International anti‐money laundering and anti‐terrorist financing: the work of the Office of the Superintendent of Financial Institutions in Canada
| DOI | https://doi.org/10.1108/13685200410810038 |
| Pages | 320-332 |
| Date | 01 October 2004 |
| Published date | 01 October 2004 |
| Author | Nicolas W. R. Burbidge |
| Subject Matter | Accounting & finance |
Journal of Money Laundering Control Ð Vol. 7 No. 4
International Anti-Money Laundering and Anti-
Terrorist Financing: The Work of the Oce of the
Superintendent of Financial Institutions in Canada
Nicolas W. R. Burbidge
INTRODUCTION
This paper focuses on the background and application
of international anti-money laundering and anti-
terrorist ®nancing measures as they relate to ®nancial
institutions and their supervisors; and summarises the
approach and activities of the Oce of the Superinten-
dent of Financial Institutions (OSFI) in these areas.
It also notes two current areas of economic crime
impacting ®nancial institutions.
OSFI'S MANDATE AND MISSION
The OSFI is the primary regulator of federally char-
tered ®nancial institutions and federally administered
pension plans. The OSFI's mission is to safeguard pol-
icyholders, depositors and pension plan members
from undue loss. The OSFI supervises and regulates
all banks, all federally incorporated or registered
trust and loan companies, insurance companies, coop-
erative credit associations, fraternal bene®t societies
and pension plans.
The OSFI takes a risk-focused approach to supervi-
sion in order to accomplish its mandate. This means
close attention is paid to the key risks that ®nancial
institutions are taking and the quality of the manage-
ment programmes and governance systems they have
put in place to manage those risks. Financial insti-
tutions are required to ®le certain information with
the OSFI on an ongoing basis. Regular on-site exam-
inations of a ®nancial institution's operations are also
undertaken.
THE GROWING MONEY LAUNDERING
PROBLEM
There is no question that over the past several years,
governments, regulators, bankers and other ®nancial
executives have realised that the systemic abuse of
the world's ®nancial systems by money launderers is
a threat to the con®dence the public has in those
systems.
The International Monetary Fund (IMF) has
estimated that the amount of money laundering
occurring on a yearly basis could range between 2
and 5 per cent of the world's gross domestic product
Ð or somewhere between US$600bn and
US$1.5trn. Estimates come from a variety of sources
based upon both macroeconomic theories and on
microeconomic approaches. The US Department of
the Treasury has suggested that US$600bn represents
a conservative estimate of the amount of money laun-
dered each year. Some estimates
1
suggest that the
amount of money laundered each year is approxi-
mately US$2.8trn, an amount more than four times
greater than the ®gure generally accepted. Due to
the clandestine nature of laundering activity,
governments and concerned organisations cannot
accurately quantify the amount of money laundered
each year.
Here are just a few examples of how illicit ®nancial
¯ows can aect the economy and institutions of the
host country.
Financial institutions that accept illegal funds
cannot rely on those funds as a stable deposit
base. Large amounts of laundered funds are
likely to be suddenly wired out to other ®nancial
markets as part of the laundering process, threa-
tening the institution's liquidity and solvency. A
®nancial institution's reputation and integrity
can be irrevocably harmed if involved in money
laundering or ®nancing terrorism.
Local merchants and businesses may ®nd that they
cannot compete with front companies organised
to launder and conceal illicit funds. Many such
front companies oer their services and goods at
below-market rates and even at a loss. Because
their primary objective is the laundering of
money, they do not need to compete in the
marketplace and make a pro®t for their owners.
Money laundering may also distort some econ-
omic sectors and create instability in their mar-
kets. Money launderers may channel funds to
sectors or areas where funds are unlikely to be
discovered whether or not investment is needed
or real returns are oered. The often sudden
Page 320
Journalof Money Laundering Control
Vol.7, No. 4, 2004, pp. 320± 332
#HenryStewart Publications
ISSN1368-5201
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