Illicit cannabis online shops are laundering money via front shops, according to the Canadian financial intelligence agency.
This week, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) released an operational alert related to money laundering and illicit cannabis operations where it analyzed around 5,000 suspicious transaction reports from March 2020 to March 2021.
The agency found that online dispensaries are laundering money using front shops in a wide range of businesses including e-commerce businesses related to beauty and wellness, food and beverage wholesales, automotive sales, electronics repair, marketing, advertising and construction.
The centre observed that email money transfers, cheques, bank drafts and cash deposits were the main methods used to move the funds.
#ICYMI: Project Legion is focused on enhancing awareness of the harm associated with illicit #cannabis activities and strengthening the detection of the laundering of proceeds from this crime. https://t.co/nrDcTQu4OR pic.twitter.com/VOEJ6cr7TV
— FINTRAC_Canada (@FINTRAC_Canada) September 29, 2022
Additionally, FINTRAC saw other methodologies such as using virtual currencies and nominees.
The agency detected that incoming fund transfers from virtual currency dealers into bank accounts also used references using cannabis-related words such as “bud”, “leaf”, “pot” and “weed” and the funds were rapidly depleted from the bank accounts to other virtual currency dealers.
It saw that front stores suspected of money laundering showed little to no business-related transactions in their accounts, which were owned by suspected producers and distributors of illicit cannabis or related associates.
“Many of these individuals owned more than one business and would transfer funds between their business and personal accounts and those of their associates, with no clear purpose,” reads the alert.
Private bank-FINTRAC partnership aims to bust illicit cannabis operations
Project Legion is a public-private partnership initiative led by Toronto-Dominion Bank (TD), supported by Canadian law enforcement agencies and FINTRAC. The project targets illicit cannabis activities by focusing on money laundering.
The objective of the project is to “improve the awareness of the crime and to improve the detection of the laundering of proceeds from illicit cannabis.”
According to the Canadian Cannabis Survey 2021, 81 per cent of respondents obtain their cannabis from licensed sources and 37 per cent obtained their cannabis from unlicensed sources.