Organised crime groups in cost Canadians an estimated five billion dollars a year in financial crime alone, according the the Criminal Intelligence Service of Canada’s website. This includes everything from credit card fraud, money laundering and bookkeeping fraud, to exploiting legitimate investments or employing illegitimate investment ventures (e.g. Ponzi schemes).
While the overlap between white collar crime and organized financial crime isn’t always synchronous, any crime that generates money necessitates that the money be laundered, including the global drug trade, human trafficking and in some cases contributions to armed terror groups.
In Alberta in 2013, millions of dollars were lost to taxpayers and banks before law enforcement agencies interrupted a massive mortgage fraud scheme. The perpetrators bought and sold more than 20 homes using different variations and methods of their scheme. Four individuals were arrested on thirty charges of acts that “aided and abetted a large cross-section of Calgary’s underworld.” All four were charged for their support of a criminal organization which included “falsifying documents related to employment records, bank statements, credit information, and tax assessments.”
The human trafficking industry is a $400 million industry in Canada by some estimates, but it still pales in comparison the estimated $44.5 billion drug trade. All of those proceeds require laundering.
The good news is that industry can play a major role in addressing money laundering. In 2013, Project ORAJA put a stop to an Eastern European Criminal Organization that was engaging in financial crime at the same time as human trafficking to support their broader criminal operations. That criminal investigation started only after the Canadian Bankers Association (CBA) flagged suspicious behaviour.
In 2015 the British Columbia Lottery Corp raised concerns about money laundering to the B.C.’s gaming enforcement branch. This sparked an RCMP investigation where it was alleged that $220 million in cash was laundered in British Columbia in one year.
Industry plays an important role in combating money laundering; and it is important that corporations understand that where money is involved in criminal activity, there will likely be some form of laundering or fraud.
Having systems and controls in place to detect money laundering activity where a relationship is already established is vitally important. It is also important (and in many cases required by law) to have measures in place to know-your-client/know-your-customer; as well as your partner organizations, consultants and suppliers. These measures help to protect your organization from getting involved with criminal actors in the first place.
Enhanced Due Diligence does not stop after the relationship has been established. We also recommend that EDD should be done periodically, on a risk assessed basis, throughout the business relationship as the circumstances of partners, customers and suppliers can change over time which may raise the risk of money laundering.
In cases where analytics are employed to flag suspicious transactions, it is likely that many of the same investigative research techniques that are used in Enhanced Due Diligence will be required to flush out the “red-flags” that transaction monitoring systems produce.