COMING CLEAN WITH DIRTY CASH

Prince George is the regional centre for the production and
trafficking of drugs and local authorities say that means money
laundering is also big business locally.

"More than a few times, we have had cash deposited here and the money
smells like pot," said Linda Sowles, risk management officer for
Integris Credit Union.

But she said the signs of dirty money are not usually that obvious.
"We had an individual who was in the news for being busted at the
border with illegal substances, and he had an account with us," she
said. "Sometimes you put it together that way. We search our database
to see if we have known Hells Angels on file, or different things
like that. Sometimes just a name in the newspaper will trigger us to
search for them to see if they are doing business with us now or in
the past. We don't want to be the organization used to filter their
criminal money."

Cpl. Dennis Blommaert, of the RCMP's integrated proceeds of crime
section, was in Prince George recently as a guest of the Chamber of
Commerce. He told a large gathering of mostly bankers, accountants
and other money handlers that the two words allow money laundering to
take place in this community -- willful blindness.

"If you don't ask those questions, when people bring you large
amounts of money, if you don't follow up on those red flags, you are
being willfully blind," Blommaert said. "If you are willfully blind,
you become a money launderer and you also can be charged criminally."

Police don't want to see otherwise legitimate businesses - most of
the time they are car dealerships, boat dealers, jewelers, investment
brokers, real-estate agents, financial institutions -- fall under the
cloud of organized crime. It is the Hells Angels, the Asian gangs,
the East Indian gangs, the Italian and Russian mafia groups, and
other criminal organizations from across Canada that spearhead money
laundering in B.C.

Rather than waving the big stick of legislation, police point out a
major weapon money launderers bludgeon the law-abiding business
community with: unfair competition. Money launderers don't just buy
big-ticket items and make circular investments to try to make their
dirty millions look clean, they will also set up stores and
restaurants in order to channel their money.

"When you start up your little business, you go to the bank to get
loans, you hire the best staff you can afford, your family works long
hours to make the business a go, but down the street you have the
same business going against you with the best equipment, the best
staff, the best location, and they don't really care if they make a
profit," because they are only a front for criminals to dump their
proceeds of crime into so it comes out the other end looking clean,
Blommaert explained.

"They got the money selling drugs, but it all looks like legitimate
corporate money now, and your business goes bankrupt because you
can't compete."

The process isn't usually sophisticated, with only two or three
layers of cover before the money's dirty origins are revealed. Of
course, for reasons of privacy and confidentiality that protect us
all, law enforcement needs all kinds of warrants and legal standing
to look into clean money. Blommaert said most investigations start at
the other end. If they can pinpoint the drug industry players, they
can more effectively trace their dealings forward and take down the
money laundering infrastructure as the money moves.

"First we will find out what asset the suspect has, then find out
where it came from, what kind of banking has been done, and follow it
along from there," Blommaert said.

"They aren't always complicated," said Beau Doherty, a researcher for
the RCMP's merchants against money laundering program. "A lot just
take the drug money and buy big-ticket items, so they have assets
instead of cash. Some might go so far as to set up a company and buy
things in the name of the company, so there is another level of
cover. Some take over legitimate businesses with high-volume cash
transactions like restaurants, bars, private ATM machines, etc."

The majority of drug business in B.C. is marijuana sold in enormous
quantities in the United States in exchange for cash (sometimes
cocaine and guns). Of course American customers use primarily American cash.

In order to convert the U.S. currency into Canadian currency, crooks
must use banks or money exchanges. In the Lower Mainland and
Victoria, money exchanges are common and are often very small
operators. Crooks and their associates will literally wheel shopping
carts full of cash in, flip it all to Canadian funds, and disappear
again with no idea who they were. Doherty said one B.C. marijuana
merchant was flipping $1-million per week in this fashion before
police caught him.

Undercover operations are constant against such launderers in the
Vancouver and Victoria area, according to police.

The goal is always to catch Papa Smurf. Crooks have coined the phrase
"smurfing" to describe the most common form of money laundering in
B.C. Papa Smurf is the boss, and under that are all the smurfs that
will take the dirty cash in small amounts - always less than $10,000
for a very important reason - to banks and other financial
institutions. Each smurf may visit six or eight banks in a day, and
there may be five or six smurfs working for Papa Smurf. They bring
bank drafts or prepaid credit cards back and, viola, dirty money now
looks clean with no suspicions aroused.

No matter what the scheme, no matter if it is a smurf doing the dirty
work, or the crook's lawyer, or wife, or Papa himself standing in
your business, it is up to the law-abiding proprietor to blow the
whistle on this kind of activity, Blommaert said.

"Every business is a local business to the people coming in the door
off the street. Get to know your customers," Blommaert said. "Ask
them questions, learn about them, find out about the transactions
they are doing with you. There are signs most money launderers will
show. Are they reluctant to show you their ID? Are they making
purchases in a nominee's name? Do they have difficulty explaining the
source of their income? Are they paying cash for big-ticket items or
investments? Are they outside the profile for such items? Do they
seem unconcerned by the price? Even if they offer an explanation, did
you have some kind of feeling that something wasn't quite right?"

If any of these things come to mind about someone, Blommaert said at
the very least the transaction should be reported to FINTRAC. FINTRAC
is an independent agency, arm's length from police and government,
responsible for the collection, analysis and disclosure of
information that may assist law enforcement and national security
officials curb money laundering.

Anyone can make that report, and financial institutions and certain
money-handling businesses are required to.

Sowles said FINTRAC has some drawbacks. It is bureaucratic in nature,
reports have to be filed on some transactions the bank knows full
well are legitimate, and even if there are suspicions and a report is
filed, they never hear back what the results were because the police
work is secret and sometimes takes years to investigate.

"It is a lot of work for us, and we don't see the end result. We are
not privy to what goes on after we report to FINTRAC," she said.
"There are benefits for the community at large, though, it is to
protect the public. And we certainly don't want to be aiding and
abetting these criminal organizations, which we know for a fact are
operating in Prince George. We don't want to be seen as a target by
criminal organizations. There is a list of suspected terrorists that
we are regularly provided with and we have to report monthly that we
have checked to ensure we are not dealing with that long list of
names. I take that seriously. I do believe it could absolutely happen
in Prince George, and drug money is definitely running through this
town," Sowles said.

Money laundering can have devastating social consequences, according
to police. It allows the drug trade to flourish. It buys guns and
heavy weapons for drug traffickers, arms dealers, terrorists and
other criminals. It allows local criminals to make a living and enjoy
luxuries they gained by hurting and demoralizing local people.

Investigations have shown that criminals manipulate financial systems
in Canada and abroad to support their illicit activities. The
International Monetary Fund estimates global money laundering to be
between two and five per cent (half a trillion dollars total) of the
world's gross domestic product. Money laundering in Canada alone is
estimated to be in the billions of dollars. Blommaert estimated the
British Columbia drug industry to be, conservatively, between $7
billion and $10 billion per year, and all that money has to somehow
get circulated into the legitimate economy.

"We, the legitimate people in town, are scratching to make ends
meet," Blommaert said. "If we want to be crooks, we can be crooks,
but you run the risk of a knock at the door late at night and there's
a guy with a shotgun saying 'all your stuff is now mine.' You want
safety for your children, you want a healthy lifestyle, you don't
want to be worrying about drug addiction and violence in your
neighbourhood. To ensure that, you have to take the profit out of
crime, and that is done by calling it in when suspicious things
happen. Do not be willfully blind or you are, like it or not, part of
the problem."

Blommaert and others are touring the province to teach businesses
about money laundering and how it works. For more information call
604-264-3178.

+++++++ INFO BOX +++++++++++++++

Money Laundering Methods

* Structuring ("smurfing"): Smurfing is possibly the most commonly
used money laundering method. It involves many individuals who
deposit cash into bank accounts or buy bank drafts in amounts under
$10,000 to avoid the reporting threshold.

* Bank Complicity: Bank complicity occurs when a bank employee is
involved in facilitating part of the money laundering process.

* Money Services and Currency Exchanges: Money services and currency
exchanges provide a service that enables individuals to exchange
foreign currency that can then be transported out of the country.
Money can also be wired to accounts in other countries. Other
services offered by these businesses include the sale of money
orders, cashiers cheques, and travellers cheques.

* Asset Purchases with Bulk Cash: Money launderers may purchase high
value items such as cars, boats or luxury items such as jewelry and
electronics. Money launderers will use these items but will distance
themselves by having them registered or purchased in an associate's name.

* Electronic Funds Transfer: Also referred to as a telegraphic
transfer or wire transfer, this money laundering method consists of
sending funds electronically from one city or country to another to
avoid the need to physically transport the currency.

* Postal Money Orders: The purchase of money orders for cash allows
money launderers to send these financial instruments out of the
country for deposit into a foreign or offshore account.

* Credit Cards: Overpaying credit cards and keeping a high credit
balance gives money launderers access to these funds to purchase high
value items or to convert the credit balance into cheques.

* Casinos: Cash may be taken to a casino to purchase chips which can
then be redeemed for a casino cheque.

* Refining: This money laundering method involves the exchange of
small denomination bills for larger ones and can be carried out at a
number of different banks in order not to raise suspicion.

* Value Tampering: Money launderers may look for property owners who
agree to sell their property, on paper, at a price below its actual
value and then accept the difference of the purchase price "under the
table." The launderer can, for example, purchase a $2-million dollar
property for $1-million, while secretly passing the balance to the
seller. After holding the property for a period of time, the
launderer then sells it for its true value of $2-million.

* Loan Back: Using this method, a criminal provides an associate with
a sum of illegitimate money and the associate creates the paperwork
for a loan or mortgage back to the criminal for the same amount. This
creates an illusion that the criminal's funds are legitimate. The
scheme's legitimacy is further reinforced through regularly scheduled
loan payments made by the criminal, and providing another means to
transfer money.

++++ FINTRAC INFO BOX +++++

FINTRAC - The Financial Transactions and Reports Analysis Centre of Canada

FINTRAC now administers the Proceeds of Crime (money laundering) and
Terrorist Financing Act enacted by Parliament following the terrorist
attacks of September 11. The new act gives FINTRAC the authority to
receive voluntary information from the public, law enforcement
agencies, and others about suspicions of terrorist financing.

Who must report to FINTRAC?

All financial entities, life insurance companies, securities dealers,
foreign exchange outlets and money service businesses, which have
detected a suspicious transaction, or conducted cash transactions or
wire transfers in/out of Canada worth $10,000 and over. Records
related to these transactions must be kept for a period of five years.

Why report to FINTRAC?

If there are reasonable grounds to suspect that a transaction is
related to a money laundering or terrorist financing offence, the law
requires that a report be filed with FINTRAC.

How to file a report:

FINTRAC has a new reporting system called F2R.

Email: F2R@fintrac.gc.ca

Telephone: 1-866-346-8722 (After making your language choice, press 1.)

Information on FINTRAC can be found online at http://www.fintrac.gc.ca

If you suspect money laundering, Report it.

Disclosure provisions under Section 462.47 of the Criminal Code of
Canada justify you to do this. Under the law, whistle blowers will be
protected from any civil or criminal liability, even if your
suspicions prove to be wrong.

What They Need From You

When contacting police or FINTRAC concerning a suspicious
transaction, you may be asked to provide specific information, such as:

1. Date, time, and location of the transaction.

2. Name, age, address, telephone number, description of the person(s)
involved in the suspicious transaction and their associates.

3. The amount of the suspicious transaction.

4. Bank, credit card, or other personal information about the subject
that might be available.

5. Description of vehicle and licence plate number associated with
the suspicious transaction/activity.

6. The circumstances, details, and events that raised your suspicion.

7. The type of activity associated with the suspicious transactions
(payment made by an unusually large volume of cash, use of nominees
(associates), currency exchanged, smurfing, refining, undervaluing
goods, loan backs).