CUSTOMS OFFICERS STOLE DRUG CASH, MOUNTIE SAYS

At Pearson international: Group stole at least $1-million in seized
money: documents

Customs officers working to fight the money-laundering problem at
Canada's busiest airport were themselves involved in the theft of drug
cash and its transfer to various foreign accounts, according to court
documents discovered by the National Post.

Court documents filed this week say the group channelled the stolen
cash out of Canada into the U.S., the Bahamas, and the Channel Islands
in a bid to hide it.

The activities took place between January, 1995, and December, 1998,
and involved the transfer of money to locations in Ontario, New
Jersey, elsewhere in the United States, the Bahamas, and the Channel
Islands.

Sources close to the investigation say the thefts took place during an
ongoing joint operation by the RCMP and Canada Customs, during which
agents X-rayed suspicious luggage on flights from Toronto's Pearson
International to Colombia. Suitcases containing cash are part of a
drug cycle in which cocaine comes into Canada and is sold on the
streets. The Canadian cash paid for the drugs is then converted into
U.S. dollars and sent back to Colombia to buy more drugs.

Sources say that, rather than turn the seized cash -- amounting to at
least $1-million (US) -- over to police, the group pocketed it and
banked it. One bank reported the unusual deposits, a source said.

A bail hearing has been set for Monday morning for five men and two
women in Brampton, Ont. Sources say police have made arrangements with
the lawyers representing the group that they turn themselves over to
the police.

The case raises fresh questions about laundering controls in Canada,
which have been repeatedly criticized in the United States and Europe
as an easy place to move the proceeds of crime. The team targeted in
the current police case were themselves part of a federal effort to
step up the fight against launderers.

Information sworn Wednesday by Sergeant Robin Smith, of the London
RCMP proceeds-of-crime unit, outlines the basis for 12 charges.

According to the documents, one member of the group,"being an official
Revenue Canada customs officer, did unlawfully commit a breach of
trust, did steal money the property of person or persons unknown of a
value exceeding $5,000." That person "did commit a breach of trust in
connection with the duties of his office by failing to report the
seizure of money as he was required to do," the record says.

Leading the investigation is Corporal Jamie Jagoe of the London RCMP.
"It certainly is an interesting case," Cpl. Jagoe said yesterday. He
declined further comment.

The information outlines nine counts of breach of trust and two counts
of unlawful possession of property under the Controlled Drugs and
Substance Act. There is also one count of theft.

The group "did unlawfully conspire . . . to use, transfer the
possession of, send, or deliver to any person or place, transport,
transmit, alter, dispose of, or otherwise deal with in any manner or
by any means any property or any proceeds of any property to wit:
money, with intent to conceal or convert that property," in violation
of federal narcotics laws.

One person named in the records worked in the Intelligence and
Contraband Division of Revenue Canada Customs at Pearson International
Airport in Toronto, a source at the division confirmed yesterday. He
hasn't been working with the intelligence unit for three years,
however, said an official at the division.

The court records allege that between January, 1995, and December,
1998, the group "did unlawfully have in their possession property or
proceeds of property, to wit . . . money . . . knowing that all or
part of the property or those proceeds was obtained or derived
directly or indirectly as the result of the commission in Canada of an
offence under Part I of the Controlled Drugs and Substances Act."

Police in recent years have formed nine Integrated Proceeds of Crime
Units across Canada to fight money laundering.

The Toronto unit involves four city police forces, the Mounties, the
Ontario Provincial Police, and Canada Customs. Those involved in the
Toronto ring uncovered by police had been themselves working for the
Proceeds of Crime team.

In its report on a 1997 visit to Canada, the Paris-based Financial
Action Task Force on Money-Laundering, set up by the Group of Seven
industrialized countries, criticized Canada for failing to set up a
mandatory regime of reporting of suspicious transactions.

All other 25 nations in the Task Force have passed laws requiring that
"suspicious transactions" be reported to a central agency.