The Financial Transactions and Reports Analysis Centre (FINTRAC) issued an operational alert last week warning regulators to be on the lookout for indicators of “underground banking schemes” – a majority of which have a link to China.
Of a sample of 48,000 financial transactions flagged by FINTRAC as being the result of said schemes, one of the primary facts “was incoming wire transfers from entities or individuals in China, notably in Hong Kong, followed by the movement of these funds through financial institutions.”
FINTRAC officials said that Canadian investment firms and financial institutions were often on the receiving end of “large bank drafts ultimately funded from unknown sources in China.”
The operational alert was part of FINTRAC’s Project Athena, which is run in collaboration with the Combined Forces Special Enforcement Unit – British Columbia.
“Project Athena focuses on improving the collective understanding of the money laundering threat, strengthen financial systems and controls, and disrupt money laundering activity in British Columbia and across Canada,” explains FINTRAC.
The issue of criminal money laundering from Chinese sources has been a problem that has plagued British Columbia for some time now, even prompting the provincial government to launch an inquiry.
With the revelations by intelligence sources that China interfered in the last two federal elections, even the Pierre Elliott Trudeau Foundation was implicated in a shady money transfer tied to foreign interference. According to media reports, the foundation received a $200,000 donation from Chinese businessmen Zhang Bin and Niu Gensheng.
Other indicators of money laundering flagged by FINTRAC were when a client “has ties to China and is using their accounts for pass-through activities funded by individuals/entities located in China, notably in Hong Kong, whose relationship is unclear.”
Additionally, FINTRAC warned of looking out for Chinese entities that have “limited to no online presence and there are no details relating to the types of services offered by the sending entity.”
Another red flag was that the stated purpose of the incoming funds from China was for the “purchase of property but the funds were used to purchase Guaranteed Investment Certificates.”
On the other hand, regulators and banks are being told to look out for money transfers from China which were marked for education (tuition fees, living expenses) or personal purposes but “are then used towards payments with indications suggesting the purpose of payment is for a real estate-related transaction.”
“Given the focus of Project Athena on links to China, notably in Hong Kong, the indicators in this Operational Alert reflect underground banking activities suspected of being tied to China-linked money laundering organizations,” wrote FINTRAC.
“The prominence of China, notably Hong Kong, in the indicators is a result of professional money launderers exploiting efforts by the Chinese diaspora in Canada to circumvent currency control restrictions to access their funds outside of that country.”
