CANADA `EASY' ON DIRTY MONEY

The United States has labelled Canada an ``easy target'' for drug
traffickers and other criminals looking to launder dirty money.

The U.S. State Department's annual report on the international drug trade
says lax Canadian laws leave the door open for shady financial transactions
intended to hide the source of ill-gotten funds. The department, which has
previously singled out Canada, continues to take a hard line despite
Liberal government promises to crack down on disreputable dealings.

``Canada still remains an easy target for drug-related and other types of
money laundering,'' says the recently released International Narcotics
Control Strategy Report.

It lists Canada as a nation of ``primary'' concern -- the most severe
rating -- along with several other places considered attractive for hiding
cash, including Brazil, the Cayman Islands, Colombia, Italy and Japan.

Money laundering usually involves a series of transactions to disguise the
source of illegally gained assets and make the money appear legitimate. The
State Department estimates the annual worldwide value of laundered funds at
between $300 billion and $500 billion U.S. The practice fuels drug and arms
dealers, and terrorists.

Canada's vulnerability stems from its high volume of cross-border trade
with the U.S., open financial system and ``fragmented'' approach to
combatting shady money transfers, says the report.

It criticizes Canada's lack of legislation to control the flow of money
across borders or to require banks and other financial institutions to
report suspicious transactions -- measures adopted by many other countries.

The report acknowledges, however, that the Liberal government has promised
to bring in such laws.

Currency exchange houses, particularly near the U.S. border, are believed
to move large amounts of drug money between the two countries, the report
says. It suggests Canada establish a financial intelligence unit to collect
and analyze information, then alert police.

The State Department echoes concerns voiced by Canadian police, who also
want more legal weapons to battle organized crime. The government took
initial steps last year, bringing in rules governing casinos and giving
police some additional powers.

Solicitor General Andy Scott has promised new legislation that would make
suspicious transaction reporting mandatory and allow authorities to monitor
the flow of cash across borders.

Mario Possamai of Forensic Investigative Associates in Toronto says the
U.S. clampdown on money laundering may have attracted more criminals to
unscrupulous Canadian operators.

``Our laws and restrictions are not as tough right now as theirs are, and
they should be.''

Mr. Possamai added, however, that the challenge is to bring in controls
without putting too onerous a burden on banks and other institutions.