Snow Washing – Our Embarassing Money Laundering Problem

The term ‘snow washing’ was coined by the Toronto Star to describe the flow of dirty money into Canada, mostly through real estate transactions, to evade taxes or to finance terrorist operations. The term is in wide use internationally because Canada has become known as a destination for money laundering due to its weak rules concerning corporate transparency.

So how does snow washing work? One way is to create a company without disclosing your true identity. You can then buy real estate anonymously using ‘dirty money’. When the real estate is later sold, presto, the money is clean, washed as white as Canadian snow.

Canadian law does not require information on the ‘beneficial owners’ of companies to be collected and verified, so it’s relatively easy for individuals to hide their identities and set up companies to launder money like this.

It’s ironic that the Canadian Government set up a massive bureaucracy in 2011 (following 9/11) called the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) with the express purpose of tracking suspicious financial transactions. Under FINTRAC, lawyers, real estate agents, accountants, and mortgage brokers (among others) are required to meticulously keep track of all large financial transactions, and to report anything that doesn’t seem right. And yet, the gaping loophole left by allowing beneficial owners of companies to remain anonymous remains unfilled.

While the exact amount of ‘dirty money’ flow isn’t known, it’s been estimated that it’s somewhere in the $50-$100 billion per year range.

Ideally, a federal registry of beneficial owners of companies should be created and made publicly available & easily searchable. The Federal Government is working in that direction, but at glacial speed.  Meanwhile, Transparency International has ranked Canada dead last among G20 countries due to its failure to meet G20 anti-money laundering commitments.

The term ‘snow washing’ illustrates how Canada is being lumped in with such money laundering havens as Afghanistan, the British Virgin Islands, China, Macau, and Columbia. Not exactly august company. Time to fix the problem. Quickly.