Many people have heard about money laundering but seem to think it does not impact them and are clearly unaware of how big the threat is to our democratic society. In 2018 over 1.3 Trillion US was laundered around the world and up to 20 Billion in Canada alone. Since the 90’s, organized crime has been able to launder Billions right in front and with the aid of official who work for the BCLC, OLG and other gaming industry watchdogs throughout the country. Billions more were laundered directly through Real Estate transactions in our country as elite gangsters moved their money from mainland China, Macau and Hong Kong commencing in the 80’s. This was accomplished with the encouragement of willfully blind politicians and corrupt Canadian officials in government and reported to foreign affairs and the finance ministries.

I hope to provide readers with a greater understanding of the who and why of large scale money laundering. Often consumers unwittingly participate through the purchase of counterfeit products or smuggled cigarettes. The dollars you saved may have funded terrorism or deadly Heroin and Fentanyl It is a huge problem and as you heard about the family through President Donald Trump tweet in November that 9 Americans lost their lives when a drug hit squad probably mistook them for a rival gang in Mexico.

The following insights will provide you with a guide to money laundering. The information is pulled directly from international academic papers and from my own compilation of data and sources.

One thing I will once again emphasize is that politicians and law enforcement took a blind eye to an underground bank operating out of Richmond B.C. and other casinos in the lower mainland. The “Vancouver Model “ as is now fondly referred to in academic circles around the globe is Canada’s great contribution to transnational organized crime syndicates.

Failings at all three levels of government allowed this to flourish in your backyard contributing to the housing affordability crisis in three Canadian markets while allowing Vancouver to be established as the key distribution point for all of North America for Heroin and Fentanyl. The results are catastrophic, with tens of thousands addicted or dead throughout North America. This war waged by Chinese drug traffickers on behalf of Beijing is also euphemistically characterized as “the Reverse Opium Wars.”

The Brief

This background brief has been prepared by the Strategic Intelligence Unit of the Crime and Misconduct Commission (CMC) to provide CMC officers with a basic understanding of what money laundering is, and introduce some of the common terminology associated with the subject.

The typical process of money laundering is described, and some examples of money laundering techniques are discussed. Definition of money laundering The term ‘money laundering’ refers to the activities and financial transactions that are undertaken with the specific aim of hiding the true source of income. Usually, the money involved has been derived from an illegal enterprise and the goal is to give that money the appearance of coming from a legitimate source. Sometimes, however, money legitimately obtained can also become the subject of money laundering; it may, for example, be disposed of in such a way that it evades lawful taxation. History The term is said to originate from Mafia ownership of laundromats in the United States. Gangsters there were earning huge sums in cash from extortion, prostitution, gambling and bootleg liquor, and they needed to show a legitimate source for this income.

One of the ways in which they were able to do this was by purchasing outwardly legitimate businesses and mixing their illicit earnings with the legitimate earnings they received from them. Laundromats were chosen by these gangsters because they were cash businesses. Laundromats also provide an apt analogy for the process of legitimizing earnings: illegal (dirty) money is put through a cycle of transactions (washed), so that it comes out the other end as legal (clean) money (Steel 1998/2003). As the need to launder billions in the proceeds of crime increased at an exponential rate throughout the world new and sophisticated operations took flight throughout the world. Creating some of the most sophisticated operations, while openly and brazenly conducting this business in front of front line officers throughout the world.

Predicate Offences

The predicate offences that usually require money laundering mechanisms to legalize otherwise illicit money can be grouped into five general classifications:

• drug trafficking

• other blue-collar crimes

• white-collar crimes

• bribery and corruption

• terrorism

History

The term is said to originate from Mafia ownership of laundromats in the United States. Gangsters, there were earning huge sums in cash from extortion, prostitution, gambling and bootleg liquor, and they needed to show a legitimate source for this income. One of the ways in which they were able to do this was by purchasing outwardly legitimate businesses and mixing their illicit earnings with the legitimate earnings they received from them. Laundromats were chosen by these gangsters because they were cash businesses. Laundromats also provide an apt analogy for the process of legitimizing earnings: illegal (dirty) money is put through a cycle of transactions (washed) so that it comes out the other end as legal (clean) money (Steel 1998/2003). Predicate offences The predicate offences that usually require money laundering mechanisms to legalize otherwise illicit money can be grouped into five general classifications: drug trafficking other blue-collar crimes white-collar crimes bribery and corruption terrorism. Research conducted by Reuter and Truman (2004) for their book Chasing dirty money led them to make some observations about the severity of the adverse effects of these crimes, and the people they predominantly affect. Their instruction to readers was to regard these.

Money laundering observations ‘not as authoritative but simply to identify dimensions that deserve consideration in policy making and research’. Their views on the ‘severity of harm’ and ‘the most affected population’ are given below.

Drug trafficking Major drug traffickers face the problem of managing large sums of cash, usually in small denominations, on a frequent basis. The harm to society caused by this form of crime is considered severe, and mainly affecting urban minority groups.

Other blue-collar crimes include illegal gambling and bookmaking, people smuggling, and organ trafficking. The amounts of money involved in these operations are much smaller than those resulting from drug trafficking. This is probably because the amounts gambled and the total revenues are usually less, and because the money to be laundered consists of the net profits rather than the gross revenues. The harm to society associated with this form of crime is rated as low to moderate, and the most affected population is unknown. White-collar crimes

The white-collar crime category includes embezzlement, fraud and tax evasion. A distinctive feature of these crimes is that money laundering is an integral part of the offence itself. For example, an offshore shelf company in a tax haven country may serve not only as a tax shelter but also as a laundering mechanism, using false invoicing and other accounting frauds, to obscure the trail of fraudulent activity. The harm to society caused by this form of crime is considered low, but the effect is spread broadly across the population. Bribery and corruption Because of their unique features, bribery and corruption are separately categorized rather than being included in white-collar crimes. The beneficiaries are usually public officials and those who stand to benefit from their decisions; and the bribery and corruption usually, but not always, takes place in poor countries and has the effect of reducing government credibility and the quality of public services. The money laundering aspects usually have international implications, as the funds are typically kept outside the local banking institutions. The public officials are known as ‘politically exposed persons’ (PEPs) — individuals who are, or have in the past been, entrusted with prominent public functions in a particular country. They include heads of state or government; senior politicians and government, judicial or military officials; senior executives of state-owned corporations; and important officials of political parties. PEPS who come from countries or regions where corruption is endemic seem to present the most potential risk, but corrupt or dishonest PEPs can be found in any country (FATF 2004). Many countries require financial institutions to apply particular diligence in their dealings with these types of customers, scrutinizing the activity Money laundering  on their accounts carefully and regularly. The harm to society associated with this form of crime is considered severe, with those most affected being the populations of developing countries.

Terrorism puts both legitimate and criminally derived funds to criminal use. The sums of money involved are believed to be modest; but, as the September 11 events of 2001 showed, the harm is unique and enormous, affecting a broad section of the population. Overview Money laundering plays a fundamental role in the activities of the drug trafficker, the organized criminal, the insider dealer, the tax evader, the terrorist, and the many others who need to avoid the kind of attention from the authorities that sudden wealth from illegal activities brings. By ‘laundering’ the proceeds, criminals hope to place them beyond the reach of any asset forfeiture laws

The Vancouver Model

Highlighted by last year’s FATF report on global money laundering River Rock Casino in Richmond BC is identified as the main casino use by the Underground bank identified in the following July 2018 report. Canada is currently under review and may lose its status as a member in good standing within the western alliance as it relates to combating organized crime and money laundering according to Roy Cullen, former 4 time Member of Parliament and the President of the Canadian arm of GOPAC However, given that the current President of FATF is Chinese and they have little aptitude for following any rules I think this an unlikely outcome.

Source July 2018 FATF report on International Money Laundering PROFESSIONAL MONEY LAUNDERING

Underground Banking and Alternative Banking Platforms

Underground banking is one tool often used by PMLs. This mechanism is used, with the goal of bypassing the regulated financial sector and creating a parallel system of moving and keeping records of transactions and accountancy.

HERE IS HOW IT WORKS

Investigation of Massive Underground Banking System

Location, Richmond, British Columbia

Subject X and his network of associates in British Columbia, Canada, are believed to have operated a PMLO that offered a number of crucial services transnational Criminal Organisations including Mexican Cartels, Asian OCGs, and Middle Eastern OCGs. It is estimated that they laundered over CAD 1 billion per year through an underground banking network, involving legal and illegal casinos, MVTSs and asset procurement. One portion of the ML networks illegal activities was the use of drug money, illegal gambling money and money derived from extortion to supply cash to Chinese gamblers in Canada. Subject X allegedly helped ultra-wealthy gamblers move their money to Canada from China, which has restrictions on the outflow of fiat currency. Chinese gamblers would transfer funds to accounts controlled by Subject X and his network in exchange for cash in Canada. However, funds were never actually transferred outside of China to Canada; rather, the value of funds was transferred through an Informal Value Transfer System.

Subject X received a 3-5% commission on each transaction. Chinese gamblers were provided with a contact, either locally or prior to arriving, in Vancouver. The Chinese gamblers would phone the contact to schedule cash delivery, usually in the casino parking lot, which was then used to buy casino chips. Some gamblers would cash in their chips for a “B.C. casino cheque”, which they could then deposit into a Canadian bank account. Some of these funds were used for real estate purchases. The cash given to the high-roller gamblers came from Company X, an unlicensed MVTS provider owned by Subject X. Investigators believe that gangsters or their couriers were delivering suitcases of cash to Company X, allegedly at an average rate of CAD 1.5 million a day. Surveillance identified links to 40 different organizations, including organized groups in Asia that dealt with cocaine, heroin and methamphetamine.

After the cash was dropped off at Company X, funds were released offshore subject X or his network. Most transactions were held in cash and avoided the tracking that is typical for conventional banking. Subject X charged a 5% fee for the laundering and transfer service. As the ML operation grew, the money transfer abilities of Company X became increasingly sophisticated to the point where it could wire funds to Mexico and Peru, allowing drug dealers to buy narcotics without carrying cash outside Canada in order to cover up the international money transfers with fake trade invoices from China. Investigators have found evidence of over 600 bank accounts in China that were controlled or used by Company X. Chinese police have conducted their own investigation, labelling this as a massive underground banking system.

Source: Canada Fintrac and confidential sources

PROFESSIONAL MONEY LAUNDERING

alternative banking platform (ABP)

is an alternative bank that operates outside the regulated financial system. However, an ABP may use the facilities of the formal banking system, while creating a parallel accountancy and settlement system. ABPsare a form of shadow banking that makes use of bespoke online software to provide banking services, without the regulated and audited customer due diligence checks. They are an effective way to transfer the ownership of money anonymously and provide banking services within a bank account across a number of individuals, without being reflected in traditional banking transactions. Usually, it is supported with special software that can encrypt traffic, manage transactions between accounts within the same platform, apply fees and assist with interaction with the outside financial system

The Cullen Commission

Now that the Cullen Commission has commenced they are currently holding public hearings. Tonight in Victoria they will hear from various witnesses and some that will outline a few important recommendations on actionable items that the commission should implement now,

Not in the future! Demand action now of your government and don’t allow them to kick the can down the road as that might lead to your neighbor’s kid to die. Or maybe your own.

Now organized crime and foreign entities have infiltrated our country in such a deep way it is hard to imagine how politicians will remove the scourge without calling attention to the gross mishandling by both their contemporaries and past colleagues. I don’t make that statement lightly and it in part, forms a piece of the submission made on behalf of the hundreds of witnesses whose voices may never be heard by the Cullen commission. It is why we are calling for a national inquiry into money laundering, organized crime and the infiltration of state actors into every part of the Canadian establishment.

As a citizen, you should demand more, not less of your government!