RESOURCE MATERIAL SERIES No. 58

CANADA’S ANTI-MONEY LAUNDERING REGIME
Daniel P. Murphy *I. INTRODUCTION
Canada enacted criminal law which,inter alia, criminalized money launderingin 1989. Part XII.2 of the Criminal Codeof Canada1 contains a money laundering
offence2. This Part also establishes all theessential provisions required to seize,
restrain and ultimately forfeit “proceeds ofcrime” 3. That Part is the proceduralfoundation for most money laundering
investigations in Canada. The provisions
in the Part go on to limit the crimes forwhich special search, restraint andforfeitures orders are available to a number* Senior Counsel, Strategic Prosecution, Policy
Section, Justice Canada, Canada
1 Revised Statutes of Canada, 1985, Party XII.2, as
amended. This can be accessed, over the internet,
at http://canada.justice.gc.ca/en/laws/C-46/
36036.html#rid-36081
2 Section 462.31. An identical money laundering
offence was included in the relevant drug law.
Subsequently, money laundering offences were
included in the new Controlled Drugs andSubstances Act, the Customs Act, and the new
Corruption of Foreign Public Officials Act. As
appropriate, money laundering offences areincluded in other federal laws.
3 The Code creates an expansive definition ofproceeds. It includes proceeds from Canadian andforeign offences. The definition reads as follows :“proceeds of crime” means any property, benefit
or advantage, within or outside Canada, obtainedor derived directly or indirectly as a result of(a) the commission in Canada of an enterprisecrime offence or a designated substanceoffence, or(b) an act or omission anywhere that, if it had
occurred in Canada, would haveconstituted an enterprise crime offence ora designated substance offence.

286

of predicate offences, which Canadian law
describes as “enterprise crime offences”4.
There is some thought of a revision to
the existing provisions so that proceeds of
all crimes would be covered by the Part
XII.2 scheme.5 The problem with a law that
attempts to list crimes, which may resultin forfeitures, is that individuals frequently
migrate to non-listed crimes for profit.
They can avoid the loss of their criminal
profits and, ultimately, they become more
successful criminals.6
In the last decade there has been aconcerted effort to estimate the magnitudeof the money laundering problem. In
UNAFEI’s 117 th International Senior
Seminar Rationale and Objectives
document the magnitude of the laundering
phenomenon is described in the seminarrationale. I was impressed with that
document’s references to US$300 to $500
billion in money laundering from the drugtrade alone. I was as impressed with thereference to the Bank of Credit andCommerce International (BCCI) affair andthe seizure of US$12 Billion in assets.
In spite of those figures, I always asked
myself why we should be concerned withthe magnitude question. The magnitudeof a problem is important if you areconsidering the issue ab initio. You may
also need to understand the magnitude of
the problem if you have to determine the4Section 462.3 sets out the list of relevant offences.
Currently, the predicate offences include 48 broadclasses where the common element is that theoffence could generate profits (i.e. “proceeds ofcrime”).

117TH INTERNATIONAL SEMINAR
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amount of investigative and prosecution
resources you propose to put against theissue. It should not become an overarchingissue since such figures are impossible toprove and as difficult to justify. The simple
fact is that criminals launder their profits
of crime to defeat a state’s attempt to seize
those profits. I suggest that the magnitude
issue is less relevant to a better
appreciation of the approaches States cantake to the money laundering problem.
Naturally, this assumes that countries
agree that money laundering is a criminal
justice issue.

There have been numerous studies on
the harm to national economies and theglobal financial system as a result of money
laundering.7 I do not intend to discuss themagnitude of money laundering issue. I
take the phenomenon as a truism and themagnitude issue is less important than theability to investigate and prosecute (civilly
or criminally). In Canada’s case we haveelected to investigate and prosecute money
laundering under our criminal law. 8
Criminals will move their criminal profits,
abuse the financial system and ignore
national laws because they are criminals.
Anyone who sells deadly drugs, illegally,

5

would determine which serious crimes would bedesignated as money laundering predicate offences.
6 In 1892 Canada abolished the common law’s
historic ability to forfeit upon conviction for a felony.
The 1892 Code prohibited “any attaindre or
corruption of blood, or any forfeiture or escheat”
but it retained the ability to forfeit as part of asentence. Until 1989 forfeitures were reserved to
specified things (e.g. guns, explosives) and offences.
The new provisions implemented the 1988 Vienna
Conventions requirements, expanded the concept
to the listed enterprise crimes and created acriminal offence of money laundering.
7 The Basel Committee on Banking Supervision (seehttp://www.bis.org/ ) developed the “Core Principles
for Effective Banking Supervision” (see: http://
www.bis.org/publ/bcbs30a.pdf ). In addition, theBasel Committee’s study on “Prevention of Criminal
Use of the Banking System for the purpose of MoneyLaundering” (see: http://www.oecd.org/fatf/pdf/
basle1988_en.pdf ) illustrates the financial
community’s concern with money laundering.
Similar concerns can be seen in the securities andinvestment sector (see the International
Organisation of Securities Commissions’ Core
Principles, at http://risk.ifci.ch/144440.htm), andthe insurance sector, where various principles andstandards of the International Association of
Insurance Supervisors (IAIS) and the Offshore
Group of Insurance Supervisors consider money
laundering issues

The initial impetus for criminal forfeitures, at theinternational level, can be found in the 1988 Vienna
Convention against Illicit Traffic in Narcotic Drugs
and Psychotropic Substances. Pressure to expand
beyond a drug based attack against criminal profits
developed in the 1985 Milan Plan of Action (i.e. a
Plan adopted by the Seventh United Nations
Congress on the Prevention of Crime and theTreatment of Offenders) and the 1994 Naples
Political Declaration and Global Action Plan. The
Naples meeting was the precursor to the very recent
United Nations Convention against Transnational
Organized Crime.
The Financial Action Task Force [(see: http://
www.oecd.org/fatf/index.htm), an international
body that emerged from an initiative of the 1989
G7 Summit, as well as the growth of regional FATF
type bodies (such as the Asia/Pacific Group on
Money Laundering (APG) (see: http://www.oecd.org/
fatf/Ctry-orgpages/org-apg_en.htm) and the
Caribbean Financial Action Task Force (CFATF)(see: http://www.oecd.org/fatf/Ctry-orgpages/orgcfatf_en.htm)] advocated a broadly based money
laundering provision. This is the clear intent of
the FATF’s Recommendation 4. It reads as follows:
Each country should take such measures as may
be necessary, including legislative ones, to enable
it to criminalise money laundering as set forthin the Vienna Convention. Each country should
extend the offence of drug money laundering to
one based on serious offences. Each country287

RESOURCE MATERIAL SERIES No. 58
for profit does not care that they may haveto bribe a banker or corrupt a government
official. That type of activity is a cost of
doing business. I expect that other experts
at the Seminar will be better able to fully
discuss the magnitude of the money
laundering phenomenon.9 I leave that issue
to those experts.
The more interesting issue is how acountry approaches money laundering
problems. What are the lessons, if any, it
has learned? What are its roadblocks toeffective money laundering investigations
and prosecutions? How can nations
combine their sovereignties to react tocriminals who use territorial sovereignty
to shelter their profits or hinder
investigations? These are all valid
questions. In this paper I will try andanswer some questions that develop from
Canada’s anti-money laundering regime.
In a second discussion I will examine theemerging development of privacy laws,
electronic cash and similar issues in theanti-money laundering context.
II. INVESTIGATIVE AND
FORFEITURE’S ROLE IN CANADA’SPROCEEDS OF CRIME REGIME
The 1989 revision to Canada’s Criminal
Code built upon earlier work. In 1973 theoffence of possession of property obtainedby crime was added to the Canadian
8

On December 5, 2000 the Province of Ontario tabled
the Remedies for Organized Crime and Other
Unlawful Activities Bill, a new civil forfeiture ofproceeds of crime law. (See Bill 155, at http://
gateway.ontla.on.ca/library/bills/155371.htm). It is
an interesting option but investigative andlitigation results will be the final arbiter of thesuccess of that approach.
9 If this assumption is incorrect the FATF publishes
reports from its annual money laundering trends
and typologies meetings. (see http://www.oecd.org/
fatf/FATDocs_en.htm#Trends)

288

criminal law.10 The possession offence was
not generally used. In the early 1980 the
RCMP established an anti-drugprofiteering unit to attack the property
obtained by drug traffickers. They targeteda bank account but the courts ultimately
overturned their search warrant. That
warrant purported to seize the money held
on deposit in the bank and the court heldthat a warrant could only seize tangibles
while the money on deposit was anintangible.11
The inability of the police to freeze theassets in the Montreal bank accountcreated added impetus for the subsequentmajor proceeds of crime amendments. The
Part XII.2 scheme created an ability to
trace and freeze proceeds of crime at theinvestigative stage, long before charges
were laid.12 Once property is seized or
retrained further provisions apply to theproperty. The court has jurisdiction toaccept applications to challenge the seizureor restraint orders. A person effected by
the seizure, (i.e. the person in possession
or a person having a valid interest in thething) can seek to overturn the order or,
10 S.C., 1972, C.13, s.27.

The provision is now foundin subsection 354(1). It creates an offence
punishable by two years, whenever anyone
possesses property obtained from the commissionsof an indictable offence. The subsections states:
354. (1) Every one commits an offence who has
in his possession any property or thing or
any proceeds of any property or thingknowing that all or part of the property or
thing or of the proceeds was obtained by orderived directly or indirectly from(a) the commission in Canada of an offence
punishable by indictment; or(b) an act or omission anywhere that, if it
had occurred in Canada, would haveconstituted an offence punishable byindictment.
11 Royal Bank v. Bourque (Sub nom. Quebec A.G. v.
Royal Bank) (1985) 18 C.C.C. 98

117TH INTERNATIONAL SEMINAR
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alternatively, seek payments from thetargeted assets to cover reasonable living
business and legal expenses.13
Any proceeds investigation can proceed
simultaneously with the investigation of apredicate offence. It can follow thepredicate offence or it can be a stand-alone
investigation. This is because thepossession offence is itself a predicate
charge. The Canadian system is flexible.
A criminal could be charged and convictedof the single predicate offence and all of her
proceeds of crime could be forfeited. This
forfeiture must occur at the time ofsentence for the offence. The onus on theprosecutor is to establish that the property
is proceeds from the offence charged, on abalance of probabilities standard of proof.14
Alternatively, the offender could have
served their time on the principal charge
and subsequently face a possession ofproceeds of crime charge that allows forforfeiture. They could also be charged witha money laundering offence. In thosescenarios the forfeiture options continue.
Independent money launders, not involvedin the underlying offences that gave riseto the proceeds of crime, could also be
investigated and charged with that offence.
Forfeiture is available. In addition,
Canadian law, for any drug or organizedcrime offence, provided that “offence
related property”, sometimes referred to as
an instrumentality, can be seized,
restrained and subsequently forfeited upon
12 Sections 462.32 and 33 of the Criminal Code allow

applications to the court with evidence that
supports a reasonable belief that the targeted
property may be forfeited. Subsection 462.35
provides that the seizure or restraint is in force forsix months. It is renewed once charges are laidbut it can be extended if the investigation iscontinuing.
13 Section 462.34
14 Section 462.37(1)conviction.
III. MONEY LAUNDERING,
TRANSACTION REPORTING AND A
FINANCIAL INTELLIGENCE UNIT,
CANADA’S REGIME
In 1991 Canada enacted a Proceeds ofCrime (money laundering) Act.15 This Act’s
declared object, as provided in section 2,
specified that:
The two referenced sections are
Canada’s money laundering offences at thetime the Act was drafted. This object was
accomplished by a regulatory package16.
The regulations established financial
sector account creation; customer
identification; record keeping; and related
record requirements. The regulations cameinto force on March 26, 1993 and the result
partially satisfied international
expectations. It created a paper trail formoney laundering investigations andprosecutions. It did not oblige effectedbusinesses to actually report suspicioustransactions.
There was no specific bank secrecy law
in Canada when the Act became law.
Financial institutions and other effectedbusiness could “voluntarily report”
suspicious transactions. 17 Subsequentdevelopments resulted in the new Proceeds
15 Statutes of Canada 1991,c.26, in R.S.C 1985, C. P-

24.5 as amended. (see http://canada2.justice.gc.ca/
en/laws/P-24.5/79312.html )“(T)he object of this Act is to establish recordkeeping requirements in the financial field in orderto facilitate the investigation and prosecution of
offences under subsection 462.31(1) of the Criminal
Code and subsection 9(1) of the Controlled Drugs
and Substances Act.
16 Proceeds of Crime (Money Laundering) Regulations,as amended, SOR/93-75 (see http://
canada2.justice.gc.ca/en/laws/P-24.5/75/
145024.html )289

RESOURCE MATERIAL SERIES No. 58
of Crime (Money Laundering) Act18. This
new law is now being implemented over a
suitable transition period. Prior to
examining these new provisions it isimportant to consider other legal
developments.

Subsequently, the courts have adopted an
expansive interpretation of an individual’sreasonable expectation of privacy.19 Thisdevelopment evolved as courts interpreted
the scope of s. 8 of the Charter in various
cases.

IV. INCREASED PRIVACYEXPECTATIONS

Concomitantly, privacy expectations
became the banner for significant changes
as a result of the explosive growth of theInternet and the need to protect electroniccommerce. This led to a new law that has
a direct impact on every business in
Canada. The Personal Information
Protection and Electronic Documents Act20.
It came into force on January 1, 2001. It
specifically covers banks; other federally
regulated financial institutions; and otherfederal business organizations.
Transitional provisions provide that all

Privacy expectations of Canadians havesignificantly evolved since 1993 when thefirst Proceeds of Crime (money laundering)
Act came into force. The precursor toincreased privacy expectation is seen in
constitutional protections in Canada’s 1984
Charter of Rights and Freedoms.
17 The common law established an expectation ofconfidentiality between a financial institution andits client. A reporting concept was a voluntary
obligation in light of the confidentiality relationshipbetween a financial institution and its client.
Section 462.47 of the Criminal Code (see http://
canada.justice.gc.ca/en/laws/C-46/36036.html#rid36081) developed the voluntary reporting theory
by providing as follows :“For greater certainty but subject to section 241of the Income Tax Act, a person is justified indisclosing to a peace officer or the Attorney
General any facts on the basis of which that
person reasonably suspects that any property isproceeds of crime or that any person has
committed or is about to commit an enterprisecrime offence or a designated substance offence.”
18 The most important development was thesignificant revision to the FATF’s Recommendation
15. Its predecessor called upon States to consider
a requirement to report suspicious transactions tocompetent authorities. Canada’s voluntary
reporting regime could be said to comply with theearlier recommendation. It did not comply withthe revised recommendation which states, as
follows:
15. If financial institutions suspect that funds
stem from a criminal activity, they should be
required to report promptly their suspicions tothe competent authorities.

290

19 For many years the leading case on bank secrecy

was the Tournier v. National Provincial Bank ofEngland, [1924] 1 K.B. 461 (C.A.). See also
Canadian Imperial Bank of Commerce v. Sayani[1994] 2 W.W.R. 260 (B.C.C.A.). In a 1993 case, R.
v. Plant (http://www.canlii.org/ca/cas/scc/1993/
1993scc96.html), the Supreme Court of Canada
held that s. 8 of the Charter protected abiographical core of personal information
maintained by a commercial enterprise in certain
scenarios. In Plant the police obtained hydroconsumption records from a city utility company
without a search warrant. Justice Sopinka, for the
majority, opined on the issue of access to commercial
information as follows :“The United States Supreme Court has limited
application of the Fourth Amendment (the rightagainst unreasonable search and seizure)protection afforded by the United States
Constitution to situations in which theinformation sought by state authorities is
personal and confidential in nature: UnitedStates v. Miller, 425 U.S. 435 (1976). That casedetermined that the accused’s cheques,
subpoenaed for evidence from a commercial bank,were not subject to Fourth Amendment
protection. While I do not wish to be taken

117TH INTERNATIONAL SEMINAR
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other Canadian businesses will become
subject to that law within three years. Thislaw controls the business collection of
personal information and the subsequent
use and disclosure of such information. I
will address the investigative impact of thisinitiative in another paper but, for thepresent, it is sufficient to indicate that acustomer’s personal information held by
any business in Canada now has greater
protection than ever.
V. THE NEW PROCEEDS OF CRIME(MONEY LAUNDERING) ACT
The development of an increased privacy
concern for personal information held bycommercial businesses is crucial to any
appreciation of the evolution of Canada’s
new Proceeds of Crime (Money Laundering)
Act. This law received assent on June 29,2000 Canada’s but it is, as yet, not fully inforce. Part III was quickly proclaimed in
as adopting the position that commercial records
such as cancelled cheques are not subject to s. 8
protection, I do agree with that aspect of theMiller decision which would suggest that in orderfor constitutional protection to be extended, theinformation seized must be of a “personal andconfidential” nature. In fostering the underlying
values of dignity, integrity and autonomy, it isfitting that s. 8 of the Charter should seek toprotect a biographical core of personal
information which individuals in a free anddemocratic society would wish to maintain andcontrol from dissemination to the state. This
would include information which tends to reveal
intimate details of the lifestyle and personal
choices of the individual. The computer records
investigated in the case at bar while revealing
the pattern of electricity consumption in theresidence cannot reasonably be said to reveal
intimate details of the appellant’s life sinceelectricity consumption reveals very little about
the personal lifestyle or private decisions of theoccupant of the residence.”
20 S.C., 2000, C.5

force on July 5, 2000. That Part was
implemented to provide sufficient
opportunity to establish and equip
Canada’s new Financial Transactions andReports Analysis Centre. The remainderof the Act will come into force with acomplete regulatory package, after theCentre is ready for business.
All businesses covered under thepredecessor Act will remain covered in the
new law. The new Act allows additional
sectors to be added by regulation. The Act
and Regulations will also create a crossborder currency regime. Individuals andbusinesses that conduct cross-bordertransfers of large amounts of money will
be required to report these transfers to
Canada Customs. Again, regulations will
be developed to allow effective customs
reporting and forfeiture provisions. The
Act further provides that unreported cash
at the border can be forfeited and available,
in appropriate cases, for sharing21.
The new, independent, financial
intelligence unit, known as the Financial
Transactions and Reports Analysis Centreof Canada (the Centre), was established tooperate as the competent authority for the
purposes of the FATF’s Recommendation
15. This Centre will receive and administer
the information transmitted to it inaccordance with the Act. It will analyse
the information in all filed reports anddisclose designated information to an
appropriate police force, when specified
conditions are met.
The establishment of a suspicioustransaction-reporting centre in Canada isa novel development in Canada’s law. The
concept has been widely accepted
throughout the world 22. Internationalpressure to establish a financial
intelligence unit must be considered in
21 S.C. 2000, C. 17, s. 22

291

RESOURCE MATERIAL SERIES No. 58
light of Canada’s constitutional frameworkand its Charter. Our Charter normallyrequires a prior judicial authorization
before an agent of the state, such as the
new Centre, obtains information.23 This
had a significant impact upon the drafters
as the new law developed. The RCMP, asa law enforcement agency, could not hostthe Centre without creating a Charter risk.
Essentially, if a law enforcement agency,
directly or through a subsidiary part of theenforcement agency, obtained personal
information without a warrant. It operates
under a significant section 8 Charter risk.
The solution was to establish a new
independent agency.
This new Centre was deliberately
established without investigative powers.
The law also placed significant restrictions
on the amount of data that the Centre could
divulge to investigators.24 Otherwise, theCentre’s information collection activity
activities would be challenged. Its
22 This is best seen in the work of the Egmont Group.)
23 The seminal Supreme Court of Canada’s decisionon point is R. v. Hunter and Southam [1984] 2 S.C.R
145
24 Section 55 first states that the Centre may notdisclose the information it collects, other than under
the provisions set out in subsection 55(3), (4) and(5). Those subsections provide, as follows :(3) If the Centre, on the basis of its analysis andassessment under paragraph 54(c), hasreasonable grounds to suspect that designatedinformation would be relevant to investigatingor prosecuting a money laundering offence, theCentre shall disclose the information to(a) the appropriate police force;(b) the Canada Customs and Revenue Agency,
if the Centre also determines that the
information is relevant to an offence ofevading or attempting to evade paying taxes
or duties imposed under an Act ofParliament administered by the Minister of
National Revenue;292

authority to collect suspicious or proscribedtransaction reports may have been seen asa backdoor device for law enforcement. The
Charter required law enforcement to use
search warrants and similar priorauthorizations. The new Centre was adeliberate choice in the Proceeds of Crime(Money Laundering) Act as a suitable
compromise to undertake a regulatory andanalysis function, rather than a law
enforcement function.
When fully implemented, the Act repeals
its predecessor. Structurally, the Act
consists of five parts. Part I contains
specific objects25 which define the purposes
for the legislation. This Part obliges adesignated business to make and maintainrecords; report either questionable (i.e.
suspicious) or prescribed financialtransactions 26 to the new Centre. The
record keeping and maintenance provisions
will continue to facilitate an investigative
paper trail. Law enforcement will have to(c)the Canadian Security Intelligence Service,
if the Centre also determines that the
information is relevant to threats to thesecurity of Canada within the meaning ofsection 2 of the Canadian Security
Intelligence Service Act; and(d) the Department of Citizenship andImmigration, if the Centre also determinesthat the information would promote theobjective set out in paragraph 3(j) of the
Immigration Act and is relevant todetermining whether a person is a person
described in subsection 19(1) or (2) or section
27 of that Act or to an offence under section
94.1, 94.2, 94.4, 94.5 or 94.6 of that Act.
(4) The Centre may disclose designatedinformation to an institution or agency of aforeign state or of an international organization
established by the governments of foreign statesthat has powers and duties similar to those of
the Centre if(a) the Centre has reasonable grounds to117TH INTERNATIONAL SEMINAR
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use search warrants or voluntary
disclosures to access that trail. On theother hand, the Centre will have significant
financial information for its purposes
Part II creates cross border currency andmonetary instrument reporting
obligations. Persons must report tosuspect that the information would be
relevant to the investigation or prosecutionof a money laundering offence or asubstantially similar offence; and(b) the Minister has, in accordance withsubsection 56(1), entered into an agreement
or arrangement with that foreign state orinternational organization regarding theexchange of such information.
(5) The Centre may disclose designatedinformation to an institution or agency of aforeign state that has powers and duties similar
to those of the Centre if(a) the Centre has reasonable grounds tosuspect that the information would be
relevant to the investigation or prosecutionof a money laundering offence or asubstantially similar offence; and(b) the Centre has, in accordance withsubsection 56(2), entered into an agreement
or arrangement with that institution or
agency regarding the exchange of suchinformation.
25 The objects are found in s. 3 and state :The object of this Act is(a) to implement specific measures to detect anddeter money laundering and to facilitate theinvestigation and prosecution of money
laundering offences, including(i) establishing record keeping and client
identification requirements for financial
services providers and other persons thatengage in businesses, professions or activities
that are susceptible to being used for money
laundering,(ii) requiring the reporting of suspicious
financial transactions and of cross-border
movements of currency and monetary

Canada’s Customs and Revenue Agency27.
Persons will be obliged to report theimportation or exportation of proscribedcurrency or monetary instruments. Part
III establishes the Centre to collect,analyse, assess and disclose designatedinformation in order to assist in thedetection, prevention and deterrence of
instruments, and(iii) establishing an agency that is responsiblefor dealing with reported and otherinformation;(b) to respond to the threat posed by organizedcrime by providing law enforcement officials with
the information they need to deprive criminalsof the proceeds of their criminal activities, while
ensuring that appropriate safeguards are put inplace to protect the privacy of persons withrespect to personal information about
themselves; and(c) to assist in fulfilling Canada’s international
commitments to participate in the fight against
transnational crime, particularly money
laundering.
26 Two sections are relevant. The first, section 7, deals
with suspicious transaction reporting; the second,section 9, deals with proscribed transaction
reporting. Section 7 provides, as follows:
7. In addition to the requirements referred to in
subsection 9(1), every person or entity shallreport to the Centre, in the prescribed form andmanner, every financial transaction that occurs
in the course of their activities and in respect ofwhich there are reasonable grounds to suspectthat the transaction is related to the commissionof a money laundering offence.:
Section 9 provides for proscribed transaction
reporting, as follows:
9. (1) Every person or entity shall report to theCentre, in the prescribed form and manner, everyprescribed financial transaction that occurs in
the course of their activities.
The Act specifies that something is proscribed byregulations. Therefore, the subsequent regulatory
package will establish when specific transactions,293

RESOURCE MATERIAL SERIES No. 58
laundering the proceeds of crime. The
Centre is also responsible for ensuring
compliance with Part I of the Act. Part IV
authorises the Governor in Council to makeregulations. Part V creates offences,including the failure to report suspicious
financial transactions and the prohibiteduse of information under the control of theCentre.28

as opposed to suspicious transactions, will have tobe reported to the Centre.
27 This will comply with the FATF’s Recommendations
22. The Act establishes a cross border reporting
regime as follows:
12. (1) Every person or entity referred to in
subsection (3) shall report to an officer, in
accordance with the regulations, the importation
or exportation of currency or monetary
instruments of a value greater than theprescribed amount.
(2) A person or entity is not required to make areport under subsection (1) in respect of anactivity if the prescribed conditions are met inrespect of the person, entity or activity, and if
the person or entity satisfies an officer that thoseconditions have been met.
(3) Currency or monetary instruments shall bereported under subsection (1)(a) in the case of currency or monetary
instruments in the actual possession of aperson arriving in or departing from Canada,orthat form part of their baggage if they and theirbaggage are being carried on board the same
conveyance, by that person;(b) in the case of currency or monetary
instruments imported into Canada by courieror as mail, by the exporter of the currency ormonetary instruments or, on receiving noticeunder subsection 14(2), by the importer;(c) in the case of currency or monetary
instruments exported from Canada by courieror as mail, by the exporter of the currency or

294

VI. CURRENT MONEY
LAUNDERING INVESTIGATIVESITUATION IN CANADAThe Royal Canadian Mounted Police(RCMP), within its federal policing
portfolio, operate the national proceeds ofcrime programme.29 They have developed
thirteen Integrated Proceeds of Crime(IPOC) Units tasked with investigative
responsibility for proceeds of crime. These
units include peace officers (RCMP
members and seconded officers from local
monetary instruments;(d) in the case of currency or monetary
instruments, other than those referred to inparagraph (a) or imported or exported as mail,that are on board a conveyance arriving in or
departing from Canada, by the person in
charge of the conveyance; and(e) in any other case, by the person on whose
behalf the currency or monetary instruments
are imported or exported.
(4) If a report is made in respect of currency ormonetary instruments, the person arriving in or
departing from Canada with the currency ormonetary instruments shall(a) answer truthfully any questions that theofficer asks with respect to the information
required to be contained in the report; and(b) on request of an officer, present the currency
or monetary instruments that they arecarrying or transporting, unload any
conveyance or part of a conveyance or baggage
and open or unpack any package or containerthat the officer wishes to examine.
(5) Officers shall send the reports they receive
under subsection (1) to the Centre.
Once again, the regulations will flesh out thereporting requirements.
28 Sections 74 to 80 of the Act create a number ofoffences where persons or entities (e.g.
corporations) criminally fail to comply with the Act.
The penalties vary with the relevant offences but
they include incarceration for up to five years andfines up to $2 million dollars.

117TH INTERNATIONAL SEMINAR
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police departments), tax and customs
officers, forensic accountants, and legal
counsel (i.e. prosecutors and advisors). In
addition the Federal Prosecution Service,
the prosecution arm of the Canadian
Department of Justice, has thirteen
regional offices and branch offices oragents, throughout Canada, who routinely
prosecute proceeds of crime cases
investigated by the RCMP and the major
police forces in Canada.
It should also be appreciated that there
is only one source for criminal law in
Canada. The federal government has thesole authority to enact criminal law andlaws of criminal procedure. This is why
Part XII.2 of the Criminal Code applies toany proceeds of crime criminal
investigation and prosecution.
Various prosecutors can undertake
criminal prosecutions. Federal
prosecutions routinely involve nonCriminal Code money launderingprosecutions, unless a provincial Attorney
General agrees that a federal prosecution
can include a Code “enterprise crime
offence”.30 On the other hand, provincial
Attorneys General and local law
enforcement can investigate and enforce
the criminal law in Canada. The dual
ability of federal and provincial Attorneys
General to prosecute is a novel feature of
the Canadian criminal justice system.

29 The RCMP acts as a contract police force for all but

two provinces (Ontario and Quebec). It also is asignificant player in many municipal police
contracts. It is the major proceeds of crime
investigative authority in Canada. You can accessfurther information on this particular aspect of
their work on the Internet, at http://www.rcmpgrc.gc.ca/frames/rcmp-grc1.htm . The RCMP
currently maintains thirteen Integrated Proceedsof Crime (IPOC) units across Canada in the major
cities and regions.

VII. CANADA’S APPROACH TO
CRIMINAL ORGANIZATIONS
Recently, the money laundering debate
has been intermixed with the issue oftransnational organized criminal groups.
Canada has joined in that debate. There
was a very recent significant modification
to the Canadian criminal law. In 1996 thepublic’s perception of a problem withcriminal organisations resulted in asignificant expansion of the criminal law
and investigative powers in Canada.31 The
RCMP re-focused investigative priorities todeal with the organized crime issue. Theirearlier approach to proceeds of crime
investigations has now become an
integrated approach where proceeds andcriminal organizations are dealt with intandem32.
The two issues are easily related. Any
effective attack against organized crimemust consider the profits from that crime.
Canada and the various Provincial
governments have collectively undertaken
an expanded organized crime programme
as a national initiative. It is primarily
directed against organizations that are
involved in a violent turf war (e.g. outlaw
motorcycle gangs) and others involved intransnational organized crime. Obviously,
30 Section 2 of the Criminal Code defines and controls

the case prosecutor in Canada. Broadly speaking
anyone can institute most criminal charges andprosecute a case. The Code allows the Attorney
General, as defined in s. 2, to intervene and takeover a private prosecution. In addition, only counsel
for the Attorney General can make various proceedsof crime applications, such as applications for
special search warrants and restraint orders
against proceeds of crime and all forfeitureapplications. It is therefore important to ascertain
which Attorney General is conducting aprosecution. Equally, any forfeiture goes to the
Attorney General who made the forfeitureapplication. (See s. 462.37 of the Code)295

RESOURCE MATERIAL SERIES No. 58
this initiative targets groups of individuals.
After all, an organization, by definition,must include five or more persons. This
creates increased investigative costs andsystemic issues for the criminal justicesystem33.
There are proceeds of crime and money
laundering ramifications in any criminalorganization investigation. Collectively,
the organization should realise morecriminal activity. A criminal organization
targets profitable crimes. This justifies
more intensive investigative resources.
Does this mean that states should only
concentrate on organizations? I believethat such a decision would be a mistake.
31 Section 467.1 created a new participation in acriminal organization offence with a maximum
punishment of fourteen years. Section 2 of the Codedefined a criminal organization in the following
manner :“criminal organization” means any group,
association or other body consisting of five or
more persons, whether formally or informallyorganized,(a) having as one of its primary activities thecommission of an indictable offence under thisor any other Act of Parliament for which the
maximum punishment is imprisonment for five
years or more, and(b) any or all of the members of which engage inor have, within the preceding five years, engaged
in the commission of a series of such offences;
The Code’s wiretap provisions were also modified(e.g. A one year wiretap authorization could beobtained) and other related amendments weremade.
32 In February 2000 the RCMP announced a major

new organized crime initiative. See http://
www.rcmp-grc.gc.ca/frames/rcmp-grc1.htm.
33 The system must adapt to larger trials. The
evidence is much more complex. Year long wiretap
investigations, multiple defendants and increased
legal aid costs are some of the problems in thisinitiative.

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Any organized criminal or criminalorganization, and I intentionallydistinguish between the two concepts,
launders to protect their profits. The
activity of either requires that criminal
profits be laundered. Any money
laundering has a serious negative effectupon financial systems. It involves thesame issues and creates demands for thesame limited investigative resources. The
individual “organized” criminal andcriminal organizations, in general equallyharm societal interests. The scale of thecriminal activities and profits is the only
significant difference.
The fact is criminal profits can be used
to buy financial and other advice. Theinternational financial system is available
for a rich individual criminal or a criminalorganization. Either type of criminal must
use the same techniques to launder theircriminal profits. Indeed, with the evolutionof the global financial system, any
criminal’s laundering difficulties are easier.
Apart from exceptional investigative
authority 34 available in a criminalorganization offence, the investigative
effort is the same.
The problem is that criminalorganizations are merging to takeadvantage of expertise available in anotherorganization. Why compete when a mergedorganization is more efficient? The merged
groups work off each other’s strengths.
They do not compete for the media’s
attention. They do not have to worry what
they next year’s budget allocation will be
and how their manpower needs will be
resolved. The reality is that organizedcrime groups are sometimes more efficient
34 Section 186.1 of the Criminal Code permits a one

year wiretap authorization when the underlying
investigation is committed for the benefit of, at thedirection of or in association with a criminalorganization.

117TH INTERNATIONAL SEMINAR
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than law enforcement. National selfinterest and laws are irrelevant to acriminal organization!
In order that nations respond to thisreality their law enforcement agencies
must do their investigations more
effectively. States and law enforcement
must co-operate or recognise that criminalorganizations will continue on the basisthat laws and the police are minor
inconveniences. This means that newforms of international co-operation must be
developed. Time and space restraints limit
a discussion of this issue.
I can raise at least one investigativetechnique to illustrate this fact. Moneylaundering creates a need to develop proactive investigative techniques. The police
can not wait at their station for aremorseful criminal to walk in andconfess35. One effective technique can beseen in a law enforcement storefront
operation. Does a storefront money
laundering operation offer the police a
problem free effective alternative
investigative technique?
35 R. v. Bond, 135 A.R. 329 (Alberta C.A.) at page 333

opinedIllegal conduct by the police during an
investigation, while wholly relevant to the issue ofabuse of the court’s processes, is not per se fatal toprosecutions which may follow: Mack, supra, at 558.
Frequently it will be, but situational police illegality
happens. Police involve themselves in high speed
chases, travelling beyond posted speed limits.
Police pose as prostitutes and communicate for that
purpose in order to gather evidence. Police buy,
possess, and transport illegal drugs on a daily basis
during undercover operations. In a perfect world
this would not be necessary but, patently, illegal
drug commerce is neither successfully investigated,
nor resisted, by uniformed police peering throughhotel-room transoms and keyholes or waiting
patiently at police headquarters to receive theconfessions of penitent drug-traffickers :VIII. MONEY LAUNDERINGINVESTIGATIVE TECHNIQUESAND THE RULE OF LAW
Law enforcement can undertake astorefront money laundering operation
where the police and co-operating agents
hold themselves out as service providers
for criminals. This type of investigativetechnique has advantages and problems.
The police must conceal and convert
criminal assets in this type of operation.
That is the essence of a money laundering
operation. The police view the operationfrom a different perspective. They movemoney or other assets to record thecriminal’s instructions and gather evidence
for subsequent prosecutions. If someone
reviews the law enforcement activity froma justice policy viewpoint the investigators
may have a good motive but they arecommitting crimes. Are they any better
than the criminals? Some consider thisissue through he eyes of law enforcement
others argue that the rule of law should
apply to the police and the criminals alike.
A. Police Illegality
The Supreme Court of Canada
considered the police illegality issue in apolice reverses sting drug investigation. In
R. v. Campbell and Shirose36, the court heldthat the police were not immune from
criminal liability for criminal activities
committed in the course of a bona fidecriminal investigation. However, whileobserving that “everybody is subject to theordinary law of the land”, the Supreme
Court explicitly recognised that “if someform of public interest immunity is to beextended to the police...it should be left to
Parliament to delineate the nature and
36 This and other Supreme Court decisions can be

f o u n d a t : h t t p : / / w w w. s c c - c s c . g c . c a /Judgments_Jugements/menu_e.htm. . R. v.
Campbell and Shirose can be accessed at http://
www.canlii.org/ca/cas/scc/1999/1999scc18.html.

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RESOURCE MATERIAL SERIES No. 58
scope of the immunity and thecircumstances in which it is available”. The
Court noted further that “in this country
it is accepted that it is for Parliament todetermine when in the context of law
enforcement the end justifies the meansthat would otherwise be unlawful”. Thismeans that the law must keep up withcriminal activity and address the needs ofproactive law enforcement. That is adifficult requirement in any democracy.
B. Benefits in a Storefront
Operation
The use of storefront money laundering
techniques has been proven to be very
effective. The technique has several
advantages. Criminals come to theundercover police operation rather than thepolice attempting to infiltrate a criminal’sorganization. Criminals, once satisfied
that the storefront money laundering
operation can deliver, frequently divulge
information. Often that is information that
law enforcement would never discover intheir ordinary investigations. Essentially,
criminals brag about their criminal
prowess. Their admissions provide
invaluable criminal intelligence. As amoney laundering service, the storefront
allows law enforcement to better track theassets moved by the undercover operatives.
The storefront client can tell theundercover operative where they want theasset to go, or better yet, the undercover
operative can suggest alternative routes
and investments. In either scenario thelong-term goal is to track, trace, freeze andultimately, forfeit the assets.
C. Associated Problems in a
Storefront Operation
Storefront money laundering operations
also create problems. Frequently thelaundered assets must be moved offshore.
Obviously, foreign law enforcement must
co-operate in these investigations.
Otherwise a domestic investigation that298

moves outside Canada runs the risk of
infringing another State’s law. These
operations must be long term. The up-front
development costs would be easily
frustrated if the police immediatelyarrested the first criminal that brought ina suitcase of cash to be laundered. Thereis a continuous risk that the storefront’s
laundered cash could be used to purchasemore drugs or foster other criminal activity.
This is a difficult reality to deal with assome point in every storefront
investigation.
D. A Police Officer Exception to the
Money Laundering Offence
In Canada we have a concern with illegal
police conduct. The undercover police
officer must inevitably commit a money
laundering offence. The police are subject
to the rule of law. Laundering is a broadly
defined concept in Canada’s criminal law.37
The offence provisions are broad enoughto include the controlled delivery of assetsthat the police know or believe are proceedsof crime. Essentially, the scope of thesection could be seen to resemble controlled
deliveries of drugs.38 The important point
to remember is that the “rule of law”
37 Section 462.31 (1) provides as follows :Every one commits an offence who uses, transfers
the possession of, sends or delivers to any personor place, transports, transmits, alters, disposesof or otherwise deals with, in any manner andby any means, any property or any proceeds ofany property with intent to conceal or convertthat property or those proceeds, knowing or
believing that all or a part of that property or of
those proceeds was obtained or derived directly
or indirectly as a result of(a) the commission in Canada of an enterprisecrime offence or a designated substanceoffence; or(b) an act or omission anywhere that, if it had
occurred in Canada, would have constituted
an enterprise crime offence or a designatedsubstance offence.

117TH INTERNATIONAL SEMINAR
VISITING EXPERTS’ PAPERS
applies. If the police commit an unlawful
act in their investigation the defence willargue that their illegal activity taints theinvestigation and justifies a judicial “stayof proceedings”.
Parliament, to use the words of theSupreme Court, in R. v. Campbell and
Shirose, delineated “the nature and scopeof the immunity and the circumstances inwhich it is available”. This occurred as aresult of a statutory money laundering
exception for law enforcement.39

38 The 1988 Vienna Convention specifically calls uponcountries to co-operate in controlled deliveries ofdrugs. In 1996 Canada’s new Controlled Drugs andSubstances Act’s (CDSA) new Controlled Drugs andSubstances Act (Police Enforcement) Regulations,
SOR/97-234 (see http://canada2.justice.gc.ca/en/
laws/C-38.8/234/67999.html ) established a very
rigorous administrative regime for state supplieddrugs and exceptions for law enforcement when
they undertake investigations that could infringe
the CDSA offences.
39 Subsection 462.31(3) of the Criminal Code, as wellas identical amendments in other money
laundering offences, provides as follows :(3) A peace officer or a person acting under the
direction of a peace officer is not guilty of an
offence under subsection (1) if the peace officer
or person does any of the things mentioned inthat subsection for the purposes of aninvestigation or otherwise in the execution of
the peace officer’s duties
This is not a wide-open exception for any peace
officer. For example foreign law enforcement official
would not be considered to be a peace officer in
Canada. That foreign law enforcement officer or
any civilian agent assisting a peace officer must
act under the direction and control of a peace officer.
In addition the peace officer must be undertaking
the money laundering investigation as part of his/her duties.

It should be noted that the mere
existence of a law enforcement exception
does not mean that the storefront money
laundering operation’s client has no
defences. The exception operates as ashield for law enforcement and persons
acting under the direction and control ofthe peace officer but it does not obviate any
defence for the accused individual.
Entrapment continues to be a recognised
legal defence in Canada40.
40 In 1985, in R. v Jewitt [1985] 2 S.C.R.

128, 136137, the Supreme Court of Canada found thatcourts had a discretion, although it could only be
exercised in “the clearest of cases”. Subsequentdecisions from the court have expanded upon theconcept. Madam Justice L’Heureux-Dub_ has beenquite instrumental in developing the law in thisarea. In R. v. Conway, [1989] 1 S.C.R. 1659, 1667
she said that:“ ... where the affront to fair play and decency isdisproportionate to the societal interest in theeffective prosecution of criminal cases, then theadministration of justice is best served by staying
the proceedings.”

In Power [1994] 1 S.C.R. 601, she defined “theclearest of cases” to mean “conduct which shocks
the conscience of the community.” She said thecases of this nature will be extremely rare. In
O’Connor [1995] 4 S.C.R. 411, 465, she said a staywill only be appropriate when two criteria are
fulfilled:
1. Where the prejudice caused by the abuse inquestion will be manifested, perpetuated or
aggravated through the conduct of the trial,or by its outcome (in other words, this is not a
remedy for past misconduct per se; there has
to be some continuing abuse); and2. Where no other remedy is reasonably capableof removing that prejudice.
Finally, R. v. Mack, [1988] 2 S.C.R 903 is theseminal decision on point. It fully canvassed all
aspects of the issue and raised the problem causedby police illegality.

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E. Storefront Operation
Implementation Issues
In the last decade the RCMP has
undertaken a number of storefront money
laundering operations. They have also
assisted foreign law enforcement in money
pick ups and ancillary activity. The
existence of the law enforcement exception
has assisted the police as they determine
if a proposed storefront or other proactive
investigative technique is appropriate. In
spite of this exception, every storefront
money laundering proposal creates othersignificant issues.

be obtained in all cases. This is importantconsideration in any Canadian storefront
laundering case. A Canadian peace officer
must work on the case so that the officer
and others are sheltered within the
exception created by ss. 463.31. Any
undercover operation will use a Canadianpeace officer. Every foreign peace officer,
posing as an agent, or civilian argent, must
operate under the Canadian peace officer’s
direction and control to shelter under the
exception. They are agents of the state forinterception purposes. This has an impact
on any possible interception.

Some issues are obvious. These
operations became security problems.
Generally, the undercover team deals withsignificant amounts of cash. Proper
personal and exhibit security is required.
Cover teams; safe locales; and record
keeping systems are essential. Storefront
enforcement cases also have otherunexpected surveillance costs.

These operations frequently include aninternational dimension has an effect oninterception options. Canada’s Criminal
Code, and, in particular, Part VI does not
apply outside Canada. This means thatinterceptions of private communications
outside Canada must comply with the law
in the territory upon which the interception
occurred. Charter considerations may
continue to apply42 in some cases. The bestadvise is to obtain judicial authorisations
whenever possible.

F. One-party Interceptions
Every case commences with the
expectation that the best admissible
evidence is sought. Frequently, thisrequires the interceptions of theparticipant’s conversations and video
surveillance of their conduct. This isrequired for the personal security of theoperatives. Equally, interception evidence
is important for the intrinsic value of theevidence obtained by means of theinterception. The problem is that
Canadian interception law creates preconditions that all investigative
participants in a storefront operation
should understand.
Electronic surveillance evidence isadmissible against an accused person, in
Canada, provided that the evidence waslawfully obtained. Canadian law41 provides
that a judicially authorised one-party
consent interception order can and should

300

41 Part VI of the Criminal Code governs.

(See http://
canada.justice.gc.ca/en/laws/C-46/35184.html). Theinterception of private communications by an‹‹agent of the state›› with the consent of one of theparticipants but without prior judicial
authorization violates s. 8 of Canada’s Charter ofRights and Freedoms. The Supreme Court of
Canada, in R. v. Duarte, refused to apply American
jurisprudence and opined that while a s. 184
criminal offence did not occur in a one party consent
interception scenario that in all cases where stateagents consented a prior judicial authorization wasa constitutional prerequisite. (see : http://
www.canlii.org/ca/cas/scc/1990/1990scc2.html ). As
a result subsections 184.1 to 184.4 were added toPart VI of the Code.
42 Section 8 of the Charter gives persons “the right tobe secure against unreasonable search and seizure”.
Case law indicates that the Charter may apply
outside Canada in certain cases.

117TH INTERNATIONAL SEMINAR
VISITING EXPERTS’ PAPERS
G. Other Investigative Conduct
Undercover investigations are a routinefeature in Canadian law enforcement.
Apart from the one-party intercept scenario
undercover operatives have few legal
roadblocks to control their activity.
Recently, the defence bar has seized upon
the R. v. Campbell and Shirose and its
predecessors to successfully argue that any
police illegality taints an investigation andinures to the benefit of the criminal
defendant.
The tainted police conduct shocks thecommunity’s standards of fairness. The
argument is that this conduct requires thecourt to enter a stay of proceedings. Thishas been argued in several cases. Most
occurred before the recent amendment to462.31 creating a law enforcement
exception. 43 The money laundering
exception does not create exceptions forother unlawful conduct. The defence
frequently looks for unlawful activity toadvance a defence. Therefor investigators
must be aware of this concern.
H. Profits or Evidence
Finally, what happens to the profits froma Canadian storefront money laundering
i n v e s t i g a t i o n ? C a n a d a ’s f i n a n c i a ladministration provisions and the criminallaw 44 have another unexpected impact
upon storefront money laundering
operations. The storefront operator
charges the criminal for their investment
or cash conversion activity. If they did not
the criminal would be suspicious. Law
43 In R. v. Mathiesson ((1995), 172 A.R.

196 (Q.B.), acase where the police laundered money. In
R.v.Cresswell (http://www.courts.gov.bc.ca/jdb-txt/
ca/00/05/c00-0583.htm ) the British Columbia Courtof Appeal returned the matter for reconsideration.
44 At the federal level, the Financial Administration
Act, RSC 1985, C. F-11 and the Criminal Code havean impact on the money realized in a storefront
money laundering operation.

enforcement would like to re-invest thesecharges into the operation to help fund thestorefront’s costs. This is a problem.
The realities are that the operation<scosts, recovered from the criminal, areretained as a case exhibit. The heavy
investigative costs for these operations
must be included in the investigative
budget. There can not be a direct transferof the criminals laundering costs to thestorefront’s operations budget. The merefact that money is obtained does notconvert an exhibit into property which thepolice can use for their own purposes.
These exhibits are ultimately disposed of,generally by forfeiture orders.45 There isno direct payment or financial benefit tolaw enforcement.
IX. CONCLUSION
Canada has adopted a moderate andbalanced approach to the problems createdby money laundering. It has constantly
reviewed its laws and attempted to reflect
the best practices of other jurisdictions
around the world. I always end these typesof discussions with the observation thatcriminals are more organized than States.
Criminals use national borders as a shield
whenever it suits their purposes.
Criminals are free to organise for their own
self-interest. They merge as needed andcompete as required.

45 The subsequent disposition of the forfeited property,

in any case prosecuted by the Attorney General of
Canada, is controlled by the Seized Property
Management Act (http://canada2.justice.gc.ca/en/
laws/S-8.3/83666.html). This law specifies thateverything is deposited into a special purpose
account. It also permits domestic sharing with
Provincial governments and international sharing
with foreign governments.

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RESOURCE MATERIAL SERIES No. 58
States seem prone to an approach thatsuggests co-operation while investigatorscompete for budgets and media attention.
The Attorney General of Trinidad andTo b a g o a d v i s e d t h e I n t e r n a t i o n a l
Association of Prosecutors, in a speech at
Ottawa, in September 1998, that nations
had to pool their sovereignties to protect
their sovereignties. Free trade and theeasy movement of capital and information
merely accelerates the need to actuallyadopt the Attorney General’s observation.

302