Fintrac highlights the criminal risks of shadow banking


Canada’s financial intelligence agency is warning that unregistered remittance services are ripe for criminals to use to launder money and fund terrorist activities.

In a new advisory on the risks of shadow banking, Canada’s Financial Transactions and Statements Analysis Center, known as Fintrac, says everyone from students to the elderly can be affected. scam helps to disguise shady cash through such services.

Fintrac identifies money involved in illicit activities by electronically sifting millions of pieces of information each year from money service businesses, banks, insurance companies, securities dealers, real estate, casinos and others.

In turn, it discloses intelligence to police and other law enforcement agencies about suspected cases.

The new advisory cites trends and patterns from Fintrac’s analysis of shadow banking-related transactions and disclosures to enforcement agencies.

It focuses on unregistered money services businesses primarily in Metro Vancouver and the Greater Toronto Area, and to a lesser extent in the Calgary-Edmonton corridor.

Many people in Canada use a money transfer service, which often operates outside of the regular banking system, to send cash abroad. Possible benefits include lower fees and exchange rates, faster transactions, and the ability to transfer money to places where formal banking services are lacking.

These businesses may operate in the expat community, providing informal transfer services to community members and foreign workers, the advisory notes. Sometimes no cash is actually transferred, with intermediaries clearing accounts through various other means.

Individuals and organizations providing such monetization services must register with Fintrac and may be subject to administrative or criminal penalties for failure to do so.

“Limited visibility and lack of transparency regarding shadow banking transactions pose inherent funding and money laundering risks for terrorist activities,” the advisory said.

Based on its analysis, Fintrac suspects that a portion of the funds transferred through shadow banks and unregistered money service businesses are proceeds of crime or illicit transfers, to evade restrictions imposed by international sanctions, for example.

“We recognize that Canada is home to many expat communities and people want to maintain their ties to host countries,” said Annette Ryan, Fintrac Vice President of Policy and Analytics. , and part of that is related to financial assistance”.

At the same time, Ryan said in an interview, Fintrac wants people to be “aware of the risks” and that those who run these types of businesses have a responsibility to sign them up.

Professional money launderers use a variety of techniques to transfer value and obscure the identities of those in control of the money, the advice said.

Money mules – shady money transmitters or criminal money transporters – may knowingly cooperate or unknowingly work on behalf of money laundering networks.

“Students, housewives, unemployed, elderly and migrant workers are frequent targets for mule recruitment,” the advice said. “Scam victims can be exploited or coerced into becoming money scammers. Criminals can use victims’ bank accounts to illegally place and transfer money.”

Fintrac discovered that the suspected scam accounts received large amounts of third-party cash deposits and email transfers that did not match customer records.

The funds were depleted quickly, the advice said, primarily through email transfers and bank drafts to unrelated third parties. “These funds are also used to purchase investments, real estate and vehicles that are shipped to West Africa and Asia.”

Some of the suspected scammers are international students who receive wire transfers from individuals and institutions in China and Hong Kong, as well as email transfers and bank drafts from institutions, the agency said. third party in Canada.

“While these transactions do not necessarily represent a direct link to money laundering, the lack of details that could cause transactions to be considered legitimate is a concern.”

The cuckoo lays its eggs in the nests of other birds, tricking them into raising their own young. Following this advice, money launderers use a technique called cuckoo smurfing to make criminal proceeds come from legitimate sources and move the money across jurisdictions.

This technique relies on unwitting third parties’ bank accounts – usually those of people in the expat community expecting to receive money – to illegally send cash.

Fintrac said companies controlled by professional money launderers can invoice real or fictitious transactions, distorting the true value of goods crossing the border. Additionally, they can co-collect with commercial payments and transfer funds through money service businesses.

Individuals who own convenience stores, parent companies, construction and general contracting companies, and import and export businesses who have shared addresses or phone numbers with money service businesses and appear to be co-accounting for personal and business related money services activities.

Fintrac believes that some money service operators may be misrepresenting the nature of their business to banks to access financial services and that the federal agency suspects they are companies. shield or cover for the illegal receipt of money.

“Some of these businesses have received funds from organizations that are involved in organized crime, drug trafficking or law enforcement investigations into money laundering and sanctions evasion.”

The suspicious transactions show a common flow of money from Iran and China, mainly through the United Arab Emirates, Hong Kong and Qatar, to Canadian businesses. “In turn, these institutions transferred funds to many individuals and institutions in Canada through bank drafts, checks and wire transfers.”

Fintrac said those sending money to and from abroad can protect themselves by being cautious and only dealing with reputable, registered financial institutions and money service businesses.

“To avoid becoming a money mule, beware of unsolicited phone calls, texts, emails or social media messages that ask for personal information and offers that sound too good to be true. to come true,” advises.

“Besides face-to-face leaks, fake business advertisements can entice potential money mules to unwittingly participate in money-laundering schemes. Social media recruitment tends to be a trend. much focus on attracting money quickly, easily and attractive lifestyle.”

This Canadian Press report was first published on May 5, 2022.

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