Money laundering is the process of disguising the proceeds of illegal activity as legitimate funds. It is a serious crime that can have far-reaching consequences, including the financing of terrorism and the destabilization of financial systems. In this article, we will explore what money laundering is and how it is regulated in Canada.
- Definition of money laundering in Canada
In Canada, money laundering is defined as any act or attempt to conceal or disguise the proceeds of a designated offence as legitimate funds. A designated offence is any offence listed in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, as well as any other offence under federal or provincial law that is punishable by imprisonment for a term of more than six months.
- How money laundering works in Canada
Money laundering in Canada typically involves three stages:
- Placement: This is the first stage of money laundering, during which the proceeds of a designated offence are introduced into the financial system. This can be done through activities such as depositing cash into a bank account or purchasing high-value assets with cash.
- Layering: The second stage of money laundering is layering, during which the proceeds are moved and restructured to conceal their illegal origin. This can be done through activities such as transferring funds between accounts, using shell companies, or engaging in complex financial transactions.
- Integration: The final stage of money laundering is integration, during which the laundered funds are reintroduced into the economy as legitimate funds. This can be done through activities such as investing in businesses or real estate, or using the funds to make purchases.
- Regulation of money laundering in Canada
In Canada, money laundering is regulated by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). The PCMLTFA establishes a system for reporting and preventing money laundering and terrorist financing in Canada. It requires certain individuals and entities, known as “reporting entities,” to report suspicious transactions and large cash transactions to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
The PCMLTFA also requires reporting entities to establish and implement anti-money laundering and anti-terrorist financing policies and procedures. These policies and procedures must include measures to identify and verify the identity of their clients, to identify and report suspicious transactions, and to keep records of their transactions and client identification.