What is it?
Its not leaving a ten or a twenty in you jeans on laundry day!
Money laundering is the generic term used to describe the process by which criminals disguise the original ownership and control of the proceeds of criminal conduct by making such proceeds appear to have derived from a legitimate source.
The criminal conduct can be in the form of violent crime, like armed robbery, extortion, kidnapping; white collar crime, like fraud and tax evasion; trafficking in illegal goods, like drugs, prostitution and human trafficking or anti terrorist financing. Laundering (the money kind) has tree components: Watch the video for a detailed explanation.
Money laundering is a serious charge — in 2001, U.S. prosecutors obtained almost 900 money-laundering convictions with an average prison sentence of six years. The rise of global financial markets makes money laundering easier than ever — countries with bank-secrecy laws are directly connected to countries with bank-reporting laws, making it possible to anonymously deposit “dirty” money in one country and then have it transferred to any other country for use.
In 1989, the G7 identified money laundering as a significant international problem. As a result, the Group of 7 (G7) countries founded the Financial Action Task Force on Money Laundering (FATF) at this summit. This task force is an inter-governmental body dedicated to developing policies to combat money laundering and terrorist financing.
So how is the problem tackled?
Tracking the flow of money in and out of the legitimate commercial activities and markets is one key component. The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is Canada’s financial intelligence unit. Its mandate is to facilitate the detection, prevention and deterrence of money laundering and the financing of terrorist activities, while ensuring the protection of personal information under its control. The following entities co-operate with FINTRAC in this endevour.
- Department of Finance
- RCMP Anti-Terrorism Financing Group
- Canada Border Services Agency (CBSA)
- Canada Revenue Agency (CRA)
- Department of Justice (DOJ)
- Public Prosecution Service of Canada
- Public Safety Canada (PSC)
- Canadian Security Intelligence Service (CSIS)
- Office of the Superintendent of Financial Institutions
Similar structures exist in many countries around the world. Reports of suspicious activity have to be made to FINTRAC by reporting entities. What are reporting entities? These are entry and exit points where money can enter or exit commerce and financial markets. In Canada the reporting entities are:
Reporting entities must report certain transactions to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). This includes the following:
The following video from FINTRAC demonstrates through a case scenario how this activity is tract and analyzed.
Reports have to be made where large financial activity transactions occur or can occur. For example, your life insurance adviser may or may not ask you certain questions when transacting a purchase. If you are purchasing a $1,000,000 term life insurance policy, no questions are asked. On the other hand, if you are buying a Universal Life Insurance policy, where cash investments may be made in addition to the insurance, extra security questions will ensue.~