Of the $554 million stolen by online scammers, over $10 million of that sum was public funds doled out to criminals in the last five years by municipalities and First Nations across Canada.
According to the Toronto Star, fraudsters would begin by impersonating a service provider with the money ultimately ending up in bank accounts in Ontario.
Data provided by the Canadian Anti-Fraud Centre shows there has been a 46% spike in fraud claims since 2021.
One of these scams recently took $1.5 million from the City of Greater Sudbury.
Many of the institutions that were the victims of these crimes did not make their losses public, preferring to deal with these matters privately in court.
While much of the stolen money has since been recovered, there are still funds which cannot be tracked down.
“It’s a major Canadian problem,” Toronto forensic accountant Al Rosen told the Toronto Star.
Rosen said that municipalities lack the basic controls over their accounting systems to properly keep themselves protected from fraud.
“They’re just being willing victims for the guys who want to con them,” he said.
Fraudsters will often pose as contractors to gain access to funds, with the City of Kelowna getting scammed out of $4 million from a fraudster pretending to be a city-contracted construction company.
They tricked city officials into setting up electronic deposits into a Scotiabank account which did not belong to the real company.
The scammer had forged the contractor’s signature and created a fake domain name and email addresses.
Within four months of the fraud, Kelowna officials managed to recoup almost all of the funds except for $20,000. The money had been intended for an integrated water distribution project.
According to a statement of claim filed in an Ontario court in July 2019, Kelowna officials discovered it was a fraud after Scotiabank contacted them to ask if the transactions should be made to a business located in Mississauga, which is located about 4,000 kilometres away.
“Why didn’t you catch it at the first point of access where you were actually dealing with the client?” Vanessa Iafolla, principal at Halifax-based Anti-Fraud Intelligence Consulting asked, in an interview with the Toronto Star.
Iafolla said that fraud cases are usually the consequence of failures at multiple points of any given transaction.
Kelowna did not notify the public of the fraud, nor has it since disclosed the legal costs of recuperating it.
“The public was not notified in this case because there was no breach of data affecting the public and the majority of funds were recovered,” said spokesperson Tom Wilson, who felt notifying the public may be advantageous to other scammers who are looking into ways to commit further fraud within the system.
A similar story happened in Surrey which was the victim of a $2 million scam the same year.
They also managed to recover most of the money that was stolen, however, not without leaving taxpayers with a $100,000 bill for the costs of the investigation and recovery process. Surrey also kept the news of the scam from the public.
While the city would not discuss details of the case with The Star, they did confirm that the fraud case involved an ex-cop who later became a lawyer.
Surrey alleged that Ganesh Balaganthan, a former police officer who would later become a practicing lawyer in Toronto and immigration paralegal Amir Akhtar were involved in the scam, among others.
A similar incident happened to Saskatoon, however, that city chose to issue press releases about the fraud and eventually managed to recover all of the stolen funds.
According to Iafolla, the reason municipalities and corporations have more success in recouping their stolen funds is because they have the resources to do so.
Despite the advantage, the cost of recovering the money is quite an expense unto itself.
First Nations have also fallen prey to online scammers as well, like Cross
Lake Band of Indians in Manitoba, who sent $847,947 to a bank account in London, Ont. under the impression that it belonged to a contractor who was constructing a public works facility on their reserve last November.
They have since filed a lawsuit in a Toronto court, hoping to freeze and track the lost funds.
The Naskapi Nation of Kawawachikamach in Quebec was the victim of a $65,860 fraud scam in January of 2022.
“We’re seeing this all over the place. So it’s not that systems are any weaker than the rest of Canada,” said Rosen.
A total of $554 million in lost money to fraud was reported across the country last year, according to the Canadian Anti-Fraud Centre.
“The less private we are with ourselves and the more reliant we are on the internet, the more possible it is in general for different kinds of fraud to take place and to proliferate,” said Iafolla.
