LAUNDERERS TOTE BAGS OF CASH

Five Suspects 'Cleaned' $59 Million In Just 12 Months, RCMP Estimates

A woman walked into a currency exchange in February carrying a sports
bag containing $150,000 US and plunked it on the counter.

"I borrow money from my sister," the women said, explaining why she
had so much cash.

She described herself as a homemaker who wanted to start her own
business. After filling out a form declaring where she got the money,
she was given $197,850 in Canadian funds.

The woman must have a very rich sister. During a 12-month period, she
exchanged a staggering $19,149,800 at one currency exchange.

Police suspect the woman was laundering money -- turning the proceeds
of criminal activity into "clean" cash that could be invested in
legitimate businesses.

The woman may be merely a "smurf" -- a term used to describe low-level
underlings who act as couriers for organized crimes bosses, who keep
their hands clean by never touching the cash in an attempt to elude
prosecution.

Under federal law, a person involved in a transaction of $10,000 cash
or more must declare the source of the funds on a form and list their
name, address and occupation.

The Vancouver RCMP has collated the transactions of the woman and four
other people -- the five were all related -- who each brought in more
than $100,000 US cash the same day.

"They would go in together and line up, one after another," said RCMP
Insp. George Pemberton of the integrated proceeds of crime section,
which tracks suspected money laundering.

One exchanged $2.8 million over a year, another did $10.5 million, a
third did $11 million. One exchanged $15 million in cash, claiming he
made the money from clothing sales to the U.S.

Police suspect the five exchanged a total of $59 million in one year
for drug dealers selling B.C.-grown marijuana in the U.S. The five
people are under investigation but so far have not been charged.

"Typically we find groups acting as brokers for a lot of other
people," Pemberton said, adding that a broker usually charges a
five-per-cent fee.

He recalled that one woman who exchanged large sums of money claimed
she ran her own hair salon. "She said the business was generating
$6,000 to $7,000 cash a day."

One man claimed he won large sums at U.S. casinos (police found he
failed to report the cash when crossing the U.S. border into Canada,
which is illegal). Another man claimed he sold fish for cash to the
U.S. market.

"Legitimate businesses don't generate that much cash," Pemberton said.
If they do, they get an armoured car service to transport it. They
don't carry it around in hockey bags, he added.

Pemberton has a large graph that plots the top eight suspected money
launderers in B.C. who did transactions of $100,000 US or more almost
daily during the 12 months beginning Jan. 27, 2003.

One man did $45 million worth of transactions during the period.
Another did $16.3 million. The eight people did 912 transactions for a
total of $110 million.

Police believe much laundered money is invested in real estate,
expensive jewelry, business ventures, stocks and offshore banks using
shell companies in foreign countries to facilitate wire transfers of
funds to make the money appear legitimate.

Organized crime groups use sophisticated techniques to hide the
illegal source of funds, making it difficult for police to detect,
Pemberton said.

Tracking illicit money is the time-consuming part, often requiring the
cooperation of offshore banks in Caribbean tax havens or countries
such as China that have no treaties with Canada.

"Our resources are limited so we try to target the bigger players,"
Pemberto n said.

Vancouver RCMP's proceeds of crime section employs 45 investigators,
three forensic accountants, four federal Department of Justice
prosecutors and one Canada Revenue Agency employee, who looks at tax
returns and estimates unpaid taxes on undeclared income.

Two recent investigations -- Project Exchange Rate and Project
Incumbrance -- each allegedly involved laundering about $200 million
during 18-month periods.

In Project Exchange Rate, one of the alleged targets ran his own
currency exchange. Although no proceeds-of-crime charges have been
laid in the case, a report has gone to Crown. The suspect and several
others already have been charged with a variety of drug offences in
Vancouver and Washington state.

U.S. court documents related to the case allege a group of Mexican men
living near Spokane helped smuggle B.C. marijuana into the U.S., where
it was exchanged for cocaine that was smuggled back to Canada.

Currency exchanges aren't the only places used to exchange large sums
of American cash into Canadian funds. Some banks also accept bags of
cash.

"Some banks take the position that if a person complies with the
regulations [to fill out a declaration form for amounts exceeding
$10,000 cash], then they're bound to do business with them," Pemberton
said.

Previously, banks suspicious of the source of large amounts of cash
would turn business away. But now, with mandatory reporting
requirements in place, some banks have received legal advice that if a
customer meets the reporting requirements, the customer should not be
turned away, he said.

Police conservatively estimate that $17 billion in illegal cash is
laundered in Canada each year,

although authorities say that figure may be far too low. It could be
as high as $30 billion, Pemberton said.

The Canadian Association of Chiefs of Police recently estimated
organized crime earns $1 trillion a year globally from illegal activities.

A 1998 report by Samuel Porteous for the federal solicitor-general on
the impact of organized crime suggested that money laundering has an
enormous impact on basic Canadian societal values because, if allowed
to continue, "it is a clear signal that crime indeed does pay."

"Ultimately money laundering must be controlled not because it causes
significant economic distortions (in many cases it may not) but
because it is recognized as morally unacceptable that individuals
profit from criminal activities."

Money laundering has been a focus of law enforcement since 1989, when
the federal government first introduced proceeds-of-crime legislation,
allowing police to go after criminal assets rather than just the drugs.

The idea was to hit organized crime where it hurts most -- by seizing
its profits, real estate and other assets bought with funds from
criminal activity.

Police say organized crime investors who buy legitimate businesses
have an unfair advantage over their competition -- they have a sizable
illegal income that allows them to undercut prices or tender low bids
for contracts. "The business is probably paid for free and clear by
the time they open their doors," Pemberton said.

In 2000, the government tightened reporting requirements for
suspicious transactions, especially those involving $10,000 or more,
to fight global money laundering.

Initially, the reporting of suspicious transactions exceeding $10,000
was voluntary. But after the terrorist attacks in the U.S. on Sept.
11, 2001, Canada passed a new bill. The Proceeds of Crime (Money
Laundering) and Terrorist Financing Act created a mandatory reporting
regime.

The bill had been waiting the approval of federal cabinet before the
U.S. terrorist attacks.

The new legislation also led to the creation of Canada's financial
intelligence agency, the Financial Transactions and Reports Analysis
Centre of Canada (Fintrac), which collects, analyses and discloses
information about suspected money laundering and terrorist financing
activities.

Fintrac also receives reports on the cross-border movement of large
amounts of currency or monetary instruments, analyses the information
and provides tips to police that could lead to the prosecution of
money laundering offences and terrorist activity.