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Dirty money.  Keeping money launderers and terrorist financing at bay. Thumbnail

Dirty money. Keeping money launderers and terrorist financing at bay.

This year as each staff member in our office completes our mandatory annual Anti-Money Laundering and Anti-Terrorist financing training requirements, it occurs to me that many people may not realize our obligations in this regard within our industry, and other businesses.

In Canada, the Proceeds of Crime (money laundering) and Terrorist Financing Act and the Criminal Code of Canada laws apply to every bank, insurance company, mutual fund dealer, securities dealer, and other financial services companies doing business in Canada, including many business professions like financial planners, accountants, life insurance agents, brokers, real estate agents etc.

To comply with the law, financial institutions, together with oversight bodies FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) and OFSI (The Office of the Superintendent of Financial Institutions) follow the rules and regulations to be on the lookout for unusual or suspicious transactions.

Money Laundering and Terrorist Financing are two very different things however, they both use similar criminal activities to fund their activities.  These include things like drug trafficking, fraud, human trafficking, smuggling, extortion, theft and bribery.  Due to the criminal nature of these activities, they generate large amounts of cash so the funds generated can avoid detection.  

At some point though, these criminals will attempt to re-introduce this money back into the economy in a seemingly legitimate way.  The attempt to turn dirty money as a result of proceeds of crime into clean money is how the term money laundering came into existence.  It is the process by which the criminal or organization looks to legitimize or wash the funds clean in an attempt to remove the trace of its criminal origins.

They are looking for ways to do this using unsuspecting citizens and organizations to execute this process.

The attempt to put this money back into society as apparently legitimate funds can take the form of attempting to set up investments or accounts, attempting to put money in someone else’s name who may go undetected, moving money into offshore accounts, purchasing large ticket items or property, flowing cash through a shell company, casino, money business, or cash intensive business front, among other things.

Certain industries can find themselves as a target for money launderers or terrorist organizations looking for unsuspecting people or companies to help them clean their money without even realizing it.  These may include industries like financial, brokers, real estate, auction houses, luxury items dealers (boat, car, art, antiques), casinos, pawn shops etc just to name a few.

They are looking for ways to do this using unsuspecting citizens and organizations to execute this process.

It is for this reason as financial professionals, we are prohibited from accepting cash to open investment accounts.  All funds must come from legitimate accounts on the books with proper financial institutions which can be traced back and connected to the account opener themselves and an identifiable source of funds.

People dealing with financial advisors over the years have likely noticed how much information is collected in getting to know the client, confirming identity, source of income, making sure payments are set up to approved bank accounts with proper client names attached.  Investment dealers require the i’s to be dotted and the t’s crossed with the upmost scrutiny and verification processes.

This may seem like a nuisance to some, but in the big picture these important steps play a big role in doing our part to help minimize the risk of being an unwitting participant to a money laundering or terrorist financing scheme.  

Stephanie Farrow, BA., CFP., Stephanie has over 28 years' experience in the financial services industry, a diploma in Financial Planning from the Canadian Institute of Financial Planning and Certified Financial Planner designation.  Stephanie has been writing a financial column for local business magazine Elgin This Month/This Month in Elgin since 2010.  Stephanie and her husband own Farrow Financial Services Inc.  About our Farrow Financial Team.

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