Could you be involved in global financial crime?

Financial crime in international trade is big business, with proceeds of up to $1.5 trillion annually. A Canadian exporter or importer who finds themselves embroiled in such activities—even by accident—can be financially crippled and see their reputation destroyed.

In 2013, for example, an Alberta energy company was fined $10.35 million for paying a $2-million bribe to secure oil rights in Africa. The same year, an Ottawa businessman was sentenced to three years in prison for bribing public officials in India to win a $100-million security contract with Air India. And in 2019, the U.S. Department of Justice charged four executives of a Canadian payment processor with fraud and money laundering.

Cases like these show how dangerous it can be for a Canadian company to ignore the risks of international financial crime. They also show that protecting your business against these criminal activities can be one of the wisest investments you can make.

Take this quiz to find out if you could be involved in crimes such as money laundering, terrorist financing, corruption or financial fraud. For more information, check out Export Development Canada’s guide on Financial Crime in International Trade. 

International criminals launder money to disguise the fact that it comes from illegal sources. Laundering can make large amounts of crime-generated cash appear to be the proceeds of legitimate business activities.

Without realizing it, companies can become part of a money-laundering scheme in several ways:

Money laundering by an international customer

To see if an international customer may be involving you in money laundering, ask yourself the following questions:

• Is the customer trying to pay you through one or more apparently unrelated businesses in a third country?
• Has the customer overpaid you for a shipment of goods and is now asking you to send the refund to an apparently unrelated business in a third country?
• Does the customer want to pay you in cash for a shipment of goods?

If you answered “yes” to any of these questions, you may be involved in a money-laundering scheme.

Money laundering by a global supplier

To see if a global supplier may be trying to involve you in money laundering, consider the following questions:

• Is the supplier asking you to pay for a shipment of goods by sending the payment to an apparently unrelated business in a third country?
• Is the supplier offering you an exceptionally good deal, provided you send the payment to an apparently unrelated business in a third country?

If you answered “yes” to either of these questions, you may be dealing with a money launderer.
 

What to do

If you think your company might be involved in money laundering, you should immediately do the following:

• Retain legal counsel to advise you how to proceed.
• Gather all supporting documentation and place it in a secure location.
• Notify both your financial institution and the federal government’s Financial Transactions and Reports Analysis Centre (FINTRAC) that you may have become involved in money laundering.
• Don’t tell your customer or supplier (or a third party, if there is one) that you have reported the transaction.

Terrorist financing supports terrorist activity and may use funds raised from both legitimate and criminal sources. Note: Terrorist organizations often use money laundering to disguise the origin of funds and to move money from place to place.

Companies can become linked to terrorist financing schemes without any idea that this is happening, but the investigating authorities may not assume that you’re innocent. To see if an international customer or supplier may be trying to involve you in terrorist financing, consider the following questions:

• Are you being approached by a potential customer or supplier who has been sanctioned by the Canadian government? (“Sanctioned” means that Canadian companies are legally prohibited from doing business with this person or organization).
• Has an international customer overpaid you for a shipment of goods and is now asking you to send the refund to an apparently unrelated business in a third country, and that third-country business is listed as a sanctioned entity?
• Is an international supplier offering you an exceptionally good deal that involves sending the payment to an apparently unrelated business in a third country, and that third-country business is listed as a sanctioned entity?

If you answered “yes” to any of these questions, you may be dealing with a terrorist financing scheme.

What to do

If you realize that you’re dealing with an individual or organization that could be linked to terrorist financing, you should immediately contact the RCMP’s National Security Information Network at 1-800-420-5805.

Corruption refers to wrongdoing by government officials by means that are illegitimate, immoral or incompatible with ethical standards. Corruption in international trade is very often associated with the bribery of government officials and it can attract severe penalties under Canadian law.

To see if an international customer or supplier may be trying to involve you in corruption and bribery, consider the following questions:

• Does the customer or supplier seem to be using business practices that would not be acceptable in Canada?
• Does the customer or supplier seem to be using business practices that would not be acceptable in their own country?
• Is the customer or supplier asking you to make a payment to a local official to gain preferential treatment in the local market?
• Is the supplier asking you to make a payment to a local official before the supplier will ship the goods to you?
• In any of the situations above, is an agent involved in the transaction? (It’s known that the use of agents is linked to a higher risk of corruption or bribery.)

If you answered “yes” to any of the above, you may be involved in the corruption of global officials.

What to do

If you suspect bribery and/or corruption in your dealings with an international customer or supplier, contact the International Anti-Corruption Unit of the RCMP in Calgary (403-699-2550) or Ottawa (613-993-6884).

If you’re an exporter, financial fraud means you ship goods to an international customer, but don’t receive payment for them. If you’re an importer, it means you pay an international supplier for goods, but receive either substandard merchandise or nothing at all.

If you become involved in fraud, it will more likely be as a victim rather than as an unwitting perpetrator. That said, you should be aware of the threat simply out of self-protection.
 

Fraud by an international customer

To see if a customer abroad is trying to defraud you, consider the following questions:

• Is the customer refusing to pay for your goods even though there’s nothing wrong with them?
• If the customer has provided a letter of credit (LC) to guarantee payment for your goods, could the letter of credit be fraudulent?
• If the customer has sent you a cheque to pay for your goods, could the cheque be fraudulent?
• If the customer has provided you with credit references, could they be fraudulent?

If you answered “yes” to any of these questions, you may be at risk of financial fraud.
 

Fraud by an international supplier

To see if a supplier in another country is trying to defraud you, consider the following questions:

• Is the supplier offering you deep discounts for its merchandise, but only if you agree to a high-risk payment method such as payment in advance?
• Has the supplier shipped you inferior goods after you paid for quality merchandise, and now refusing to replace the goods or refund your payment?
• Has the supplier shipped you an insufficient quantity of goods after you paid for the full shipment, and now failing to make up the shortfall or provide a refund?
• If an international inspection company has sent you an inspection certificate for goods you’ve bought from the supplier, could either the certificate or the inspection company be fraudulent?
• If you’ve bought goods from the supplier, is there any risk that these goods may be counterfeit or may include counterfeit components?

If you answered “yes” to any of these questions, you may be at risk of financial fraud.
 

What to do

If you suspect that a transaction with either a customer or a supplier may involve financial fraud, you should do the following:

• Retain legal counsel to advise you how to proceed.
• Gather all supporting documentation and place it in a secure location.
• Notify your local law enforcement that you suspect a transaction may be related to financial fraud.