The federal government has proposed anti-money laundering task force to improve Canada’s weak policing record in this area. While this is a positive step, the real obstacle, in Iran’s case, is the sanctions that hinder transparent, legitimate, and taxable transactions between banks in Canada and Iran.
By Younes Zangiabadi
If you have a debit card from an Iranian bank, you could use your card to receive cash in Canadian dollars or other prominent currencies at dozens of currency exchange offices in Canada. It is done through an Iranian-based interbank information transfer network called “Shetab”, which is much faster and cheaper than a regular banking system. This is an electronic banking network that handles ATM, POS, and card-to-based transactions in real-time among all the banks in Iran. Thanks to US sanctions, the system now operates far beyond Iran’s border and it is being widely used by Iranian-Canadians who are unable to use the regular banking system to transfer money between Iran and Canada.
While this system has facilitated money transfer for thousands of people, it has also made it easier for some to engage in money-laundering (ML) in Canada. This is an issue that has been raised by high-ranking officials in Iran. Iran’s Foreign Minister Mohammad Javad Zarif, in a meeting at the Iranian Parliament Commission on Economy, criticized the use of the Shetab system in foreign countries like Canada that have become the safe haven for ML, particularly through these payment machines at currency exchange shops. In the same vein, Abdolnaser Hemmati, Head of the Central Bank of Iran referred to these practices as the main example of ML, which allows anyone to easily move millions of dollars from the country.”
Iran has taken various initiatives to control and limit these practices as part of its broader strategy to align its anti-money laundering (AML) laws with international norms set out by the Financial Action Task Force (FATF). The central bank has recently imposed restrictive limits on the amount of financial transactions (up to roughly $5,000) allowed to be processed by any individual per day through the payment system.
Nevertheless, speculators still have a number of ways to go around the CBI’s new preventive measures. For example, they exploit various national identity cards as well as different bank accounts to exceed the daily limit imposed on the individual. They also – notwithstanding de-activations of payment machines outside Iran – use Virtual Private Network (VPN) and proxy servers to intentionally misinform the authorities of their exact locations. Therefore, it is extremely difficult to track these transactions, given that the IP addresses of the sender, processor, and receiver are shown to be in Iran.
Ultimately, there is only so much that a non-FATF member like Iran could achieve alone when it comes to AML. However, the bar must be set higher for Western countries including Canada that possess the financial capacity, legal foundation, and political capital to combat ML on a global scale. According to the latest FATF evaluation report, “Canada’s open and stable economy along with its accessible financial system makes it vulnerable to foreign ML threats taking place through financial institutions, banks, and money service businesses.” This is no breaking news for some of the foreign criminals who have long used Canada to launder and integrate their dirty money into one of the most legitimate financial systems in the world. But how do these corrupt individuals bring their money to Canada?
Apart from breaking down their money into multiple low payment transfers (Up to $10k), they also make deals with currency shop owners who have multi-million-dollar wealth and investment in both countries. The shop owner could receive any amount of money in Iran and reimburse the equivalent value to the customer (with no due diligence) in forms of bank draft, cheques, and even properties in Canada. The only thing that needs to be done to complete the layering and integration phases of ML is to forge a purchase agreement of a high-valued property in Iran just in case if the bank demanded more information about the source of money.
The federal government has proposed anti-money laundering task force to improve Canada’s weak policing record in this area. While this is a positive step, the real obstacle, in this specific case, is the sanctions that hinder transparent, legitimate, and taxable transactions between banks in Canada and Iran.
The truth of the matter is that there is not much that Canada could do regarding US sanctions. However, Canada can still directly engage with Iranian authorities to work on this common problem. After the tragedy of downing of a civilian plane with 63 Canadians on board, Canadian high-ranking officials, for the first time in years, engaged with their counterparts to ensure that a transparent investigation is taking place and to provide consular assistance to victims’ families. If Iranians show cooperation in addressing Canada’s concerns in this tragedy, Canadian officials should also use the established channel of communication to discuss other issues including money laundering measures that must be implemented between the two countries.