Financial Crime World

Canada Cracks Down on Financial Crimes: Understanding the Definitions

Canada is taking a firm stance against financial crimes, including money laundering and terrorist financing. Here’s a look at the definitions of these illicit activities within the Canadian context.

Money Laundering

Money laundering is the process of making illegally-gained proceeds appear legal 1. Money launderers attempt to move tainted money through legitimate channels to disguise its source. methods of money laundering include:

  • Structuring cash transactions to avoid detection by banks
  • Purchasing high-value assets
  • Creating complex financial transactions

The Canadian Criminal Code outlines various offenses related to money laundering 2:

  1. Possession of proceeds of crime
  2. Proceeds of crime obtained by crime
  3. Converting proceeds
  4. Knowingly dealing with proceeds
  5. Operating a money services business without due diligence

These offenses carry substantial penalties, including fines, forfeitures of assets, and imprisonment 3.

Terrorist Financing

Terrorist financing is the process of providing financial support to terrorist organizations or their members, with the intention of furthering their ideological, political, or violent objectives 4. This support can take various forms, such as:

  • Transfer of funds or assets
  • Provision of goods and services
  • Use of non-profit organizations

Terrorist financing is illegal under both Canadian and international law 5:

  1. United Nations Security Council Resolutions
  2. Proceeds of Crime (Money Laundering) and Terrorist Financing Act

In Canada, financial institutions and other reporting entities are required to report any suspicious transactions to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) if they suspect money laundering or terrorist financing 6. FINTRAC analyzes reported transactions, and if necessary, may refer instances to law enforcement authorities for further investigation.

Key Distinctions

Though related, money laundering and terrorist financing must be distinguished 7 :

  • Money laundering involves disguising the criminal origins of funds.
  • Terrorist financing specifically involves providing funds to a terrorist group.

Both activities undermine the integrity of the financial system and threaten national security, making it crucial for individuals and organizations to be aware of their definitions and reporting obligations.

  1. Money laundering is the process of making illegally-gained funds appear legitimate. (Source: Financial Transactions and Reports Analysis Centre of Canada) ↩︎

  2. Specific offenses related to money laundering as defined in the Canadian Criminal Code. ↩︎

  3. Penalties for money laundering offenses as outlined in the Canadian Criminal Code. ↩︎

  4. Terrorist financing is the provision of financial support to a terrorist group or its members. (Source: Financial Transactions and Reports Analysis Centre of Canada) ↩︎

  5. Laws pertaining to terrorist financing in the Canadian context. ↩︎

  6. Reporting requirements for financial institutions and other reporting entities in relation to suspicious transactions under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act in Canada. ↩︎

  7. Distinction between money laundering and terrorist financing. ↩︎