OTTAWA - So-called white-label ATMs can be used to launder money with alarming ease, leaving authorities struggling to track the dirty cash, says a federal watchdog agency.
The Financial Transactions and Reports Analysis Centre of Canada, known as Fintrac, outlines a scheme to launder money in a draft report prepared this year and obtained by The Canadian Press under the Access to Information Act.
The scam essentially works like this: A white-label ATM operator loads it with ill-gotten cash. Over time, unknowing customers empty the machine. When the ATM runs dry, it's replenished with clean money.
"At this point, the proceeds of crime seem like legitimate funds," the report says.
Fintrac spokesman Peter Lamey said it's relatively simple to launder money through these ATMs, which aren't affiliated with a specific bank and are often found in convenience stores, airports and bars.
"It is fairly straightforward," he said.
Fintrac is an independent federal agency set up to collect, analyze and, where appropriate, pass on information to police and the Canadian Security Intelligence Service on money laundering and terror financing.
By law, Fintrac must straddle a fine line between safeguarding privacy and giving the authorities the information they need to investigate and prosecute offences.
Those legal restrictions can handcuff Fintrac, said Martin Rudner, a retired Carleton University professor and director of the Canadian Centre of Intelligence and Security Studies.
"Picture the situation over at the RCMP and CSIS," he said. "They have a lot else to do in life. You suddenly get this disclosure that says, 'by the way, here's some more work for you, but we can't tell you anything."'
In October, Fintrac official Janet DiFrancesco told the Air India inquiry that the money-tracking outfit gets no automatic feedback from the Mounties and the CSIS about the information it hands on.
A report tabled later at the inquiry highlighted the chasm between financial institutions and Fintrac, CSIS and the RCMP.
That report expressed concern that laws governing these agencies may prevent them from providing detailed followup briefings to institutions that send them information about suspect cash dealings.
Legislation passed last year broadened the scope of Canada's anti-money-laundering laws, but there are still ways dirty money can crisscross the globe.
The 2006 federal budget earmarked $64 million over two years for Fintrac, the RCMP, Canada Border Services Agency and the Justice Department to crack down on money laundering and terrorist financing.
Chisholm Pothier, Finance Minister Jim Flaherty's press secretary, said in an e-mail to The Canadian Press that "the work on that file is ongoing."
"The department has continued to work with various partners, including the RCMP and Fintrac, to assess risks and vulnerabilities and we have had discussions with the white label industry," Pothier wrote.
In its latest annual report, Fintrac said about $8 billion in case disclosures last year dealt with suspected money laundering. Another $1.6 billion was flagged because of a combination of suspected money laundering and security-related issues.
Lamey wasn't able to say how much of this suspected money laundering involved white-label ATMs.
It's been estimated there are about 30,000 of the machines in Canada.
Ron Carr, a former Royal Bank executive who now runs a company that sells white-label ATMs, said he doubts they contribute much to money laundering since the transaction volume on each machine is relatively low.
A typical white-label ATM sees fewer than 300 transactions each month, he said, with an average withdrawal of $60 - or about $18,000.
"You'd have to have a lot of ATMs to make laundering any sizable amount of money worthwhile," Carr said.
The sometimes murky ownership of the machines makes it difficult to keep tabs on operators, the Fintrac report says.
"Operator anonymity may facilitate the ease with which individuals linked to criminal activities can obtain and operate a white-label ATM."
Carr described a convoluted ownership structure where ATM owners and operators can purchase or lease the machines - either directly or indirectly.
"That's where it kind of goes, there's another layer and another layer and another layer," Carr said. "It's very blurred who owns the ATM."
The machines are not covered under the federal Bank Act because they are not financial institutions and their ownership is not regulated.
Fintrac recommends mandatory registration of white-label ATM owners as a measure to crack down on money laundering.
However, Lamey conceded that registration is only the "first step." It wouldn't necessarily stop a crooked operator from loading dirty money into a white-label ATM unbeknownst to the owner of the machine.
