Reverse Money Laundering Sting in Canada Increased Drug Trade, Failed to Obtain Government Permission

LAW ENFORCEMENT July-August 1998

A currency exchange business set up by the Royal Canadian Mounted Police (RCMP) to trap drug dealers attempting to launder money began operating before receiving approval from the government, broke U.S. laws, and actually increased drug trafficking (Andrew McIntosh, "Mounties Didn't Have Government's OK for Covert Drug Sting," Ottawa Citizen (Canada), June 14, 1998, p. A1; Andrew McIntosh, "Government Attacked for Defying Court Order," Ottawa Citizen (Canada) June 14, 1998; Andrew McIntosh, "RCMP Sting Sparks Call for Inquiry," Ottawa Citizen (Canada), June 12, 1998).

The RCMP did not seek the required permission from the Canadian Solicitor General for the "reverse sting" until months after it began operating. The Montreal International Currency Centre (MICC), Inc., opened for business in September 1990 but was not approved by then Solicitor General Pierre Cadieux until January 1991 (Andrew McIntosh, "Government Attacked for Defying Court Order," Ottawa Citizen (Canada), June 14, 1998).

Furthermore, the RCMP failed to inform U.S. authorities of its Montreal exchange business, which involved U.S. dollars, or of its use of a Canadian bank branch in New York City until February 1992, almost a year and a half after beginning operations. The Assistant Commissioner of the RCMP had worried that some of the officers might be prosecuted in the U.S. for their role in laundering U.S. money on American soil, but no action was taken (Andrew McIntosh, "RCMP Sting Broke U.S. Laws," Ottawa Citizen (Canada), June 15, 1998).

RCMP currency exchange businesses were set up in Montreal and Vancouver. Although designed to expose drug dealers, the one in Montreal had the unintentional effect of boosting the cocaine market between Colombia and Canada. Traffickers laundered and exchanged $141.5 million through the MICC, but the police involved with the operation were understaffed and could not investigate many of the suspected dealers who used the center.

The center did, however, make a profit from the drug dealers by charging suspected criminals more than other clients. MICC charged people thought to be laundering drug money through the center a fee of one or two percent for the currency exchanged in addition to the usual exchange rate. During the years the center was in operation, it allocated some of its profits -- $1.15 million -- to the RCMP drug investigations. By the time the company stopped operating in 1997, it had amassed a profit of $3 million dollars, which was given to the federal government.

The other exchange operation, set up in Vancouver in 1993, was called the Pacific Rim International Currency Exchange. This company was revealed to the U.S. Drug Enforcement Administration and U.S. Customs at its inception.

Royal Canadian Mounted Police, 1200 Vanier Parkway, Ottawa, Ontario, Canada, K1AOR2, Tel: (613) 993-5281.