Canada’s failed anti-money laundering system.

Acouple of weeks ago, I wrote about how numerous international agencies now consider Canada a haven for dirty money, because Ottawa does little to control the flow of illicit funds, despite paying lip service to the issue.

The day after the column ran, Canada’s Office of the Superintendent of Financial Institutions ( OSFI), which regulates banks, issued a press release saying that it would be dismantling its anti-money laundering section.

Then I got a call from a retired OSFI official, Nichols Choules- Burbidge, who outlined why Canada has failed to combat this financial scourge.

“This dismantling is despite that banks are the riskiest part of the financial sector,” he said. “This is yet another backward step by Canada as the government ignores the dismantling of our anti- money laundering regime. Canadian lawyers are not covered at all and are known to be the highest risk.”

Burbidge retired in 2017 after heading OSFI’S anti- money laundering and combating the financing of terrorism division, and now works internationally as an expert in this field.

“The government says it’s dedicated to the fight but is not co-ordinated to deal with it in any effective way,” said Burbidge.

OSFI is responsible for auditing banks and, until now, for passing along information about possible money laundering or terrorist financing concerns to the Financial Transactions and Reports Analysis Centre of Canada ( FINTRAC). If warranted, this intelligence would presumably be handed over to the RCMP for further investigation and possible charges. In return, the RCMP is obliged to pass along suspicious transactions to FINTRAC.

But FINTRAC is a big black hole where intelligence goes to die.

By contrast, America’s financial intelligence counterpart, the Financial Crimes Enforcement Network, is part of its Treasury Department and shares all its records with the FBI and other law enforcement agencies. Its database is open to all police agencies, which is why the United States has been so successful at conducting money laundering investigations, getting convictions and seizing assets, and Canada has not.

Any OSFI or RCMP intelligence just disappears into FINTRAC, which does not reciprocate, said Choules-burbidge. That’s because it’s a useless appendage that reports to the Ministry of Finance. Worse, its director is a cabinet appointee who has no experience with financial crimes.

“The regime is dysfunctional,” Burbidge said. “It is not organized to address the risks or the mitigation that’s required. Even the RCMP had dedicated anti- money laundering units — IMET units — but I don’t think they have these anymore. We ( OSFI) gave information over the years to FINTAC about banks, but they did nothing with this. If they’d have done something, we would have heard about it.”

A simple restructuring is needed, he continued, noting that, “If FINTRAC was changed to a police financial intelligence unit, and became part of the RCMP, then it could share and give information to facilitate law enforcement.”

So why hasn’t the system been altered in light of former finance minister Bill Morneau’s promises to crack down on money laundering?

That’s the $ 100- billion question, which is roughly the amount of laundered money that flows illegally into Canada every year and goes into real estate and the financing of criminal organizations that operate here.

This year, Canada was criticized in a comprehensive report by the British- based Tax Justice Network, which noted that, “Canada’s weaker anti- money- laundering laws provide criminals with the anonymity to not get caught and likely not be prosecuted if they are caught.”

Is this a problem of bureaucratic incompetence or something more sinister? The beneficiaries of this dirty money are Canada’s banking oligopoly, real estate developers and law firms that enable the flow of funds from despots, dictators, kleptocrats, criminals and tax evaders. The victims are Canadians who overpay for real estate and rents compared to those living in other countries.