Thursday, August 6, 2015


Reports of the limited release, of a highly-redacted white paper entitled Assessment of Inherent Risks of Money Laundering and Terrorist Financing in Canada 2015, focusing upon the failure of anti-money laundering controls in the country's banking industry, are extremely disturbing. The report is said to refer to seventy-two instances of AML ineffectiveness, committed during the past five years, by Canadian financial institutions.

The fact that the names of the banks that were found by OFSI to be deficient, as well as the status of any regulatory, civil, or criminal, penalties that occurred as the result of these failures, are not in the document speaks volumes to the utter failure of Canadian regulators, and law enforcement agencies, to police the banks. One must, unfortunately, assume that no significant fines, nor other penalties, were levied upon the guilty banks, or their officers or directors.  Indeed, there has been a total lack of publicly-released information from Canadian regulators, on banks found to have AML or CFT shortcomings.

If we wish to be blunt about it:

(1) Canada's banking and securities regulators have a long and unsatisfactory track record of failing to control the banking & securities sectors, and many observers believe that government agencies fear that they will damage the economy by nailing offending entities. Frankly, nothing could be further from the truth. The big banks, most of whom are allowing a significant amount of money laundering to occur within their accounts, are not afraid of regulators who never wield a big stock. Other observers, perhaps more cynical than others, see that regulators often leave public service, and accept lucrative job offers in the same private sector that they are supposed to be regulating; they do not want to kill the golden goose in their future career plans.

(2) Canada's humane criminal justice system, which does not impose lengthy sentences upon white collar criminals, is also not a deterrent to money launderers, for they know the worst case scenario is two years in a very comfortable prison.

(3) The systemic money laundering which pervades the Canadian banking system, which is well known to compliance officers at international banks located outside of the country, is common knowledge, and experienced compliance officers generally take hard looks at large wire transfers from Canada, to minimize the risk that they are not dealing with narcotics profits, or transfers which will benefit sanctioned countries or entities, such as:

* Surviving Tamil Tigers fundraisers
* Middle East specially designated global terrorist organizations financing terrorism
* Canadian tax evaders
* BC Bud narco-profits
* Venezuelan PEPs illicit funds
* Profits from white-collar crimes committed in Canada

In my humble opinion, and based upon the obviously unsatisfactory spike of money laundering in many of Canada's major banks, I believe that Country Risk should be increased for Canada at this time.

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