APPENDIX II - EXAMPLES OF SUSPECTED MONEY LAUNDERING AND TERRORIST ACTIVITY FINANCING

SUSPECTED MONEY LAUNDERING

SUSPECTED LAUNDERING OF DRUG MONEY

FINTRAC detected the following suspicious activity from our analysis of money movements between many individuals, several reporting entities and a variety of financial transactions.

A number of persons were depositing substantial amounts of cash in Canadian and foreign currency into their individual bank accounts. Some of these individuals were also physically transporting foreign currency into Canada, which was then used to purchase casino chips that were later redeemed for casino cheques. They were also redeeming casino cheques from casino chips purchased by other individuals—evidence of a money laundering technique called “smurfing”.

Three of the individuals repeatedly deposited amounts of foreign currency into the accounts of a retail company that had affiliates across Canada and in two foreign countries. The affiliates then issued drafts in small amounts to various other individuals and/or wired funds to recipients in several countries.

Taken together, the above activity suggested the movement of drug money. This suspicion was heightened when it was noted that some of the businesses were receiving cash deposits from individuals who were suspected by police of being drug dealers. Further, some of the affiliate businesses were purchasing bank drafts and/or wiring funds to these individuals and/or what appeared to be suppliers in foreign jurisdictions. Another related company collected cash deposits from three of the five individuals and then transferred larger dollar amounts to another company, which, in turn, provided bank drafts to a law firm for the purchase of houses suspected of being used as marijuana grow operations.

SUSPECTED TELEMARKETING FRAUD

Another case involved a telemarketing company that had a number of different call centres located throughout Canada. The company would cold-call residents of a foreign country and offer access to credit in exchange for a fee.

FINTRAC’s analysis noted that the monies collected as fees were then moved within Canada, and to at least one other country, through what are called shell companies. Shell companies have no physical presence in the jurisdiction where they are incorporated and can be used as a conduit for moving and obscuring the origins of money.

Three of these shell companies, which shared the same postal address, appeared to be the “funnel point” in the money laundering scheme. On receiving money from the telemarketing company in the form of electronic funds transfers, the shell companies then forwarded the money to an offshore bank account.

SUSPECTED ARMS TRADING AND NARCOTICS TRAFFICKING

An individual established a web of corporations in over 40 countries through which funds moved that were suspected of being derived from criminal activities including narcotics trafficking and illegal arms dealing. Many of the companies operated out of the same location in a large Canadian city and many shared common directorships.

Over a two-year period, tens of millions were transferred between companies, some of which were located in prime offshore money laundering locations. The individual also received wire transfers to a personal account from corporations registered in other jurisdictions. As well, large cash deposits were made to the accounts of the individual's Canadian companies.

SUSPECTED INVESTMENT FRAUD

Another example involved the operation of what appeared to be a fraudulent investment scheme. The case involved many companies—a few of which were trading companies—and associated individuals that were suspected of soliciting funds with the promise of high returns on investments that did not exist.

One of the companies based in Canada was receiving large amounts of money in the form of wire transfers from what appeared to be unrelated individual ‘investors’ in three other countries. This company was then moving money in North America, Central America and the Caribbean using trust accounts and other means including the use of accountants and lawyers.

FINTRAC’s analysis revealed related financial transactions totalling tens of millions of dollars. The associated trading companies moved some of this money using wire transfers. Suspicion of illicit activity was heightened when it was found that these trading companies had been ordered to cease trading in securities by provincial securities commissions due to concerns over fraudulent investment activities.

SUSPECTED TERRORIST ACTIVITY FINANCING

SUSPECTED FUNDRAISING ACTIVITIES

FINTRAC received reports on suspicious transactions that ultimately connected a number of individuals, their businesses, and a non-profit community organization. According to open source intelligence, the individuals and entities were supporters of a known radical terrorist organization. Some of the individuals also supported a known terrorist.

Analysis revealed that, over the course of two years, these individuals and their businesses were involved in transactions valued at many millions of dollars.

Further analysis revealed that through their corporate and personal accounts, these individuals were wiring money out of Canada to locations of concern in the Middle East and Eastern Europe. They were also making large cash deposits to the non-profit community organization’s bank account that were followed by large wire transfers to entities and locations of concern.

SUSPICIOUS WIRE TRANSFERS LINKED TO POSSIBLE TERRORIST ACTIVITY FINANCING

It was reported that an individual from the Middle East, who had associations with a known terrorist, owned a large company in Canada. The associate of this business person was known to be financing terrorist organizations.

Analysis revealed that, in addition to the companies owned and controlled in the Middle East, the business person in question did, in fact, have business ties with several companies in Canada.

Our analysis also revealed that numerous large wire transfers between companies in Canada and the Middle East were associated with this business person. These wire transfers were far in excess of the amounts required for normal business operations and were sent to a country sympathetic to the terrorist organization that was supported by his associate.

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