25 May, 2020
Money Laundering, Organized Crime, and Police Governance
In recent years, there has been extensive media investigation and coverage of money laundering and, in particular, on its impact on real estate markets. Various studies and reports have also shed light on the prevalence of money laundering in British Columbia and its detrimental effects. The public is more aware and concerned than ever about this problem.
A year ago, the B.C. government established a Commission of Inquiry into Money Laundering in British Columbia (Cullen Commission). The Inquiry’s broad terms of reference require the Commission to study the prevalence of money laundering in, and its impact on, various economic sectors. The Commission is mandated to review the acts and/or omissions of individuals and agencies responsible for combating money laundering, in order to determine whether those acts or omissions have contributed to the spread of money laundering and if so, whether they amount to corruption. Very importantly, the Commission is also mandated to review the barriers to effective law enforcement respecting money laundering in British Columbia.
It is probably futile to attempt to eradicate money laundering without addressing the sources of that dirty money or, in other words, without countering organized crime in both its domestic and transnational manifestations. Countering organized crime, however, definitely requires effective police governance and accountability. Governance includes key management issues such as policy formation and implementation, the determination of priorities and strategies, the allocation of resources, deployment strategies and decisions, the implementation of rigorous standards, the prevention of corruption internally, and the maintenance of internal discipline. It follows that weak governance can undermine the effectiveness of police actions against organized crime.
In this province, the lack of effective law enforcement against organized crime and money laundering has led a keen observer to conclude that, “(…) both police and prosecutors have essentially checked out of the zone, out of frustration with statutes and court decisions which have made it extremely difficult to pursue financial crime investigations” (German, 2019, p. 18). There obviously are some genuine obstacles to effective law enforcement action against organized crime, financial crime and money laundering, but they can’t possibly justify inaction.
Globally, law enforcement operations against organized crime are still relatively ineffective. Disrupting organized crime activities is presented as the goal of these operations. Unfortunately, in the near complete absence of an evidence-based comprehensive enforcement strategy, these disruption efforts often amount to little more than occasional police crackdowns. Furthermore, there rarely is much thought given to what may be the unintended, counterproductive, or detrimental effects of such disruptions.
We lack adequate metrics to measure the relative success of various enforcement strategies against different forms of organized crime. Clearly, however, disruption strategies are no substitute for proactive enforcement strategies based on sustained efforts to understand the structure of the targeted criminal organizations, the changing nature and modes of their operations, or the dynamics of the markets they exploit. Police leaders everywhere have at times been forced to admit their organization’s inability to control organized crime and the relatively limited impact of their current strategies.
Successful investigations that are actually led to dismantling of international criminal organizations are still fairly rare. That failure to seriously confront organized crime is clearly evidenced by its troubling proliferation, its penetration of every sector of social, commercial and economic activity, as well as the escalation of gang violence. Violence itself, including assassinations, develops into a marketable commodity.
Investigations of financial crimes, as well as money laundering and corruption, remain very weak everywhere. The proceeds of these crimes are quite easily dissimulated and protected against law enforcement. Financial crime patterns facilitated by modern technology, international banking practices and a lack of corporate transparency, have evolved rapidly and rendered many current law enforcement practices obsolete. There are clearly massive amounts of suspicious financial transactions that are detected but rarely followed up by effective investigations. Law enforcement efforts with respect to financial crimes and money laundering are still very limited and unfocussed. At the same time, international cooperation in criminal matters did not grow fast enough to keep up with the pace of change in patterns of transnational crime, the movement of criminals, and their growing technological sophistication. By most accounts and in most parts of the world, the international cooperation regime remains very weak, fragmented and capricious.
A report produced by a panel commissioned by the British Columbia government estimated that $5 billion had been laundered through that province’s real-estate market in the previous year out of $47 billion in Canada as a whole. In the words of the report, “there is a lack of the specialized skills and abilities needed to effectively investigate the complex, secretive financial arrangements used to launder money at both the law enforcement and regulatory levels. There is also a complex web of federal and provincial agencies involved, which presents a significant challenge in terms of cooperation and coordination” (Maloney et al., 2019, p. 3). Peter German (2019) who was tasked by the Attorney General to examine why so few money laundering cases ever lead to a prosecution, found that there were no federal RCMP officers dedicated to criminal money laundering investigations in that province in spite of the fact that such investigations had publicly been identified as a priority for many years.
Unfortunately, too little attention is being paid to the development of effective police governance models, including the role of civilians in governance, policy setting, and oversight. Performance measurement and accountability mechanisms are often weak. In fact, most countries struggle to find a balance between preserving some level of law enforcement independence to protect it against undue political interference, and the need for deeper accountability for police practices, conducts, use of resources, and results.
It seems that law enforcement agencies have been particularly inept at controlling the exploitation of illegal markets, including illicit financial markets. It seems also that we may have reached a point where we must reconsider what we can reasonably expect law enforcement to do to curtail the rapid growth of organized crime. As it happens and as was noted by the Global Initiative against Transnational Organized Crime (2020), “the coronavirus pandemic may be paving the way for the most radical reshaping of police mandates and criminal-justice systems seen in modern times” (p. 12). Surely, we cannot leave it totally to law enforcement agencies to define their role and goals with respect to organized crime, money laundering, corruption, and financial crimes, neither can we leave it to them to measure the success of their own efforts. A greater level of accountability is required, and perhaps some of the answers lie in developing better governance mechanisms for both the organizations and the activities involved in countering organized crime.
Organized Crime, Illegal Markets, and Police Governance. Vancouver: ICCLR. Yvon Dandurand, 2020. https://icclr.org/wp-content/uploads/2020/05/Dandurand_Police-Governance-and-Organized-Crime.pdf?x30145
Combatting Money Laundering in BC Real Estate, Maureen Maloney, Tsur Somerville and Brigitte Unger, March 31, 2019. https://www2.gov.bc.ca/assets/gov/housing-and-tenancy/real-estate-in-bc/combatting-money-laundering-report.pdf
Dirty Money: An Independent Review of Money Laundering in Lower Mainland Casinos conducted for the Attorney General of British Columbia, Peter M. German, Q.C., March 31, 2018. https://news.gov.bc.ca/files/Gaming_Final_Report.pdf
Dirty Money – Part 2: Turning the Tide – An Independent Review of Money Laundering in B.C. Real Estate, Luxury Vehicle Sales & Horse Racing, Peter M. German, Q.C., March 31, 2019. https://news.gov.bc.ca/files/Dirty_Money_Report_Part_2.pdf
Commission of Inquiry into Money Laundering in British Columbia, Website. https://cullencommission.ca/
Crime and Contagion: The impact of a pandemic on organized crime. Global Initiative against Transnational Organized Crime, Geneva, March 2020. https://globalinitiative.net/wp-content/uploads/2020/03/CovidPB1rev.04.04.v1.pdf
Photo by Annie Spratt on Unsplash.