Who benefits from runaway money-laundering in Canada?
With TD Bank facing multi-billion dollar fines in the US, Canada's minimal anti-money laundering efforts come into sharp relief. Do we really care?
To hear US prosecutors tell it, 43-year-old Da Ying Sze of Queens, New York, needed nothing more than $200 gift cards to penetrate the world-class risk management systems of TD Bank and launder US$653 million through dozens of the bank’s American branches.
Although Da Ying Tze pleaded guilty to money laundering in a New Jersey courtroom in 2020, the case is just now shaking TD’s foundations as Canada’s second-largest bank prepares to pay US fines that could range between US$3 billion and $4 billion.
The case raises profound questions about how TD and Canada’s other major financial institutions confront money laundering and, even more critically, whether Canadian regulators really care about it at all.
In stark contrast to the US prosecutors, Canadian regulators have fined TD only $9.18 million, despite finding it guilty of five violations of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
The fine, imposed by the Financial Transactions and Reports Analysis Centre of Canada (FinTRAC), was the largest in the agency’s history, but only 1.5 per cent of the amount TD expects to pay in the United States.
Canadians might never have learned about the FinTRAC penalty without the efforts of investigative journalists at the Globe and Mail, who used information provided by three sources to piece together TD’s Canadian woes.
The fine resulted from a review by the Office of the Superintendent of Financial Institutions (OSFI), which does not disclose its findings because of secrecy and privacy provisions in Canadian law.
(The Globe team of Tim Kiladze, Rita Trichur, James Bradshaw and Stefanie Marotta summed up more than a year of work on the TD’s catastrophe in this feature last month.)
TD is not the only Canadian bank under scrutiny in the US. In January, a Royal Bank of Canada subsidiary was fined $65 million for “systemic deficiencies” in its anti-money laundering defences.
RBC is Canada’s largest bank, but it was RBC CEO Dave McKay who complained on September 4 of the “ruthless oligopoly” in Canadian banking that is driving cutthroat competition as higher interest rates put pressure on profits.
When the oligopolists whine about oligopoly, it’s time to worry. Don’t oligopolies just sit down and work these things out? That may be what McKay is hoping for. In the meantime, is it possible that competitive pressures make it easier for banks to look the other way when a man comes into the branch with a bag of cash and a fist full of gift cards?
According to the Globe’s reporters, Da Ying Tze bribed tellers and other bank employees to accept cash and transfers generated by the drug trade and other criminal activities over a five-year period from 2016 to 2021. US investigators said his bribes cost him a laughable US$57,000 as he and his crime ring took one or two per cent commissions on hundreds of millions of dollars
Of course, TD CEO Bharat Masrani feels just sick about all this. A veteran of TD’s risk management side of the business, he admitted in a memo to employees that “criminals broke through our defences and used the bank to launder money . . .This is absolutely unacceptable. I am deeply disappointed.”
In 2023, he took a pay cut of $1 million, reducing his total compensation to a pitiful $13.4 million. A multi-billion dollar fine and Masrani is docked a few weeks’ pay? What does it take to get fired?
According to insiders interviewed by the Globe team, Masrani oversaw a creeping shift in corporate culture at TD since he took the helm in 2014, creating layers of new bureaucracy. Unusual transaction reports escalated internally until they “disappeared into TD’s ether.” That’s over, he vowed in an interview with the Globe: “We own it. I own it. We are fixing it.”
TD’s troubles in the US are far from over. A strategic acquisition has been vetoed by American authorities. TD’s share prices have tumbled since Masrani was forced to set aside $2 billion to pay a final settlement that could be twice that size.
In Canada, however, FinTRAC’s $9 million fine is a speed bump that’s now in the rearview mirror.
Both American and international agencies fighting to control global money-laundering have been demanding that Canada step up its game for years, to no avail.
As Canadian academics Christian Leuprecht and Jamie Farrell point out in Dirty Money: Financial Crime in Canada, published last year, BC’s recent investigations of money laundering, including the Cullen Commission and Maureen Maloney’s review of money laundering in real estate, found fewer than 50 money laundering convictions in Canada in ten years.
Cullen found pervasive money laundering in real estate and gaming, as well as the corporate and financial sectors, but almost no successful enforcement.
“Canada is struggling even to do the bare minimum,” say Leuprecht and Farrell, with law enforcement agencies and provincial prosecutors “unable to turn copious intelligence produced by FinTRAC into criminal intelligence that meets the requisite evidentiary threshold.”
Translation: Canada is a paradise for money launderers.
Faced with this reality, Calgary law professor Sanaa Ahmed asks this provocative question in her chapter of Dirty Money: “How reasonable is the presumption that the Canadian state wants to prevent or even contain laundering? Who benefits from and wants laundering to continue unabated?”
The current system in Canada is certainly advantageous to global investors, banks, accountants, tax evaders and organized crime, she notes, but it’s also helpful to federal and provincial governments in one of the world’s largest economies.
The steady rush of cheap money — cash that doesn’t need to be raised by taxes, royalties or fees — is a great financial lubricant for the Canadian economy. Why should governments rush to fund anti-money laundering initiatives? There are always other priorities.
If part of that illicit cash flows from the fentanyl trade, so be it.
Manzo shooter convicted of murder in targeted killing of alleged money-launderer
In other money-laundering news, the Vancouver Sun’s Kim Bolan reports that Richard Reed, of Richmond, BC, was convicted September 4 of first degree murder in the targeted shooting of alleged money-launderer Jian Jun Zhu at the Manzo restaurant in 2020.
Also injured in the seven-bullet fusillade was Paul King Jin, the man at the centre of a long but unsuccessful money-laundering investigation undertaken by the RCMP that collapsed in 2018. Two other diners at Zhu’s table that night were later shot in separate incidents, one fatal. (Some of the details were recounted on Lotusland last month.)
Although apparently not nearly as large as the money laundering scheme at the heart of the TD Bank’s American charges, Zhu’s operation was alleged to be laundering as much as $220 million a year.
No successful convictions have arisen from those activities, despite years of effort.
Thanks Geoff, illegal drug trade is a very big player. take that marketplace down and lives are saved and the big players move on.
legalize, regulate and distribute a safe supply of now illicit and toxic drugs.