Wash And Dry?

As I have written in the past on this blog, I have long suspected that Canada is soft on white-collar crime, including money laundering. The fact that the Panama Papers has yielded almost no recovery by the CRA of hidden tax money speaks volumes.

It would appear that laissez-faire attitude is now working its way through other federal bodies. Marco Chown Oved writes:

Despite multiple recent reports that identified Toronto’s vulnerability to money laundering, the RCMP has decided to disband its Ontario financial crimes unit, the Star has learned.

Announced internally on December 10 in a series of meetings held in detachments across the province, the decision will see 129 officers and eight civilian staff re-assigned to other units, including organized crime, anti-terrorism and drugs, according to an internal email obtained by the Star.

Breaking up a stand-alone unit devoted to investigating complex and difficult cases has financial crime experts worrying that fraud and money laundering activity will increase.

The many people currently working in the division will be redeployed to others dealing with terrorism, drugs and organized crime - a very bad idea:

“It just won’t work,” said Garry Clement, former director of the RCMP proceeds of crime unit. “The RCMP, in my view, has sort of lost sight of the fact that taking on financial crime requires a very high degree of expertise.”

A similar reorganization happened in B.C. several years ago, said Clement, where there has since been an explosion of money laundering in casinos, real estate and luxury cars.

“It amazes me that they tried this approach of dissolving the (financial crime) units and putting them together with other units and we know the results,” he said.

Says former deputy commissioner of the RCMP, Peter German,

“Eliminating economic crime as a national priority for the RCMP is a mistake. It was recognized years ago that protection of our economy is a critical issue for the national police. Furthermore, following the money trail is accepted around the world as likely the most effective way to attack organized crime where it hurts most,” German said.

It is difficult to draw any positive inferences from this egregiously bone-headed move, a reminder once more that when one scratches beneath the surface, all sorts of unpleasant implications are exposed.

A Damning Documentary

Active Measures is the name of a new documentary about Donald Trump and his ties to the Russian mob. It is also a term used to describe a series of covert measures (Twitter examples of which you can find here) Russia uses to influence global policies. According to documentary-film maker Jack Bryan, Trump was the perfect vehicle for the latter.

Active Measures shows how foreign investments made by Russian oligarchs bolster the Kremlin's ambitions to exert influence in the west. The key is money laundering — the export of Russian wealth with the knowledge and approval of Putin.

In an interview with Day 6's Brent Bambury, which includes a podcast, Jack Bryan says that Russian money-laundering efforts with Trump go back to at least 1985:

"He sells three condos to a man named David Bogatin, who's a Russian mobster," Bryan says. "This is in Trump Tower. And the reason they did Trump Tower is that it was the second building in New York where a shell company could purchase a condominium. And so it makes it much more easy to launder dirty money."

When the fortunes of the self-described real-estate genius begin to falter, the Russians go for the kill:

"Once he loses out in Atlantic City, once he can't get a loan from a bank, that's when the Russian mafia says: 'We have an opportunity here,'" says Bryan.

That's when Trump becomes less of a partner for Russian mobsters and more of a mark.

Bryan's film alleges that Trump needed Russian mob money to reinvent himself after his disastrous string of bankruptcies. Without it, the film alleges, he would never have won the presidency.

"The Russians saved him. They rescued him. He would not have gotten back in business without them," journalist Craig Unger says in the film.

Essentially, as revealed in the following, the Russian mob is an arm of the Russian government:


Trump's bankruptcies multiplied; the Russians were presented with an unparalleled opportunity, and Bayrock Group moved into Trump Tower:

"Bayrock Group is a Russian real estate firm. The manager was this guy Felix Sater, and he is very connected to the Russian mafia," Bryan says.

Sater, a convicted felon, also has ties to Trump's recently fired attorney, Michael Cohen. Bryan says Cohen entered the Trump organization at the same time as Bayrock.

"Cohen is childhood friends with Felix Sater. They went on their first date together," Bryan says. "They did a lot of business together."

Bayrock operated from offices two floors below Trump's and partnered with him on a wide variety of real estate deals from 2002 to 2011. Bryan says Bayrock likely didn't see Trump as a political player or a potential president. They saw him as a shield.

"I think, at that point, they're seeing him as: he's a really famous guy and it's great cover because nobody's going to question a lot of money going into the Trump organization. And they knew that he needed the money. And also they knew he's really litigious. And so it would be really hard to go after him. And I think that he just became this sort of perfect place to stash money."

Through this period, Sater remained in contact with his old friend Michael Cohen. A series of emails between the two, written during the campaign, appeared last year in the New York Times.

The FBI raided Michael Cohen's office and home on April 9th. Bryan says it could mark turning point in the investigation of the president.

Al Capone was ultimately imprisoned due to tax evasion.The noose around Trump is tightening, and he may well go down, not for campaign collusion with the Russians, but for the more prosaic crime of money laundering.

And given what he knows, Michael Cohen should be very, very careful of what he eats and drinks well into the future.

This Is Why Journalism Is Vital To Healthy Democracies

At a time when traditional journalism is weathering both economic and political storms, we should all take a moment to reflect on the vital role it plays in healthy democracies. The following story, about a joint investigation by The Toronto Star and The National Observer of FINTRAC, (Canada’s money laundering and terrorist financing enforcement agency), is illustrative of this truth.

As I previously wrote, FINTRAC chose to keep secret the identity of a bank that it penalized for failing to report a suspicious transaction and committing hundreds of other violations in its dealings with a controversial client. Thanks to journalism's dogged determination (which is not cheap, by the way), the mystery is over.

It took 10 months of media scrutiny and public outrage before Canadians learned Manulife Bank of Canada was the mysterious financial institution behind a $1.2-million fine for money-laundering violations.

The decision to confer anonymity upon this giant financial institution was puzzling, given that the same day in April, a handful of much smaller companies — facing far less severe fines — were publicly named by FINTRAC. This is all part of a pattern:

Over the past eight years, FINTRAC has named 40 companies for violating the law while keeping secret another 55.

Left unanswered is the reason for this double-standard, especially disturbing given the scope of Manulife's malfeasance:

-Manulife’s fine, which was reduced twice from an initial $1.8 million, was for five different types of violations of anti-money laundering and anti-terrorism financing law, involving a failure to report transfers totalling at least $12.2 million.

-The bank failed to report one suspicious transaction to FINTRAC — labelled a “very serious” violation that experts say undermines Canada’s system to detect financial crimes and trace dirty money.

-Manulife also failed to report 1,174 outgoing international electronic transfers of $10,000 or more, 45 deposits of $10,000 or more in cash and four incoming international electronic transfers of $10,000 or more.

-The bank was also fined for failing to “develop and apply compliance policies and procedures.”

Curiously, for much less serious violations, FINTRAC showed no such penchant for secrecy. Those named and shamed included one whose misdeeds seem relatively minor:

Mahdi Al-Saady, CEO of Altaif Inc., an Ottawa-based money exchange and transfer company, was hit with a $42,600 FINTRAC fine — and publicly named — in 2014.

The violations for which Altaif was fined included failing to report the sending and receipt of money transfers of more than $10,000 — two of the same violations the unnamed bank was found to have committed.

The fact that Altaif was named is, of course, not the issue. The real question is why all who run afoul of FINTRAC are not treated the same, with the rules rigidly applied.

I have my own suspicions, but I leave it to informed readers to draw their own conclusions.

What Are They Hiding?

You tell me.

The federal agency that levied a $1.1-million fine against a Canadian bank for failing to report a suspicious transaction had intended the hefty penalty to send a stern message to the financial sector. Instead, it has fuelled an outcry over why the name of the penalized bank has been kept a secret.

On Wednesday, all of the Big Six Canadian banks said they were not fined by Financial Transactions and Reports Analysis Centre of Canada, or FinTRAC, leading to speculation that the offending bank is a smaller entity or the Canadian branch of a foreign institution.

FinTRAC said that the fine, the first of its kind levied against a Canadian bank and paid two weeks ago, was supposed to act as a deterrent against taking a loose approach to reporting standards. Rules have been toughened up in recent years in response to money laundering and terrorism financing activities.

But it is unclear how this deterrent is supposed to work when the offender is granted anonymity and whether an unintended consequence of the fine is that it casts suspicions upon the entire financial sector.

While FinTrac has been happy in the past to name names, its reluctance to identify a big player is perhaps best explained this way:

Michael Baumbach is director of Toronto-based Diamond Exchange Toronto Inc. which was fined $12,750 and named by Fintrac in March. He says the agency is unfairly punishing smaller firms like his jewelry business, which is trying hard to comply, while letting bigger players with deeper pockets off the hook.

He believes the bank’s name was kept secret because it has resources at its disposal to give Fintrac a legal headache. Meanwhile, he feels powerless when trying to get answers about why it fined his company, which now faces bankruptcy over what he says is an unjust fine.

“The banks are not just going to sit back and have their names slipped, but a small company — we can’t do anything,” he said.

“All they’re doing is putting the smaller businesses out of business and the bigger businesses who have the legal clout to contest it, obviously they’re not naming names because of the fact that these companies will do something.”

Yet another reminder that the thing we call justice can too frequently be a fluid and elusive concept, more honoured in the breach than in the observance.