Laundering, the near-invisible financial fiddling to make the money from crime look respectable so it can be openly used, is an essential element of the cycle that keeps mobsters and transnational crime bosses in business.
Exactly 20 years ago I wrote a feature headlined “How to launder a million dollars in eight easy steps,” which caused a stir by highlighting how easily the mob cleans its dirty money.
Two decades later, things are as grim as ever.
More dark money than ever is whizzing around the world; more dirty money is moving into Canada; and more sophisticated methods circumvent the few restraints Canada has imposed.
While new methods emerged that were pure science fiction in 1999, equally alarming is how many old techniques continue unimpeded.
For a modern variation of the theoretical exercise, 1999’s $1 million goal seems downmarket today. Prominent underworld figures easily exceed that daily.
For this updated variation of my theoretical money-laundering exercise, a more apt goal is to launder $10 million.
Truth be told, though, at the top tier — the transnational organized crime of the most significant underworld entities — even that amount is accomplished in a single transaction, often using institutions, governments and trade and banking systems.
Money laundering, however, can be as simple or as sophisticated as the moneyman’s needs. It is a service needed by all but the lowest levels of criminal.
Here are some of the ways criminals of all food groups clean up their dirty money.
Digital assets such as Bitcoin, not controlled by any central bank, move money in relative secret and did not exist in 1999.
Bitcoin now has automated teller machines (ATMs), like those used by banks. Cash is inserted into a crypto ATM and assigned to a wallet. A chain of Bitcoin ATMs with machines in eight provinces advertises: “No ID is needed” and “our ATMs are 100% anonymous.”
ATMS are frequently found in convenience stores and gas stations. According to Coin ATM Radar, a website tracking cryptocurrency ATMs, there are 718 Bitcoin ATMs in Canada, second only to the United States in world distribution.
While the ATMs charge a fee, often 5% to 15%, money launderers know it costs money to clean money.
What we do: We can deposit as many bills as we want in as many ATMs as we like — but it takes time. Let’s push 180 $50 bills and 300 $20 bills into two machines twice on a slow night and send four associates to do the same for us twice the next day. Minus a service fee of 12%, we’ll shed $320,000 of small, awkward bills and get $281,600 of pretty anonymous Bitcoin.
THE MINIMAL LOSS
This summer, police north of Toronto said members of a Mafia clan laundered more than $70 million in Ontario’s casinos.
Members and associates of the clan took wads of cash, typically $30,000 to $50,000, almost every night to casinos in Southern Ontario. They used the cash to buy casino chips and hit the tables and slot machines, winning a bit here, losing a bit there, trying to incur as little loss as possible despite their time playing.
They stopped when their loss was in the 10% to 20% range and cashed out their chips. They left with a clean cheque from the casino that can be deposited as winnings, rather than dirty money.
What we do: Sending our associates on a casino run four times a week with $40,000, losing 15% gives us $136,000 a week; that’s $544,000 in a month. We’ll drop $20,000 for them to have a good time while they’re out and it’s $524,000 of clean money.
There is nothing complicated about laundering money through real estate, which is one reason it’s so popular. A study on money laundering in B.C.’s real estate market estimated $5 billion was laundered through home sales last year.
When property is bought for laundering, it is usually placed in the name of a third party, such as a relative, associate, relative of an associate or a corporation.
Sometimes the property is paid for in cash. Other times, loans or mortgages are used, with the repayment done by co-mingling dirty money into the payments. More sophisticated players have real estate “loans” from foreign companies they control. The best use lawyers, business agents, trust funds and corrupted realtors to help hide ownership and source of money.
The property can be re-sold and the money deposited in a bank as a legitimate business transaction.
Or, it can be used to facilitate laundering in other ways: rent to tenants and deposit more than the collected rent by adding dirty money to what tenants pay; have associates live there for little or no rent as a perk of working in the organization with dirty money deposited as fictitious “rent” from the property; renovate the home, using dirty cash for supplies and contractors to increase the property’s value before selling it.
What we do: Nice homes and condos in Canada’s largest cities run into the millions. In Toronto and Vancouver, in particular, a single deal could achieve our $10 million goal, but let’s be conservative and buy a $5.5 million home near Toronto. Minus commissions and fees, we can walk away with $5 million.
Gangsters often drive expensive cars. It’s part of their lifestyle. Crime scenes of gangland slayings often feature BMW X6s — popular with mobsters in Canada — or other luxury brands being towed away by police. When an alleged Mafia boss was arrested north of Toronto this summer, police seized two Ferrari sports cars from his garage, one of them valued at $880,000.
The cars are often bought as the perks of being a gangster; sometimes they are just laundering tools. Often they’re both.
Cars can legally be purchased in cash and car dealers are not required to report the transactions to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
Once bought, new cars can be quickly resold. The sale price will be lower than the purchase price but, again, that’s the cost of cleaning dirty money. A launderer can insist on being paid with a bank cashier’s cheque. Sometimes cars are shipped overseas and sold; that way they can get provincial sales tax back.
What we do: A well-appointed BMW X6 will run $100,000. A sleek Ferrari 488 Pista will top $400,000. Cars are said to lose 10% of their value just driving it off the dealer’s lot. We’ll deduct another 10% loss for handling and sharing with accomplices.
We’ll buy two of each and resell: $800,000 cleaned.
Organized crime bosses and transnational crime figures increasingly turn to professional services to help them act more like businessmen than gangsters. It is easy enough, because professionals are nothing if not professional.
A long-term money launderer will want to set up companies to then use to open corporate bank accounts, without having to put their name on anything that would be public.
Typically they hire a law firm in a tax haven jurisdiction to establish a company, using the names of local nominees to be the directors of record, so no trace of the true owner is publicly available. The legally registered company is then used to open bank accounts, likely several in different jurisdictions.
This opens up a huge range of high-end, high-volume laundering through what is known as trade-based money laundering. The bank accounts from the shells can be used for deposits and transfers between accounts, across borders and for fake business transactions.
At this tier, there is little limit to the amount that can be laundered and the $10-million of this exercise becomes a bit of a farce.
What we do: We’ll use our shells in a simple trading scam: the phantom shipment. We’ve set up shells and opened corporate bank accounts in Canada and overseas. Our shell company signs a contract with a friendly company in Uruguay to buy $1-million worth of soybeans. We prepay through our account and the money is then immediately transferred out by the Uruguay company to a third corporate account, which is another one of ours, minus a fee. The soybeans never arrive, but that’s fine, it is a phantom shipment with false documentation as an excuse to move our dirty money. We will have $880,000 when the money settles and we’ll do it all over again and again.
In the end, through these methods, that’s $10 million of illegal crime money moved back into circulation to fund a criminal life, establish a veneer of legitimacy and fund the next round of criminal activities.
And these are only five of the hundreds of methods and ideas that mobsters and their enablers are thinking up.
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Adrian Humphreys has covered Canada’s underworld for 25 years and written three bestselling books on the subject. In this occasional series, he dissects the histories, mysteries and quirks of organized crime in Canada and beyond.
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