Pubdate: Sat, 02 Sep 2006 Source: Prince George Citizen (CN BC) Copyright: 2006 Prince George Citizen Contact: http://www.princegeorgecitizen.com/ Details: http://www.mapinc.org/media/350 Author: Frank Peebles, Citizen staff Bookmark: http://www.mapinc.org/mjcn.htm (Cannabis - Canada) Bookmark: http://www.mapinc.org/coke.htm (Cocaine) Bookmark: http://www.mapinc.org/find?188 (Outlaw Bikers) COMING CLEAN WITH DIRTY CASH Prince George is the regional centre for the production and trafficking of drugs and local authorities say that means money laundering is also big business locally. "More than a few times, we have had cash deposited here and the money smells like pot," said Linda Sowles, risk management officer for Integris Credit Union. But she said the signs of dirty money are not usually that obvious. "We had an individual who was in the news for being busted at the border with illegal substances, and he had an account with us," she said. "Sometimes you put it together that way. We search our database to see if we have known Hells Angels on file, or different things like that. Sometimes just a name in the newspaper will trigger us to search for them to see if they are doing business with us now or in the past. We don't want to be the organization used to filter their criminal money." Cpl. Dennis Blommaert, of the RCMP's integrated proceeds of crime section, was in Prince George recently as a guest of the Chamber of Commerce. He told a large gathering of mostly bankers, accountants and other money handlers that the two words allow money laundering to take place in this community -- willful blindness. "If you don't ask those questions, when people bring you large amounts of money, if you don't follow up on those red flags, you are being willfully blind," Blommaert said. "If you are willfully blind, you become a money launderer and you also can be charged criminally." Police don't want to see otherwise legitimate businesses - most of the time they are car dealerships, boat dealers, jewelers, investment brokers, real-estate agents, financial institutions -- fall under the cloud of organized crime. It is the Hells Angels, the Asian gangs, the East Indian gangs, the Italian and Russian mafia groups, and other criminal organizations from across Canada that spearhead money laundering in B.C. Rather than waving the big stick of legislation, police point out a major weapon money launderers bludgeon the law-abiding business community with: unfair competition. Money launderers don't just buy big-ticket items and make circular investments to try to make their dirty millions look clean, they will also set up stores and restaurants in order to channel their money. "When you start up your little business, you go to the bank to get loans, you hire the best staff you can afford, your family works long hours to make the business a go, but down the street you have the same business going against you with the best equipment, the best staff, the best location, and they don't really care if they make a profit," because they are only a front for criminals to dump their proceeds of crime into so it comes out the other end looking clean, Blommaert explained. "They got the money selling drugs, but it all looks like legitimate corporate money now, and your business goes bankrupt because you can't compete." The process isn't usually sophisticated, with only two or three layers of cover before the money's dirty origins are revealed. Of course, for reasons of privacy and confidentiality that protect us all, law enforcement needs all kinds of warrants and legal standing to look into clean money. Blommaert said most investigations start at the other end. If they can pinpoint the drug industry players, they can more effectively trace their dealings forward and take down the money laundering infrastructure as the money moves. "First we will find out what asset the suspect has, then find out where it came from, what kind of banking has been done, and follow it along from there," Blommaert said. "They aren't always complicated," said Beau Doherty, a researcher for the RCMP's merchants against money laundering program. "A lot just take the drug money and buy big-ticket items, so they have assets instead of cash. Some might go so far as to set up a company and buy things in the name of the company, so there is another level of cover. Some take over legitimate businesses with high-volume cash transactions like restaurants, bars, private ATM machines, etc." The majority of drug business in B.C. is marijuana sold in enormous quantities in the United States in exchange for cash (sometimes cocaine and guns). Of course American customers use primarily American cash. In order to convert the U.S. currency into Canadian currency, crooks must use banks or money exchanges. In the Lower Mainland and Victoria, money exchanges are common and are often very small operators. Crooks and their associates will literally wheel shopping carts full of cash in, flip it all to Canadian funds, and disappear again with no idea who they were. Doherty said one B.C. marijuana merchant was flipping $1-million per week in this fashion before police caught him. Undercover operations are constant against such launderers in the Vancouver and Victoria area, according to police. The goal is always to catch Papa Smurf. Crooks have coined the phrase "smurfing" to describe the most common form of money laundering in B.C. Papa Smurf is the boss, and under that are all the smurfs that will take the dirty cash in small amounts - always less than $10,000 for a very important reason - to banks and other financial institutions. Each smurf may visit six or eight banks in a day, and there may be five or six smurfs working for Papa Smurf. They bring bank drafts or prepaid credit cards back and, viola, dirty money now looks clean with no suspicions aroused. No matter what the scheme, no matter if it is a smurf doing the dirty work, or the crook's lawyer, or wife, or Papa himself standing in your business, it is up to the law-abiding proprietor to blow the whistle on this kind of activity, Blommaert said. "Every business is a local business to the people coming in the door off the street. Get to know your customers," Blommaert said. "Ask them questions, learn about them, find out about the transactions they are doing with you. There are signs most money launderers will show. Are they reluctant to show you their ID? Are they making purchases in a nominee's name? Do they have difficulty explaining the source of their income? Are they paying cash for big-ticket items or investments? Are they outside the profile for such items? Do they seem unconcerned by the price? Even if they offer an explanation, did you have some kind of feeling that something wasn't quite right?" If any of these things come to mind about someone, Blommaert said at the very least the transaction should be reported to FINTRAC. FINTRAC is an independent agency, arm's length from police and government, responsible for the collection, analysis and disclosure of information that may assist law enforcement and national security officials curb money laundering. Anyone can make that report, and financial institutions and certain money-handling businesses are required to. Sowles said FINTRAC has some drawbacks. It is bureaucratic in nature, reports have to be filed on some transactions the bank knows full well are legitimate, and even if there are suspicions and a report is filed, they never hear back what the results were because the police work is secret and sometimes takes years to investigate. "It is a lot of work for us, and we don't see the end result. We are not privy to what goes on after we report to FINTRAC," she said. "There are benefits for the community at large, though, it is to protect the public. And we certainly don't want to be aiding and abetting these criminal organizations, which we know for a fact are operating in Prince George. We don't want to be seen as a target by criminal organizations. There is a list of suspected terrorists that we are regularly provided with and we have to report monthly that we have checked to ensure we are not dealing with that long list of names. I take that seriously. I do believe it could absolutely happen in Prince George, and drug money is definitely running through this town," Sowles said. Money laundering can have devastating social consequences, according to police. It allows the drug trade to flourish. It buys guns and heavy weapons for drug traffickers, arms dealers, terrorists and other criminals. It allows local criminals to make a living and enjoy luxuries they gained by hurting and demoralizing local people. Investigations have shown that criminals manipulate financial systems in Canada and abroad to support their illicit activities. The International Monetary Fund estimates global money laundering to be between two and five per cent (half a trillion dollars total) of the world's gross domestic product. Money laundering in Canada alone is estimated to be in the billions of dollars. Blommaert estimated the British Columbia drug industry to be, conservatively, between $7 billion and $10 billion per year, and all that money has to somehow get circulated into the legitimate economy. "We, the legitimate people in town, are scratching to make ends meet," Blommaert said. "If we want to be crooks, we can be crooks, but you run the risk of a knock at the door late at night and there's a guy with a shotgun saying 'all your stuff is now mine.' You want safety for your children, you want a healthy lifestyle, you don't want to be worrying about drug addiction and violence in your neighbourhood. To ensure that, you have to take the profit out of crime, and that is done by calling it in when suspicious things happen. Do not be willfully blind or you are, like it or not, part of the problem." Blommaert and others are touring the province to teach businesses about money laundering and how it works. For more information call 604-264-3178. +++++++ INFO BOX +++++++++++++++ Money Laundering Methods * Structuring ("smurfing"): Smurfing is possibly the most commonly used money laundering method. It involves many individuals who deposit cash into bank accounts or buy bank drafts in amounts under $10,000 to avoid the reporting threshold. * Bank Complicity: Bank complicity occurs when a bank employee is involved in facilitating part of the money laundering process. * Money Services and Currency Exchanges: Money services and currency exchanges provide a service that enables individuals to exchange foreign currency that can then be transported out of the country. Money can also be wired to accounts in other countries. Other services offered by these businesses include the sale of money orders, cashiers cheques, and travellers cheques. * Asset Purchases with Bulk Cash: Money launderers may purchase high value items such as cars, boats or luxury items such as jewelry and electronics. Money launderers will use these items but will distance themselves by having them registered or purchased in an associate's name. * Electronic Funds Transfer: Also referred to as a telegraphic transfer or wire transfer, this money laundering method consists of sending funds electronically from one city or country to another to avoid the need to physically transport the currency. * Postal Money Orders: The purchase of money orders for cash allows money launderers to send these financial instruments out of the country for deposit into a foreign or offshore account. * Credit Cards: Overpaying credit cards and keeping a high credit balance gives money launderers access to these funds to purchase high value items or to convert the credit balance into cheques. * Casinos: Cash may be taken to a casino to purchase chips which can then be redeemed for a casino cheque. * Refining: This money laundering method involves the exchange of small denomination bills for larger ones and can be carried out at a number of different banks in order not to raise suspicion. * Value Tampering: Money launderers may look for property owners who agree to sell their property, on paper, at a price below its actual value and then accept the difference of the purchase price "under the table." The launderer can, for example, purchase a $2-million dollar property for $1-million, while secretly passing the balance to the seller. After holding the property for a period of time, the launderer then sells it for its true value of $2-million. * Loan Back: Using this method, a criminal provides an associate with a sum of illegitimate money and the associate creates the paperwork for a loan or mortgage back to the criminal for the same amount. This creates an illusion that the criminal's funds are legitimate. The scheme's legitimacy is further reinforced through regularly scheduled loan payments made by the criminal, and providing another means to transfer money. ++++ FINTRAC INFO BOX +++++ FINTRAC - The Financial Transactions and Reports Analysis Centre of Canada FINTRAC now administers the Proceeds of Crime (money laundering) and Terrorist Financing Act enacted by Parliament following the terrorist attacks of September 11. The new act gives FINTRAC the authority to receive voluntary information from the public, law enforcement agencies, and others about suspicions of terrorist financing. Who must report to FINTRAC? All financial entities, life insurance companies, securities dealers, foreign exchange outlets and money service businesses, which have detected a suspicious transaction, or conducted cash transactions or wire transfers in/out of Canada worth $10,000 and over. Records related to these transactions must be kept for a period of five years. Why report to FINTRAC? If there are reasonable grounds to suspect that a transaction is related to a money laundering or terrorist financing offence, the law requires that a report be filed with FINTRAC. How to file a report: FINTRAC has a new reporting system called F2R. Email: Telephone: 1-866-346-8722 (After making your language choice, press 1.) Information on FINTRAC can be found online at http://www.fintrac.gc.ca If you suspect money laundering, Report it. Disclosure provisions under Section 462.47 of the Criminal Code of Canada justify you to do this. Under the law, whistle blowers will be protected from any civil or criminal liability, even if your suspicions prove to be wrong. What They Need From You When contacting police or FINTRAC concerning a suspicious transaction, you may be asked to provide specific information, such as: 1. Date, time, and location of the transaction. 2. Name, age, address, telephone number, description of the person(s) involved in the suspicious transaction and their associates. 3. The amount of the suspicious transaction. 4. Bank, credit card, or other personal information about the subject that might be available. 5. Description of vehicle and licence plate number associated with the suspicious transaction/activity. 6. The circumstances, details, and events that raised your suspicion. 7. The type of activity associated with the suspicious transactions (payment made by an unusually large volume of cash, use of nominees (associates), currency exchanged, smurfing, refining, undervaluing goods, loan backs). - --- MAP posted-by: Beth Wehrman