In Canada, it has long been illegal to possess money or property acquired by the commission of a crime. But until last January, Canadian law never specifically made the disguising of illegal income, or money laundering, a crime. As a result, drug traffickers were free to enjoy the wealth cleansed through a chain of financial transactions. All that changed with the enactment of C-61, a law that targets what it calls “enterprise crime” and “designated drug offences.” Now, anyone who knowingly delivers or transfers illicitly gained money in any way is liable to prosecution and a prison term of up to 10 years and substantial fines. For the first time, the law forges a direct link between drug traffickers and the chain of bankers, realtors, stockbrokers, currency exchangers and auto, boat and plane salesmen, among others, who help the traffickers enjoy their profits.
Strict: Still, the Canadian legislation is less strict than American laws, which require U.S. banks to report to the treasury department on any transactions of $10,000 or more. For their part, Canadian banks face no mandatory reporting requirement—instead, Canadian banks have established various private guidelines on what constitutes suspicious deposits.
C-61 encourages them to report to the police if they have what the act calls a “reasonable suspicion” about any of their deposits by protecting them from civil liability for breaching customer confidentiality.
The law also permits authorities to freeze bank accounts and to seize other assets gained through drug crimes or money laundering. Although it is still too early to judge how effective the new law will be, seizures have already increased dramatically. So far this year, the RCMP’s Anti-Drug Profiteering Squad has confiscated about $30 million, almost half the total seized under the old law in the past eight years. But that figure represents only a fraction of the total amount of money generated through illegal drug deals in Canada— estimated at $10 billion a year.
Before C-61, warrants for the seizure of illgotten gains were restricted to portable items.
Land or buildings, as well as items such as bank deposits, could not be seized. A drug dealer could be jailed, but much of his wealth was beyond reach. Now, all assets can be seized even if the suspect himself has fled the country. Upon conviction, a judge may also impose a fine, equal to the property’s value, instead of forfeiture. But the law also protects innocent partners in businesses that have
been partially financed with drug money.
Law enforcement officials have applauded the new law for making money laundering in Canada more difficult, but prosecutors have reservations about a section of the law that makes the Crown liable for any losses if a court rules that a seizure was illegal.
Penalty: Other criticisms have been levelled at the new act. American officials note that Canadian bank reporting practices on suspected laundering are discretionary and that there is no penalty for noncompliance. In the United States, banks are fined $10,000 per transaction for each day a money-laundering crime continues. The fines can extend to each office, branch or place of business where the laundering occurs. And to launch a successful case against a U.S. financial institution, the prosecution need merely show what the antilaundering legislation calls “gross negligence,” rather
than the more difficult to prove “wilfulness.” And that is only the civil penalty. Those convicted of money laundering are liable to a 20year prison term and a $500,000 fine.
The mounting concern over drug dealing in the United States has led to proposals for even stricter laws. Earlier this month, the Bush administration promised to take unspecified action to monitor the electronic transfer of
funds, the key element in laundering and the most difficult to detect. And amendments to the American Drug Abuse Act of 1988 would lower the U.S. reporting requirement from $10,000 to $3,000 (U.S.), and its reach could even extend to Canadian banks. By October, 1990, the U.S. treasury must negotiate international agreements that will force foreign banks with U.S. operations to keep the same kind of records as American banks. They must also make such records available to U.S. investigators upon request. Those that resist risk termination of their banking relationship. If the trend towards stiffer laws in the U.S. is any indication, money laundering in Canada and elsewhere is likely to become a much more dangerous proposition for those willing to pursue the risks of enterprise crime.
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