CUT FLOW OF DIRTY MONEY, OTTAWA IS URGED

OTTAWA -- The amount of dirty money laundered in Canada each year by
criminals and terrorists "is probably in the tens of billions of
dollars," a high-profile Senate committee reported yesterday -- far
higher than what's been uncovered to date.

The Senate banking, trade and commerce committee also called on
Ottawa to broaden the scope of efforts to detect illicit money,
saying officials should start monitoring jewellers, lawyers and
generic bank-machine operators for suspicious transactions.

"The size and scope of the problem is much more . . . than we
expected," committee chair Senator Jerry Grafstein said, adding that
a precise estimate of the activity wasn't possible because the
committee didn't find one.

The committee's estimate of the problem dwarfs what Canada's
anti-money-laundering authorities have uncovered to date. In 2005,
the Financial Transactions and Reports Analysis Centre of Canada,
flagged more than $2-billion worth of dirty-money transactions.

The report lists gaps in Canada's dirty-cash detecting system, saying
there are a host of sectors ripe for abuse by money launderers and
terrorist fundraisers from diamonds to no-name bank machines and
independently owned and operated pubs.

Criminals have been driven to new methods as authorities have
tightened reporting and tracking requirements in the financial
services sector where they have traditionally operated, the report
says. "The criminal mind is an agile and creative one so legislators
have to constantly review and update our laws to keep pace," Mr.
Grafstein said.

The Senate committee is calling on Ottawa to require dealers in
precious metals, gemstones and jewellery to report suspicious cash
transactions above $10,000.

It's recommending that lawyers be required to meet
customer-identification, record-keeping and reporting requirements of
Canada's anti-money-laundering laws in a manner that doesn't breach
the confidentiality of lawyer-client privilege.

"There should be some type of amendment to deal with it to ensure the
suspicious transactions are brought to the surface. Lawyers are
officers of the court and they have an obligation to the public
interest as well as anybody else," Mr. Grafstein said.

Lawyers have long fought efforts by Ottawa to get them to spy on
clients and supply information about their finances. The federal
government granted them an exemption in 2003 but has recently been
negotiating on other efforts the legal community could make.

Lawyers groups say they've already taken steps to meet federal
concerns, including enacting rules prohibiting them from accepting
more than $7,500 cash from clients, but are willing to keep negotiating.

Experts say the report's estimate of the scale of money laundering in
Canada is plausible. "It's many times bigger than what's been tracked
so far," said Chris Walker, president of About Business Crime
Solutions, a firm that helps companies comply with
anti-money-laundering disclosure rules.

Mr. Walker said unlabelled bank machines -- which anyone can buy --
are the "perfect vehicle" for whitewashing money because there's no
monitoring of who loads them with bills. "What you've walked out with
could be [cash] that two or three days earlier paid for four hits of
whatever drug and now you've got the dirty money," Mr. Walker said.

He thinks Ottawa will have to keep expanding its monitoring to
include car and truck dealers, too.

The Senate report comes during an important year for Canada's fight
against money laundering and terrorist financing. In June, 17 people
were arrested in anti-terrorism raids in Southern Ontario. That month
Canada also agreed to become the permanent home for the Egmont Group,
a global body that co-ordinates the battle against dirty cash in 101
countries. In July, Canada also began a one-year term as chair of the
Financial Action Task Force, an international group that tracks illicit cash.