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Journal of Financial Crime Ð Vol. 11 No.

Money Laundering in Canada: A Quantitative
Analysis of Royal Canadian Mounted Police Cases
Stephen Schneider
The objective of this study is to analyse, in both qua-
litative and quantitative terms, how the money made
from entrepreneurial criminal activity is disbursed
through the legitimate economy in Canada. Central
to this analysis is a discussion of how these revenues
are `laundered', which includes identifying how the
illicit cash enters the legitimate economy; the com-
mercial and ®nancial sectors used to launder the
funds; the products, services and expertise that are
exploited within each of these sectors; as well as the
techniques and guises expressly employed to facilitate
the money laundering process. This study represents
one of the ®rst quantitative analyses of money laun-
dering using a survey of police cases. The exclusive
source of primary data for this study was Royal
Canadian Mounted Police (RCMP) proceeds of
crime (POC) case ®les. The research found that,
while there are a number of illegal activities that
produce substantial revenues, drug tracking repre-
sents the largest single source of the proceeds of
crime, according to this survey. This ®nding is a
re¯ection of the prominence of drug tracking in
the repertoire of most criminal groups, as well as of
the priority that the RCMP has placed on anti-
drug pro®teering enforcement. Deposit institutions
(in particular banks) and real estate (mostly single-
family residential property) represent the two most
popular destinations of drug revenues, in terms of
their frequency of use and the volume of cash laun-
dered. The police cases also reveal that guises or tech-
niques used to facilitate the laundering process most
frequently involve attempts to hide the true owner-
ship and source of criminal proceeds (through the
use of nominees), avoid suspicion associated with
large amounts of cash (by using `smurfs'), circumvent
reporting requirements (by structuring transactions),
or create the perception that the criminal funds were
derived from legitimate sources (eg establishing com-
panies and then claiming the proceeds of crime as
legitimate revenue).
Despite the absence of accurate data, the fact that
organised criminal activities generate billions of
dollars annually in Canada is beyond dispute. And
because pro®t-oriented criminal activity is generally
cash-based, criminal entrepreneurs must often devise
the ways and means to maximise their ability to use
and enjoy the fruits of their illegal activity without
attracting suspicion or government attention. Con-
verting illegally derived cash into other assets, while
concealing the criminal source of the funds, has
developed into an essential tactical imperative of
organised crime. Money laundering is a process by
which one converts or transfers cash or other assets
derived from illegal activity for the purpose of con-
cealing or disguising their criminal origin. To maxi-
mise its bene®ts to the criminal entrepreneur, the
money laundering process should satisfy three essen-
tial objectives. First, it should convert the bulk cash
proceeds of crime to another, less suspicious form.
Secondly, it should conceal the criminal origins and
ownership of the funds. Thirdly, it should create a
legitimate explanation or source for the funds and/
or assets. In other words, to realise the greatest
bene®t from money laundering, criminally derived
cash should not simply be converted to another
asset, such as a bank draft, electronic credit, or real
estate, but the illicit ®nancing of the assets must also
be hidden. The third objective, while less frequently
satis®ed in most money laundering operations, is no
less important than the former two; the e€ectiveness
of a laundering scheme will ultimately be judged by
how convincingly it creates a legitimate front for
illegally acquired cash and assets. Moreover, one of
the keys to satisfying the objectives of the laundering
process is to conduct commercial and ®nancial trans-
actions that appear as legitimate as possible. The more
successful a money laundering operation is in emulat-
ing the patterns and behaviour of legitimate ®nancial
or commercial transactions, the less likely it will be
exposed as a criminal process.
Roughly corresponding to these three objectives are
four stages Ð placement, layering, integration, and
repatriation Ð all of which must be completed in
sequential order to satisfy exhaustively the money laun-
dering process. In the initial placement stage, the cash
proceeds of crime are introduced into the legitimate
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Journal of Financial Crime
Vol. 11, No. 3, 2004, pp. 282±291
#Henry Stewart Publications
ISSN 1359-0790
economy, which essentially satis®es the conversion
objective. The placement stage is the most dangerous
for the launderer, as it involves the physical move-
ment of bulk cash, usually in small denominations,
and as such it is at this stage that the o€ender is
most vulnerable to suspicion and detection and
where the funds can most easily be tied to criminal
sources. However, the placement stage is absolutely
critical to the laundering process because it simulta-
neously converts large amounts of cash into less sus-
picious assets, while moving the proceeds of crime
into the legitimate economy. Once this combined
conversion/placement goal has been met, a process
of layering takes place, which involves circulating
the funds through various sectors, companies, and
commercial or ®nancial transactions Ð domestically
and internationally Ð to conceal the criminal source
and ownership of the funds, obscure the audit trail,
and sever the link with the crimes that generated
the funds. In short, it is during this layering stage
that the greatest opportunities arise for the cleansing
of the dirty money. The penultimate stage of the
money laundering process is termed integration
because it is at this point that the funds are completely
assimilated into the legal economy. In other words,
`having been placed initially as cash and layered
through a number of ®nancial operations, the crim-
inal proceeds are fully integrated into the ®nancial
system and can be used for any purpose'.
In the
fourth and ®nal stage, the laundered funds are repa-
triated into the hands of the criminal entrepreneur,
complete with an apparently legitimate explanation,
so that they can be used without attracting suspicion,
thus minimising the possibilities of government
The centrality of money laundering to criminal
operations, combined with law enforcement's on-
going targeting of illegal revenue, has spurred an
investment of creative energy into this criminal
operational support function that often rivals the
amount of e€ort and thought that goes into the
illegal activities that generated the money. In turn,
a money laundering cottage industry has emerged,
populated by a diverse range of professionals con-
ducting a vast array of ®nancial and commercial
transactions that can span many borders. In many
cases examined for this and other studies, the expen-
diture of illegally derived revenues by professional
criminals hardly satis®es the money laundering objec-
tives and processes laid out above, while in other
cases, millions of dollars of criminal funds are
cleansed through elaborate operations that involve
numerous economic sectors, dozens of professionals,
a myriad of guises and techniques, and hundreds, if
not thousands, of obfuscating transactions. In short,
one should not be overly preoccupied with the
term money laundering; for both analytical and law
enforcement purposes, attention should be paid to
how the proceeds of crime are disposed by the crimi-
nal element Ð with particular emphasis on how they
enter and circulate within the legitimate economy Ð
regardless of whether these transactions satisfy the
de®nition of money laundering.
The overriding goal of the research that informs this
paper is to identify, quantify, and examine how the
proceeds from pro®t-oriented (organised) criminal
activities in Canada and abroad are disbursed
through the legitimate economy in this country. Spe-
ci®cally, the objectives of the study are to identify,
examine, and quantify:
the types of illegal activity that generate the
criminal revenue invested into the legitimate
the sectors of the economy into which criminal
proceeds are placed;
speci®c assets or services purchased with the
criminal proceeds in each sector;
transactions and processes used in each sector for
money laundering purposes;
speci®c guises and/or techniques employed to
facilitate the money laundering process; and
the linkages between di€erent economic sectors,
transactions, and techniques that have been
forged through money laundering operations.
The primary source of data for this study was RCMP
proceeds of crime case ®les. The sampling frame for
the research was compiled by identifying relevant
POC ®les from the RCMP Management Informa-
tion System (MIS), a database of cases investigated
by the RCMP. The population of POC cases was
re®ned by applying certain criteria intended to
maximise the relevancy and quality of the cases to
be included in the ®nal sample. The most important
criterion for the inclusion of a case in the sampling
frame was that the legal de®nition of `possession of
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A Quantitative Analysis of Royal Canadian Mounted Police Cases
the proceeds of crime'
or `money laundering'
be satis®ed. To this end, the two initial criteria for the
inclusion of cases in the sampling frame were: (1) the
®le was successfully closed between 1993 and 1998
the ®le was closed by the RCMP following the for-
feiture of assets resulting from either a conviction or a
a plea bargain), and (2) at least one proceeds of crime
seizure or restraint had been made or at least one
possession of proceeds of crime or money laundering
charge had been laid in this ®le.
Based upon the application of the above criteria to
the sampling frame, the MIS database produced a
total population of 371 POC cases. An initial
inquiry into the population indicated that additional
criteria would have to be applied to screen out
certain cases from the ®nal sample. The purpose of
these additional criteria was to ensure that all qualify-
ing cases contained sucient information on how the
proceeds of crime were disbursed by o€enders (osten-
sibly minimising the number of cases that would be
unable to supply answers to the questionnaire). The
additional criteria used to screen out cases were as
follows: (1) the monetary value of the property that
was the target of the seizure or restraint must be
above $10,000, (2) the case could not involve
simply a cash seizure,
and (3) the case must have
involved more than 40 person-hours of investigative
time. The application of these additional criteria
resulted in a ®nal sample of 149 cases.
A standardised coded questionnaire solicited infor-
mation from the RCMP POC ®les for a quantitative
and qualitative analysis, using close-ended questions
(to facilitate a statistical analysis of the data) as well
as open-ended questions (to facilitate an in-depth
qualitative analysis of money laundering methods
and techniques). For some open-ended questions,
the answers were collated and coded for a quantita-
tive analysis. Data from the eligible cases were col-
lected by members of the Proceeds of Crime
Sections and Integrated Proceeds of Crime (IPOC)
Units who were part of the Expert Witness
The author of this study also conducted
site visits among the POC Sections and IPOC
Units to collect original data and to check the accu-
racy and completeness of the questionnaires ®lled
out by the police members. The data collection
took place between September 1999 and May 2002.
Cases analysed for this study were drawn from all
of the major Proceeds of Crime Sections and IPOC
Units across the country. In general, the sample of
cases included in this study is representative of the
distribution of POC cases investigated on an annual
basis across the country. The one exception is
Quebec, where the number of cases included in this
survey is under-represented.
Researchers were instructed to examine all rele-
vant documents contained within the case ®les, in
order to identify as much information as possible
on the predicate criminal conspiracy, how the crim-
inal proceeds were disbursed by o€enders, and any
money laundering techniques used. This information
generally came from documents prepared to obtain
judicial authorisation to execute certain police
powers, such as an `Information to Obtain a Search
Warrant,' an `Application for a Part VI Authorisa-
tion' (electronic surveillance), or a `Restraint
Order', all of which includes extensive detailed infor-
mation on the accused and the alleged criminal con-
spiracy. Other documents that proved useful for
this study included court transcripts, investigative
progress reports, court briefs, intelligence reports,
`statement of facts' and wire-tap transcripts. Docu-
ments obtained by police during an investigation,
and contained in the case ®les, such as banking state-
ments, real estate contracts, and correspondence, also
proved to be very useful sources of primary data.
Personal interviews were also conducted with rele-
vant police investigators and prosecutors to corrobo-
rate or elaborate on information contained in these
documents, or to provide any information that may
have been absent from the case ®le. Information
from media sources was also used for some cases.
The triangulated research design was used in part
to overcome some of the de®ciencies that result
from relying exclusively on police cases; de®ciencies
that can potentially limit the reliability of the data,
as well as the ability to extrapolate the research ®nd-
ings to the broader universe of money laundering in
Canada. Commenting on a researcher's dependency
on police data to study organised crime, Tremblay
and Kedzier opined, `What documentary sources
are pertinent for the analysis of the organisation of
crime? It is generally agreed that police statistics,
while now standardised and fairly reliable, tell us
more about the organisational qualities of the police
than about crime as such.'
Indeed, the examples of
money laundering included in this study are skewed
toward those that have been identi®ed and investi-
gated by the POC Sections and the IPOC Units.
As such, this study must be viewed as an analysis of
money laundering as ®ltered through the enforce-
ment priorities and capacities of the police, and
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more speci®cally, the RCMP. Moreover, informa-
tion that was relevant for the study was not always
available from the case ®les or from other (police)
sources, partly because police investigations cannot
always identify the full range of laundering vehicles
and techniques used by the o€enders, especially in
those cases where money was transferred o€ shore.
This dilemma foreshadows another limitation that
confronts any research into money laundering: its
inherently secretive nature, its inherent goal of con-
cealing revenue and assets. There is no guarantee
that a POC investigation, let alone this study, was
able to identify all of the assets and laundering vehi-
cles associated with a particular criminal conspiracy.
Problems were also encountered in the execution
of the sampling method designed for this study.
These methodological problems revolved around
the quality and completeness of the information con-
tained in the RCMP MIS database. In some of the
relevant MIS data ®elds, it was later discovered by
this researcher that important information was
missing or was entered erroneously. This problem
was detrimental to e€orts to draw a random sample,
especially when the erroneous information was
located in data ®elds used as part of the ®ltering
criteria. It also became apparent as the study pro-
gressed that the inventory of POC cases contained
in the MIS database was not in fact comprehensive.
During the latter stages of the data collection, as
this researcher conducted site visits among the
RCMP POC Sections, a number of cases were dis-
covered that ®t the criteria for inclusion in the
sample, but were not in fact listed in the centralised
O€ences generating the proceeds of
While there are a number of illegal activities that
produce substantial revenues, drug tracking repre-
sents the largest single source of the proceeds of
crime, according to this survey. This ®nding is a
re¯ection of the prominence of drug tracking in
the repertoire of most criminal groups, as well as
of the priority that the RCMP Proceeds of Crime
Program has placed on anti-drug pro®teering enfor-
cement. In 111 of the 149 POC cases (74.5 per cent) a
designated drug o€ence was involved as the predicate
criminal activity. Of these 111 cases, 60 (54 per cent)
involved cannabis, 59 (45 per cent) involved cocaine,
9 (8.1 per cent) involved heroin, and four (3.6 per
cent) involved synthetic drugs. The second most
common predicate o€ence was committed against
the Customs Act and/or the Excise Act, which pri-
marily consists of the highly pro®table trade in con-
traband tobacco and liquor products. The survey
included 23 cases (15.4 per cent) where the substan-
tive o€ence was committed against either of these
Acts. Of these 23 cases, 20 involved cigarettes and
16 involved alcohol. O€ences involving theft or
fraud accounted for 11 cases (7.4 per cent of all
predicate o€ences).
Sectors of the economy used
The survey of RCMP cases indicates that the pro-
ceeds of crime ®nd their way into a number of di€er-
ent sectors of Canada's economy. Figure 1 identi®es
these sectors, and the frequency with which each
was the recipient of criminal proceeds, based on the
survey of POC cases.
As indicated in Figure 1, deposit institutions, the
insurance industry, motor vehicles and real estate
are the four most frequent destinations for the pro-
ceeds of crime in Canada. Deposit institutions are
the largest single recipient, having been identi®ed in
114 of the 149 POC cases (76.5 per cent). While the
insurance sector was implicated in almost 65 per
cent of all cases, in the vast majority the o€ender
did not explicitly seek out the insurance sector as a
laundering vehicle. Instead, because motor vehicles,
homes, companies and marine vessels were purchased
with the proceeds of crime, it was often necessary to
purchase insurance for these assets. In a smaller
number of cases, the insurance sector was used as a
®nancial service provider to launder the proceeds of
crime. In these cases, mortgages, investment certi®-
cates, life insurance policies and mutual funds were
purchased from an insurance company or broker.
Motor vehicles were purchased or ®nanced with
the proceeds of crime in 89 cases (59.7 per cent).
Real property transactions were identi®ed in 83
cases (55.7 per cent). In 49 cases (32.9 per cent), com-
panies were established or purchased by an o€ender
to facilitate the laundering process. Currency
exchange companies and cheque cashing businesses
were implicated in 26 of the cases (17.4 per cent).
The purchase or sale of securities was implicated
in 11 cases (7.4 per cent). Other assets purchased
with the proceeds of crime were marine vessels (22
cases), jewellery, precious gems or gold (13 cases),
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A Quantitative Analysis of Royal Canadian Mounted Police Cases
rare coins (one case), art work (three cases), and live-
stock, including race horses (six cases). Legalised
gambling venues, in particular casinos and lotteries,
were used to launder funds in ®ve cases.
Techniques used to facilitate money
In many of the police cases, a number of guises and
techniques were used to facilitate the laundering
process. In particular, attempts were made to hide
the true source and ownership of illegally acquired
cash and other assets (eg through the use of nominees
and layering), to avoid suspicions that may stem from
transacting in large amounts of cash (eg by using
smurfs and `structuring' transactions), or to create
the perception that the funds were derived from a
legitimate source (eg by claiming the criminal pro-
ceeds as revenue from a legal business). As indicated
in Figure 2, the most prevalent money laundering
techniques used were nominees, smur®ng, layering,
structuring and claiming the criminal proceeds were
generated from legitimate sources.
The most common technique used to help expedite
the laundering process is the use of nominees. Of the
149 cases, 69 (46.3 per cent) involved some attempt
by the accused to obscure a direct connection
between himself and assets he owned, primarily by
registering legal title to the asset in the name of
another individual, usually a relative, a friend or a
lawyer. In most cases, the nominee was unconnected
to the criminal activities and had no criminal record.
The assets most often placed in the name of nominees
were real estate, cars, companies and bank accounts.
The second most common laundering technique is
to claim the proceeds of crime as legitimate revenue
from a legal business, which attempts to satisfy the
third objective of the laundering process Ð creating
the perception that the criminal proceeds were
derived from a lawful source. Once this seemingly
legitimate source of revenue is established, criminal
proceeds can be deposited into bank accounts
under the guise of this business. In some cases, the
proceeds of crime will be co-mingled with revenues
generated from legal businesses and deposited into
bank accounts.
Within the context of money laundering, layering
involves separating the illicit proceeds from their
source and obstructing any audit trail by creating
Figure 1 Economic sectors and other assets used for money laundering
Page 286
several `layers' of ®nancial and commercial transac-
tions and/or assets. Layering is accomplished either
by conducting multiple transactions with the illicit
funds or by setting up complex hierarchies of assets,
in order to put as much distance between the laun-
dered assets and their original source of funding and
bene®cial ownership. The layering stage is often the
backbone of the money laundering process. Layering
was suspected of being used in 26 of the 149 cases
(17.4 per cent).
In 26 of the 149 cases (17.4 per cent), the money
laundering technique known as smur®ng was used.
A `smurf ' is used by a criminal enterprise to attend
numerous banks or other ®nancial service providers
and perform, at each, transactions with a relatively
small amount of cash. Used primarily during the
placement stage of the laundering process to circum-
vent mandatory reporting requirements and avoid
suspicion associated with large amounts of cash,
each smurf is instructed to deposit less than $10,000
at a time. Larger criminal organisations may utilise
a number of smurfs as part of an elaborate money
laundering e€ort. The objective of this laundering
technique is to avoid transactions involving large
amounts of cash by spreading the funds among a size-
able number of individuals, ®nancial institutions, and
accounts. In the context of money laundering, the
term `smurf ' was derived from the blue cartoon char-
acters, all of whom are innocently innocuous in
appearance (a characteristic of nominees that is
highly valued by the Fagin-like money launderers).
In 24 of the 149 cases (16.1 per cent), structuring
was used to facilitate the laundering process. Struc-
turing refers to a process whereby large cash deposits
and other transactions are broken down into smaller
amounts to avoid suspicion associated with large
amounts of cash. Structuring is most commonly
practised at banks and similar ®nancial service provi-
ders and is an integral part of smur®ng. The need for
structuring as part of the money laundering process
will be heightened in Canada as new legislation
requires the ®nancial services sector to record and
report all cash transactions over $10,000.
In some money laundering schemes identi®ed in
this study, a seller of an asset agreed to a purchase
price below the actual value and then accepted the
di€erence under the table. This laundering technique
is most often used in relation to real property and
motor vehicles, but can also be applied to other big-
ticket items. By using this technique, the launderer
can claim that he purchased an asset for a price
that falls within his legitimate ®nancial means. This
transaction also allows the criminal entrepreneur to
dispose of cash, which is provided `under-the-table'
Figure 2 Guises and techniques used to facilitate money laundering
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A Quantitative Analysis of Royal Canadian Mounted Police Cases
to the seller. Undervaluing assets was suspected of
being used in nine of the 149 cases (6 per cent).
In some cases, o€enders will use aliases, provide
false identi®cation, or record bogus information on
transaction reporting forms in their dealings with
®nancial institutions. Of the 149 cases examined,
®ve involved the use of fraudulent information to
facilitate the money laundering process. One of the
most e€ective techniques to satisfy the laundering
process is to engage the cooperation of corrupt pro-
fessionals, or for a criminal enterprise to place opera-
tives within ®nancial institutions. By doing so, the
o€ender can bypass scrutiny, falsify documents, and
avoid mandatory transaction reporting requirements.
Internal conspiracies and corruption were identi®ed
in four cases.
In an attempt to demonstrate the broad range in the
scope and sophistication of money laundering opera-
tions, a typology can be constructed that runs the
gamut from `basic' (no real attempt to satisfy the
objectives of the laundering process) to `advanced
international' examples (sophisticated and complex
transnational money laundering operations). The
range in the scope and complexity of money launder-
ing conspiracies often re¯ects the size and sophistica-
tion of the criminal conspiracy that generated the
The typology framework criteria
Money laundering is a process rather than an isolated
act and can best be understood as occurring with
varying degrees of thoroughness. The typology is
meant to demonstrate the great variance in the
scope and sophistication of money laundering opera-
tions. The typology has been developed based on
four criteria, which are summarised below.
Ability to satisfy the three money
laundering objectives
The position of each case in the typology is greatly
in¯uenced by the extent to which the disbursement
of the criminal proceeds satis®es the three main objec-
tives of money laundering: converting the cash pro-
ceeds of crime to another asset, concealing the true
source or ownership of the cash proceeds and
asset(s), and creating the perception of a legitimate
source for the proceeds.
The scope and sophistication of the
money laundering operation
Where a case is situated in the typology is also
determined by the scope and sophistication of the
money laundering operation, and more speci®cally,
the extent to which it uses: (i) di€erent sectors of
the economy, (ii) di€erent services within each of
these sectors, and (iii) speci®c guises or money
laundering techniques.
The scope of the criminal operation and
the amount of cash disbursed
In general, the larger the criminal operation, the
greater amount of cash that needs to be laundered,
and hence the more extensive and sophisticated the
laundering operation.
The geographic scope of the laundering
The geographic scope of the laundering operation is
often related to its level of sophistication. The most
complicated laundering operations are often national
or international in nature. However, this is only a
general rule: there can be very sophisticated launder-
ing operations at the local or regional level, while
some international schemes can be quite elementary
(such as those that simply involve smuggling cash
across international borders).
The typology framework
Based on these criteria, the typology that has been
constructed encompasses six hierarchical levels.
(1) Basic
No real money laundering has been attempted at this
level (ie not even the conversion stage is satis®ed).
The accused simply purchases assets or services for
personal consumption. No attempt is made to
conceal the ownership or the source of the funds,
nor is there an attempt to convert the cash into a
less suspicious monetary instrument before an asset
is purchased. This level usually involves street-level
drug trackers and other criminals where the
annual amount of funds laundered is under $50,000.
(2) Elementary
This level involves rudimentary attempts at money
laundering. The accused will attempt to convert cash
into a less suspicious form, which is then used to
purchase assets or services for personal consumption.
Page 288
The most common scenario is where an accused
deposits cash into a bank account, without any real
attempt to conceal the ownership of the funds, and
then purchases assets using a cheque, bank draft, or
larger denominations of cash drawn from the
account. The number of economic sectors used for
an elementary laundering operation is usually two
or less. Most of the transactions are conducted
locally. This level generally consists of drug track-
ers operating at the street level, but may also include
small wholesalers, importers, marijuana growing
operators, and other types of criminal operations
with annual revenues between $50,000 and $300,000.
(3) Intermediate domestic
While the accused may still conduct a number of
transactions in cash, at this level some attempt has
been made to satisfy at least two of the three
money laundering objectives. In particular, cash is
converted to another (less suspicious) asset and/or
the source or ownership of the funds is somehow
concealed. At least two sectors of the economy and
more than one service within each sector are used.
Some attempt has been made to employ basic tech-
niques to facilitate the laundering process, such as
nominees, smurfs or structuring. The money laun-
dering activity is generally regional in scope, but in
some cases may be national. This level generally
consists of larger drug retail ventures, small whole-
salers, marijuana growing operators, and other
types of criminal enterprises with annual revenues
of between $300,000 and $1,000,000.
(4) Advanced domestic
In addition to converting the cash proceeds into
another asset and concealing the true source and own-
ership of the funds, at this level attempts will be made
to create the perception of a legitimate source of the
funds. As such, there is more extensive use of sophis-
ticated laundering techniques and guises, such as shell
and legitimate companies, under-invoicing, internal
conspiracies, corruption etc. Three or more sectors
of the economy are used, including numerous ser-
vices within each sector. These sectors are often
linked to create a complex hierarchy of transactions
and assets. The laundering operation may be national
in scope, although there are limited international
transactions in relation to the predicate criminal con-
spiracy (ie purchasing drugs or other contraband on
the international market) and/or the money launder-
ing activity. The scope of the laundering operation
is larger due to both the size of the criminal operation
and the amount of funds laundered. This level
generally consists of multi-kilo drug wholesalers,
mid-sized scale smuggling enterprises, multi-site mar-
ijuana growing operations, and other criminal con-
spiracies with annual revenues of between $1,000,000
and $10,000,000.
(5) Intermediate international
At this level, attempts are made to transport the
illicit funds internationally, although the transna-
tional component of the predicate o€ence and the
laundering operation is con®ned to two countries
and may not be particularly sophisticated. Speci®-
cally, this category involves cases where the inter-
national aspects of money laundering centre on the
physical smuggling of cash across the border Ð in
particular the Canada±US border. It may also
include transporting monetary instruments or sending
wire transfers internationally, which inevitably
entails converting cash into less suspicious assets and
using smurfs and couriers in both the conversion
and international transportation phases. Moving
illicit cash across borders is commonly associated
with criminal conspiracies that operate internation-
ally, such as illegal drug manufacturers, exporters,
importers or wholesalers and a broad range of other
smuggling enterprises. The annual revenue of
the criminal operations that launder money at this
level ranges from as low as $50,000 to as high as
(6) Advanced international
This level involves the explicit satisfaction of the
three `Cs' of money laundering. In addition, the
criminal organisation and laundering operation is
truly transnational in scope in that it operates in
three or more countries. Countries not involved in
the predicate o€ence Ð in particular the so-called
safe haven countries Ð will be used for money laun-
dering purposes. The laundering operation will have
used four or more economic sectors of the di€erent
countries and these sectors will be linked to create a
complex, transnational hierarchy of transactions,
assets, and sophisticated techniques and guises. The
extensive scope and sophistication of the laundering
operation stems from large, transnational, multi-
enterprise criminal operations that generate millions
of dollars in criminal proceeds. Indeed, annual reven-
ues from these criminal activities exceed $10,000,000.
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A Quantitative Analysis of Royal Canadian Mounted Police Cases
In their quest to legitimise the revenue from unlawful
activities, criminal entrepreneurs take advantage of a
wide range of sectors, services, transactions and pro-
fessionals within the legitimate economy. Despite its
underworld connotations, the money laundering
process itself is not an economic aberration; it
thrives on the very same commercial and ®nancial
transactions that are conducted by most Canadian
citizens and companies. Indeed, a fundamental tenet
of money laundering is to ensure that the transactions
used to cleanse the proceeds of crime appear as
legitimate as possible.
While this report has demarcated its analysis of
money laundering into di€erent economic sectors,
the research shows that, in many cases, a number of
di€erent sectors will be used in the context of a
single money laundering operation. This is especially
true of the most sophisticated schemes. Moreover,
when used for money laundering purposes, the di€er-
ent economic sectors used are not mutually exclusive,
but critically interconnected; one sector of the
economy (such as deposit institutions), will often be
used as a ®rst step in accessing others (such as real
estate). Indeed, deposit institutions continue to be
the most frequently used medium through which
the proceeds of crime are laundered. They also consti-
tute the common thread running through the myriad
of money laundering schemes used by criminal enter-
prises. This sector is especially signi®cant because it
represents the largest single portal into the legitimate
economy for cash generated in the underground
A number of techniques Ð some rudimentary,
some more inventive Ð are also used to facilitate the
money laundering process. In particular, nominees,
smurfs, structuring, and claiming criminal proceeds as
legitimate revenue are commonly employed to
conceal criminal ownership and avoid suspicion asso-
ciated with large amounts of cash. Given the newman-
datory transaction reporting regime in Canada, it is
inevitable that these money laundering techniques
will increase in the future in order to circumvent the
®ling of large cash and suspicious transaction reports
by the private sector. One should also anticipate an
increase in e€orts by criminal organisations to
corrupt industry professionals, in order to bypass or
manipulate the transaction reporting requirements.
Despite its reach into the country's numerous eco-
nomic sectors, there is little evidence that money
laundering, in and of itself, has any substantial
negative repercussions for the Canadian economy.
In fact, the most signi®cant costs incurred by the
private sector in relation to money laundering argu-
ably stem from the mandatory requirements systems
that are now required to be implemented to detect
and report large cash and suspicious transactions. It
could even be argued that money laundering has
some marginal bene®ts for society, in that it involves
investing funds from the underground economy into
the legitimate economy, which can then be used for
economically productive ventures. With that said,
however, the impact of money laundering on
society cannot be examined in isolation from the
criminal organisations and activities that it supports.
Yet, it remains to be seen whether the costs to
society of the production and marketing of less
harmful drugs (ie marijuana) actually exceed the
bene®ts they bring about in generating revenue,
which in turn is invested into the legitimate
economy. This highly subjective analysis, however,
is for another day.
(1) UN Oce on Drugs and Crime (nd) `The Money Launder-
ing Cycle',
cycle.html, accessed 15th June, 2003.
(2) Criminal Code of Canada, RS, 1985, c. 42 (4th Supp.),
s. 462.3; Controlled Drugs and Substances Act, RS 1996,
c. 19, s. 8; Customs Act, RS, 1985, c. 1 (2nd Supp.),
s. 163.1; Excise Act RS 1985, c. E-14, s 126.1.
(3) Criminal Code of Canada, RS, 1985, c. 42 (4th Supp.),
s. 462.31; Controlled Drugs and Substances Act, RS 1996,
c. 19, s. 9; Customs Act, RS, 1985, c. 1 (2nd Supp.),
163.2; Excise Act, RS 1985, c. E-14, s. 126.2.
(4) While most POC cases examined for this study were
concluded by 1998, some investigations were concluded in
(5) POC®les initiated by cash seizures, but where no subsequent
investigation took place, generally have insucient infor-
mation on how the proceeds of crime are laundered. In
other words, if a ®le was initiated by the seizure of cash
by police, to qualify for inclusion in the sample, a
proceeds of crime investigation must have subsequently
been undertaken.
(6) The Expert Witness Program includes members of the
RCMP, as well as provincial and municipal police
agencies assigned to the Integrated Proceeds of Crime
Units, who are to be designated as experts in money
laundering for court purposes.
(7) Tremblay, P. and Kedzier, R. (1986) `Analyzing the Orga-
nization of Crime in Montreal 1920 to 1980: A Canadian
Test Case' in R. J. Kelly (ed.) Organized Crime: A Global
Perspective, Rowman and Little®eld, Totowa, NJ, p. 78.
(8) Theft or fraud o€ences are considered a lower priority for
POC investigations, which explains why, statistically,
there are only a few POC cases where these o€ences
constituted the source of the criminal proceeds.
(9) This ®gure is skewed upward because included in the
random sample were at least ten cases involving undercover
currency exchange companies set up by police.
Page 290
Stephen Schneider, Assistant Professor in the
Department of Sociology and Criminology at St
Mary's University, Halifax, Canada. The author
is also a research associate at the Nathanson
Centre for the Study of Organised Crime and
Corruption at York University in Toronto.
Crime (International Co-operation) Bill
receives Royal Assent
A new Act to help the ®ght against international
organised crime Ð including money laundering,
people-tracking and ®nancial crime Ð came
onto the statute book when the Crime (Interna-
tional Co-operation) Bill received Royal Assent
on 30th October, 2003. The new law will enable
faster and more e€ective cooperation against terror-
ism and other serious crime with the UK's EU and
other international partners through:
ensuring the UK's ability to use the law enfor-
cement cooperation arrangements of the EUby
preparing the ground for the UK to have access
to the Schengen Information System (SIS Ð a
database of missing and wanted persons and
items covering the whole of the EU);
providing more streamlined and ecient
arrangements for joint legal cooperation (eg it
will be possible to send evidence by TV link
in a much wider range of circumstances than
at present);
fast and ecient arrangements for police sur-
veillance cooperation between EU countries,
minimising the risk of losing suspects in emer-
gency situations where prior notice is not
mutual recognition between EU countries of
orders to freeze evidence, so courts can take
swift action to ensure that vital evidence is
not lost (eg a UK police team investigating a
UK-based armed robbery which obtains intel-
ligence that the weapons used in the robbery
are located in the Netherlands could get a
court order to search for the weapons at a spe-
ci®ed location and the Dutch authorities would
be required to act on this order within 24 hours
Ð currently any request to freeze evidence in
another EU country has to be processed
through the courts in the foreign country,
which can cause delay);
modernising the UK's counterfeiting laws to
cover payment methods such as debit cards;
making terrorist o€ences committed outside
the UK by UK citizens o€ences under UK
law (this is part of the EU's Framework Deci-
sion on combating terrorism, which will
bring the anti-terrorism legislation of all EU
countries up to the standards of the UK).
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