Organized crime exploits ‘consciously and actively’ federal pandemic benefits: intelligence reports

The federal government spent billions of dollars on income support to help Canadians cope with the pandemic – but it seems that these emergency aid also inadvertently went to criminals.

According to a recently obtained financial intelligence report, it appears that criminals and organized crime “knowingly and actively” had cheated Canada’s emergency service (CERB) and Canada’s emergency account (CEBA).

The Financial Transactions and Reports Analysis Center of Canada (FINTRAC), the country’s financial intelligence department, observed that during the first few months of the CERB program, criminal organizations filed multiple applications with stolen identities.

“They tend to hire groups of individuals to redeem benefit checks at various locations around the city,” said the FINTRAC report for 2020, released through a request for access to information submitted by Ottawa researcher Ken Rubin.

“In one case, the reporting entity indicated that social media was being used as a means of recruiting these people.”

Launched in March, CERB initially paid $ 2,000 a month to Canadians whose incomes were hit by the pandemic. The program paid out more than $ 74 billion before the government switched to paying Canadians through employment insurance.

A similar scheme was used by criminal organizations that exploited the Canada Emergency Business Account: applicants transferred the $ 40,000 grant from their corporate accounts to personal accounts and withdrew the money in cash.

“Why would you not take it? I mean, it’s free money in a way,” said Sanaa Ahmed, an assistant professor of law at the University of Calgary.

“I think this is one of those opportunity crimes. Even at the time the government announced these relief measures, we knew some of it had to happen because Ottawa has said quite explicitly that you know “they are not really bothered to interrogate whoever is applying, so it was only fair that some of the applicants would be fraudulent.”

CERB mixed with whitewash

Sometimes the benefit money seemed to be mixed with money laundering.

“Reporting entities indicated that criminal organizations using stolen IDs and people recruited via social media carry out ‘CERB scams’ in certain cities; prepaid cards are fraught with CERB benefits and other money laundering,” the intelligence report said.

The term “reporting entities” refers to casinos, auditors, agents of the Crown, Canadian banks and foreign banks in Canada, insurance and real estate agents, sellers of precious stones and metals and others – all of whom must report suspicious transactions to FINTRAC if there is reasonable cause to believe that they may be linked to money laundering or terrorist financing.

Jessica Davis, a former senior intelligence analyst at CSIS who now heads the consulting firm Insight Threat Intelligence, said using prepaid cards is a well-known money laundering tactic to prevent a paper trail.

“Criminal entities combine the money obtained through CERB fraud and identity theft with criminal proceeds, potentially from a variety of schemes, perhaps other frauds, perhaps other criminal activity. So it’s all just pulled into one pool, transferred to prepaid cards as a form of to separate the money trail, “she said.

“There was a huge drive to get the money out the door quickly, which I think for many Canadians would have been a lifesaver … whether there were appropriate security measures in place or not, yes, I think that criminals will often find solutions to a lot of them anyway, “she said.

The Employment Insurance Section of the Government of Canada Website. (THE CANADIAN PRESS)

The report also said payments were sent to individuals who appear to have been involved in illegal or suspicious economic activity. FINTRAC said some customers received checks despite not living in Canada and while appearing to live in “a jurisdiction of concern.” These are countries and territories that FINTRAC considers to pose a higher risk of money laundering or terrorist financing.

FINTRAC said that since the beginning of 2020, until October 31 this year, it received 30,095 suspicious transaction reports referring to COVID-related benefits, a small percentage of total reports. The majority of these 30,000 also engaged in human trafficking and drug crimes.

Approximately 1,500 of them engaged in CERB and / or CEBA related fraud.

“Given that there is no monetary threshold associated with the reporting of a suspicious transaction, it is not possible to give an exact figure in relation to the total amount of CERB / ​​CEBA funds that may have gone to organized crime. “said spokeswoman Mélanie Goulette Nadon.

Prosecution unlikely

While the FINTRAC document describes how organized crime used the programs, it is far from the first warning. In July 2020, The Canada Revenue Agency advised the House of Commons Finance Committee that the program was affected by organized crime.

A spokesman for the Canada Revenue Agency stressed that the government was in a hurry to ensure that Canadians could stay afloat in the beginning of the pandemic.

“Throughout the life of the CERB program, we have made adjustments to introduce new measures and controls to address suspicious activity,” said Etienne Biram.

“The CRA has zero tolerance for fraud. The vast majority of Canadians are honest, and the CRA has effective systems in place to deal with the small percentage of people who file fraudulent claims.”

FINTRAC, which helps police detect money laundering and terrorist financing, calls money laundering a “multibillion-dollar problem” in Canada. However, investigating that issue has not necessarily been a priority.

“Canada does not prioritize the investigation and prosecution of economic crime,” Davis said.

“Canada is a pretty significant economy, there is significant criminal activity, and there is significant economic criminal activity going on in this country, and I would say that by and large, law enforcement is not good at detecting and disrupting that activity.”

Ahmed agreed, noting in the past decade that Canada has secured less than 50 convictions for money laundering, and calls prosecution in these cases “unlikely, very unlikely.”

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