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

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.

Related Topics:#InsidePolicy #MacdonaldLaurierInstitute CanadaFinancialCrime CanadaOrganizedCrime JamieFerrill TradeBasedMoneyLaundering

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Finance Titans May Have Found Trojan Horse For ‘Climate Mandates’

Published on October 14, 2025

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By Audrey Streb

Major global asset managers including BlackRock and Blackstone have been looking to buy power utilities across America in a move that some industry insiders warn could harm consumers, raise electricity costs and advance a climate-driven energy agenda.

In recent months, Blackstone reportedly sought regulatory approval to buy utilities in New Mexico and Texas all while a BlackRock-led group won approval Friday to purchase a major utility in Minnesota. While BlackRock and other huge asset managers have distanced themselves from environmental, social and governance (ESG) investment practices in recent years, some energy experts and consumer advocates that spoke to the Daily Caller News Foundation are concerned that buying up utilities may represent a new frontier of financial giants orchestrating “climate mandates.”

“BlackRock isn’t just influencing utilities anymore, they’re buying them. After years of ESG-driven coercion that pushed utilities to abandon reliable energy in favor of China-dependent renewables, BlackRock is now taking direct control. The result will be more of the same: higher costs, weaker grids, and millions in unpaid bills, all driven by the very climate mandates they lobbied for,” Jason Isaac, CEO of the American Energy Institute, told the DCNF. “Minnesotans should brace for more unreliable power, rising rates, and a media narrative that blames Trump for ending taxpayer-funded handouts instead of holding the woke politicians and Wall Street elites responsible for the crisis.”

Electricity demand is on the rise after years of stagnancy as the artificial intelligence (AI) race ushers in the build out of power-hungry data centers. Utility costs are also spiking as demand takes off in a trend that dates back to the Biden administration.

Against this backdrop, private investment titans like BlackRock and Blackstone are reportedly moving to buy power utility companies and invest in data center expansions and startups.

Minnesota recently granted the BlackRock-led group known as Global Infrastructure Partners (GIP) approval to buy one of the state’s major power utilities, Allete. GIP is also reportedly on the cusp of acquiring the major energy company, AES, according to sources familiar with the matter that spoke with Reuters. The Financial Times reported that the deal may be for $38 billion.

BlackRock referred the DCNF to Allete’s statement on regulators approving its partnership with GIP and declined to comment further for this story.

Allete’s statement notes that the impending partnership with the BlackRock-led group includes “guaranteed access to capital to fund ALLETE’s five-year plan for advancing transmission and renewable energy goals [and a] $50 million Clean Firm Technology Fund to support regional clean-energy projects and partnerships.”

The Federal Energy Regulatory Commission (FERC) renewed BlackRock’s ability to own up to 20% of utility voting shares in April, with former FERC Commissioner Mark Christie stating that BlackRock “pledged not to use its holdings to influence utility management” and that utilities need the access to capital.

Christie also warned in September 2024 that “this is an issue that deserves much greater scrutiny” and that “the influence that large shareholders, BlackRock or otherwise, can potentially exert across the consumer-serving utility industry should not be underestimated.”

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“Blackstone’s sustainability strategy prioritizes accelerating decarbonization by investing in the energy transition and driving value accretive emissions reduction in our portfolio,” Blackstone’s 2024 sustainability report states. “We believe the transition to cleaner energy creates meaningful investment opportunities for private capital. For over a decade, we have pursued attractive investments in companies and assets that are part of the global energy transition as part of our broader energy investing strategy.”

Blackstone also announced on Sept. 15 that private equity funds affiliated with Blackstone Energy Transition Partners will acquire the Pennsylvania-based Hill Top Energy Center natural gas plant for almost $1 billion. The company also announced in July that funds managed by Blackstone Infrastructure and Blackstone Real Estate would invest over $25 billion to help build out Pennsylvania’s energy infrastructure to support the AI “revolution.”

“Renewable” energy goals and ESG investment tend to align with emissions-reduction targets, with some power companies, utilities and states that set goals to cut emissions striving to retire conventional energy sources like coal plants. Isaac added that companies like American Electric Power, in which BlackRock owns a significant stake, have been decommissioning coal plants and replacing them with intermittent sources like solar.

“What happens is when the wind stops blowing and the sun stops shining, then you have to ramp those generational assets back up, and that’s when price spikes happen,” Isaac said.

University of North Carolina at Chapel Hill professor of finance Greg Brown told the AP that the reason behind these buyouts are “very simple. Because there’s a lot of money to be made.”

Other experts devoted to consumer protection like Executive Director of Consumers’ Research Will Hild told the DCNF that investment companies like BlackRock stand to gain more than just a profit from these purchases.

“There is no world in which BlackRock’s ownership of American energy benefits ordinary American consumers,” Hild told the DCNF. “This is the same firm that proudly brought us the radical ESG rules and Net-Zero nonsense that forced all our energy bills to skyrocket. We wouldn’t have the scourge of woke capitalism without Larry Fink, who already controls nearly $13 trillion in assets and has been sued for violating anti-trust laws.”

ESG investors weigh a company by its social and environmental choices as well as its finances in a move that critics say bogs down businesses with new costs while doing little to combat climate change. One August 2023 InfluenceMap report showed that as Republicans at the state level and in Congress ramped up their opposition to ESG-focused practices, BlackRock and other major U.S. asset managers decreased their support for climate-related resolutions.

BlackRock CEO Larry Fink also said in June 2023 that he no will no longer use the term ESG because it has been “politicized,” less than a year after he noted that climbing energy prices are “accelerating” the green energy transition.

“BlackRock has backpedaled on its ESG messaging and its aggressive, unapologetic imposition of ESG on everything they touch. But the leopard hasn’t changed its spots,” President of the Heartland Institute James Taylor told the DCNF. “It still has the same management group with the same values, and it’s still doing whatever it can to impose ESG on everything it touches, in actuality, if not in name.”

Taylor argued that whether BlackRock buys or acquires a large stake of a utility, it “can now assert itself over legislatures in dictating energy policy.”

Notably, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) threw their weight behind an antitrust lawsuit against major asset managers that alleges the firms colluded to tank coal production with their embrace of zero-emissions goals in May.

The lawsuit, backed by 11 state attorneys general, alleges that BlackRock and multiple other asset managers used their market power to suppress coal production, thereby hurting consumers by causing the price of coal to climb.

The DOJ and FTC’s “support for this baseless case undermines the Trump Administration’s goal of American energy independence,” a BlackRock spokesperson previously told the DCNF. “As we made clear in our earlier motion to dismiss, this case is trying to re-write antitrust law and is based on an absurd theory that coal companies conspired with their shareholders to reduce coal production.”