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Ottawa begins cleaning up its act on money laundering

Financial Post, Weekly edition, Thursday, May 7, 1998

When the annual summit of the Group of Seven major industrialized nations and Russia (redubbed the G8) kicks off next Friday in Birmingham, leaders will sit down to a serious discussion on globalization's dark side -- transnational organized crime. And Canada, long seen as the weak link among the seven in the fight against these worldly crooks, will be expected to put some concrete measures on the table as proof of its commitment to the cause.

Given our stable economy, efficient financial services sector and close proximity to the U.S. and its massive drug market, it is no surprise Canada is an appealing destination for money launderers. We've managed to make ourselves even more attractive to criminals thanks to our lax currency regulations.

It's hard to believe that until 1991, money laundering wasn't even considered a crime. Since then, financial institutions and businesses that receive more than $10,000 cash are required to keep transaction records for at least five years. And the major banks have committed to voluntarily reporting any "suspicious" transactions to the police.

Compared with measures in the U.S., Britain and Australia, however, Canada's approach is too soft. Solicitor-General Andy Scott recently launched public consultations on money laundering with a set of proposals that would make reporting of suspicious transactions mandatory. "Red flags," for example, would include dealings with subsidiaries of offshore financial institutions in drug-trafficking territories, or an irregular swelling in account balances.

Making reporting mandatory is certainly the way to strengthen the process, although there should also be some flexibility built in. Getting the red flags right will be important in avoiding paper burdens being placed on those reporting transactions and the police. Also, criminals can quickly change their modus operandi to dodge red flags -- that means authorities will have to be equally resourceful.

One of Canada's proposals is long overdue: currency reporting at border crossings. Now, customs officials can seize all sorts of contraband, but can't even ask where large amounts of cash come from when brought into the country.

This week Justice Minister Anne McLellan also took action to ensure Canada doesn't become a safe haven for criminals. Legislation introduced Tuesday would overhaul the country's 100-year-old extradition laws by simplifying the process and broadening the grounds for extradition.

Canada and fellow summiteers are all working to deny criminals a place to hide and access to their ill-gotten gains. Ottawa's latest efforts mean this country will no longer be the weak partner in the fight against money laundering.

Source: This information is provided by the Financial Post.

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