What is Money Laundering in Canada?

What is Money Laundering in Canada Featured Image

The corruption perceptions index 2021 estimates that Canada’s money laundering may hit as much as $113 billion. Another report shows that the estimated money laundering amount globally is between $800 billion to $2 trillion, which is 2 – 5% of the global GDP.

The value is simply alarming, and thus the Canadian government has introduced anti-money laundering laws to prevent it.

Let’s know what money laundering is, how it occurs and the adverse effect of money laundering on Canada’s economy.

What is Money Laundering?

Simply put, when money is transferred illegally, it is called money laundering. In this process, money is transferred or transacted through different media like business entities which are not legitimate.

One of the intentions behind this criminal act is to hide the illegal income source.

Why do money launderings take place?
Money laundering is critical because it is related to two deleterious industries, which are terrorist organizations and drug trafficking.

Obviously, the people associated with such illegal acts will try to hide their financial records, and avoiding tax parallels this. Apart from these two industries, many other entities like to hide their property records and avoid compulsory financial duties.

What are the Adverse Impacts of Money Laundering?

Before jumping into the centre topic, let’s look into the influences of money laundering. First of all, money laundering interrupts the economic growth of a country. That begins with the corruption reducing the efficiency.

Besides causing damage to the running financial institutions, money laundering creates a harder situation for a market to rise. Surprisingly, emerging markets are also a great opportunity to carry out money laundering.

Some other possible consequences may include:

  • Significant fluctuation occurs in exchange rates and international capital flows
  • Different sectors face financial instability
  • Foreign investment is anti-proportional to money laundering
  • It reduces public income, and that further minimizes tax revenues
  • An institution may face a reputation crisis that was used in money laundering. It’s possible to do this wicked act without informing a financial institution.

Where Does Money Laundering Happen in Canada?

There are several sectors where money laundering is frequently occurring. Some of the sectors are–

  • Deposit institutions (76.5%)
  • Insurance industry (64.4%)
  • Motor vehicles (59.7%)
  • Real estate (55.7%)
  • Criminal companies (32.9%)
  • Currency Exchange (17.4%)
  • Marine Vessels (14.8%)
  • Jewelry/Gems/Gold/Coins (9.4%)
  • Securities Industry (7.4%)
  • Other (43.6%)

The list shows that deposit accounts are the top source of most money laundering activities. And we all know that the most traditional deposit institutions are banks. You must have heard about money laundering through a specific bank in the news or via the social media you use.

Deposit Services used in Canada for money laundering

Banks provide numerous services. Now we know by the studies that most of the activities occur through these services. They are-

Account deposit: Savings account is the most used portal that brings illegal cash to any deposit institution. Here begins the initial stage. A bank lets its clients use their accounts for spending, investing, and transferring cash or funds. Normally, it doesn’t attract anyone’s attention.

Monetary instruments: It is possible to withdraw multiple amounts from a fund as monetary instruments. It can be bank drafts, certified cheques, money orders, traveller’s cheques, etc. We can easily understand that these forms of transactions are less suspicious. It is the process in which moving a large amount is quite convenient.

Wire transfers: Through wire transfer, it is possible to send cash anywhere within and beyond the border instantly. Besides being a beneficial tool for laundering, wire transfer is preferable for criminals to purchase drugs and other contraband goods.

Account transfers: It is possible to hide the income source by transferring funds from one bank to another. It is found from the police cases that there have been account transfers to alternative accounts to conceal the actual connection between the owner of the funds and the criminal activities.

Safety deposit boxes: A criminal can purchase and store jewellery, coins, and precious gems in deposit boxes. Cash also can accompany them. It’s a secure place to keep things, and to trace the documental records is not that convenient. That leaves money laundering easy to do.

Multiple Services and Transactions from the bank: Often, the criminal executes multiple transactions and takes multiple services to cover the source and status of the fund.

There are other deposit activities like loans, cheque cashing, mutual funds, and currency exchange. Some utilize them with the intention of money laundering.

 Most Common Ways Frauds Follow for Money Laundering

With deposit institutions, there are several techniques used for money laundering.

Nominees: It is possible to hide major information by opening an account in the name of a nominee. The nominees are often relatives.

Smurfs: It is done by moving a big figure of cash formed by several transactions of little amounts.

Depositing in the name of an organization: By that, the account’s user can raise a large amount of cash. In the account’s detail, small and multiple denominations are mentioned as the source of the money- restaurants, video arcades, grocery shops, etc.

Less contact with bank personnel: This way, the account holder uses automated teller machines and other ways for deposits other than meeting the accounts officers in the bank. The potential scrutiny can be avoidable, and at the same time, someone else can deposit on behalf of the account holder via this technique.

Last Words

Money laundering is a big reason to question the legal and economic status and governance of a country.  It is so horrible to accept that a tiny portion of people with significant scopes can manipulate a country’s whole economy.

Money laundering in Canada is as significant as in any random country. Thus, with no exception, the authority should look into the matter and improve the policies and procedures to stop this mischievous act.

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