By RITA TRICHUR and ALISTAIR MACDONALD
Aug. 6, 2015 7:40 p.m. ET
Canada’s top banking regulator has found that money-laundering controls at the country’s banks failed on numerous occasions, according to a document obtained by The Wall Street Journal.
Between 2009 and 2014, the Office of the Superintendent of Financial Institutions logged 72 failures of anti-money-laundering controls at the country’s banks, according to an OSFI document released under the Canadian Access to Information Act.
The document was heavily redacted to exclude the names of the banks. Other details, such as the dates of the failures and specifics about those instances, weren’t included. It also isn’t clear whether any of the banks ever faced penalties related to the episodes.
…Canada has been facing growing pressure to step up efforts to fight money laundering, in line with efforts of regulators and law-enforcement agencies globally. In 2013, the US State Department named Canada and the US as countries of “primary concern” over money laundering, highlighting currency transactions at financial institutions involving large sums of money from international narcotics trafficking as being problematic.
…Canada’s biggest bank, Royal Bank of Canada, moved to close down its Latin American and Caribbean wealth-management operation late last year.
The bank made the decision, the Journal reported, after a string of investigations in different countries and a 2013 warning from a US regulator that RBC’s anti-money-laundering controls were unsatisfactory…
Inside Royal Bank of Canada’s Latin Misadventure is an earlier Wall Street Journal story by the same authors:
MIAMI—As Royal Bank of Canada mounted an aggressive campaign to reel in business from Latin America’s growing class of superrich, a Miami-based banker made a big catch: Gilberto Miranda Batista, a former Brazilian senator with a $500 million fortune, three houses, four farms and a Rolls Royce.
While some bankers celebrated, RBC’s compliance department soon raised a warning flag. Worried that Mr. Miranda’s accounts might attract scrutiny from global regulators over potential money laundering, some compliance officers began recommending that the accounts be shut down around 2007, according to people familiar with the episode.
…In 2013, Mr. Miranda’s accounts attracted the attention of a U.S. banking regulator, the Office of the Comptroller of the Currency, which that year deemed RBC’s anti-money-laundering controls unsatisfactory, according to people familiar with the matter.
The tensions between compliance and business officials at Canada’s largest bank, revealed in internal company documents seen by The Wall Street Journal, underscore the dilemma faced by many of the world’s financial giants as they balance the promise of lucrative accounts in emerging markets against the increased risk of regulatory action.
…For RBC, which weathered the financial crisis to become one of the world’s largest banks, the OCC’s negative review was one in a long line of brushes with regulators and prosecutors over anti-money-laundering controls in its Latin America and Caribbean wealth-management businesses.
…Prosecutors in Uruguay and France also started cases against the bank in the past several years. In 2008, the Uruguayan central bank fined RBC $50,140 for “omissions” in anti-money-laundering controls, according to the central bank’s website…
Related reading at In-Sights:
…It is not unusual for the right course of action to be avoided because it brings with it a financial cost. It may not be right, but it is human nature. Clearly, the government of British Columbia has always been aware of criminal activities such as loan sharking and money laundering in gambling estabishments. However, crime prevention would cost money for effective policing and, more importantly, it would reduce gaming revenues and lead to closures in an industry overbuilt by influential people.
By 2009, BC Liberals had decided that blind eyes were more profitable than diligence when it came to supervision of gambling. They know there are costs in terms of lives ruined and families destroyed but, there are financial benefits to be had. Every now and then, police will complain or a story will appear in the media but politicians are well practiced at promising things will soon change. After reassuring words, everything goes back to normal. Nothing changes and the weak continue as victims.
My supposition is that BC’s illegal drug trade is so large that government wants a share and the easiest way to gain it is to skim a share from the extensive money laundering done through casinos…
…”It’s not clear how big of a problem money laundering is in BC casinos but the government admits it’s not uncommon for people to walk into casinos with suitcases filled with tens of thousands of dollars in small bills.”…
“. . . Add it all up, and you can’t help but see British Columbia for what it is — a key hub in the world of international organized crime. For all its natural beauty and its Birkenstock reputation, police now put Vancouver on par with New York and Los Angeles when they talk of cities in the grip of criminal syndicates. By some estimates, criminal activity amounts to roughly seven per cent of the province’s total economy. . .”