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Canada can – and should – crack down on trade-based money laundering

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11 minute read

From the Macdonald Laurier Institute

By Jamie Ferrill for Inside Policy

Neglecting to take decisive action enables organized criminal networks whose activities cause significant harm on our streets and those of our international partners.

Financial crime bears considerable political and economic risk. For the incoming Trump administration, the threat that transnational organized crime and the illicit financial flows pose to global financial stability is a top priority. The threat of tariffs by the Trump administration makes the costs to Canada in enabling global financial crime all too apparent. In addition to the cost of tariffs themselves, the associated reputational risk and loss of confidence in Canada’s financial system has implications for investments, credit, supply chains, and bilateral co-operation and agreements.

Canada’s proximity to major international markets, stable economy, high standard of living, and strong institutions and frameworks make it an attractive place to do business: for both legitimate and criminal enterprises.

Trade is a key contributing sector for Canada’s economic security. It represents two-thirds of Canada’s GDP, and exports alone support nearly 3.3 million Canadian jobs. Trade is also highly vulnerable to criminal exploitation. Ineffective oversight, regulatory complexity, and lagging technology adoption, coupled with a lack of export controls, make it possible to move vast proceeds of crimes, such as those from drug trafficking, human trafficking, corruption, and tax evasion through the global trade system.

These vulnerabilities are well-known by transnational organized crime groups. They are able to effectively move billions of dollars of dirty money through the global trade system every year, a method commonly referred to as Trade-Based Money Laundering (TBML).

While any statistics must be interpreted with caution, evidence shows that TBML is a prevalent method of money laundering.

What is it?

There are several types of Trade-Based Financial Crimes such as terrorism financing through trade, sanctions evasion, and simply trade fraud. However, the TBML definition is necessarily specific. Essentially here, TBML is a money laundering method: the processing of criminal proceeds to disguise their illegal origin. TBML involves the movement of value through the global trade system to obfuscate the illicit origin. This is usually done through document fraud: undervaluing, overvaluing, phantom shipping, or multiple invoicing. Different techniques employ different aspects of the supply chain. And TBML may be just one method used within larger money laundering operations.

By way of example, US authorities allege that two Chinese nationals living in Chicago laundered tens of millions of dollars for the Sinaloa and Jalisco Cartels. Drugs were smuggled into the United States and sold throughout the country. The proceeds from these sales were collected by the Chinese nationals. Those proceeds were used to purchase bulk electronics in the United States, which were then shipped – with a falsified value – to co-conspirators in China, who sold them locally. The legitimacy provided by the electronics sales and the trade transaction provide cover to “clean” proceeds from precursor crime.

Either the importer and/or the exporter of the goods can shift value. Chances here are the electronics shipped were undervalued: on leaving the country, they are declared at a (much) lower value than they are actually worth. The importer in China pays the undervalued invoice, then sells the goods for what they are worth. The profit from those electronics now appears clean, since it was used for a “legitimate” sale. The ensuing value gap can be transferred informally or stored as illicit wealth. The value has now shifted, without fiat currency leaving the country of origin.

But the cycle does not stop there. The value and money itself continue to traverse around the world, through various intermediaries such as financial institutions or cryptocurrency exchanges. It then goes right back into the system and enables the very crimes and organized crime groups that generated it in the first place. It is, in short, the business model of organized crime.

The Canadian problem

Ultimately, the proceeds of crime that have been legitimised through TBML (and other money laundering methods) supports the criminal enterprises that generated the value in the first place. In the example, these are prolific cartels who have been behind the fentanyl crisis, migrant trafficking and abuse, corruption, and widespread violence that destabilizes communities and undermines governments across North America and beyond.

With new actors, drug routes, and ways of doing business, the cartels are very much active in Canada. The Sinaloa cartel in particular has established a significant presence in Canada where it controls the cocaine market, manufactures and distributes fentanyl, and is embedded in local criminal networks. This increases Canada’s role as a strategic location for drug trafficking and a base to export abroad, notably to Europe, the US, and Australia.

Hells Angels, Red Scorpions, ’Ndrangheta, and other organized crime groups are also exploiting Canada’s strategic location using their transnational links. These groups are active in criminal activities that generate proceeds of crime, which they launder through Canadian institutions. From drug trafficking to extortion to human and sex trafficking, the foundation of organized crime relies on generating and maximizing profits. The proceeds generally need to be laundered; otherwise, there are direct lines back to the criminal organizations. They are, without a doubt, exploiting the trade sector; the very sector that provides so much economic security for Canada.

Canada’s regulation, reporting, and prosecution record for money laundering is notoriously weak. Its record for regulation, reporting, and prosecution for trade-based financial crimes, namely here TBML, is even weaker.

As financial institutions and other regulated entities face increased scrutiny following the TD Bank scandal and the Cullen Commission’s inquiry into money laundering in BC, more criminal activity is likely to be displaced into the trade sector and the institutions it comprises.

TBML is difficult for financial institutions to detect, especially given that 80 per cent of trade is done through open accounts. It exploits established trade structures that are meant to protect the system –like documentation and invoicing processes – by manipulating transactions outside traditional payment systems, which requires more sophisticated anti-money laundering strategies to address these hidden vulnerabilities.

Addressing the problem

Trade is a gaping vulnerability. Yet, it attracts minimal attention in countering transnational financial crime. Containing the fentanyl crisis for one requires a collaborative effort to bolster supply chains and the trade sector against financial crime. This means global cooperation, technological advances (such as blockchain technology), appropriate resourcing, more scrutiny on high-risk countries and shippers, and regulatory innovation.

But political will is in short supply. The federal government’s Budget 2024 and the resulting proposed Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorism Financing Act will grant CBSA new authorities to counter TBML, but limited resources to make good on them. And CBSA cannot do it alone.

Transnational organized crime and the illicit financial flows that support it poses a threat to global financial stability. The enabling of financial crime hurts Canada’s reputation abroad. With a new political regime emerging in the US, Canada cannot afford to be seen as a weak link. Loss of confidence in a country and its financial system has implications for investments, credit, supply chains, and bilateral cooperation and agreements.

By neglecting to take decisive action, we inadvertently enable organized criminal networks whose activities cause significant harm on our streets and those of our international partners. With profits as their primary driver, it is imperative that we scrutinize financial pathways to disrupt these illicit operations effectively.

Organized crime groups are not bound by privacy laws, bureaucracy, political agendas, and government budgets. They are continually evolving and staying many steps ahead of what Canada is equipped to control: technologically, geographically, strategically, logistically, and tactically. Without appropriate regulations, technological advances, and resources in place, we will continue to be a laggard in countering financial crime.

More systematic change is needed across regulatory frameworks, law enforcement coordination and resourcing, and international partnerships to strengthen oversight, close loopholes, and enhance detection and disruption.  It would be a low-cost signal to the Trump administration that Canada is committed to upping its game.


Jamie Ferrill is senior lecturer in Financial Crime at Charles Sturt University and co-editor of Dirty Money: Financial Crime in Canada.

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Business

Exposing Global Affairs Canada’s crazy spending spree

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From the Canadian Taxpayers Association

By Franco Terrazzano

$1,700 on Lesbian Pirates! musical $3,900 for a “frank discussion” of “how to do a proper land acknowledgment” Millions on vacant land in Africa and properties in Afghanistan we abandoned to the Taliban $7,500 to promote DEI at music festival in Estonia $12,000 so seniors in other countries could talk about their sex lives $7.2 million for “gender-responsive systems approach to universal healthcare in the Philippines” $13,000 for an Oscars party in LA $8,800 for a show called “whose jizz is this” And so much more…

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Addictions

Calls for Public Inquiry Into BC Health Ministry Opioid Dealing Corruption

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Sam Cooper

The leaked audit shows from 2022 to 2024, a staggering 22,418,000 doses of opioids were prescribed by doctors and pharmacists to approximately 5,000 clients in B.C., including fentanyl patches.

A confidential investigation by British Columbia’s Ministry of Health, Financial Operations and Audit Branch has uncovered explosive allegations of fraud, abuse, and organized crime infiltration within PharmaCare’s prescribed opioid alternatives program. Internal audit findings, obtained by The Bureau, suggest that millions of taxpayer dollars are being diverted into illicit drug trafficking networks rather than serving harm reduction efforts.

The leaked documents include photographs from vehicle searches that show collections of fentanyl patches and Dilaudid (hydromorphone) apparently packaged for resale after being stolen from the taxpayer-funded “safer supply” program. This program expanded dramatically following a federal law change implemented by Prime Minister Justin Trudeau’s government in 2020, which broadened circumstances in which pharmacy staff could dispense opioids, according to the document’s evidence.

“Prior to March 17, 2020, only pharmacists in BC were permitted to deliver [addiction therapy treatment] drugs,” the audit says.

B.C.’s safer supply program was launched in March 2020 as a response to the opioid overdose crisis, declared in 2016. It allows people with opioid-use disorder to receive prescribed drugs to be used on-site or taken away for later use.

The Special Investigations Unit and PharmaCare Audit Intelligence team identified a disturbing link between doctors, pharmacists, assisted living residences, and organized crime, where prescription opioids meant to replace illicit drugs are instead being diverted, sold, and trafficked at scale.

“A significant portion of the opioids being freely prescribed by doctors and pharmacists are not being consumed by their intended recipients,” the document states.

It suggests that financial incentives have created a business model for organized crime, asserting that “prescribed alternatives (safe supply opioids) are trafficked provincially, nationally, and internationally,” and that “proceeds of fraud” are being used to pay incentives to doctors, pharmacists, and intermediaries.

BC Conservative critic Elenore Sturko, a former RCMP officer, began raising concerns about the program two years ago after hearing anecdotes about prescribed opioids being trafficked. She asserts that the program is a failure in public policy and insists that Provincial Health Officer Dr. Bonnie Henry be dismissed for having “denied and downplayed” problems as they emerged. Sturko also argues that B.C. must change its drug policy in light of U.S. President Donald Trump’s stance linking the trafficking of fentanyl and other opioids to potential trade sanctions against Canada.

The document shows that PharmaCare’s dispensing fee loophole has incentivized pharmacies to maximize billings per patient, with some locations charging up to $11,000 per patient per year—compared to just $120 in normal cases.

Perhaps most alarming is the deep infiltration of B.C.’s safer supply program by criminal networks. The Ministry of Health report lists “Gang Members/Organized Crime” as key players in the prescription drug pipeline, which includes “Doctors, pharmacies, and assisted living residences.”

This revelation confirms long-standing fears that B.C.’s “safe supply” policy—originally designed to prevent deaths from contaminated street drugs—is instead sometimes supplying criminal organizations with pharmaceutical-grade opioids.

The leaked audit shows from 2022 to 2024, a staggering 22,418,000 doses of opioids were prescribed by doctors and pharmacists to approximately 5,000 clients in B.C., including fentanyl patches.

Beyond organized crime’s direct involvement, pharmacies themselves have exploited regulatory gaps to generate massive profits from PharmaCare’s policies:

  • Pharmacies offer kickbacks to doctors, housing staff, and medical professionals to steer patients toward specific locations.
  • Financial incentives fuel fraud, with multiple investigations identifying 60+ pharmacies offering incentives to clients.
  • Non-health professionals, including housing staff, are witnessing OAT (opioid agonist treatment) dosing, violating patient safety protocols.

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