Sanaa Ahmed, a professor at the Faculty of Law at the University of Calgary and money laundering expert, in Calgary on May 30. Ahmed makes the claim that, like distressed jeans, the holes in Canada's money laundering laws are there not by mistake, but by design.Jude Brocke/The Globe and Mail
Canada’s anti-money-laundering regime is like a pair of distressed jeans – the holes are there on purpose.
That pointed analysis comes from Sanaa Ahmed, an assistant professor at the University of Calgary’s Faculty of Law. As one of this country’s leading experts on money laundering, she fearlessly scrutinizes the role of the state in Canada’s ascendence as an international haven for financial crime.
Dr. Ahmed, who wrote an eye-opening chapter for a book entitled Dirty Money: Financial Crime in Canada, rejects the notion that illicit proceeds wash up on Canadian shores by accident. Indeed, she questions whether it is even reasonable to presume that Canada wants to combat money laundering given its chronic failure to keep its promises over the past 35 years.
If there is a lack of political will to combat financial crime, it is because the Canadian economy is dependent on dirty money. Dr. Ahmed dubs it “laundering as public policy.” It’s a provocative statement, to be sure. But this is no tin-foil-hat conspiracy. The evidence shows that she is right.
“When we talk about AML regulation, I like to analogize it with a pair of distressed jeans. We can no longer pretend that the holes are inadvertent or they just manifested overnight,” Dr. Ahmed said in a recent interview.
“They are part of the design of the jeans. The holes were always supposed to be part of it. And so, this pretense that, you know, this is something that’s just cropped up and maybe we need to batten down the hatches; I don’t think that’s a particularly productive way of looking at it.”
It is unsettling for some people to question whether our political elites are on the right side of this issue. We want to believe that they are earnest do-gooders. After all, from a young age, we are spoon-fed the bromide “peace, order and good government.” But even Canadian naiveté has its limits.
Sure, some banks have been penalized in recent years. And the federal government keeps telling us that money laundering is bad.
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But Canada has ostensibly been tightening its anti-money-laundering regulations since the late 1980s. And yet, as Dr. Ahmed points out, it is still profitable for banks and other businesses to run afoul of the law and for criminals to “snow-wash” through provincially incorporated shell companies. Similarly, the “Vancouver model” of laundering illicit proceeds through B.C. casinos remains a blight.
An estimated $45-billion to $113-billion is laundered here each year, according to Criminal Intelligence Service Canada. Even so, Canada’s track record on enforcement is disconcerting.
Enforcement results, which include the number of investigations, charges, prosecutions, convictions and asset forfeitures, actually declined between 2010 and 2020, according to a 2023 report by the Department of Finance.
If that wasn’t bad enough, the report offered this curious explanation: “The factors contributing to these results are complex and must be considered within Canada’s unique context.”
Undoubtedly.
Only in Canada would it be acceptable for the national police to take a five-year break from investigating money laundering. That, of course, is exactly what happened when the RCMP shuttered its national proceeds of crime and commercial crime sections in 2012. No one in Ottawa said boo.
For her part, Dr. Ahmed argues it’s time we start interrogating the role of the state more seriously than we have in the past.
“A few errors in judgment or miscalculation could potentially be explained away but an entire series of chronological missteps by the executive, the legislature, and the judiciary throw the role of the state into sharp relief,” Dr. Ahmed writes in the book.
“The more germane question then becomes: how are the state’s normative commitments and pronouncements against laundering to be reconciled with its slew of seemingly contradictory policies, regulations, and in/action?”
Part of the paradox, she reasons, is that money laundering buoys the Canadian economy through corporate profits and jobs. The state, in turn, benefits from that illegal activity through tax revenues and fees.
Her argument makes a lot of sense. Not only are real estate and construction among Canada’s top drivers of economic growth, but our country is also reliant on external inflows including from immigration.
Here’s an uncomfortable truth: All those activities are vulnerable to illicit financial flows.
A 2016 evaluation by the Financial Action Task Force, an intergovernmental body that sets standards to combat financial crime, concluded that Canada struggles to detect corruption and the laundering of money through real estate. It also found that cross-border movements of money are rarely analyzed by law enforcement in Canada.
“Why would any government – let alone a cash-strapped government such as the Canadian government – worry about the origins of this money?” Dr. Ahmed writes.
Why, indeed?