized nature of online currency. The blockchain technology that controls currencies such as Bitcoin records transactions transparently but often does not directly link deposits to their origin, making it challenging for authorities to who is depositing the money and where it is going.

What is the penalty for money laundering?

Section 462.31 (1) of the Criminal Code makes it a crime to use, transfer, send or deliver any property or any proceeds of any property with the intention of concealing their origins. Anyone found guilty of an indictable offence for money laundering faces a maximum prison sentence of 10 years, with lesser sentences if the change is treated as a summary conviction.

What is ‘snow-washing’?

“Over the past 10 years, Ottawa-area banks flagged more than 10,000 suspicious transactions to Canada’s financial intelligence agency, but during that same period only 20 people faced money laundering-related charges in the city,” states a 2021 news report.

It adds that while banks in the “Ottawa area were signalling several dozen reports of suspicious activity to the Financial Transactions and Reports Analysis Centre of Canada every month … it’s not always obvious whether there is a follow-up to these reports.”

The story states that the crime “has long been left by the wayside in Canada. It is under-prosecuted and under-policed [as] law enforcement and prosecutors face a number of hurdles that often prevent them from following through with money laundering investigations.”

Canada is such an appealing money laundering destination that the term “snow-washing” has been coined to describe it, the report notes.

“You have nearly no prosecutions in the country,” says a financial service advisor. “The odds are infinitely small that you are going to be charged. If you are charged, the odds are infinitely small that you are going to be prosecuted. If you are prosecuted, it’s almost entirely unlikely that they’re going to find the money and almost entirely unlikely that it’s going to be forfeited.”

How do police prove money was laundered?

According to a background document from the Public Prosecution Service of Canada, “investigations into laundering offences are long and complex. Over the years, launderers have significantly refined their techniques in order to mask the source of funds originating from criminal activities, particularly by using new technologies and virtual currencies.”

The RCMP states that when it receives a report about laundered money, it will:

• identify and seize profits and/or assets acquired from illegal activities;
• record financial information about organized crime groups;
• help other agencies with their investigations; and
• work with law enforcement agencies at national and international levels.

To keep up with changes in technology, the federal government’s 2024 budget proposed various proposed amendments to the Criminal Code aimed at combating money laundering and other forms of economic crime. If passed into law, the amendments would:

• allow courts to order financial institutions to keep accounts open for the purpose of assisting in the investigation of suspected criminal offences; and
• authorize law enforcement agencies to obtain ongoing, specified information on account activity connected to persons of interest in criminal investigations.

The document adds, “These new proposals follow amendments to the Criminal Code introduced last year which gave law enforcement the ability to freeze and seize virtual assets with suspected links to crime.”

How common is money laundering in Canada?

According to a 2020 report from Criminal Intelligence Service Canada, the “majority of organized crime groups and other criminals disguise their proceeds of crime … 176 organized crime groups in 2019 were identified by police as being involved in money laundering activities, ‘but we believe the actual number to be higher.’”

The report adds that approximately 50 per cent of the organized crime groups involved with money laundering maintain international links, “with almost half of them involved in the cocaine market … cryptocurrencies [are used] as a way to pay for mass-marketing fraud and dark web marketplace purchases.”

Contact me for assistance

A conviction for money laundering or any other criminal charge can seriously affect your job, reputation and personal freedom. Before speaking with the police, contact me for a free consultation. As an experienced criminal lawyer, I can strategize your defence, clarify plea implications and address the details of your charge. Contact me for a free consultation, in French or English.