The dirty truth about money laundering laws

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The great North American crusade to detect and eliminate certain illegal activities – drug smuggling, human smuggling, street gangs, mafia groups, tax evasion, terrorist organizations – has once again focused on the alleged enablers of all that criminal activity: the banking sector. . Regulators, the media and a new book published by McGill-Queen’s University Press – Dirty Money: Financial Crime in Canada – are sending the message that criminal activity would not be possible without the massive money laundering schemes that enable national and international criminal actors to to flow cash through Canadian banks and other financial institutions.

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The high-profile case of TD Bank, which faces fines of $4 billion or more for failing to prevent $653 million in drug money from being laundered to China and elsewhere, serves as headline news for the idea that banks – and weak Canadian laws and regulatory enforcement – ​​have allowed criminal industries, tax evaders and international oligarchs to flourish and contribute to national financial and political risks.

The argument, as presented in the more than four hundred pages of academic advocacy in Dirty Money, is that national and global money laundering enables “an arsenal of heinous local crimes.” If the money laundering system were eliminated through arrest and prosecution, one of the Dirty Money essayists argues, “law enforcement could target organized crime where it is most vulnerable.”

While the rhetoric and political hype behind the idea continues to grow, there are many reasons to question the theory.

Take the sensational case of TD Bank, whose officers and management systems failed to detect and prevent an American money launderer named Da Ying Sze from using TD and other banks to move more than $653 million in fentanyl cash from the United States to China. or other countries where the drugs come from. In 2022, a 43-year-old Sze pleaded guilty to charges of money laundering and corruption.

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To get the money back to China or Mexico or wherever the drugs come from, the money is put in the hands of a money launderer like Sze. According to a 2024 report from the U.S. Federal Deposit Insurance Corporation, “Sze routinely accepted illegal cash proceeds and deposited the money in financial institutions in New York, New Jersey, Pennsylvania and elsewhere, using bank accounts in the names of shell companies and conspirators. Sze then further obscured the source of the illicit funds by purchasing official bank checks, writing personal and business checks, and making international and domestic wire transfers to transfer the illicit funds to thousands of individuals and entities in the United States, China, Hong Kong Kong and other countries. elsewhere. For his services, Sze received compensation of approximately one to two percent of the laundered money.”

So now let’s follow the fentanyl chain that leads to charges against TD Bank. It all starts with government anti-drug laws that make the sale of addictive and deadly drugs like cocaine and fentanyl a crime. Despite the crime involved in importing such drugs, hundreds of millions of dollars flow into Canada and the United States every year.

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Over a period of about five years, half a billion dollars worth of fentanyl and other drugs arrived in the United States undetected by customs or other government agencies. The drugs were then flown by truck, by mail and through wholesale and retail systems across the US and Canada to local street vendors – also undetected and unstopped by government or police. Local participants in the drug trade are also said to have made a profit from the sale, and probably made a good living from the proceeds.

At the end of this long trail of criminal activity, across thousands of miles of land and sea and at the hands of hundreds of criminals evading state detection, governments would best go after TD Bank for failing to stop what the police and the scores do. from other agencies could not identify themselves.

Banks and other financial institutions targeted by government anti-money laundering programs are the last and weakest link in a chain of criminal activity. TD Bank has admitted that its anti-money laundering regime has failed and will pay a price amounting to an outrageous fine, while leaving every government agency free of blame or responsibility.

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The Dirty Money activists argue that if only banks were more heavily regulated and forced to be the gatekeepers of the war on money laundering, global and local criminal drug cartels would be starved. There is no evidence for this theory. Prof. Stephen Schneider of Saint Mary’s University in Halifax noted in an interview that it “doesn’t make sense to just focus on money laundering itself.” In a chapter in a new book published by the University of Toronto Press, Big Crime and Big Policing, Schneider and his co-editors document the countless examples of the global banking industry’s experiences with money laundering. But are the banks the problem?

International researcher L. Burke Files concluded earlier this year that anti-money laundering laws “sold to the public as a way to end crime and terrorism do not work.”

Unless, of course, the intention is to shift criminal responsibility for drug trafficking and other government-created crimes to the evil capitalist financial sector.

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