FINTRAC, RCMP faltering in money laundering fight

Federal anti–money laundering authorities are failing to combat the flow of illicit funds into the legitimate economy, according to the final report from an inquiry in British Columbia.

The so-called Cullen Commission, which examined the problem of money laundering in the province, concluded that there are numerous vulnerabilities that require “decisive action.” The report, which runs to over 1,800 pages, sets out 101 recommendations for reform for governments, law enforcement and regulators.

“An enormous volume of illicit funds is laundered through the British Columbia economy every year, and that activity has a significant impact on the citizens of this province,” the report noted.

The commission was unable to put a precise figure on the amount of money laundering that’s taking place but suggested that it runs into the billions annually in B.C.

“It is essential that government, law enforcement and regulators take strong and decisive action to respond to the problem,” it concluded.

Among a host of issues, the inquiry concluded that the federal anti–money laundering regime “is not effective.”

While the federal government has “enacted increasingly complex legislation aimed at addressing money laundering activity” over the past couple of decades, the report found that it’s not working.

“One of the primary criticisms of the federal regime is the ineffectiveness of FINTRAC [the Financial Transactions and Reports Analysis Centre of Canada], the agency responsible for receiving and analyzing information about money laundering threats and communicating this information and analysis to law enforcement,” it said.

The agency doesn’t provide law enforcement authorities with much intel on suspected money laundering, given the scale of the activity and the volume of transaction reports that FINTRAC itself receives, the report said.

The federal regime has produced “high-volume, low-value reporting,” it said, which isn’t translating into useful intelligence for law enforcement.

The report also criticized the RCMP’s lack of attention to money laundering since it largely abandoned its efforts in this area in 2012 due to resource constraints — a move that “has allowed for the unchecked growth of money laundering,” it said.

“Given the state of the federal regime, if the province is to achieve success in the fight against money laundering, it must develop its own intelligence capacity in order to better identify money laundering threats,” it said.

To that end, it recommended creating a dedicated provincial anti–money laundering intelligence and investigation unit.

It also called for the creation of an independent anti–money laundering commissioner to provide strategic oversight.

In addition to the existing conduits for money laundering, the report flagged the crypto sector as an “emerging money laundering vulnerability” that, it said, should be addressed through provincial regulation.

Specifically, it said the province should regulate virtual asset service providers, but it declined to recommend which agency should have the task, saying that the government should determine whether this should fall to the B.C. Financial Services Authority, the B.C. Securities Commission or some other body.

“It is crucial for government, regulators and law enforcement to develop in-house expertise on cryptocurrency,” it said.