Money laundering in Canada a problem government seems happy to overlook, say experts
The recent US$3-billion settlement TD Bank Group reached with US regulators over money laundering oversight failures has exposed what experts see as Canada's comparatively lax approach to such violations, according to experts.
Denis Meunier, former deputy director of Canada’s Financial Transactions and Reports Analysis Centre (FINTRAC), believes that penalties in Canada are far too low to act as a true deterrent.
"It's time we take off the kid gloves," Meunier said. "You need penalties to punish, to really send a message: we're serious. And these penalties should be in the millions and potentially billions of dollars."
While US regulations allowed a penalty of up to US$500,000 per day for non-compliance, Canada's maximum penalty for a severe violation is CAD$500,000 in total.
Earlier this year, TD was hit with the largest penalty ever issued by FINTRAC, totalling $9.2 million, which pales in comparison to its US settlement.
Experts said that Canada’s lack of tough enforcement has created an environment where financial institutions face little risk for non-compliance.
Christian Leuprecht, professor at the Royal Military College of Canada, said money laundering has been a “pervasive problem in Canada that governments have largely been happy to ignore.”
Leuprecht noted that between CAD$45 billion and CAD$113 billion is believed to be laundered annually in Canada. The scale of the issue, he warned, requires more than just bigger fines.
"Yes, we need much more serious fines, but we also need capability capacity to investigate,” Leuprecht said. “We have terrible capacity in this country to investigate."
He added that without the threat of meaningful consequences, banks operate with little fear of being caught or facing significant penalties.
"Banks in this country have nothing to fear. We have a financial intelligence unit that is essentially an administrative compliance unit," Leuprecht said.
The situation is compounded by the ability of the private sector to lure top talent away from regulatory agencies. Meunier pointed to the recent hire of former FINTRAC executive Nathalie Martineau by TD Bank to head its anti-money laundering governance. He warned that regulatory bodies are struggling to retain expertise when they can’t compete with private-sector salaries.
To address the issue, Meunier advocated for stronger enforcement and increased resources for regulators like FINTRAC. He believes the agency should have more authority to impose conditions on banks, much like US regulators, who capped TD Bank’s asset growth in the US until it improves its anti-money laundering efforts.
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The federal government has started taking steps to strengthen Canada’s anti-money laundering regime. Last year, it held public consultations and introduced tougher regulations for non-bank entities like casinos and title insurers. It has also invested nearly CAD$379 million since 2019 to fight financial crime.
Despite growing awareness of the issue, some experts are sceptical that these changes will lead to meaningful results.
Sanaa Ahmed, assistant professor at the University of Calgary’s faculty of law, noted that while there is a lot of discussion around money laundering, “there doesn't seem to be that shift” in actual enforcement. She said the government may be hesitant to clamp down too hard, given the economic benefits that flow from international capital.
"It appears fairly clear that the government doesn't want to," Ahmed told The Canadian Press.
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