Financial Crime World

Financial Crime Examples: Saint Pierre and Miquelon’s Role in Smuggling Liquor During Prohibition

Saint Pierre and Miquelon, a French territory located off the coast of Newfoundland, played a significant role in the history of financial crime during the United States’ prohibition era. The territory’s strategic location and favorable laws made it an attractive hub for smuggling liquor into North America.

The Proximity Effect

The Volstead Act, which came into effect on January 1, 1920, prohibited the production, transportation, and sale of alcohol in the United States. However, Saint Pierre and Miquelon, governed by French law, allowed the consumption, production, storage, and transport of liquor. This created a lucrative opportunity for bootleggers to smuggle alcohol into the United States.

Bootlegging Opportunities

  • The territory’s proximity to Canada made it an ideal location for smuggling liquor.
  • Canadian whiskey distillers were drawn to Saint Pierre and Miquelon due to its low import duties and ease of obtaining international landing certificates required by Ottawa to export liquor duty-free.
  • The French government invested heavily in improving the harbor and storage facilities, which accommodated over 1,000 ships per year.

The Rise of Gangsters

Saint Pierre and Miquelon became a haven for gangsters like Al Capone, who was rumored to have a private residence on the island. The territory’s economy flourished, with income from customs alone tripling the operating budget of Saint Pierre and Miquelon before prohibition.

Economic Impact

  • The territory’s economy diversified through tourism and oil and gas exploration after Prohibition ended.
  • However, it has never experienced the same level of prosperity as during those 13 years.

A Cautionary Tale

The story of Saint Pierre and Miquelon’s role in Prohibition-era smuggling serves as a cautionary tale about the consequences of financial crime and the importance of effective regulation. The territory’s experience highlights the potential risks and consequences of failing to regulate financial activities, particularly during times of great demand for illegal goods.

Lessons Learned

  • Effective regulation is crucial in preventing financial crime and maintaining economic stability.
  • A lack of regulation can lead to significant economic and social problems, as seen in Saint Pierre and Miquelon’s experience during Prohibition.