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With $1.5 billion in trade crossing the border each day, both the United States and Canadian governments are concerned about the criminal cross-border movements of currency, particularly the illicit proceeds of drug trafficking. Significant amounts of U.S. currency derived through illegal drug sales in the United States are subsequently laundered through the Canadian financial system each year.

The Government of Canada (GOC) enacted the Proceeds of Crime (Money Laundering) Act in 2000 to assist in the detection and deterrence of money laundering, facilitate the investigation and prosecution of money laundering, and create the financial intelligence unit (FIU). The Proceeds of Crime (Money Laundering) Act was amended in December 2001 to become the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). The list of predicate money laundering offenses was expanded to cover all indictable offenses, including terrorism and the trafficking of persons. In addition to amending the PCMLTFA, the 2001 reforms made it a crime under the Canadian Criminal Code to knowingly collect or give funds to carry out terrorism, denied or removed charitable status from those supporting terrorism and facilitated freezing and seizing their assets.

The PCMLTFA created a mandatory reporting system for suspected terrorist property, suspicious financial transactions, large cash transactions, large international electronic funds transfers, and cross-border movements of currency and monetary instruments totaling 10,000 Canadian dollars (approximately $9,000) or more. Failure to report cross-border movements of currency and monetary instruments could result in seizure of funds or penalties ranging from approximately $225 to $4,500. Failure to file a suspicious transaction report (STR) could result in up to five years' imprisonment, a fine of approximately $1.8 million, or both. The law protects those filing suspicious transaction reports from civil and criminal prosecution. There has been no apparent decline in deposits made with

Canadian financial institutions as a result of Canada's revised laws and regulations. Canada's FIU, the Financial Transactions and Reports Analysis Center of Canada (FINTRAC), was established in July 2001. FINTRAC is an independent agency within the GOC that receives and analyzes reports from financial institutions and other financial intermediaries (such as money service businesses, casinos, accountants, and real estate agents) as mandated by the PCMLTFA, and makes disclosures to law enforcement and intelligence agencies. Guidelines explaining the PCMLTFA and its requirements were published by FINTRAC in 2002; further additions were made in 2003. The guidelines provide an overview of FINTRAC's mandate and responsibilities, and include background information about money laundering and terrorist financing, including their international scope and nature. The guidelines also provide an outline of the Canadian legislative requirements for a compliance regime, record keeping, client identification and reporting transactions.

FINTRAC currently has over 37.4 million financial transaction reports contained within its database. During 2005-2006, FINTRAC received nearly 15 million reports from reporting entities. FINTRAC produced a total of 168 case disclosures in 2005-2006, totaling approximately $4.5 billion, more than double the value of the previous year. The case disclosures represented nearly $4.3 billion in transactions of suspected money laundering, and $230 million in transactions of suspected terrorist financing activity and other threats to the security of Canada. Thirty-two domestic law enforcement agencies and 10 foreign counterparts have received disclosures from FINTRAC.

FINTRAC has the authority to negotiate information exchange agreements with foreign FIUs. It has signed over 35 memoranda of understanding (MOUs) to establish the terms and conditions to share intelligence with FIUs--including an MOU with FinCEN, the FIU of the United States--and is negotiating several other memoranda. Canada has longstanding agreements with the United States on law enforcement cooperation, including treaties on extradition and mutual legal assistance. Canada has provisions for sharing seized assets, and exercises them regularly.

The PCMLTFA enables Canadian authorities to deter, disable, identify, prosecute, convict, and punish terrorist groups. As of June 2002, STRs are required on financial transactions suspected of involving the commission of a terrorist financing offense. The PCMLTFA expanded FINTRAC's mandate to include counterterrorist financing and to allow disclosure to the Canadian Security Intelligence Service of information related to financial transactions relevant to threats to the security of Canada. The GOC has also listed and searched financial records for suspected terrorists and terrorist organizations on the UN 1267 Sanctions Committee's consolidated list. There are currently more than 500 individuals and entities associated with terrorist activities designated by the GOC. This designation effectively freezes their assets and prohibits fund-raising on their behalf in Canada.

In a 2004 report to Parliament, Canada's Auditor General stated that "privacy concerns restrict FINTRAC's ability to disclose intelligence to the Police, and as a result, law enforcement and security agencies usually find that the information they receive is too limited to justify launching investigations." United States law enforcement officials have echoed concerns that Canadian privacy laws and the high standard of proof required by Canadian courts inhibit the full sharing of timely and meaningful intelligence on suspicious financial transactions. Such intelligence may be critical to investigating and prosecuting international terrorist financing or major money laundering investigations. Recently, concern has focused on the inability of United States and Canadian law enforcement officers to exchange information promptly concerning suspicious sums of money found in the possession of individuals attempting to cross the United States-Canadian border. A 2005 Memorandum of Understanding on exchange of cross-border currency declarations expanded the extremely narrow disclosure policy. However, the scope of the exchange remains restrictive.

In October 2006, Bill C-25 was introduced to Parliament to amend the PCMLTFA. Bill C-25 is designed to make Canada's anti-money laundering and antiterrorist financing regime consistent with the Financial Action Task Force (FATF) recommendations. Canada will undergo a FATF Mutual Evaluation in early 2007. The new legislation will expand the coverage of Canada's anti-money laundering and antiterrorist financing regime by bringing additional business sectors, including lawyers and dealers in precious metals and stones, under the authority of the PCMLTFA and related regulations. Bill C-25 also mandates that FINTRAC create a national registry for money service businesses and establish a system of administrative monetary penalties. The proposed measures will improve compliance with the reporting, record keeping and client identification provisions of the PCMLTFA. The Bill permits FINTRAC to include additional information in the intelligence product that FINTRAC can disclose to law enforcement and national security agencies, as recommended in the 2004 Auditor General's Report. Bill C-25 received final Parliamentary approval in December 2006

In addition to new legislation, the GOC is undertaking other initiatives to bolster its ability to combat money laundering and terrorist financing. In May 2006, the GOC announced that it had added in the 2006 budget approximately $58 million over the next two years for FINTRAC, the Royal Canadian Mounted Police (RCMP), and the Department of Justice. The new funding will increase the number of RCMP officers working in the antiterrorist financing and anti-money laundering units; increase the capabilities of the Canada Border Services Agency (CBSA) to detect unreported currency at airports and border crossings; enable Canada's Department of Justice to handle the expanding litigation workload that will result from increasing the enforcement resources of other GOC agencies; and ensure that FINTRAC can better analyze transactions reports and monitor compliance of unregulated financial sectors such as money remitters.

Canada is a party to the UN International Convention for the Suppression of the Financing of Terrorism, the 1988 UN Drug Convention, and the UN Convention against Transnational Organized Crime. The GOC has also ratified the Organization of American States (OAS) Inter-American Convention on Mutual Assistance in Criminal Matters, the Inter-American Convention against Terrorism, and the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. The GOC has signed, but not yet ratified, the UN Convention against Corruption.

Canada is a member of the Financial Action Task Force and assumed the FATF Presidency for a one-year term beginning in July 2006. Canada became a member of the Asia/Pacific Group on Money Laundering (APG) in July 2006. Canada also belongs to the OAS Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering. FINTRAC became a member of the Egmont Group in 2002. In June 2006, Toronto was selected as the permanent location of the Secretariat of the Egmont Group. The GOC will contribute approximately $4.5 million over the next five years to help establish the Secretariat

Canada has demonstrated a strong commitment to combat money laundering and terrorist financing both domestically and internationally. In 2006, the GOC made strides in enhancing its anti-money laundering regime and reducing its vulnerability to money laundering and terrorist financing, and should continue to expand these efforts in 2007. The GOC should consider taking the necessary steps to permit FINTRAC to disclose timely and meaningful information to Canadian law enforcement agencies on suspicious financial transactions. Were the GOC to do so, both Canada and the United States might see a significant decrease in the illegal cross-border movement of cash and narcotics, as well as a significant increase in successful prosecutions and convictions.
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Title Annotation:Country Reports
Publication:International Narcotics Control Strategy Report
Article Type:Country overview
Geographic Code:1CANA
Date:Jan 1, 2007
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