HV 8079 .M64 P7 1993D Guide-Eng

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CRIME and ETECTION 1111

Reference Guide Workbook Case Study HV 8079 .M64 P7 1993d Guide

Solicitor General Canada I Solliciteur général Canada Canad'a •

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CRIME 11110 DETECT1011 Proceeds of Crime

Reference Guide

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The following training program, which includes a reference guide, a video, and a student workbook with a case study, is intended to assist police forces in developing the skills of police officers and investigators in the area of proceeds of crime investigation.

These materials are not intended to supplant the discretion and judgement of the police forces in any proceeds of crime investigation.

These materials are in no way meant to be comprehensive or to be taken as legal advice. If you are in doubt as to the proper procedure, seek legal advice.

Further, the views expressed in these materials are those of Bindernagel-Ross New Media and do not necessarily reflect the views of the Government of Canada. •

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It is illegal to reproduce any portion of this book except by special arrangement with the publisher. Repro- duction of this material without authorization by any duplication process whatsoever is a violation of copyright. Every effort has been made to determine and locate copyright owners. In the case of any ommissions, the publisher will be pleased to make suitable acknowledgements in future editions.

Bindemagel-Ross New Media 306, 2000 Weston Road Weston, Ontario M9N 1X3 • Crime 0 Detection "Proceeds of Crime" Chapter I • Money Laundering Table of Contents

SECTION 1 Introduction 6 Chapter 1 - Money Laundering 9 What Is Money Laundering? 11 Money Laundering - The Techniques 21 The Load 25 The Wash 35 The Dry 38 Moving Money 39 Social Mores 40

Chapter 2 - Secrecy Havens 41 On Law Enforcement and Foreign Banks 47

Chapter 3 - The Canadian Banking System and Financial Transactions and Records 49 The Canadian Financial System 51 Account Records 56 Over the Counter Services 62 Investment Services 64 Lending Services and Mortgages 66 Safety Depo,sit Boxes 67 Double Entry Accounting 68

Chapter 4 - Financial Investigation and Public Information Systems 69 Pathfinding 73 Where to Apply for Information on Corporations 74

Chapter 5 - Financial Investigation Techniques 77 Audit Trails 79 Investigating a Bank Statement 79 Investigating a Bank Account Passbook 85 Investigating a Cheque 88 Investigating a Deposit 98 Investigating a Proof Tape 105 Investigating a Cheque on Deposit 107 Investigating a Wire Transfer 109 Investigating a Money Order/Draft Purchase 112 Investigating a Client Profile 115 Investigating Foreign Exchange 116 Currency Source Declarations 116 Summary 117

Chapter 6 - Financial Investigation Summary and Analysis 121 Source and Use of Funds 123 Net Worth Analysis 148 Appendix A: Lecture Scene Transcript 151 Appendix B: Summaries of Records 173 Glossary 179 Endnotes 181

SECTION 2 • Workbook W1 SECTION 3 Case Study Cl Crime 0 Detection "Proceeds of Crime" Introduction

Introduction Crime and Detection is a Police Education Program developed for the Federal Ivfmistry of the Solicitor General of Canada to develop the skills of police officers and investigators in the area of proceeds of crime investigation. The purpose of the training program is to build upon the criminal investigation skills and applied experience the student investigator already possesses. It introduces a relatively new and potent method of law enforcement that targets criminal enterprises through the identification and demonstration of the profits or assets obtained through the criminal activity. The application of proceeds of crime enforcement has been particularly well-demonstrated by the Royal Canadian Mounted Police against narcotic trafficking organizations in Canada and has been an effective law enforcement measure by United States law enforcement agencies in their war against drugs. This program has been developed with the assistance and cooperation of expert sources including the Royal Canadian Mounted Police, Metropolitan Toronto Police, Ontario Provincial Police, Investigative Accounting Group of Ernst & Young Public Security of Canada, and Mr. Charles Intriago, an internationally renowned expert on the topic of money laundering. The Canadian banlcing industry and specifically the Royal Bank of Canada has been extremely helpful in the development of this training package. VVithout the support and cooperation received from the Royal Bank of Canada, the creation of this training program would not have been possible. Throughout this course and the case study, several references and illustra- tions of financial records relating to a fictional money laundering case have been presented to assist the investigator with interpreting realistic and accurate evidence during an investigation. The requirement to present the investigator student with accurate records has been critical to achieve the learning objectives of this training program. In doing so, nearly every major Canadian fmancial institution has been represented in this investigation in order to demonstrate the fluency with which transactions can be structured by launderers. We do not imply or target any specific financial institution as being especially vulnerable or susceptible to laundering activity, nor do we intend to suggest that any of the financial institutions has been victimized by a launderer.

6 Crime o Detection "Proceeds of Crime" Introduction

The training is broken down into the following sections:

Moneg Laimdenng In this section you will learn: • The definition of money laundering. • The motivations and techniques criminals use to launder money. • Why identification of money laundering can be difficult, and what steps the financial industry has taken to prevent themselves from being used by money launderers.

Financial Insbtubon Records In this section you will learn: • The structure and organiz.ation of the Canadian banlçing and trust industry. • The methods of domestic and international financial transactions. • Record-keeping practices for financial transactions.

Financial Invesbgabon Techniques In this section you will learn: • The principles and techniques of fmancial (forensic accounting) investigation and how it applies to a proceeds of crime investigation. • What an audit trail is. • What records make up an audit trail and where to find them. • How to analyse evidenc,e and determine further financial investigative steps. • How fmancial transactions can be used in intelligence gathering. • About financial investigation summaries such as a Source and Use of Funds analysis and a Net Worth analysis, and how to prepare them for court. • You will be introduced to Proceeds of Crime investigation.

Case Study In this section you will learn; • How the knowledge presented in the workbook applies to a proceeds of • crime investigation. 1 Cnme 0 Detection "Proceeds of Crime" Introduction

• How the example of the proceeds of crime investigation dramatized in the video was conducted. • The difficulties and challenges that may be experienced during an investigation. • How to use the evidence'gathered from this investigation to complete certain elements of the investigation yourself.

In this section, you will practice: Document investigation techniques. Interpreting and analysing actual evidence from the investigation. Preparing a Source and Use of Funds Worksheet.

This training package is designed to be a self-paced, self-study learning and reference material which includes a reference guide, a video case study, a print case study, and reproductions of key evidence from the video. The suggested study pattern for this course is: 1 Read through Chapters 1 through 6 of the reference guide. 2 Read the Case Study introduction. 3 Start the Case Study by watching the video (approximately 60 minutes). 4 As you watch the video, refer to the evidence sections (especially Appendix A and Chapter 6) of your workbook to get a closer view and understanding of the evidence that the investigators on the case are handling. 5 After the video, commence the case study exercises on document investigation and asset tracing. 6 Verify the correctness of your answers by comparing your results to the answer key found in the Workbook. 7 If you experienced difficulty in understanding the document investigation techniques, review the video again and/or refer to the appropriate topic of Chapter 5 in the Reference Guide.

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Money Laundering

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10 Crime 0 Detection "Proceeds of Crime"

Chapter I 0 Money Laundering

• What Is Mo e u Laundermg? While the term "money laundering" may sound mysterious, essentially it is disguising the origins of money that has been obtained illegally. Generally, money laundering is thought to be an act exclusive to the illegal drug trade; yet laundering has been a pursuit of all major cash-generating criminal organizations and individuals. Prostitution, gambling and loan sharlcing are traditional criminal activities that would require laundering, but also to be included in the Money Laundering Hall of Fame are tax evaders, some political organizations and some corporations. An individual who has been bribed, an employee who used inside information to profit in the stock market, a political party that received financial contributions from a source it does not want to publicly acknowledge: all of these, and others, want to disguise the source of their income. They are all money launderers.

Whg is É done? In order for a criminal to reap the rewards of his labour he must present himself as a legitimate individual who has attained his wealth and standing in a legal and accountable way. The money you spend must come from somewhere. Any country that taxes income regulates which sources are legitimate. In order to spend money, you must be able to declare its source. You could hardly declare • income from drug trafficking or extortion on an income tax return! Drug traffickers launder money to convert the vast amounts of cash generated by their sales to more manageable assets. Large amounts of cash must be converted to less conspicuous forms which can be moved more easily than cash. Money is usually laundered through the domestic and international banking systems which keep the capital flowing to the international connections of the drug traffickers.

Drug Organzabons Criminal enterprises involved in trafficking illicit drugs are large, sophisticated organizations. Much like a multinational corporation, they have in place a wholesale, distribution, retail, financial and administrative network that spans the world. They are often controlled by citizens of the area in which the drug is cultivated. Many drug organizations have invested their enormous profits and have extensive holdings in prime downtown real estate in major cities, legitimate businesses, stocks and bonds, etc. They have become powerful, wealthy business concerns. These organizations are thought to receive an estimated $US 300 billion annually in worldwide sales of illegal narcotics — $U.S. 822 million a day! •

II Crime 0 Detection "Proceeds of Crime" Chapter 1 o Money Laundering

lhe Ihe cFle The drug cycle starts with the cultivation of the plant required to produce the drug. For cocaine, the coca leaves cultivated in South America provide the "raw material." Farmers in Bolivia and Peru rely heavily on this crop for sustenance. The fanners are generally not linked to the drug trafficking organizations, and there are many legitimate reasons for growing coca. However, they play an essential role in the drug cycle. Heroin, which is characteristically produced in Asia, is derived from opium plants. Farmers rely on this crop for their livelihood and receive a moderate sum of money for their crop. Once the plant is cultivated, it is transported to a manufacturer, usually a jungle chemical plant, where it is refmed and re-refined into a product that can be sold on the street. Throughout this process the raw materials and the manufacturers are under the enormous protection of the drug organization's security because of the enormous profits to be made by selling the drug. At each stage, management and administration ensure the continued unin- terrupted flow of product with an efficiency and effectiveness not duplicated in the legitimate business world. VVhen the product is in a saleable forrn, it is transported to the market. With the obvious threats of detection and seizure by law enforcement agencies in both the countries of import and export, the product is carefully concealed and transported by boat and plane. In the Western hemisphere cocaine trade, the product transported north from Colombia is under intense surveillance by the United States Custom Service, United States Military, United States Drug Enforcement Agency, and the United States Coast Guard through naval patrols, air patrols using both regular police and military aircraft, and sophisticated secret spy planes and satellites. The regular military and commercial radar facilities in place all along the U.S. coast are now used extensively for drug interdiction and United States Military Reserve Forces are also used to support this role. As the entry points to the United States are closed, more and more evidence supports the theory that Canada has become the preferred and ideal entry point for the drugs destined for the U.S. market. Canada shares with the U.S. the longest unguarded border in the world and is an excellent access point for drugs. The preferred method of transportation is small planes equipped vvith extra long range fuel tanks that will allow the plane to fly far off the U.S. Atlantic coast just out of radar range, and then in over Canada's Atlantic coast to land at small landing strips in the eastern provinces. Once there, the planes can refuel and fly to a central Canadian landing point and then into the United States. A

12 Crime 0 Detection "Proceeds of Crime" Chapter 1 • Money Laundering

flight plan filed from an Ontario point to a small U.S. airport arouses little suspicion and is therefore not as likely to be detected by American Law En- forcement agencies. An alternate method is to unload the drugs in the Atlantic landing destination and transport them by cars, trucks, etc. across Canada and then to the U.S. The methods used, the individuals used, the entry points and the receiving contacts are managed and chosen by King Pins or the "CEO's" of the drug organizations based and he,adquartered in Colombia. Their vast business networks are managed by financial and business advisers around the world. The drugs are received in the importing country by contacts or members of the same organization who act as wholesalers and/or distributors and regional managers. The drug is either sold wholesale to local independent drug dealers or distributed to their ovvn retail network of street drug dealers and then to the teenage pushers and couriers. $200,000 every minute is generated in cash drug sales in the U.S. At each point of this cycle, the value or price of the product increases substantially. (See Table 1.1, page 14.) The value of one successful shipment brings tremendous wealth to the drug corporations. The risk of losing the shipment or of arrest is considered small compared to the potential gains. While the effects of the drug trade on Canada pale by comparison to the United States, several indicators concern Canadian law enforcement agencies. Canada's proximity to the United States, the world's largest drug consumption market with the world's longest unguarded border, allows a tremendous volume of illegal narcotics and profits from drug sales to be transported back and forth. The Canadian economy, its investment opportunities, and financial community with its strong international financial relationships offer a very attractive base to drug organizations.

How long has É been done? Disguising the proceeds of crime has long been the sensible way to avoid any undesirable attention to the business of the criminal. The art of laundering the proceeds of crime was perfected in the early 1930s by an American named Meyer Lansky. Lansky was a business partner of Salvatore 'Lucky' Luciano. 'Lucky' was responsible for leading the notorious Chicago mob (once run by Al Capone) into the heroin business after prohibition was lifted. After the convic- tion of Al Capone on tax evasion charges, the Mafia lords recognized the need • for an effective laundering system that distanced the proceeds of crime from them firther than the existing chain of laundromats and car washes.

13 Crime o Detecbon "Proceeds of Crime" Chapter 1 Money Laundenng

FIGURE 1.1

Representative Prices for Southeast Asian and Southwest Asian Heroin at Successive Stages of Trafficking, 1984'

Southeast Asian Heroin Farmer 10 kg of opium $ 1350-$1500 Laboratory (Golden Triangle) 1 kg of No. 4 heroin (pure) $4200- $5800 Distribution Centre (Bangkok) 1 kg of No. 4 heroin (pure) $7400-$11500 Canada 1 kg of No. 4 heroin (pure) $225000 1 ounce (28 grams) of No. 4 heroin (pure) $13000 1gram of No. 4 heroin (pure) $600-$1000 1 capsule of No. 4 heroin 15%-6% pure) $35-$60

Southwest Asian Heroin Farmer 10 kg of opium $90041000 Laboratory (Golden Crescent) 1 kg of heroin (pure) $520047150 Distribution Centre (Europe) 1 kg of heroin (pure) $50000-$85000 Canada 1 kg of heroin (pure) $225000 1 ounce (28 grams) of heroin (pure) $13000 1gram of heroin (pure) $60041000 1 capsule of heroin (5%-6% pure) $35-$60

lbw Is it done? The mechanical methods of money laundering are many and complex; however, the principle underlying laundering is quite simple: to render police investigators ineffective by distancing the true origins of the money from the criminal. With the knowledge that all financial transactions have a true source and a true destination, launderers rely on the following methods: Crime 0 Detection "Proceeds of Crime"

Chapter I 0 Money Laundering

• • altering the perception of the source by creating a series of nonoperating companies owned by the money launderer that create the appearance of legitimate sources for income, FIGURE 1.2

• manipulating the flow of cash so as not to raise any undue suspicion by bankers, FIGURE 1.3

$5,000 $3,000 $8,000

• creating a network of financial transfers between various accounts and financial institutions that has limited exposure to any individual placing the information about the owners of the accounts at a distance,

FIGURE 1.3

77-1

ge.eraln • •••••• •

IS Crime 0 Detecbon "Proceeds of Crime" Chapter 1 0 Money Laundering

• taking advantage of an impersonal financial network that provides for the quick courier of international funds expediently and efficiently, • manipulating payments between financial institutions and corporations so as to create a incomprehensible trail of records for investigators, • using foreign banking and corporation havens that offer secrecy laws to protect owners from prying eyes.

Does money laundenng work? Launderers understand the precautions financial institutions have taken at a policy level to prevent laundering, but depend on the branch's lack of stringent enforcement of these precautions. They assume that the bank's policy of know- ing the source, purpose and destination of all transactions is unrealistic and impractical. They also rely on the lack of access to and understanding of the fmancial system by proceeds of crime offic,ers. The Imowledge necessary to launder depends on the preventative measures used by both bank employees and law enforcement officers, and the length of the trail. If money is moved from point A to point B without being detected, money laundering is perceived to be successful. In the same way, a burglar who has sneaked past the guard and alann system without detection has been successful. If he leaves and never returns to the same route he probably will never be caught. If an investigation leads to an individual who has been laundering drug money for a number of years and the assets or proceeds of the crime can be seized some years later, the money launderers will not seem so successful. It is unlilcely that money laundering will be stopped at the moment the money is deposited. However, because the records of these transactions remain intact for several years, it is possible to investigate and obtain evidence for prosecution after the fact. A launderer will feel comfortable and secure with a method that appears to be successful. This perception of security will work to the advantage of investigators because much of their work can be done quickly and quietly, without the launderer's knowledge! Once law enforcement investigators have bridged the gaps of knowledge in understanding financial transactions and financial investigations, their perception of the success and failure of money laundering individuals or organizations will change. It will change because they will learn that almost anything can be traced.

16 Crime 0 Detection -Proceeds of Crime- Chapter 1 0 Money Laundering

The Financial Organization DRUG SALES of 1 Drug Corporations Courier Smurfs Service Fronts FIGURE 1.4

Trauporsed Conversai to dreg, by canner truretlier's casquas, money orders

e e Secrecy !savers: Mailed to International iasernational corporstiosu iII Mint" Yor* Torcasio Hong Kong London cosporesions secrecy havens • in secrecy lamas

1=1WeNee Maiden

Foreign Corporations for Legitimate Investments

All OvCrned By Drug Corporation

DRUG CORPORATION'S • PRIVATE AND BUSINESS WEALTH

11 Crime 0 Detection "Proceeds of Crime-

Chapter I 0 Money Laundenng

The Money Laundering Cycle

FIGURE 1.5

Life-style

The drug corporation is the beginning and the end of the money Cayman laundering cycle,. Islands

Plants that are the raw material for drugs are purchased and refined, then smuggled to 7 North America to be sold. Cash is converted into other payment instruments in countries like Canada with a stable banking system and transfenred electroni- From sales, huge cally to accounts around amounts of cash accu- the world. i mulate. It is heavy and bulky, and launderers have devised many ingenious ways to convert the unwieldy cash into more manageable forms. /

ID Crime o Detection "Proceeds of Crime- Chapter 1 Money Laundering

lbw sophisbcated are theg? To effectively launder great quantities of cash, one needs to lmow how the financial community works, especially if the financial institution has prioritized itself to recognize the signals of money laundering. If the organization and the quantities of cash are small (under $5 million a year), the trail would not necessarily be long and might not be international. In this case a woriring knowledge of the mentality of the financial institution's employees and the establishment of a good client/bank relationship with a few different institutions under the front oflegitimate businesses would probably suffice. A more intimate understanding of financial institutions and instruments of 'flight capital' would be necessary for larger international organiz.ations vvith larger volumes and quite possibly different intentions for the cash. Such an organization might want to decentralize its wealth into its various countries of origin and into legitimate investment vehicles such as stocks, real estate or businesses. Expertise might be obtained from legitimate sources such as lawyers, accountants, and bankers. The financial expert could be from the home country that directs the financial operations worldwide of many satellite organizations. Local dealers could also be set up as franchises with advice rendered but autonomy left to the owner/operator. There are also individuals or organizations that could be hired to move or 'courier' the money for the dealers. In all cases the advice would probably take into account the present barriers in the system that are intended to prevent laundering and would count on lack of attention to those barriers when calculating the risks and likelihood of suc- CeSS. A lack of understanding of the record keeping of transactions, a lack of confidence in the analytical ability of both law enforcement and financial institution employees, and a complete failure to recognize the impact of recent legislation and zealous fmancial investigators dominate the launderer's approach!

Bo th know the baking sgstem? The manipulation of various financial institutions and their respective accounts sug,gest that launderers receive expert advice either from an individual who has developed experience from the act of laundering or possibly from a banker. It would be simple to plant someone into a branch to learn the banicing system. In a few short months the necessary information could be obtained. Accurate advice must come from a banker, not from a lawyer or from an accountant! The banking community's ecology is sophisticated and difficult for the outsider to understand. There are constant innovations in technology and operating procedures. 19 Crime 0 Detection "Proceeds of Crime" Chapter I Money Laundering

Do those who are abasmg them [accountants lawyers hankers] know the banking sgstem? Neither lawyers nor accountants are experts on the administrative and operational infrastructure of banking. Their expertise will be limited to the percep- tions obtained through observation as a bank client and through correspondence such as bank statements. Concentrated exposure to fmancial institutions from a client point of view will certainly give a sound understanding of the aspects of banlcing as it pertains to them: how long it takes to wire money, what documentation is required to open bank accounts, and also a detailed understanding of the worlcing mentality of the typical branch employee! Accountants would understand the bookkeeping aspects of operating a business and would certainly be able to give direction with respect to reconcil- ing the bank records on their client's company with their own records. They are generally very knowledgable about directing individuals as to what type of bank accounts to open and what (legAly) would be required to open them. Their lcnowledge of how a bank operates its own records is normally very little — unless they have a worldng source in a banking system. Lawyers would defmitely be capable of giving expert advice about the legal obligations of operating a business. Based on their experiences with their own trust accounts, they could explain the particularities of such accounts and would be well-acquainted with banldng documents from the client's point of view. Both of these professionals normally offer incorporation services which would be the first stop for advice about opening any type of business operation. In addition, some might offer an administrative service. For example a lawyer or accountant with a power of attorney can operate the daily transactions of the operation and protect the true owner from exposure. A banker who is approached for advice (covertly) about the daily operation of the banldng systems might be unable to give the advice needed to assist the trafficker depending on his/her position in the bank.

Is angthmg untraceable? The record-keeping proc,edures in the Canadian banking system are quite effective in tracing the route of fimds. It is impractical for branches to monitor daily transactions given the volumes they process. To overcome this problem, the processing centres of the financial institutions have developed an extensive system of electronic recording and filining of the transactions it processes. The records are retained for a specific amount of time for branch reference in case of errors or problems. Any opened account, deposit, cheque, wire transfer or foreign exchange transaction produces either electronic records or film copies.

20 Crime 0 Detection "Proceeds of Crime" Chapter I • Money Laundering

• the transactions of an organization or individual, you In order to reconstruct must know where to find these records and how to interpret them. This information will be covered in Chapter 3. Almost anything is traceable.

Money Laundermg • The Techniques A money laundering operation will take dirty money and route it through several structures such as cash yielding businesses and place it back into the hands of the drug dealer. (See Figure 1.6, page 22.) A Judiciary committee submitted to Congressional hearings in the United States that: These launderers carry on a number of activitie,s at one time. They arrange for the deposit of illicit cash into domestic financial institutions; arrange for the transportation or delivery of currency into or out of the U.S.; they may buy U.S. dollars in exchange for Colombian pesos; buy pesos in exchange for dollars; buy and sell both Colombian banking instruments as well as U.S. cashier's checks, personal checks or corporate checks; manipulate U.S. domestic disguised wire transfers of funds from the U.S. to relatively secure havens such as Panama, the Cayman Islands and Switzerland; set up sham foreign corporations...sometimes all these things are happening at the same time.2 The money launderer may carry the funds through as many corporations or businesses as he controls. The number he does use probably depends on how secure he feels about the safety of his money laundering operation. Funds could be moved locally (i.e.. in North America) by directing payments back and forth inconspicuously and simultaneously through twenty banks by mail or telephone. (See Figure 1. 7; page 23.) Once the cash has been accepted by the bank and placed into the dealer's account, it begins to appear legitimate. The payments made between the various corporations belonging to the money launderer are in the form of regularpaynent instruments. Financial institutions process biffions of individual payments every day! Once satisfied that the money has been sufficiently distanced from him, the money launderer will route it back to himself in the guise of legitimate salary. However long and indiscernible the trail, it is a safe assumption that the • fiinds will lead back to the launderer in some relatively liquid form. 21 Crime 0 Detection "Proceeds of Crime Chapter I 0 Money Laundering

FIGURE 1.6

The money launderer deposits cash through the businesses that would be expected to yield cash deposits. He then dmws the money out to himself as apparently legitimate salary.

DRUG SALES - CASH

Pizza Plus Have Fun Club 99 Amusements

Bank A Trust B Bank C

Cheques drawn on Cheques drawn on Cheques drawn on

ena 111,4 Hass ha Usk 99 'MOOD $05 000 $25 000 Ilbag lasieme ern lammileut Waal Imair14

These cheques are payable to the money latmderer as apparently legitimate income.

22 Crime 0 Detection "Proceeds of Crime" Chapter I 0 Money laundering

FIGURE 1 .7

The money launderer decides to move the flow of proceeds of crime through various shell companies and financial institutions to extend the trail further both geograhically and on paper.

DRUG SALES - CASH

Pizza Plus Have Fun Club 99 Amusements

Avocado Investments Back Door Holdings New Wave Marketing

Avocado Inv. NY Two Cities Inv. Fia. Running News Inv. Ca

Running News Inv. Toronto Inv. Holdings Vancouver Inv. Ltd.

Money launderer receives apparently legitimate • investment income.

23 Cnme 0 Detection "Proceeds of Crime" Chapter I • Money Laundering

The use of dummy corporations The need to spread the trail out further in the distribution process of money laundering is satisfied by forming corporations that can accept large transfers of capital into and out of the corporation's books. The use of corporations gives an air of respectability. Since the receipt of capital in any form by a corporation is quite normal it will not be suspect. The use of a corporation also provides privacy since the ownership is determined by shareholders and information on the shareholders would never become public knowledge unless investigated by authorities. Incorporation is a simple inmensive process that would raise no suspicion. Many businesses incorporate for tax purposes. There are many sources of expert advice and service. A lawyer, accountant or paralegal service can provide the documentation and act on your behalf to incorporate. You need never step into the offices of the Mmistry of Consumer and Corporate Affairs where corporations are registered. Once incorporated, the business is maintained and operated at the owner's discretion. The accountant or lawyer might be retained as council or to act on the owner's behalf with a power of attorney, but in the case of Money launderers that could compromise security. It is therefore unlikely. Information about corporations is available upon request and is based on information provided to the registrar by the corporation. Even in countries with secrecy laws, information as to the ownership of a corporation may be available with proper investigation and cooperation. Information such as internal accounting records and who owns corporations is the key to imrestigating the money laundering trail.

Open ng Midi account Once a front corporation ha.s been established, the next component in the money laundering mechanism is opening a bank account. The most important part of laundering drug money is to establish a relationship with a financial institution that is willing to accept large quantities of cash and execute transactions without getting suspicious. The dealer's criteria for selecting a branch is really no different than that of any legitimate businessman. However, certain factors will contribute to a lack of suspicion. • A money launderer would not choose a corporate banlcing centre where account managers get to know clients and their businesses in order to sell

21i Crime o Detection "Proceeds of Crime" Chapter I Money Laundering

banking services. Large volumes of money or transactions in an account would attract the account tnanager's attention. This would be dangerous for a money launderer. • The branch's location could affect the level of suspicion on the part of the bankers towards cash deposits. For instance, bankers will be more suspicious if the branch is located in a seedy part of a city that is known as a drug-ridden neighbourhood. • A branch that is very busy all of the time is a good choice because the employees are too busy performing administrative functions and serving customers to take the time to scrutiniz.e clients and their transactions. It is easy to establish a good friendly relationship with these employees because they are appreciative of nice, understanding clients. • A branch in a buik up retailfmdustrial area would receive large cash deposits from legitimate business clients such as stores, service stations and restaurants. Financial institution employees would be used to large cash transactions. This would also ensure that the branch would have a large cash limit and would be able to absorb steady cash volumes without raising any suspicion at head office. • The branch should not be located close to the location that the dealer lists as luis business address. For example, if he represents himself as a restaurant owner he wouldn't want any of the bank tellers trying to fmd it for a lunch excursion. • The branch that doesn't exercise too much inquisitiveness when approached about opening a new business account is less likely to be inquisitive later.

Once the launderer has satisfied some or all of these requirements, has opened an account, and has established a friendly rapport with the branch employees, the money laundering mechanism has its first and most crucial element in place. Now to effectively and safely operate this aspect of the laundering mechanism, the launderer must understand the barriers that bankers and legislators have instituted to prevent or detect laundering, and then fmd a way to circimvent them. Since many financial institutions have a policy of obtaining declarations from clients as to the source of cash transactions over $10,000, a launderer must naturally take care not to do business in a branch that adheres to these guidelines. The cash must enter the banking system quietly. Dropping more than $10,000 cash at a time is not wise. Except for major department stores or high 25 Crime 0 Detection "Proceeds of Crime" Chapter le Money Laundering

volume restaurants like McDonald's, very few businesses generate more than that $10,000 cash sales on a daily basis. A consistently large, recurring drop of cash in the banker's lap could attract the attention of someone in the branch since it would not only cause a substantial increase in the normal work load, but would also put the branch over the branch cash holdings limit (i.e. the amount of cash a branch is allowed to have on hand). The bankers are required to justify why the litnit was exceeded. Large cash drops are neither safe nor smart on the part of the launderer. The shotgun approach to dumping the cash into the banking system is not necessary. Individuals who show so much skilful planning and patience in the business of the development and importation of narcotics need not become impatient or ignorant at the cash processing end of the business. A calculated and methodical approach to placing the cash into the financial system is not only safer, but once perfected is capable oflaundering an astounding amount of funds. The launderer has a whole financial world of opportunity at his disposal.

Service fronts - In order to maintain discretion and secrecy when moving the cash into the fmancial system, the launderer may use several 'service' type fronts such as restaurants, jewellers, or bars to move a steady source of cash into the bank through daily deposits. Actually establishing operating businesses provides legitimate representation in the community and provides income earning assets, which is the launderer's goal. The cost of taxes would be far less than the cost of laundering money. The Colombian cocaine cartels are said to be a large conglomerate inte- grated vertically and horizontally with holdings in commercial real estate, restaurants, TV and radio stations, manufacturing and retail businesses. These holdings are worldwide and could be part of a load mechanism or results of a wash investment (This is discussed in more detail on page 35). Estimates also suggest that the Colombian c,ocaine industry provides for a $20 billion annual injection of capital into the Colombian economy. In its early times the Capone organization held intere,sts in a string of car washes through which a great amount of income from liquor sales was laundered. When a storefront operation is used with careful attention to detail, complex series of international transfers may not be necessary. Records of operation are produce,d for potential audits and further diversification into legitimate enterprises can be made.

26 Crime 0 Detection "Proceeds of Crime" Chapter I 0 Money Laundering

Example of a Storefront Operation A downtown jewellery store that was floundering under its previous management was purchased outright at a generous price by a young established entrepreneur who was diversifying and interested in the jewellery business. The former owners, who had run the store for some 15 years, are in their early fifties and excited about the prospects of early retirement. To their delight the payment for their business is svvift and they consider it good fortune to have sold to an established individual who didn't require financing. Payment was delivered two weeks after the purchase agreement was signed. Payment was in the form of bank drafts in U.S. currency from the purchaser's different companies. The drafts were from different banks in incre- ments of $10 000 to $50 000. The books and the keys were turned over to the new owner. The new owner, a money man for the country's largest cocaine lord, purchased the business to launder cash from local drug sales. The store was kept open as a front. An ambitious business plan was enacted and new bank accounts opened at different banks across the city. The new banks were approached by the young entrepreneur and a professional presentation of business strategy was made to the various bank managers showing tremendous future growth potential. In addition, a substantial amount of working capital was transferred to each new acc,ount to the satisfaction of each branch manager. If the dealer's goal is to appear legitimate and to pass audit inspections, then the actual operation of the business must expand to show proportionately realistic increased cash flows to absorb more drug cash. One store wouldn't increase its sales from $300000 to $30 million annually. However, if the store were expanded into a chain, further laundering would be facilitated. This option has many benefits. It further legitimizes the dealer in the eyes of his bankers and the community since entrepreneurial skills are greatly admired and respected. The drug proceeds can also be further laundered through the purchase of real estate for the new locations and gems for inventory. The guarantee of legitimate sales through the new stores is secured by advertising and cheaper inventory costs from buying in bulk. All of these benefits are the result of cheap money, i.e. drug cash. The "jeweller's" competitors, who borrow from banks, do not have this advantage. • As a result, the launderer's selling prices could be lower, which in turn gener-

21 Crime 0 Detection "Proceeds of Crime" Chapter I 0 Money Laundenng

ates a larger sales base through which drug cash could be laundered. Hundreds of millions of dollars could be laundered in such operations. The actual accounting for the sales of each store would be done centrally. The drug cash would be mixed in at this point as nominee sales, through fictitious bills of sale made up for diamond rings, paid for by cash and deposited with daily receipts. In order to account for inventory discrepancies (i.e. sale of non-existent inventory), false purchase orders could be made up to a jewel wholesaler and payments made to the wholesaler by cheque for a product never delivered. The jewel wholesaler is an international company outside the immediate investigative powers of local authorities and is secretly owned by the same drug dealer through a series of dummy corporations. This is another step in the laundering mechanism which just furthers the trail. If the books are audited, an investigator would find paYments to the wholesale supplier, with supporting invoices and accounts payable ledger entries and inventory entries. In addition, waybills showing shipping records would also be on hand. All of this would seem very legitimate but would be in fact a series of non-existent transactions. Once the money is in the hands of the jewel wholesaler who would be incorporated in a secrecy haven, the funds would be transferred to several dummy financial corporations and dumped into a holding corporation located in any financial centre in the world earning 20% legitimately! At this point the proceeds could be invested in perfectly honest businesses, stock markets or real estate. The probability of any future direct ties (i.e. business transactions) with any of the dirty or unrecycled cash or businesses would be unlikely since the risk of association would create a short trail and unravel the distance already created. Should records ever be examined, accounting and business records might also exist between all the dummy corporations to document what would appear to be perfectly legitimate transactions. The jewel wholesaler could also purchase inventory with the drug proceeds and would roll it several times to further the trail. This would be in the form of legitimate commercial transactions with other jewellers. shotgun If the dealer elects the shotgun approach a number of accounts are set up at several banks and trust companie„s. The cash is deposited at a rate of approximately $50,000 a day and is spread out between the various accounts to avoid suspicion. Alternate methods are used such as night deposit and service branches. This method, if properly applied, could operate safely for a year or two and launder about $10 million annually. 28 Crime 0 Detection "Proceeds of Crime" Chapter I • Money Laundering

An FBI report documented how a ring of twenty elderly women each made three deposits of $8000 US weekly at six different banks, and within 52 weeks had laundered $150 million. This could be done with business or personal bank accounts.

Money Orders/Drafts Money orders or drafts can be anonymously purchased at street lewl by %muds', inconspicious, looking people who blend in as bank customers. Smurfs, anned with a bag of cash, will travel to various bank branches exchanging small amounts of cash to drafts or money orders. This disposes of cash at a distance from the launderer and converts it into low profile negotiable instruments. Once in this form, the funds can be deposited into the bank account of a front such as a marketing or consulting firm that would be expected to receive large receiva- bles. There are a number of cases where teams of elderly women were discovered to be travelling to cities that had hundreds of banks, and with shopping bags of cash, purchased money orders and drafts each under $10,000. Enor- mous amounts of cash could be dropped this way. The drafts could be cashed overseas. "The money orders (could be) made out to a Swiss bat* and sent through the mail or carried by a courier, with less risk than a bulky quantity of cash."

Mire Transfers Local wire transfers from another financial institution can be credited to the launderer's account, ostensibly from another business or individual for services rendered. The wire could be paid for by cash and sent under a false name. A stranger can walk into a financial institution, hand over a large quantity of cash, and have it transferred by cable to the credit of a Swiss or other foreign bank account. When the financial institution executes the transfer, it usually insists (as when a customer uses cash to buy a large money order) that the unknown customer complete a currency report giving his name and address. This presents no problem for the dirty-money courier, who supplies a fictitious name and address. If the financial institution asks to see some identification, he is well supplied with fake passports and driver's licenses. 4 Multiple transfers can be made on a given day by making consecutive transaction using many financial institutions. The number of transfers made may depend on how secure the launderer feels about the safety of his money laundering operation. The more transfers made, the more records created, and the • more complex the investigation into the trail.

29 Crime 0 Detecbon "Proceeds of Crime" Chapter I • Money Laundering

By using a financial institution outside of the jurisdiction of investigators, the pursuit of information on the transactions is firther delayed. A wire transfer mechanism can be established whereby the funds are wire transferred from a bank account to another ftnancial institution. Bank accounts are set up across the country to receive these wire transfers. Instructions are left on each account to wire transfer funds from that account to another account at a different ftnancial institution. This process is repeated until the launderer is satisfied that enough of a paper trail has been left to hinder an investigation. Both the chequewriting method and wire transfer method can be used individually or together to wash the funds. When used along with drafts, money orders and traveller's cheques, the trail becomes extremely lengthy and complex.

Currency exchanges Currency exchanges could be used to change the cash to a money order, travellers cheques or a commodity such as gold or silver. Gold and silver are available in easily transportable form and are readily exchangeable in most countries.

Stocks and bonds 11, Securities such as stocks or bonds are an excellent disguise because they are easily purchased and sold, easily transported, and respectable. Securities can be bought at a brokerage house or through a bank branch. In addition, the introduction of discount brokerage services by the banks have distanced the buying and selling of securities even further.

Bearer rnuesbnents Bearer investments such as treasury bills and banker's acceptances are available at most financial institutions and brokerage houses. Share certificates of stock, bonds, and bearer investments can be carried easily by mail or by person to European markets where they can be disposed of easily and secretly by Swiss bankers. limbered accounts Wire transfers can be made to a Liechtenstein ansalt (see page 43 for further information), which can then be forwarded to a Swiss numbered bank account. The same can be done with international bank drafts and money orders. • 30 Crime 0 Detecbon "Proceeds of Crime" Chapter I Money Laundering

hnpersonal bank services Bank services that distance the client from the banker such as night deposit, bank machines, and service branches can be used. Night deposit is done at the banker's leisure and is done in the absence of any client presence (before business hours). It is usually done by several tellers cotnmunally. In the absence of the client, the level of scrutiny and suspicion is low. Bank machines allow for the deposit of tens of thousands of dollars daily to personal accounts. The employees that service the machines would not be suspicious of these deposits. Service branches are used by a business client of one branch of a bank who wishes to make deposits at another branch. The original branch sends a letter to the second branch introducing the business client and asking them to accept deposits for credit to the original branch. This fiwther detaches the launderer from the bank's scrutiny since the service branch employees have little knowledge of the client and don't have to concern themselves about the deposits since the original branch is responsible for recourse. • Inventory The launderer may use inventory or other relatively liquid assets with commercial appeal. For instance, a money launderer decides to convert cash into bank drafts or set up a temporary mechanism to get cash into the banking system. The goals are to use the cash in legitimate trade transactions a few times, and then draw it out clean. This can be done by putting sufficient distance between the original sources of the transactions and the final withdrawal of clean cash. For example, a money launderer purchases 3000 VCRs wholesale from Taiwan VCRs Ltd. through a distributor in Toronto. The cost is $100 per unit for a total payment of $300,000. Then the VCRs are immediately sold to a national TV sales outlet at $95 per unit. This excellent price ensures the sale. With the $285,000, real estate is purchased and three months later resold at a profit. The $310,000 resulting from the real estate transaction is used to purchase gold (in certificate form) which is carried to Switzerland. There it is sold on the Euro- pean market for shares in IBM. The trail can be extended as far as the launderer wishes. Another related technique would be to make cash purchases of big ticket items at large department stores such as Eaton's. Later, the product could be returned for refund by cheque or the product could be resold, accepting a • cheque as payment. 31 Cnmeo Detection "Proceeds of Crime" Chapter I * Money Laundering

Personal accotmts In addition to using business accounts, sewral personal accounts could be opened using false identification. Using banking machines, credit cards, night deposits and branch-to-branch service, an extensive amount of drug cash could be laundered. Non-interest bearing accounts could be opened so that no statements of interest would be forwarded to Revenue Canada.

Traveler's cheques Cash could be used to purchase traveller's cheques at any bank or trust company branch. It would be quite easy to convert $100 000 into traveller's cheques in a day by going to several different branches. These traveller's cheques could be deposited anywhere in the world or deposited into a business account used for laundering.

Credit card schemes Several credit schemes could be used to launder money. For example, Mr. X acquires a VISA credit card. He goes to Mr. Y's store (Mr. Y is a money launderer) and charges extensive purchases to his VISA credit card. Mr. X then pays his VISA bill at the bank in cash, and VISA credits Mr. Y with the amount Mr. X charged at his store. This quickly washes dirty money. Mr. X and Mr. Y could be the same person or accomplices. Gold or stocks can be purchased through banks and paid for by credit card. Again, the credit card bill would be paid for by cash. The gold or stocks could be resold on other markets.

There are many opportunities to convert cash to liquid assets in the legitimate market. A pusher c,ould use many of these techniques to launder his cut of the profits, but those techniques would not be sufficient to launder the tremendous amounts of cash the drug lord would receive. In certain cases the conventional methods of laundering give way to unique efforts.

Couners Couriers carry cash across borders to a country that will allow for an easier entry of the cash into the banking system. The money couriers pick up suitcases of cash and carry it to Panama or the Caribbean where banIcers will accept it without question. It is quite risky to carry cash out the United States, where one must declare the transportation of cash over $10,000 into or out of the

32 Crime o Detection "Proceeds of Crime" Chapter I Money Laundering

country. In Canada there are no such restrictions. This makes Canada an appealing route for couriers, if the U.S./Canada border can be safely crossed. One humorous example of this tells of four Mexicans attempting to cross the Canada-U.S. border by car at Bellingham, Washington. They were pulled over for inspection. An astute customs inspector noticed that the two rear tires did not match the front. Upon closer investigation the tires were found to contain $2 million U.S. stuffed in the hub caps. Under Canadian law this did not constitute contraband, but the method of transportation was highly suspicious. So the Mexicans were refused entry and sent back to the American side where notified officials were waiting. No declaration of the cash had been filled out. The Mexicans were subsequently arre,sted and the cash confiscated.'

Letters of Credit Letters of Credit (L/Cs) are used for legitimate transactions in trade, whether for coffee beans or widgets. For illegitimate purposes, local branches are approached for L/Cs which are made payable to a 'supplier'. L/Cs are then taken to the destination country and cashed at a local bank by a shell company acting as the supplier. In addition false commercial invoices could be fabricated to firther disguise the transactions. A Letter of Credit is a form of credit line issued between two companies conducting business. Company 1 must guarantee to Company 2 that it has the funds to complete a business transaction and has reserved those funds for payment to complete the transaction. Company 1 does this by approaching a fmancial institution and purchasing a Letter of Credit. The financial institution will determine if Company 1 has the fimds and if it does, the financial institution will hold the funds. If it does not have the funds, Company 1 may be granted a loan by the financial institution to pay for the Letter of Credit. The Letter of Credit is then issued by the financial institution to Company 2. If Company 2 desires, it may cash that Letter of Credit at any time and is guaranteed the funds by the financial institution. Normally, the Letter of Credit serves as a guarantee of payment, whereby if Company 1 does not pay Company 2 by other means, then Company 2 vvill cash the letter of credit. The money launderer may use the Letter of Credit as well. For example, he may approach a Canadian bank in Toronto for a business loan. The launderer explains that there is an opportunity to import fine ceramic tiles from Italy. • These tiles are in high demand and because the launderer is going to purchase 33 Cnmeo Detection "Proceeds of Crime" Chapter le Money Laundenng

$10 million in tiles from the manufacturer, it will be able to acquire and sell them at a price which is 40% below what other Canadian distributors vvill pay. In order to obtain the loan, the launderer explains to the Canadian bank that there are European investors (who are actually the launderer) who will guarantee the loan by issuing a Letter of Credit to the Canadian bank for $ 15 million drawn off a bank in Great Britain. The bank, with $15 million collateral, issues the loan to the launderer. The launderer imports the tiles and undersells the legitimate competition. The Canadian bank then receives instruction from the London Bank to cash the Letter of Credit, pay out and close the loan. The launderer has successfully laundered the $10 million, has provided a legitimate source of income, has established a succ,essful legitimate business, and has created a complex trail.

Cscrow or trust accounts Money laundering has attracted large numbers of otherwise respectable people who see nothing wrong in being accomplices to crime. Take the case of Richard McConnell, a former trial attorney in the US Justice De- partments Tax Division... .and subsequently in private practice in Alexan- dria, Virginia. On behalf of a client named Julian Penell, McConnell used his fimi's escrow accounts to deposit large sums of cash, which were withdrawn after short periods and paid to newly established US corporations or trusts set up in the Cayman Islands. In this way, over $30 million of Penell funds were moved during a seven year period without filing federal currency reports. These fimds, it turned out, came from marijuana and hashish operations in which 20 people, including Penell, were charged and later convicted. 6

Secunbesfrms Securities firms can also be used to launder money. For example, a Swiss bank places an order with a New York broker for the purchase of a large block of securities worth $100,000. The bank tells the broker that "our courier will pay you on the settlement date." This is welcome news to the broker. He will be paid on time and will avoid a late delivery charge. The settlement date arrives and the courier calls on the broker with $100,000 in cash or in the form of a bank cheque.

311 Crime 0 Detection "Proceeds of Crime" Chapter I 0 Money Laundering • The broker accepts the cash or cheque and the stock certificates can be held in the vault of the Swiss or of another New York bank, or sent directly to Switzerland in care of the bank account of the heroin smuggler. The account in the Swiss bank may be in the supplier's own name or, more likely, in the name of a dummy foreign company:7

The Mash Once in the fmancial system, money moves easily and quickly. The next objective is to create as much distance as possible fi-om the entry point of the funds to their final resting place in legitimate business or investments. If you can't spend and enjoy the money, there's no point to the rislcs. There is the case of the Bronx bagel baker who sold heroin and lived a double life with luxury cars and condos in Florida and a low-income lifestyle in New York. However, few people would be disciplined or patient enough to be so distanced from their wealth. The source of the drug money (the load) must be distanced from the lifestyle and income of the dealer (the final stage). This is accomplished using the same mechanisms that serve legitimate business. The distance is less geographic than it is a maze of paper and financial transactions. Paper and financial records will be defined in the following way. Paper refers to the documentation of business ownership, such as registra- tions or shares, and any subsequent changes to the same. Paper also refers to internal accounting record of the business and/or any commercial transactions such as invoices, bills of sale, sales journaLs, shipping records, and trade records. Financial records refer to records of the actual movement of cash or the transfer of assets (i.e. the transferring ownership of real estate holdings). Finan- cial transactions are documented through bank records and through correlation with accounting records. Emphasis should be focused on bank records, as they are a record of what actually happened. A launderer, unless very thorough, will not have accounting records of his transactions, especially at the load stage. Most load companies would be abandoned quickly in order to avoid detection. As the wash advances through cleaner and more legitimate companies, more accounting records will be found. Paper and fmancial records for a legitimate operation would be identical. Since the launderer's goal is to deceive, his accounting records can not be considered reliable. The fmancial records prepared by financial institutions are the most • reliable source of information.

35 Crime 0 Detection "Proceeds of Crime" Chapter I 0 Money Laundering

The wash will incorporate both paper and financial records. If effectively done it will also include a stage using a secrecy haven where investigator's access will be limited or non-existent. Unformately for money launderers, there are records of every transaction. If these records are carefully and thoroughly examined, the money launderer's tracks can be followed. To distance the investigator from the truth, the money launderer relies on several things: • Knowledge - The investigator does not understand what money laundering is or how it works. • Experience - The investigator has not spent enough time investigating money laundering to know how to effectively and quickly unravel the trail. • Skills - The investigator does not know which documents to search for, where to find them or how to use them effectively. • Privacy - The investigator is denied access to records or accurate information by secrecy havens • Distance - By taking the trail of records outside of the investigator's immediate jurisdiction, the process of investigation is lengthened and it is more difficult to see the complete picture. • Time -By maximizing the use of all of these factors, any investigation can be made slow, costly and beyond the immediate resources of the investigator. Ultimately, the launderer's goal is to discourage the investigator. Payments by cheque or wire transfer will be made from one corporation to another and so on. Gold or other liquid assets may be purchased by one corporation and cashed by another. As transfers are completed, others could already have been completed or transactions may be taking place concurrently. Money could be moved through 10 to 15 corporations within 48 hours.

Suppose that a New Jersey gambler has $500,000 in book-malcing profits hidden in a numbered Swiss bank ac,count. In order to repatriate this dirty money, he decides to invest it in a chain of Long Island car washes costing $1 million. To finance his purchase, he makes a down payment of $500,000 in "clean money," which has been declared to the government and properly taxed. He then "borrows" the remaining $500,000 from his Swiss banlc. This $500,000 is, in fact, mon' from his own Swiss account disguised as a legitimate loan.

36 Crime o Detection "Proceeds of Crime" Chapter I Money Laundermg

In order to perpetuate this loan charade, the gambler repays the $500,000 as if it were a legitimate loan. This repayment includes interest charges. In this way the loan-back not only allows a dirty money man to repatriate his money but also gives him the chance to pay himself interest and deduct these payments from his taxes. This slick "double play" has made the loan-back the most popular method of bringing dirty money back to the United States. The fact that he must repay the principal on the loan does not bother the criminal, since, if he chooses, as soon as these repayments have been made he can immediately relend the money to himself Through a continuous use of the loan-back technique, a criminal can recycle his money between the United States and Switzerland on a perpetually moving conveyor belt that connects the criminal, his Svviss bank, and dummy foreign companies together with his legitimate American business enterprises. The cooperation of the Swiss bank is not needed to complete the loan- back. In fact, in only a few instances is the money tendered directly from the bank to the criminal. Usually it travels through a number of layers of insulation, and the Swiss and other financial institutions involved may not even suspect that the loan is not legitimate. To provide more insulation, the foreign representative or the courier who originally brought the money to Switzerland often transfers the money from the Swiss bank account to another account owned by a dummy foreign company "head-quartered" in Liechtenstein, Panama, or the Baha- mas. The foreign company then tenders the "loan" to an American lawyer or a dummy company in the United States which is associated with the American criminal. The apparent legitimacy of this loan is reinforced by the fact that the transfer facilities of the large international banks are used to move funds between Europe and the United States.'

Second example of a loanbacis The launderer has $1 million of laundered drug profits in a bank located in a international secrecy haven (see chapter 2 for more information). The launderer also has a number of corporations registered in that secrecy haven. One corporation named Drug Corporation holds the drug cash, and another one is called Phoney Finance Corporation. The launderer arranges for the bank that holds his $1 million in the name of Drug Corporation to lend Phoney Finance Corporation $1 million using the $1 million in the account of Drug Corporation as collateral for the loan. Phoney Finance Corporation then lends 'Mr. Respectable' AK.A. the launderer located in Toronto $1 million to purchase a legitimate business. • The launderer now has acquired a legitimate source of income, the business,

31 Crime 0 Detection "Proceeds of Crime" Chapter I 0 Money Laundering

and legitimate representation in the community. The launderer can then use profits from the operation of the legitimate business to "repay" the loan to Phoney Finance Corporation, which is actually himself. head' Using money held in a Swiss bank account to secretly buy your own property is another favorite laundering technique. Suppose the New Jersey gambler who bought car washes with the loan-back has another $500,000 in his Swiss bank that he wants to move to the United States. He first has the money transfen-ed from the Swiss bank to a dummy Liechtenstein trust he secretly owns. The trust now openly buys the car washes from hirn and as partial payment transfers $500,000 to the gambler's New York bank account. By using his Swiss bank and Liechtenstein company to "buy" his own car washes the gambler has been able to launder an additional $500,000. He still secretly owns the car washes through his Liechtenstein company, and their profits can now accumulate in his secret Swiss bank account.9 The secrecy havens are the break points of the trail and the investigations because at this point the launderer will turn the cash around. It will head back through legitimate companies and investments to provide income for his lifestyle. He is fully confident that there vvill be no connection between his drug businesses and his legithnate businesses. There will be no business transactions between the two since the latter will probably be open to public and tax scrutiny. At this point the investigator will probably be denied access to both bank and corporate records. So ends the continuity. The Dry The return of the money would start at the haven but could follow through several routes unlimited by geographical boundaries such as investment in: Manufacturing in Hong Kong Real Estate in New York City Eurobonds on the Swiss Market European Stocks or North American Stocks L/C 's supporting North American business ventures etc... The route would probably follow through a number of holding corporations as it did during the wash so as to ensure privacy.

38 Crime 0 Detection -Proceeds of Crime- Chapter I Money Laundering

Moumg Money Funds are transferred between various corporations using regular bank payment instruments such as a cheque drawn off one account and payable to another, wire transfers made between banks or by using currency exchanges. Take the case of Eduardo Orozco Prada, who deposited over $150 million in cash with about 18 banks and foreign exchange firms, mostly in New York, for transfers to Panama, the Cayman Islands, the Bahamas, and in various accounts distributed around the United States. Most of the money apparently was from drug trafficicing. The laundering operation also involved Orozco's interests in small business in a variety of countries in Europe, the Middle East and Latin America, as well as major currency exchange businesses in Colombia and several other countries in the region. Described as a `...well educated, sophisticated, highly intelligent professional, with all the trappings of a legitimate businessman', Orozco enjoyed the support of many legitimate business people and senior-level Colombian politicians. Once established in New York, Orozco set up a company called Cirex International at 120 Wall Street, which in retrospect was dearly a money laundering operation. Over a four-month period, he placed $2.3 million in cash deposits with a Swiss bank until it refused to talce any more, and subsequently with the Marine Mdland Bank & Trust Company and the Irving Trust Company, both in New York The cash evidently came from his ovvn exchange houses in Colombia, either via Miami or via Panama using couriers and occasionally the planes of the Colombian Air Force — on average about $3 million monthly. Cash transport was difficult and risky, but necessary to avoid FBI surveillance of South Florida banks and to avoid the cash-deposit fees charged by some of them. The deposits were then transferred after varying periods of time to accounts in other banks by wire, and were thus effectively laundered. Apparently the laundering operations were highly sensitive to the investigative activities of the federal authorities. In 1980 and 1982, Orozco was doing substantial business with the currency exchange house of Deak- Perera in the name of Interdual, a Panamanian affiliate, and Dial Securities. Unlike other laundering operations that find ways to avoid filing currency transactions reports, Orozco's transactions were always in compliance with the law, yet difficult or impossible to trace because he used other people's names and never made a cash deposit himself. Intermediaries were evidently paid 25 cents per $100 cash deposit, with possible firther payments to bankers to see that funds were transferred without delay. By mid-1981 his deposits at Deak-Perera were running at $10-12 million a month and were beginning to attract an unusual amount of attention.

39 Crime 0 Detection "Proceeds of Crime" Chapter I e Money Laundering

In his search for yet another bank, Orozco fell into a Drug Enforcement Agency trap. Subsequent fund movements through third parties were tracked mostly deposits of $10 and $20 bills, totalling $15 million over an 18-month time span. Tape-recorded conversations confirmed that most of it was drugs-related money, with a 3 per cent laundering commission probably earned by Orozco, and possibly large additional gains from acting as a principal in the drugs trade itself— yet he never physically came into contact with the drugs. In 1983 Orozco was found guiky of drug law violation and sentenced to one year in prison and a $1 million fine; he was immediately released on $2 million bail pending appeal.i°

Social mores Financial institutions now train their employees to recognize and prevent money laundering. However, barriers still exist. First is the "It couldn't happen to me" syndrome. Money laundering could not happen in a respectable bank branch. Second is the belief in tell-tale signs. "Surely I would recognize the drug dealer from Miami Vice! Slicked back hair, alligator boots, black raybans, followed by four or five bodyguards forming a wall of security around him! I would recognize someone like that!" Unfortunately, most money launderers appear to be perfectly respectable people. Barriers to prevent money laundering have gradually been developed and implemented. Both the financial community and the police recognize that the financial system is used to transport drug money and that it is a crucial element of the drug cycle. The anti-profiteering enforcement approach has been revitalized, and this, combined with new legislation designed to increase search and seizure abilities, creates an opportunity for progress.

qo •

Secrecy Hauens

0 •

0 42 Crime 0 Detection "Proceeds of Crime Chapter 2 0 Money Laundering and Secrecy Havens

Countries around the world are set up as secrecy and tax havens. There are many legitimate reasons for such havens. For example, some were set up to allow persons being persecuted in the Second World War to hide their assets from the Na7is. However, the laws set up to protect legitimate clients can be used by money launderers to protect themselves as well. They may be used to set up untraceable bank accounts or anonymous corporations. This chapter summarizes details about some countries set up as tax or secrecy havens." It is in no way meant to be comprehensive or to be taken as legal advice. Regulations outlined here are subject to change. For complete current details about laws and acc,ess to information, seek professiOnal legal advice.

Liedienstem Liechtenstein is a small country between Austria and Switzerland that has no currency or army of its own. Reliant on Switzerland for these, its population of 27,700 (1987) depends on tourism and incorporations for income. A country with almost as many incorporations as citizens, its secrecy laws appeal to individuals who desire anonymity. Its laws specify that only certain designated individuals, "persons of repute," may act as representatives in incorporation in Liechtenstein. These representatives must be citizens of Liech- tenstein and must be masters of their own affairs. If you wished to remain anonymous when setting up a Liechtenstein corporation you could instruct one of these representatives to act on your behalf. Since Liechtenstein law does not require the name of the real owner of the corporation to be registered, the name of the representative would be the only information registered with the government. Since the representative (usually a lawyer), has no legal obligation to reveal the identity of the real owners under Liechtenstein law, the wall of secrecy is first put in place here. The representative could be instructed to establish a trust or "ansalt"on behalf of the company which would give the corporation a headquarters and a brass plaque on the wall with hundreds of others in the administrator's office building. The tax payable on the corporation is a nominal amount. The representative would also receive a fee for being on the board of directors of the corporation. Since the representative probably manages some 500 corporations, each corporation would probably occupy a file in his drawer. The representative could be instructed to establish a secret Swiss numbered bank account in the name of your corporation. The only representative of the corporation lcnown to e the bank would be the Liechtenstein lawyer.

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Monies could be forwarded to the lawyer for credit to the Swiss bank account. A power of attorney would give him the authority to transfer money from the Svviss account to another location upon your instructions. The combination of the Liechtenstein corporation and a Swiss bank account provides a double wall of secrecy that would be nearly impenetrable. You could also instruct your Swiss banker to open a Liechtenstein corporation for you in which the bank officer would be listed as the shareholder of the corporation on the Liechtenstein representative's records. The name of the owner of the corporation would only be listed on a trust agreement between the Swiss banker and the owner. That could be kept in a safe deposit box in a Bahamian or Panamanian bank. This would introduce a third wall of secrecy for the individual.

Spitzerland Whoever divulges a secret entrusted to him in his capacity as officer, employee, mandatory, liquidator or commissioner of a bank, as a representative of the Banldng Commission, officer or employee of a recogniz.ed auditing c,ompany, or whoever tries to induce others to violate professional secrecy, shall be punished by a prison term not to exceed six months or by a fine not exceeding 50 000 francs. The violation of professional secrecy remains punishable even after termination of the official or employment relationship or the exercise of the profession. Federal and Cantonal regulation concerning the obligation to testify and to fiirnish information to a government authority shall remain preserved. Article 47, Swiss Banking Law VVhoever makes available a manufacturing or business secret to a foreign governmental agency or a foreign organization or private enterprise to an agent of any of them, shall be subject to imprisonment and in grave cases to imprisonment in a penitentiary. The imprisonment may be combined with a fine. Article 273, Swiss Penal Code The Swiss Government holds steadfast on its bank secrecy laws. On occasion it has prosecuted separately on each document released against the law by a bank officer to a maximum penalty of ten years in prison. Es,sentially, the law provides that no information will be released to any foreign government or agent without prior approval from the Swiss government. titi Crime 0 Detection "Proceeds of Crime" Chapter 2 0 Money Laundering and Secrecy Havens

To apply for disclosure of banking information the crime must be outlined to the Swiss Government in Letters Rogatory explaining details of the crime and evidence supporting the charges. In addition, the crime must be a criminal offence under Swiss Law. Switzerland's banlring system has certainly won great appeal because of its strict secrecy laws. It can also offer tremendous services to its banking clients such as securities service on any market, foreign exchange, trust services, commercial and personal account management, and any of the other more common banking products found around the world. Swiss bankers are known for their superior judgement and service. Banlcing as a profession has tremendous respect and heritage.

Bahamas Banking Bank secrecy has been covered by criminal law since 1979. The foreign authority must show that a crime has been committed, proof of which hinges on the requested documents; a crime is suspected, proof of which rests on the requested documents; or criminal proceedings are already under way abroad. - Incorporation Any lawyer may register a company for incorporation. There is II> no requirement to evaluate the incorporator's credentials.

Antigua Banlcing There are no registration requirements for banlcs or companies. Incorporation Since there are incomplete or non-existent records, the ability to search out owners is limited.

Catinan Islands Banking The secrecy laws state that a person can be jailed for asking for financial information about a client. Considered the largest haven in the world, deposits estimated were at $200 billion in 1987. It is also one of the largest Eurocurrency booldng centres in the world. With an estimated population of 1500, there are 17,000 companies, 300 insurance companies and 450 banks and trust companies. Incorporation There are no restrictions on residence or nationality of shareholders; no requirement for a register of members or an annual return of shareholders, directors and officers; and incorporations with only a single shareholder • are acceptable.

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In 1984 the Cayman authorities passed the 'Narcotics Drug Law' that guaranteed the release of information to the United States within two weeks of application where drug involvement could be shown.

Monteserrat Secrecy on the island was essentially guaranteed by its deliberate mishandling of records. After the Government crackdown on this problem and a treaty signed with the United States providing for the release of information on very little criteria, the number of banks dropped from 62 to 12.

Getherlands Addles Incorporation service is fast and cheap. Well connected vvith the European market and international banking, it is efficient and discreet. The incorporations are protected by Antillean nominees and agents through tiered corporations. In addition, while the Government has been willing to release information on U.S. citizens it will not release information on citizens of other countries. In cases where the information has been released, it has not always been complete or detailed. When the U.S. Department of Agriculture wanted to lcnow who owned 1437 acres purchased in Orange County, Florida, for example, it wrote to the Curacao International Trust Co., which was managing the company listed as buyer, Debco NV. In reply, the Department was told through a Houston lawyer that Debc,o NV was a 'wholly owned subsidiary of Pathway Investments NV,' which in turn was described only as 'a corporation under the laws of the Neth- erlands Antilles.' In addition there is an aftermarket of locals who are in the business of supplying false invoices and other useful services.

The Channel islands 0 Jerseg and Guernsey This offshore banking centre has little visible interest in dealing with drug money. Its respectability is a valuable commodity. The Islands passed regulations requiring the banlcs to disclose records where there are drugs involved.

The Rock is a tax exempt haven, with approxitnately 4000 c,ompanies set up annually. Bank deposits have increased at a tremendous rate, from $298 million (1984) to $800 million (1987).

45 Crime 0 Detection "Proceeds of Crime" Chapter 2 0 !Honey Laundering and Secrecy Havens

Luxembourg The secrecy laws that are slowly relaxing in Switzerland are being tightened in Luxembourg. There are mandatory jail sentences for those who make unauthor- ized disclosures. In order to obtain information on a depositor an order is required from a Luxembourg court. Foreign authorities may only request such an order if the depositor in question has been charged in his home country with an offence that is also a crime in Luxembourg and that relates to the account under scrutiny.

Panama The political situation of the country dictates its role as a haven and its involvement in the money laundering mechanisms operating from the United States. Long under the control of General Manuel Antonio Noriega, Panama's policies were designed to benefit the leader. Noriega himself was extradited to the United States for his involvement in the drug industry. Banking Panama's central bank is denied the right to audit any bank operating there. Banks have long accommodated couriers with bags of cash, no questions asked. There has been testimony that the military has been used to provide escort for and transportation of funds arriving for cleaning. $500 million a year and growing is the estimated laundering of cash. The U.S. dollar is essentially the national currency. The United States Treasury often receives old notes from Panamanian barks for new ones. Based on the large quantities of small bills received, U.S. officials estimate that Pana- manian banks are also engaged in exchanging small bills for large bills. In addition, the Panamanian banks have access to the Eurodollar market. It is estimated that the figures for the amount of drug money that is electronically sent into the turegulated market and ultimately into legitimate commerce is in the billions. Incorporations Paper corporations are available. Lawyers keep established incorporations no longer in business alive on paper for clients who want a company with a history. There are also statutes in Panamanian law that allow for the establishment of secret registered companies.

On Law Enforcement and Foreign Banks Take the case of a U.S. grand jury's investigation of a criminal fraud in the early 1980s. Relevant bank records were subpoenaed from the Bahamas branch of the Bank of Nova Scotia, headquartered in Toronto, via a U.S. branch. This method of serving a subpoena on a foreign bank was established in the Quigg e case in 1981. In this instance the document was addressed to the Canadian bank

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in general, though delivered to its New York branch. This was held to be binding on the head office, which was doing business in the United States - through its New York branch. The head office could then order its branch in the offshore haven (in this case the Bahamas) to release the relevant documents — and if the Bahamas branch refused to do so it could be pwished through the U.S. branch for failing to comply. 12 In the Nova Scotia case, the branch, citing the Bahamas Bank and Trust Companies Regulation Act which prohibits the release of documents to foreign authorities without official authorization, refused to comply. At this point the U.S. judge followed the 'balancing test' criterion, established in 1968 in the Loveland case, to decide, in simple terms, which laws should prevail. In Loveland, the head office of Citibank in New York had been served with a subpoena requiring the production of records from its West German branch. It argued that c,ompliance would put it in breach of West German civil (though nôt criminal) law, which could expose it to a claim for damages from the client. In considering whether U.S. or West German law should prevail, the court tried to weigh an amalgam of factors — the vital national interests of the two countries, the hardship that inconsistent enforcement would impose on the bank caught in the middle, etc. The court concluded that for the United States the violations under investigation were of a criminal nature, whereas breach of bank secrecy was only a civil offence in West Germany, and that U.S. interests should therefore dominate. • However, in the case of the Bank of Nova Scotia, it was a criminal offence in the Bahamas for the bank to produce documents. Nevertheless, the ruling went in favour of the U.S. investigation again. A federal judge in Florida thereupon fined the branch $500 per day on a contempt of court citation in late 1981. These fines were affirmed by a federal appeals court in 1983 and let stand by the Supreme Court itself. Subsequently, the judge increased the fine to $25,000 per day, whereupon the bank turned over the requested documents. The Bahamanian government undertook a criminal investigation of the Bank of Nova Scotia's violation of local disclosure laws, threatening a fine of $15,000 and two years imprisonment for those involved. It also sent letters to (then) President Reagan and (then) Vice-President Bush, protesting US legal extraterritoriality and further straining diplomatic relations over the matter of financial disclosure."

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The Canadian Banking System and Financial Transactions and Records

• SO Crime 0 Detection "Proceeds of Crime" Chapter 30 The Canadian Banking System and Financial Transactions and Records

The Canadian Fmancial System Investigations of money laundering operations will always have one common denominator: the use of the financial system. The money launderer uses it to launder dirty money and investigators rely on it as a resource for an investigation. To use a financial institution as a resource, you need to understand the industry, how it is organized, and who will be able to help you get the information you need.

nnannal Insbtubons:Thm r role Canadian banks and trust companies are large financial institutions. They are very competitive and most of them operate internationally as well as across Canada. Some of the major Canadian banlcs are: The Royal Bank of Canada The Canadian Imperial Bank of Commerce The Bank of Nova Scotia The Bank of Montreal The Toronto Dominion Bank The Canadian trust industry consists of a number of quickly growing trust companies such as: Canada Trust National Trust - Premier Trust Montreal Trust Credit unions are smaller institutions, often with only one branch, which serve a membership. These financial institutions are responsible for serving most of Canada's financial service clientele, and offer a number of basic and specialty services. Regulatory laws ensure that Canadian banks are stable and publicly controlled. No one individual or associated shareholders is allowed to own more than a 10% of the shares of a Schedule A bank. Regulations for banks, trust companies and credit unions differ. Like any business, a financial ingitution's purpose is to make money and to capture a larger share of the market from its competitors. Competition is fierce, and you will often see four corners of a downtown intersection occupied by • competing financial institutions. 51 Crime 0 Detection "Proceeds of Crime" Chapter 30 The Canadian Ranking System and financial Transactions and Records

The world of financial institutions is constantly evolving through the introduction of new technology, new products and services, new demands by customers, and through changes in legislation. Deregulation of the financial industry has resulted in the traditional independent industries of banlçing, securities, insurance, trust services, mortgages and card services being offered by one company. Insurance companies are opening trust companies and fiercely seelcing mortgage business. Banks are offering insurance products and mutual funds/discount brokerage services throug,h their retail branches. Credit card companies are seeking larger partici- pation in the market and one (American Express) has opened its own bank. Trust companies are seeking expanded roles in the commercial banlcing markets. Most financial institutions have bought the right to Visa or MasterCard.

Clectronc Technological advancements such as automated banking machines, debit cards and home/office banking have changed the way many customers conduct financial transactions. Over the last ten years there has been a dramatic increase in the application of computer technology to financial services. Internal ac,counting functions and account reporting to customers is computerized. (Prior to that a ledger card system was in place.) Teller terminals allow financial service employees to update accounts and inquire as to balances and transactions. Client Information Systems electronically store personal information about customers and the services they use. With increasing use of card services such as Visa and Mastercard, on-line terminals and customer information services have been updated at many institutions to access credit card account information such as balances, payments and itemization of charges. Automated banking machines are replacing tellers for personal banking. Deposits and vvithdrawals, credit card payments and cash advances, bill payments and account funds transfers can be made at banking machines at all hours of the day and night. Daily deposits are unlimited at some institutions, although a single deposit would be limited by the capability of the machine. For example, the Toronto-Dominion Bank has a deposit limit of $9,999 per transaction, with an unlimited number of deposit transactions per day, the ClBC has a deposit lirnit of $50,000, with an unlimited number of deposit transactions per day, and the Royal Bank has a daily deposit limit of $50,000 per day.'4 The automated banking machine cards are also called "Debit Cards." At specially equipped stores payments can be made with these cards for goods and services. The debit cards immediately electronically transfer the amount of money due from the cardholder's account to the store's financial institution 52 Crime 0 Detection "Proceeds of Crime" Chapter 30 The Canadian Banking System and Financial Transactions and Records

account. Grocery stores and a McDonald's restaurant have been experimenting with this systetn, which is offered by several financial institutions. Home/Office banking is available on an experimental basis where a computer tenninal located at home offers balances, transfer services etc. You can also conduct your banking over the phone. Electronic banlcing has reduced the amount of paper and time required for the completion of financial transactions. The future of financial services will see a greater role for electronic banking.

Communcabons between Fmannal Insbtubons Electronic banking between financial institutions entails the communication of intent of transactions betvveen different banks. The notification of instructions of a funds transfer is followed by a settlement of funds. In the past, an individual cheque was written to cover each specific transfer. Today, many transactions are handled by computer instructions and are settled by an electronic transfer of the total amount of funds from the sending financial institution to the receiving financial institution. Electronic transactions have to a large extent replaced the paper-based audit trail.

Canadian Pagments lissonabon The Canadian Payments Association regulates the clearing payments between financial institutions. For example, the amount of acceptable time in which a cheque may be returned Non Sufficient Funds from one financial institution to another is two days. The rules are set out by the Canadian Payments Associa- tion with the agreement of participating financial institutions. The Association also publishes a directory of Canadian financial institutions, listed according to their clearing numbers (institution and transit (branch) numbers) and by their representation in a geographic area.

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Organizabon of a financual insbtution Typical financial institutions are organized much like any large corporation. A large administrative national head office houses the executives of the financial institution, who make decisions about domestic and international plans. The performance of the various provincial or regional headquarters is also managed here.

Regional Head Office Regional or provincial headquarters and management are responsible for understanding the local markets and managing several hundred branches or depart- ments. Each region (usually a province) might have its own International Centre and Data Processing Centre.

hiernabonal Centre The International Centre is responsible for financial transactions in foreign currencies. Activities include determining rates of exchange, clearing foreign cheques to the respective foreign countries and financial institutions, processing wire transfers with foreign countries and fmancial institutions, and managing the correspondence vvith all foreign institutions.

Ike Data Centre The Data Centre is the distribution centre for all of the cheques and accounting entries processed in a region by a particular institution in a business day. Since smaller trust companies do not have their own processing centres, their data centre functions are performed by a bank for a fee. Credit Unions often have only one office/branch and rely on a central Credit Union organization for clearing, administration and other vital services.

Brandies The competitive market segments require that financial institutions have significant repmsentation through branch networks. Each branch is run, to a certain extent, like an independent company with its own budget, accounting and operational management. Most financial transactions are conducted at retail branches. In branches, the employees are trained to sell the products that the particular institution offers, and deliver and administer that financial institution's services. Sit Crime o Detection "Proceeds of Crime" Chapter 30 The Canadian Ranking System and Financial Transactions and Records • In addition to retail branches, there are commercial branches that cater to business clients, and private banidng branches for more wealthier clients. The branches operate under rules, policies and procedures that the financial institution has in place to ensure a uniform approach in the service of clients and maintenance of financial accounting.

Orgazzabon of a branch Understanding how a branch is organized will help you understand how a transaction is handled and who would be involved in processing it. To investigate records you should know which employee keeps and can interpret them. Most financial institutions, organize their branches and employees in sitnilar ways. Tellers or customer service representatives are the front line of all financial institutions. They handle deposits and withdrawals, and sell products such as bank drafts, money orders, traveller's cheques, and wire transfers. They are the normal liaison between the client and the financial institution. Quite often they know the most about who the clients are and what types of transactions they perform. The difference between a teller and a customer service representative (csr) is that the teller operates a cash drawer and csrs go to a central teller for cash transactions. Usually one employee is ultimately responsible for cash control. This is a head teller in a teller branch, and a central teller in a csr branch. This employee verifies the accuracy of cash paid out and received on deposit, and is responsible for maintaining cash levels in the branch. A bank branch has a cash holdings limit which regulates how much cash they may have on hand. If it is consistently exceeded it is the central teller's responsibility to report the reason for this to head office. The current account teller/csr operates a special wicket to serve business clients only. This person is most familiar with regular business clients and the types of deposits that they make. The personal chequing clerk and the business account clerk are responsible for the administrative functions of personal chequing and business accounts. They get daily reports about maintenance charges to accounts, nonsufficient funds cheques, and overdrawn accounts. Any other reports about • account activity are also administered and filed by these employees.

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The wire transfer derk is responsible for the verification of outgoing and incoming wire transfers. The savings clerk or savings manager administrates personal savings accounts, receiving reports about maintenance charges, nonsufficient funds, overdrawn accounts, and other savings account activity. This person may also supervise the tellers. The proof operator processes all of the daily withdrawals and deposits through a machine that a.dds the total transactions and checks addition. The proof machine also micrencodes the amounts of the cheques and deposits onto the vouchers, and prepares the vouchers for sorting and rebalancing at the Data Centre. When a voucher passes through this machine a stamp that identifies the branch where the proof is processed is put on the back of the items. The investment officer sells investment products such as tenu deposits and treasury bills. This person may also take orders for selling and buying stocks. The branch administration officer (BAO), or customer service manager, supervises all these employees. She or he is also responsible for branch operations. The BAO accepts responsibility for transactions over the authorization limits ofless senior employees, signs drafts and handles customer com- plaints. The BAO also ensures that the company's policies and procedures are followed by employees, handles all training in the branch, and is the main liaison with the branch manager. Branch managers are responsible for the overall operation and profitability of the branch, for extending credit to clients, developing business, as well as communicating with senior management.

Account Records When an individual opens an account at a financial institution, a New Account Form is completed by an employee listing the following detaiLs: Personal &mounts Name Supported by Acceptable Identification - Drivers Licence - Social Insurance Number - Major Credit Card - Previous Financial Institution Reference - Photo ID. Address Tdephone Numbers Business Home Employer Spouse Name and Employer 56 Crime 0 Detection "Proceeds of Crime" Chapter 30 The Canadian Ranking System and financial Transactions and Records

If the account is for business purposes, proof of registration is required. For a sole ownership or partnership this would be a certified copy of the registration form; for a corporation, the Articles of Incorporation or corporate seals. Copies of these forms are kept in a file on the client's business. As well, the business customer will have to complete several legal account operation documents that identify the owners and officers of the company. The paper forms are retained for various time periods. The new account information is entered into a computer database. This creates a client profile which records personal or business identification, and all accounts held by the client at that institution, with the date on which each was opened. The client profile c,an be accessed by computer from other branches of the financial institution. Clients must also sign a card to provide a specimen of their signature. These are kept at the branch of account. Some financial institutions can display signatures on their computers. Savings and chequing accounts are common products available at financial institutions. They offer clients security for their savings while allowing them the freedom to draw the funds out at any time. Clients are provided with an account record such as a passbook or monthly statement shovving funds on deposit, transactions, interest and charges made to the account. Computers are used to post transactions to accounts. Each transaction must be entered into the computer so that the financial institution's records can be updated and the client can be given a receipt. Clients deposit funds into their accounts using a deposit slip. This slip provides the financial institution a paper record of the transaction. A receipt of their deposit is provided by the computer entry made to their passbook or on their statement. The business deposit slip is a larger form and usually has three copies: Cony Purnose Retained By Copy 1 Original is processed Branch as CREDIT. Copy 2 File copy for audit Teller Copy 3 Receipt Customer

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Cash makes up a large proportion of the transactions processed by fmancial institutions. The following is a detailed account of how cash is managed, received and dispersed paying attention to the problem of money laundering and detection of irregularities. There are many potential options for depositing cash.

When a teller receives a deposit, he or she makes sure the amount of cash is the same as what is written on the deposit slip. The cash would be placed in the teller's cash drawer or in the anti-hold-up safe undemeath their wicket. If there is too much cash (over their limit) then the teller will immediately place the exc,ess cash in his or her own compartment in the vault or give (cross) the cash to the head teller. The limit of cash a teller may hold is usually between $5,000 and $10,000 depending on how busy the branch is and how busy the day is. The purpose of the limit is to reduce losses in hold-ups. If large cash deposits are made with the teller, then the teller would continually exceed his or her limit. This would indic,ate that there is a problem with the limits or the teller is receiving an unexpectedly large amount of cash. Large cash deposits are generally made only by businesses bringing in the day's deposits. Average cash deposits by personal account holders are $1,000 weekly or less. Average cash deposits by small to mid-size retail businesses are $1,000 to $2,500 daily. The account record shows the date, a coded description and the amount of the transaction and the balance of the account after the transaction. The description of the transaction codes can be found at the bottom or on the back of the account record. Deposit slips are retained in the branch of account by the financial institution as proof of transaction. knpersonal deposts Clients are not restricted to using tellers at the branch of account for making deposits and withdrawals. If the client has a bank card, both deposit and withdrawal transactions to accounts c,an be made using a banking machine. These banking machine deposits and withdrawals appear in the account records with a transaction description code indicating that it was a baniring machine transaction. Clients can also make deposits using the night depository or fast deposit located at the branch of their account. These services are designed for clients who do not need an immediate receipt.

S8 Crime 0 Detection "Proceeds of Crime" Chapter 30 The Canadian Rankly System and Financial Transactions and Records • Night depository, a dropoff outside the branch, is used mostly by business clients. The client receives a numbered lockable bag, and a key to the night deposit box. The bag's number and the name of the company using the bag are recorded by the branch. The company can now malce deposits when the branch is closed. Night deposit can also be used for smaller deposits, simply by putting the cash and completed deposit slip into an envelope. These can be put into the night deposit box through a smaller opening (like a mail slot) which does not require a key. The deposits are counted and processed by the employees the next morning. All of the transactions made by night depository are recorded on a night depository record sheet which is kept by the branch. In the branch clients can put their deposit in an envelope and drop it into the fast deposit, which is a mini-vault. The branch staff will open up the mini-vault when the branch closes and process the transactions. Service branches are used by business clients of one branch of a bank who wish for some reason to make deposits at another branch. The original branch sends a letter to the other branch introducing their business client and asking them to accept deposits for credit to the original branch. Service branch employees usually know little about the client and don't have to concern themselves about the deposits since the branch of account is responsible for recourse.

Withdrawal Records The most common method for clients to draw funds out of their account is by writing a cheque. A cheque is designed for presenting payment to a second party. The second party may cash that cheque at the branch and fmancial institution that the cheque is drawn on, or may present the cheque to their own financial institution in exchange for cash or credit to their account. A payment or clearing system ensures that the institution which cashes the cheque will be able to recover money from the account the cheque was written on, even if that account is with a different fmancial institution. Each cheque contains markings that identify the financial institution, branch and account it is drawn upon. The financial institution, branch and account number are numerically coded using a standard that is regulated through the Canadian Payments Association. This information is located on the bottom of the cheque reading left to right. s

59 Crime 0 Detection "Proceeds of Crime" Chapter 30 The Canadian Bantling System and Financial Transactions and Records

FIGURE 3.1 Club 99

IlAn7.3 19.2L.

PAY TO THE ORDER OF New WaveMarketing $ 150,00000

One Hundred Fifty Thousand xx DOLLARS THE ROYAL BANK OF CANADA HAZELTON LANES BRANCH 87 AVENUE ROAD TORONTO, ONTARIO M6R 3R9

MOM Fitedgaek

1:33 1:C6652 8 CO3 933 ni9391o9r 100015000000 i/1

Cheque Branch Institution Account MICRencoded amount of cheque number number number number

If the cheques are numbered, the first set of numbers is the cheque number (not shown above). These numbers allow financial institutions to indicate the cheque numbers of statement accounts. Immediately to the right is the five die branch or transit number which identifies the branch where the account is located. To the right of that, the institution number can be found. Each financial institution has its own three digit code. Moving further right, the account number is located. The number and combinations of digits will vary from one institution to another. These numbers are printed on the cheques using a magnetic ink and are called MICRencoding. The use of magnetic ink allows high-technology machines and computers to read the cheques. When a cheque is presented for payment at a financial institution, the branch must prepare that cheque to be processed through the clearing system. The branch will process the cheque as an accounting entry through a proof machine located in the branch. The proof operator will examine the cheque to ensure that it can be processed properly, for instance to ensure that there are no tears in the cheque or to ensure that it is micrencoded, and will pass the cheque through the track of the proof machine. When the cheque passes through the machine, the amount of the cheque is micrencoded on the front of the cheque in the bottom right-hand corner. This allows the processing centre's computers to electronically read the amount of the cheque and to Imow what amount to withdraw from the clients' accounts. The proof machine also stamps on the back of the cheque the branch identification stamp to indicate where the cheque was negotiated, the date it

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was negotiated and a trace number. The trace number is assigned by the branch should a copy of the cheque ever be required from the processing centre. Once the cheque has been through the branch proof machine, the cheque is forwarded along with all of the other items processed by that branch to the processing centre. This is done at the end of each business day. The data or processing centre receives items from all branches in the region. Cheques drawn on their own institution are separated by branch and account number. The value of the cheques is electronically withdrawn from the clients' accounts. The financial institution's computers capture all of the transaction information at this point to produce the client's statement and internal financial institution records. Cheques drawn on other institutions are totalled and are presented to the corresponding financial institutions for payment. Cheques drawn on accounts at their own branches and cashed at other institutions are paid to those institutions. Computers sort the cheques by branch and account number and the clients' accounts are electronically debited. As each of the cheques passes through various processing centres, the front and back of the cheque is micro-filmed. The back of each cheque is stamped at each processing centre it passes through, indicating the location of the processing centre and the date it was processed. The cheques in the processing centre are sorted by branch and account number, bundled up and sent to the branches of account or to an administration centre. The cheques are filed by account number until the monthly statement is produced. The cheques and statement are then mailed to the customer. If a cheque clears on an account that has not enough funds on deposit to cover the amount, the branch or administration staff will remove the cheque from the pile and retum it to the fmancial institution that had cashed it as NonSufficient Funds. A client may also withdraw funds from his or her account in person at a branch by completing a withdrawal slip. This slip will be processed through the data centre. Deposit slips that are micrencoded and internal accounting records are processed in a very similar way using the processing centre. These records are kept at the branch of account or an administration centre.

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Over the Counter Services Many clients require a more secure or quicker method of payment than cheques or cash. If a client must guarantee a payment or send funds overseas, they turn to well-known and acceptable payment instruments such as money orders, drafts and wire transfers. You do not have to have an ac,count with the financial institution to purchase these products and services.

Men Orders. Drafts . Traveler's Cheques The use of money orders and drafts is popular because the fimds are guaranteed. A personal or business cheque c,ould be returned nonsufficient funds. The customer requests the draft or money order from a financial institution and pays the bank the value for it. The instrument is drawn on the particular financial institution from which it was purchased, and the funds are guaranteed by the same institution. The branch that issues the draft or money order keeps a c,opy of all payment instruments issued. Money orders are issued for amounts less than $1000. The customer is not required to indicate the payee. Drafts are issued for amounts over $1000, and a payee must be indicated. Drafts can be issued in many currencies. Traveller's cheques are sold by various fmancial institutions but can be drawn on an entkely different financial institution. Certain banks will clear all traveller's cheques internationally. These can be readily purchased in Canadian, United States and Great Britain Pounds Sterling currencies in most denotnina- tions. The traveller's cheque has two signature lines on it. One is signed when it is purchased and one is signed when cashed. There is also an area on the cheque to make it payable to someone.

Ware Transfers Another popular payment method for sending money a long distance is a wire transfer. A customer usually wants to wire money for one of two reasons: • The customer must send money to a foreign country and wishes the funds to be available immediately to the beneficiary of the funds. • The customer wants the money to be delivered right into the bank account of the beneficiary quickly, and the beneficiary deals at another bank, or at the same bank in another region.

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When a wire transfer is requested at a branch, the client's instructions include: - ordering/sending customer; - amount of money and currency type; - beneficiary customer's country; - beneficiary customer's fmancial institution; - beneficiary customer's name, address, or account number; OR instructions to pay upon notification; - identification. This information is taken by a bank employee, recorded to a wire transfer application, and the money is immediately taken from the client. Since a wire transfer is guaranteed funds, the bank wants to ensure that it has received the fimds first. The funds vvill be deposited into an internal account. The branch then telephones or faxes the instructions to the financial institution's regional International Centre. The International Centre then uses a system similar to telex to contact the destination bank with the details of the wire transfer. Financial institutions can become a member of this system, called SWIFT. This communication machine sends instructions to the foreign banks in a prearranged format agreed to by participating financial institutions. The system also translates any foreign lan- guages into the destination bank's language. Financial institutions that have accounts with one another specifically for transferring money are called "correspondent" institutions. The sending bank instructs the destination bank to debit the value of the wire from the sending bank's account. If the destination financial institution is not a correspondent one, then the transfer is sent to the correspondent financial institution in the destination country. The correspondent financial institution forwards the transfer to the destination fmancial institution. If funds are being wired domestically, the funds are sent from the Interna- tional Centre of the sending bank to the International Centre of the receiving bank and forwarded to the branch at that time. Some receiving banks will wire the funds to their closest branch and the fimds are hand-delivered to the receiving branch in the form of a draft. If a wire transfer is being done between two branches of the same financial institution, the sending branch will telephone the instructions directly to the receiving branch. The communication methods used for wire transfers make the transfer of • money as fast as possible BUT NOT INSTANTANEOUS. At all points of 63 Crime o Detection "Proceeds of Crime" Chapter 30 The Canadian Banking System and Financial Transactions and Records

communication of the wire transfer, the transactions are carefully documented. Each intermediary's involvement in the transaction at their respective locations is recorded. The time involved in a wire transfer varies, depending on when each link in the chain receives the instructions. A reasonable guideline to follow is: Domestic transfers between the same bank: same day Domestic transfers between different banks: same or next day International transfers between correspondent banks: up to two days International transfers between noncorrespondent banks: three days A wire transfer confirmation report listing all the details of the transfer is eren to the sending branch the next day.

Foreign exchange Foreign currencies, drafts, money orders, and traveller's cheques can be exchanged at most branches of ftnancial institutions. A conversion form is completed by the financial services employee. This form indicates whether the transaction is cash or cheque, as usually a different rate applies to each, and the customer signs the form. These forms are stored at the branches after œmpletion.

Investment Seruices Investments such as Term Deposits, Guaranteed Investment Certificates, Guaranteed Savings Certificates are available at most financial institutions. Treaswy Bills and Bankers Acceptances are also available over the counter in most branches. huestment cerbficales The terms of these investments vary from one day to five years. Normally, the minimum amount of investment for terms under 1 year is $5,000 dollars. The minimum amount of deposit for fewer than 30 days is $25,000. The minimum deposit for 1 day is $100,000. Investment certificates are available in Canadian and U.S. currencies in most denominations. Foreign currency investment certificates are available in large amounts (minimum $100,000) and are placed offshore with foreign banks.

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Certificates are available in registered or bearer form. A registered certificate is payable to the person whose name appears on the certificate. A bearer certificate may be cashed by whoever presents it (i.e. the bearer, or carrier, of the certificate). Government securities and corporate notes are also available in registered and bearer form. When an investment is purchased the customer completes an application for the investment that indicates his or her name, (regardless of whether or not the certificate will be registered), an address, and an account number to which interest should be credited (if the interest is credited periodically). This application is signed by the customer. Additionally, the employee will probably indicate the source of the funds for the investment on the form That source may be an account number, a cheque drawn on another account, etc.

Stodis and bonds Investment products such as stocks and bonds are available at branches. The customer need not have an account with the institution to purchase securities and mutual funds. Employees may only process requests for purchase,s and sales of securities and are not able to advise clients on investment matters. When a purchase or sale of securities is made in a branch, the employee first must deternine whether they know that customer. If the customer has no ac,count with the fmancial institution, identification will be taken. A buy or sell order is then completed. If stock is being sold, the certificate is signed by its registered owner and the financial institution telephones the sell order to the financial institution's trading department. The buy or sell order is signed by the customer. The certificate number of the security is written on the branch buy/sell order when available. Payment is received or credit instructions (such as an account number to which the payment should be credited) are taken. When the transaction is confirmed, which usually takes one or two days, the amount is debited from the branch's general ledger account and credited to the customer (for a sell order), or credited to the branch's general ledger account and debited from the customer (for a buy order). Many financial institutions have purchased securities companies. Clients could be referred to these brokerage firms by the branch. Most financial institutions also have self-directed investor services where a branch client can call a trader directly and request that buy and sell transactions be made. A personal security code is used for identification of the client and the client's account is debited or credited when the transactions are made.

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Specialty business services Business clients often require specialty services from financial institutions to assist them with domestic and business transactions. These services are offered through normal branches and through the assistance of commercial banking branches that have staff trained to understand business and international banking services. For a fee, clients can arrange for services such as foreign exchange, international payments and credit, export and import financing to be delivered with the assistance of corresponding foreign banks.

Letters of Credit Letters of Credit are often used for international trade between tvvo companies operating from different countries. A Letter of Credit is a form of credit line issued between two companies conducting business. They are described in detail in Chapter 1, page 31. Normally, the letter of credit serves as a form of guarantee of payment, whereby if Company 1 does not pay Company 2 by some other payment instrument, Company 2 will cash the letter of credit.

Lendmg Services and Mortgages Mortgages are available at all fmancial institutions. The records and procedures for processing the application and credit investigation are similar to those for consumer loans. Available for nearly every purpose, a customer can borrow money from most fmancial institutions if he or she can meet the criteria of the lenders. (That criteria is generally a significant amount of assets for collateral or high income.) When a customer borrows from a financial institution, a detailed credit application is filled out indicating personal information about the applicant. Inc,ome levels are declared and income verification (a copy of an income tax return or financial statements) is provided. The branch runs a credit bureau check which will indicate the financial institutions that the applicant deals with or has borrowed from. This includes institutions at which the applicant has credit cards, even if he or she has no other dealings with that institution. To approve a loan, a formula is used to compare the total payments required to make the debt payments with the customer's total income. Assets pledged as collateral for the loan, such as a car pledged for a car loan or a house pledged for a mortgage, are registered by the branch as security on

66 Crime o Detection "Proceeds of Crime" Chapter 30 The Canadian Oniony System and Financial Transactions and Records • the loan. If the borrower defaults on the loan, the financial institution will be able to seize the collateral and sell it to recover its money. To keep track of registered liens or claims on property the Personal Prop- erty Securities Act was proclaimed. Registration under this system allows the financial institution and branch to note publicly that it has a registered mortgage against the asset. If a client is given a loan, the client will sign a note promising to repay the loan plus interest. The financial institution will open a loan on their computer system that calculates the interest due and when the payments are required, and electronically debits the client's account for the payments. If the client does not have an account with that fmancial institution, they may leave post-dated cheques drawn on their account with another fmancial institution. The loan will be entered onto the client profile in the client database. All of the documentation is retained by the financial institution in a loan file. When a client applies and is turned down for a loan, the financial institution may retain the file in a declined loan file for their records. After a client finishes paying off a loan, the branch may retain the credit file in a closed loan file. This is done should the customer wish to apply for another loan.

Credit cards Most fmancial institutions offer credit cards. When a credit card is issued by a financial institution to a customer, a credit application and/or a detailed credit investigation should be kept on file at the branch or at the credit card centre. When a customer makes a purchase with their credit card, the purchase will appear on a monthly credit card statement administered and mailed by the financial institution's credit card centre. Copies of statements and records of charges and payments would be kept at the credit card centre but should be requested at the branch.

Safety Deposit Boxes Most branches offer safety deposit boxes or safekeeping services to clients. The safety deposit boxes are located in the vault and require 2 keys to open them. One key is held by the branch and the other is held by the customer. There are lease cards that are signed by safety deposit box clients and also access cards. These cards are usually located in the vault and the access card is signed each time the client enters the box.

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The safekeeping services offer storage of securities or sealed envelopes to clients. The securitie,s or envelopes are kept by the branch in a large common safe compartment accessible to the branch custodians. A safekeeping record card is completed listing the contents and retained and filed by the branch.

Double Entry Ilccounbog Financial institutions use the double entry accounting method. This means that for every financial transaction there is a debit and a credit of equal value. This is important to note when reviewing internal records of financial institutions. The type of accounting entries can indicate whether a transaction was cash or cheque, and where to search for further records. These records are called the audit trails. A deposit to a customer's account is a credit. A withdrawal or cheque drawn on a customer's account is a debit. A positive balance in a customer's account is a credit balance. An overdraft or minus balance in a customer's account is a debit balance. All accounting transactions are represented by vouchers. These serve as the audit trail. They are the bacicup records to the c,omputeriz.ed posting of transactions. In financial institutions there are accounting records to support all of the transactions that oc,cur. For example, a customer wishes to put $100 into her passbook account. The customer presents to the teller a deposit of $100. The deposit is a CREDIT to the account and the deposit slip is the CREDIT voucher. The cheque being deposited will DEBIT the issuer of the cheque's account.

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There are many other sources of financial information in addition to financial institutions.

For real estate When you have identified a location or an address, you can conduct a search on the history of the property which will show when and for how much the property was sold and whether a mortgage has been registered against that property. If a mortgage exists it will give you the name of the lender which could reveal another banking relationship and perhaps the existence of another bank account. You may also estimate the amount of equity or net worth in the property by subtracting the amount of mortgages from the estimated value. Of course if a property was paid for by cash no mortgages will show on the search.

For assets [chattels] When you have identified the full name of an individual you can run a PPSA search (Personal Property Security Act). This is similar to a real estate search but is for chattels: things like cars or furniture bought with financing. The lender files a statement under this PPSA which is registered by the provincial government at the Ministry of Consumer and Commercial Relations (MCCR). Anyone can ask for what is registered against anyone. This can reveal other assets that have been acquired and further relationships with lenders.

For control of companies Corporations are required to file an information retum with the MCCR for the names of the Directors and Officers of the Corporation. Whenever changes are made in these positions, an information return is also required. This should provide some indication of who is running the company but it is also possible to create blinds and use nominee names such as a lawyer or acquaintance. However, this filing does not indicate who owns the company. Usually, to determine that, you need to find out who is the lawyer for the corporation and obtain, by search warrant, the share register where the listing of shareholders is recorded. Of course, there is no guarantee that those listed are the same benefi- cial ovvners of the shares, but it is a start. •

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For ownership of computes There is a filing requirement under the Corporations and Labour Unions Re- turns Act which discloses the stated ownership of the corporation.

For credÉ worthmess of mdwuluals Lenders have a central repository of information on consumers called a Credit Bureau that they can reference to check on the credit rating of individuals. Many lenders file voluntary reports which are recorded in this repository which can be accessed by other members or the police. The Credit Bureau can provide information on the number of credit cards held by an individual; what companies have granted credit to the individual, such as a bank; and even the average number of digits in the bank account. This is a great source of financial information on individuals. A record of persons who have requested information about individuals is kept and is available to the individual on whom a Credit Bureau is kept.

Credit Weans Credit bureaus exist in most areas and are responsible for monitoring all financial dealings as reported by their member fmancial companies. The credit bureaus are available to financial companies to check on the existence of loans to or bad credit ratings on prospective borrowers. There are two separate systems in place: one for persons and one for businesses. In order to gain access to the credit bureau system you have to be registered with them and have a computer terminal to communicate with the bureau's files. In order to inquire about a file you must know: SIN number first and last name Present address, and past addresses if possible Occupation Date of birth For business inquiries, all of the above information about each owner would be helpful. In addition you must Imow: Name of company DBA (Doing business as) Where and how the company was registered. While fishing you might discover discrepancies in the names used or find

12 Crime 0 Detection "Proceeds of Crime" Chapter q0 Financial Investigation and Public Information 5g stems • that a number of smaller associations or financial connections exist. Be prepared to open subfiles or investigations on these. A note of caution: credit bureaus keep track of inquiries, including who made the inquiry. This information is available to individuals who are interested and apply for it. Since a suspect might occasionally request this information to see if anyone is checking up on him, it could compromise the secrecy of an investigation. This should be taken into consideration when making inquiries.

Tax Returns Tax returns can show the existence of income producing assets such as rental properties or bonds which would bring the assets into consideration for seizure. There would be a tendency for the dealer to report legitimate income once his drug profits have successfully allowed him to acquire income producing assets. You might also obtain other financial information attached to the return such as a T4 slip sug,gesting employment income and a working relationship of some lcind or fmancial statements on companies which are owned by the dealer. Finally, the income that has been disclosed in the return can be used as a reference amount for a net worth analysis (discussed in Chapter 6) and the assets (or liabilities - i.e. from loan interest claimed) can be double checked for their inclusion in that analysis.

Pathfmdmg The first task of the investigation is to determine where the perpetrator is doing his laundering. As in most investigations, it would be fundamental police work that will determine his name and from where he operates.

Where to sedi a trad There are several methods or sources available to the investigation team to get a financial profile. First of all, a trail could lead to a financial institution or institutions where he might do business. A courier or bag man could be in use to make the deposits, so a tail on the associates could also be valuable.

Postal Survuey Mail surveys by postal authorities have been extremely effective for the Internal Revenue Service in detecting financial dealings of individuals under investigation, especially those dealing with foreign bank accounts. Unfortunately, Swiss banks and other financial companies have several methods of avoiding this • problem for the clients that request it. Plain envelopes are almost always used.

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In certain instances all correspondence, including statements of accounts, have been held by the bankers for years until the client personally picks them up. In addition, postal meters leave their marks and the corresponding postmark.

Conspicuous Assets Monitoring the spending habits and payments of an individual could also turn up a part of the trail. Automotive dealers would have purchase records as to how the suspect paid for a car or truck. If ftnancing was arranged with the company, there will be records of financial disclosure. If it was paid for by cash, the automotive dealer may have a copy of a receipt. If it was paid for by cheque, then the automotive dealer's fin ancial institution would have a copy of the cheque that was used. If the cheque was issued by a financial institution, then financing could have been arranged there. Again there must have been disclosure of financial information. The same theory applies to any property that is owned by the suspect. The PPSA on the property will show if there are any mortgages, which will lead to a financial institution. Once any part of the trail is exposed, bank records of payments to and from that part can lead to more hidden financial connections — even connections overseas.

Where to Apply for Information on Corporations Information about corporations is available at the local government agency that is responsible for registration of businesses. Registering a corporation in a country such as Liechtenstein that provides secrecy will hinder any inquiries. In North America, however, the information is available upon request. The name and address of the corporation's owners can be obtained at these sources. If a front or dununy corporation is being used, there are signs that will give it away. If the company professes to be in a certain business, do any of its owners have any special skills in that area? Is it recognized by the industry associations? Does the company have any public contact? Does it have a relationship with the normal suppliers of such a business? Is it listed in the telephone book? Is there an employee answering the phones in a businesslike manner? Who would be the clients of the business that they profess to operate? Are there any signs of business activity or solicitation?

eel Crime o Detection "Proceeds of Crime" Chapter 11 e Financial Investigation and Public Information 5H stems • Comparing these claims of legitimacy to local tax returns, if available, or to bank records or other information a.ttained during the investigation with taxa- tion records, may also suggest whether the business is legitimate. If there is a system in place, a fmancial fanout by the local cooperative financial institutions could uncover dealings at an unknown bank or trust company.

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AUDIT TRAILS The following chapter explains the documents traditionally encountered during a financial investigation. These records make up the backbone of any financial investigation and the skills needed to interpret these documents are critical to a proceeds of crime investigation. Records may appear slightly differently depending on the financial institution but the principles of their investigation are the same. The first time you read the following information, you may not thoroughly understand the value of knovving all these details. Once you participate in the case study or in an actual investigation, the importance of understanding these infinite details will become more apparent. This chapter may become the most valuable information to you in this training program and you may find it very useful as quick reference material.

Investigating a Dank Statement • A bank statement is used by a financial institution to report and maintain records on transactions to a customer's account. It summarizes financial activity over a period of time and provides details about individual transactions that can be used to further audit trails and establish relationships that the suspect has with other companies, individuals, or assets. Transactions appear on the statement indicating the date the transaction was processed, the type of transaction, the amount of the transaction, and the resulting account balance. Transactions that decrease the account balance may appear in the form of cheques, withdrawals, banking machine withdrawals, transfers out, debit memos, pre-autho rized payments, loan payments, and overdraft interest and service charges. Transactions that increase the account balance may appear in the form of deposits, banking machine deposits, transfers in, credit memos, pre- authorized payroll credits, investment proceeds, loan proceeds, and interest earned.

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FIGURE 5.1

ROYAL BANK 0 F CANADA 32nd Street Branch Toronto, Ontario

International Investments Ltd. 1 90 Bay Street Toronto, Ontario M5G 1X0 Account #: 112-411-9 Statement Date: 01/21/88:

01/01 Balance Forward $ 0.00 01/02 Deposit $ 5,000.00 $ 5,000.00 01/04 Deposit $ 3,500.00 $ 8,500.00 01/07 Cheque $ 2,500.00 $ 6,000.00 01/11 Deposit $ 4,300.00 $ 10,300.00 01/13 Deposit $ 2,700.00 $ 13,000.00 01/14 Cheque $ 4,000.00 $ 9,000.00 01/15 Cheque $ 1,000.00 $ 8,000.00 01/18 Cheque $ 500.00 $ 7,500.00 01/18 Deposit $ 2,800.00 $ 10,300.00 01/19 Cheque $ 2,200.00 $ 8,100.00 01/20 Deposit $ 4,800.00 $ 12,900.00 01/20 Cheque $ 1,500.00 $ 11,400.00 01/20 Cheque $ 800.00 $ 10,600.00 01/20 Cheque $ 750.00 $ 9,850.00 01/21 Deposit $ 3,800.00 $ 13,650.00

Total Debits: $ 13,250 Total Credits: $ 26,900

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Business and personal chequing accounts usually generate an account statement for each month, which reports on the previous thirty days activity. When produced, the account statement is sent to a department or branch where the vouchers (cheques, deposit slips, withdrawal slips, etc.) are matched with the transactions that appear on the account statement. For electronic transactions such as interest, pre-authorized payments or banldng machine transactions, there may not be an accompanying paper voucher. Cheques are microfilmed when processed at the data centre. Original cancelled cheques are returned to the client with the account statement. (Cancelled cheques are cheques written on an account, which have been cashed, and cleared (i.e., the money has been withdrawn from the customer's account and paid to the account at the financial institution of the person or company that cashed the cheque).) Normally only one paper copy of the account statement is produced. It is mailed to the customer. The statement is microfilmed so that the financial institution will have a record of the account should the customer lose or not receive the statement. A microfiche containing all of the monthly account statements is sent to the branch of account and a backup copy is retained at a head or administrative office. All statements indicate a start and end date. Ensure the statements cover a continuous time period. Do not assume that 12 statements will cover a year's operation on an account. It is a common practice for customers to request interim statements covering a specific period resulting in 13 or more statements a year. On the top of an account statement are account number, the account owner's name and address, and starting and closing dates of the summary. The main portion of the statement summarizes the transactions for that reporting period. The first entry is the balance forwarded from the previous statement. Each transaction entry will appear on the statement with the date of the transaction, a code or abbreviation for the transaction type, and the resulting account balance after the transaction. Abbreviations or codes differ by financial institution and are usually explained on the back of the statement.

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Details found on this record: Account name Account number Period starting/ending Financial transactions Dates of transactions

Inuesbgation The purpose of investigating an account statement is to determine the total amount of money transacted through an account, the source of funds, and the final destination of those fimds (assets). You will require the original account statements or certified true copies obtainable from microfilm. When investigating an account, first determine the start date of the investigation. You may wish to use the date the account was opened. You can determine the date an account was opened by exatnining the client profile either on paper or computer. This should list all of the ac- _ counts opened by the individual and the date each was opened. If such a system does not exist, examine the signature card for that particular account. This should be dated. However, be aware that signature cards are updated periodically, which may be misleading. You may also examine the microfiche copies of the monthly account statements. The first account statement should have an entry at the beginning of the statement such as "account opened" with a starting balance of $0.00. Once you locate the required microfiche, paper copies of the statements can be produced by the financial institution. However, this is usually done at another location and may take up to weeks to obtain. Always examine the microfiche account statements first to determine the quantity and amounts of transactions that have taken place. This will help determine how much work and time will be involved in the investigation of the suspect. When a broad and detailed investigation of the suspect is initiated, the amount of work involved for the financial institution in tracing items is substantial. If an investigator can first examine statements and prioritize the tracing requests (by larger transactions or recent activity), the financial institution can arrange to produce the more important requests first. Other- wise important traces could be delayed by the large volume of less important tracing requests.

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For example, there may be 25 cheques on an account statement being investigated, but you are particularly interested in three cheques for very large amounts. If a request were made simply for copies of every cheque, obtaining the tracing information and the completion of tracing requests would be done arbitrarily; therefore, the delivery of the important copies of the large cheques could be delayed by the smaller cheques. Leave instructions with the financial institution to contact you when important items have been produced. Otherwise, the voucher copies will be delivered at one time, unnecessarily holding up the delivery of important items. Transposing the account activity to a worksheet should be done prior to asking the financial institution to produce paper copies. By starting work directly from the microfiche, you will save time normally spent waiting for records. You will be able to leave the branch after the initial visit with an idea of the amount of activity which has taken place and how large the financial investigation will be. Paper copies of statements are not required to begin tracing the transaction items that appear on the account statements. This is one of the more important aspects of the financial investigation. The financial institution may use microfiche as the basis for tracing individual transaction items. If not, with details of the transaction which are available on microfiche, the financial institution can determine what supplementary records are required to trace individual transaction vouchers. The account statement is critical to tracing cheques and deposits because it indicates the exact date that the items were processed. This determines the date of records that must be examined to obtain tracing information. Using this information, financial institutions can produce a copy of vouchers for the transactions appearing on the statement. If originals are not available, you require certified true copies of the front and back of each item. This action will be completed through the processing centre and can take up to several weeks. For example, certified true copies of cancelled cheques may be obtained using the information available on the statement. The statement reveals the date on which the cheque cleared, as well as any additional information to further indentify it, such as the amount of the cheque, the cheque number, etc. Another report, sometimes referred to as an account history report, must be referred to upon determining the date on which the • cheque cleared. This report is usually produced weekly or biweekly.

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It lists all the transactions that occurred through the account each day. It also provides a trace number which allows the data processing centre to find their copy of the cheque. The financial institution employee must now complete a form request a copy of that cheque. It will be sent to the data processing centre, where someone will then have to find the electronic copy of the cheque, convert it to a paper copy, and return it to the branch that requested the copy. Depending upon how complete the information is on the request form, and how long ago the cheque was processed, this could take anywhere from three days to several weeks. On average, it takes 15 minutes of a financial institution's time to trace one item. Certified true copies of other documents, such as deposit slips, withdrawal slips, etc. could be obtained in this way if the original voucher could not be found at the branch. The next step in the creation of the audit trail is to investigate the cheques that were deposited to the account (determine the source of the funds) and the cheques that were drawn on the account (determine the destination of the assets).

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inuestugahng a Bank Account Passbook Most business and personal savings accounts record activity in a passbook rather than a statement. The passbook is the only complete continuous record of the account. It is kept by the client and updated periodically by the client in a branch. As transactions are processed through an account, the financial institution's computer stores the transactions in its memory until the passbook is updated. Prior to being updated, the financial institution may be able to produce an on-screen or paper activity history of the account. Once the passbook has been updated the financial institution loses that ability. The account passbook or account history reports provide a sununary of financial activity over a period of time. The passbook or history report also provides the details of individual transactions such as the deposits and cheques which are obtained and used to further the audit trials and establish relationships that the suspect has with other companies, individuals, or assets. When the passbook is updated, it shows transactions that have taken place throug,h that account including the date the transaction was processed, the type of transaction, the amount of the transaction, and the resulting account balance. A glossary of transaction codes is usually on the front or back inside cover of the passbook. A passbook is the customer's only record of financial transactions for the account. The customer does not receive a statement or cancelled cheques. In the absence of the original passbook, no other records so conven- iently package all of the transaction activity in one place. Instead, you must rely on alternate records to piece together the account activity. For instance, some financial institutions produce a report that indicates the passbook was updated, and shows the items entered into the passbook. Other financial institutions produce summary account history records for all accounts on a microfiche each weelc, which is sent to the branch of account. What is important to remember is that the financial institution will always have alternate records. Microfilmed copies of the alternate records are kept at the branch of account and also at the processing centre. Deposits and withdrawals can be made in the branch with or without the bankbook, or through a banking machine. Withdrawals can also be • made by writing cheques. As vvith a statement account, credit and debit

85 Crime Detection "Proceeds of Crime" Chapter 5e Financial Investigation Techniques

memos may be used, and some electronic transactions will not provide paper vouchers. Original cheques, withdrawal slips, and deposit slips are retained by the financial institution as proof of the transaction. If the transaction is posted (i.e., the transaction is immediately entered into the financial institution's computerized system), the slip will be kept at the branch where the transaction took place (the branch of transaction posting). If the transaction is note posted immediately and the vouchers are micrencoded, it is left for the clearing at the end of the day, when the slips will be processed at the data centre and sent to the branch of account for storage. The purpose of investigating an account passbook is to determine the total amounts of money that were transacted through an account, the source of ffinds, and the destination of those funds (assets). lnuesbgabon During an investigation, you may encounter two possible scenarios. The first scenario is that you have obtained the passbook from the target of the investigation and are approaching the financial institution for details of the transactions found in the book. The second scenario is that you are approaching the financial institution without the passbook. In this case you will need to obtain copies of alternate records such as account history reports that provide details about transactions in the account during the time period under investigation. The start and end dates of the investigation can be established from the client profile, the signature card, or internal records. As well, if you have the passbook you can look at the first entry to see if is an account opened entry with a zero balance. If not, there is a previous passbook. Ensure that the passbook or history reports produced cover a continuous time period. A passbook can be quicldy filled up, and a new one issued. Make sure that you do not assume the passbook in your possession is the only record of account. The passbook or account history reports are critical to tracing the cheques and deposits. They indicate the exact date that transactions were processed. This determines the date of the records that must be examined to obtain tracing information. The passbook or account history report provides the following details: Account number Amount of transaction Type of transaction Date of transaction

86 Crime o Detection "Proceeds of Crime" Chapter 5 financial Investigation Techniques

FIGURE 5.2

Date Particulars Debit I audit Balance

Jan 1 Jan 2 Dep 100.00 100.00 Jan 5 WD 50.00 50.00 Jan 6 NSW 10.00 40.00 Jan 7 PTD 10.00 30.00 Jan 8 CHQ 10.00 20.00 Jan 9 CM 100.00 120.00

DEP = Deposit

WD = Withdrawal

NBW = No Book Withdrawal

PTD = Personal Touch Debit ("bank Machine")

CHQ = Cheque

CM = Credit Memo

Always examine the passbook or history report first to determine the quantity and values of transactions that have taken place. This will help determine how much work and time will be involved in the investigation.

01 Crime 0 Detection "Proceeds of Crime" Chapter 5 0 Financial Inuestigation Techniques

Inuesbgabng a Cheque A cheque is used by an account owner to transfer funds from his/her account to the payee: another individual, entity, or account. When the cheque is cashed by the payee, the cheque is presented for payment at the issuer's financial institution. The amount will be withdrawn from the issuer's account and the transaction vvill appear on the account passbook or statement as a cheque. The cheque is a permanent record of a transaction. By examining a cheque, you can obtain a number of details about the transaction. Cheques may be drawn off most passbook, statement, credit card, and investment accounts. Statement accounts return original cancelled cheques to the customer with an account statement. Passbook accounts normally do not return original cancelled cheques to the client. Originals are stored at the branch of account or administration centre for up to two years and then sent to storage for up to seven years. Microfihned copies of the front and back of cheques can be obtained at the financial institution which cashed the cheque and at the institution the cheque is drawn on. You will require the original cheque or a legible certified true copy of the front and back.

The Clean of Cheques Financial institutions try to process voluminous service as efficiently as possible. Human handling of cheques written on a customer's account is slow and costly. The use of micrencoding and Data Centres eliminates nearly all involvement by branch employees. An employee would be prompted by the financial institution's computer system to investigate only if the cheque is nonsufficient funds or if it could not be processed by the Data Centre's computers. At the branch which cashes the cheque, the cheque is run through a track of a proof machine which: • balances the transaction; • encodes the amount of the cheque on the front; • stamps the financial institution's name, branch, and the date on the cheque; and • stamps a tracing number on the cheque and a corresponding number on a proof tape.

88 Crime 0 Detection "Proceeds of Crime" Chapter 5 0 Financial Investigation Techniques

Along with the cheque (DEBIT), the deposit slip must also be processed through the proof machine as a CREDIT. In this way the entry will remain balanced. All entries for that day are processed by the proof operator. A permanent record of all entries sent to the Data Centre is indicated on a tape that the proof machine produces. Each evening, every branch forwards their proof tape to the data centre. The cheque, along with all of the other accounting entries processed that day by the branch, is also forwarded to the financial institution's Data Centre. The Data Centre is the distribution point for all the cheques and accounting entries processed by that financial institution in that region on that business day. Special machines electronically read the micrencoding on the cheques and sort and separate the items cashed by another financial institution. The total value of all the CIBC cheques cashed at the Royal Bank branches is added electronically by the Royal Bank's Data Centre and is presented for payment along with the vouchers that same night to the CIBC's Data Centre. The CIBC electronically transfers the value of the cheques to the Royal Bank immediately. The same process would take place between the CIBC and the Toronto Dominion bank or any other financial institution. This process is called the clearing of cheques.

•

89 Crime 0 Detection "Proceeds of Crime" Chapter 5 0 Financial Inuestigation Techniques

At the Data Centre, each cheque is electronically photocopied. Com- puters read the micrencoding of the cheques drawn on their own branches. The micrencoding gives the computer the following information based on the numbers on the bottom of the cheques: 1. The cheque number (optional). 2. The branch number. (Each branch has its own number, called a transit number, which normally has five digits.) 3. The financial institution number (normally three digits). 4. The account number (which could be a combination of number se- quences). 5. An internal transaction number (optional - generally two digits). 6. The value of the cheque (added on by a proof machine operator at the branch).

FIGURE 5.3 Maritime Fisheries Corporation 237

February 10 19 2L PAY TO Pacielli"s Fine Foods $ 75,000.00 THE ORDER OF

Seventy-five Thousand JirC DOLLARS THE BANK OF NOVA SCOTIA MAIN STREET BRANCH 87 MAIN STREET MONCTON,NEW BRUNSWICK

MEMO hut gooepk

(612.31 7500000 \ Cheque Branch Institution Account Value of Number Number Number Number Cheque

The computer reads all the information on the cheque and electronically debits the appropriate account at the appropriate branch. The cheque vouchers are then routed to the proper branch. When the cheque arrives at its final destination, (the branch of the financial institution on which it is drawn), the signature on the cheque is checked against the signature card and the cheques are filed. If the cheques are returned to the customer with his or her statement, the cheques are filed by customer account number. If it is a passbook account, the cheques are stored at the branch. They are filed by the date of clearing. Within these date bundles, the items may be sorted by account number.

90 Crime 0 Detection "Proceeds of Crime" Chapter 5 0 Financial Inuestigation Techniques

Micrencoded deposits can be processed within the same financial institution in the same way, and the account is electronically credited. In case of error, each stage of processing a cheque is filmed by computers. This process can be used as a witness to the transaction. hwesbgabon Investigating in a financial environment dictates that evidence will always appear slightly different due to various accounting methods used by financial institutions. When examining the front of a cheque, the information will always be arranged the same way, but the micrencoded account numbers on the bottom front of the cheque will differ. This is because the numbers indicate which financial institution the cheque is drawn on. The number of digits in the account number may be arranged differently and vary in quantity. The following details can be found from the front of a cheque: • the financial institution where the account is held; • the account the cheque is drawn on; • the name of the issuer; • the signature of the issuer; • the amount of the cheque; • the date that it was issued; and • to whom the cheque was issued.

FIGURE 5.4 Name of issuer Amount of cheque

237

Date cheque was issued ehruary 10 19 91 To whom the cheque was isme PAY TO THE ORDER OF Pacieles Fine Foods Z5, 000.00 Amount of cheque S'eveirtfive Thousand MC DOLLARS Financial Institution THE OVA SCOTIA AIN STREET BRANCH Branch where account 87 MAIN STREET is held MONCTON,NEVV BRUNSVVIC

MEINO

237 Ii .1112 123 et 456 oor

Branch Financial Account Signature of issuer where Institution cheque is account is drawn on held 91 Crime 0 Detection "Proceeds of Crime" Chapter 5 0 Financial Investigation Techniques

The micrencoding on the bottom of the cheque indicates the cheque number, the branch number (also called the transit number), and the account number that the cheque is drawn on. After it has been processed through proof, the amount of the cheque also appears in micrencoding. Understanding the meaning of the various stamps found on the back of a cheque is important. As a cheque passes through various processing points a microfilmed copy is made. At each of these points a record of the transaction can be found.

FIGURE 5.5 Trace Date Branch Deposit to the Credit Number Number of the payee stamp

Proof Stamp - CN:0053q DA 002-010

For Deposit To The Credit o«.,..f The Payee 00002-010 1 CANADIAN IMPERIAL BANK OF COMMERCE FEB '91' 10 FEB '91' 10 BA.NK OF C.LB.C. FEB 10 1991 DATA CENTRE NOVA SCOTIA MAIN BRANCH MONCON, N.B. EASTERN PC MONCTON, N.B. 1 00002-010

CIBC Processing Teller stamp Bank of Nova Scotia Centre stamp Processing Centre stamp

On the back of the cheque, you can usually find the signature and account number of the person who cashed a cheque. This endorsement is made by the payee. In some cases a cheque could be double endorsed — the payee signed the back of the cheque and gave it to another person who signed and cashed it. Instead of an endorsement you may find a "Deposit to the Credit of the Payee" stamp. The most important stamp to be found on the back of the cheque is the earliest dated stamp. This should be the teller's stamp that is applied when the cheque is deposited or cashed. This indicates the financial institution and branch destination of the asset transfer. A lighter inked stamp could be found on the back of the cheque if the branch runs its own proof. This stamp is left by the proof machine that balances the proof and gives the following information:

92 Crime 0 Detection "Proceeds of Crime" Chapter 5 0 Financial Investigation Techniques

• the branch transit number; • the date the proof was run; and • the trace number. (This number tells you where in the batch of proof the item was run. It is simply a "counter" which increases by one number per item.) A stamp from the data centre which cleared the cheque should be visible. If the cheque is drawn on a different financial institution, a stamp from that institution's data centre would also be found. Each of the data centre stamps will include the financial institution's name, the date, and the region (usually province). This example illustrates the elements of information that are found on the front of a completed cheque.

FIGURE 5.6 Maritime Fisheries Corporation

February 10 19 91

PAY TO Pacielli"s Fine Foods $ 75,000.00 THE ORDER OF

Seventy-five Thousand xx DOLLARS THE BANK OF NOVA SCOTIA 1C0 MAIN STREET BRANCH • 87 MAIN STREET MONCTON,NEW BRUNSWICK

MEWO Pied ewe»

1:30241 • 002 I: 123 .4561.7r 7500000

Details of this record: Payee: Pacielli's Fine Foods Body and Figure: Seventy-five thousand dollars $75,000 Branch/Transit Number: 30241 Main Street Branch Institution Number: 002 Bank of Nova Scotia Account Number: 123 456 7 Date: February 10, 1991 Account Name: Maritime Fisheries Corporation • Signature: Fred Joseph 93 Crime o Detection "Proceeds of Crime" Chapter 5 0 Financial Investigation Techniques

Information that is gathered from a single document begins to construct an audit trail and establish financial and other relationships. • In this example, a financial relationship exists between Maritime Fisher- ies Corporation and Pacielli's Fine Foods. Further to this relationship, a transfer of assets (cash) of $75,000 occurred between Maritime Fisheries and Pacielli's. The date of that transfer may be on or any day after (not exceeding six months) February 10, 1991. There is also a senior or ownership relationship between Maritime Fisheries Corporation and Fred Joseph, who is authorized to draw funds from the company. Additionally, there is a relationship between Maritime Fisheries and the Bank of Nova Scotia through its Main Street branch where an account 123 456 7 is held. When a cheque is processed, the amount of the cheque is micrencoded on the bottom right corner of the front of the cheque. The back of a cashed cheque also provides important information about how that cheque was processed and about the payee. Each of the stamps left on the back of a cheque by the processing financial institutions create a trail that indicates which institutions and employees processed the cheque and on what date. This is important as it vvill lead you to the bank and branch that cashed it. When a cheque is deposited or cashed at the financial institution where the payee has an account, the payee either endorses the cheque or the teller will stamp the back of the cheque with the "Deposit to the Credit of the Payee". As indicated in figure 5.5 this cheque was presented to the CIBC Main branch by Pacielli's Fine Foods for deposit and transacted on February 10, 1991, by teller #1.

Proof Illadoe Stamp CN:00530 DA:10/02/91 TR:0002-010 The cheque was processed that day through the CIBC proof machines and the trace number on the proof tape is 00530.

94 Crime 0 Detection "Proceeds of Crime" Chapter 5 0 Financial Investigation Techniques

Data/Processmg Cenbm Stamp

FEB '91' 10 FEB '91' 10 C.I.B.C. BANK OF DATA CENTRE NOVA SCOTIA MONCON, N.B. EASTERN PC

The cheque cleared the CIBC processing centre in Moncton on Febru- ary 10, 1991, and was processed through the Bank of Nova Scotia's Eastern Processing Centre on February 10, 1991, where the account was electronically debited. Having examined the trail markers on the back of the cheque, the investigator can determine the destination of the transfer of assets, and develop an audit trail from one corporation and bank to two corporations and two banks. If this cheque had been deposited at a Canadian trust company, the stamps on the back of the cheque would probably include a third party bank's stamp. Many Canadian trust companies do not have their own processing centre and therefore rely on a bank to process all of the cheques drawn on that trust company. FIGURE 5.7

CN:00530 DA:10/02/91 TR:0002-010

For Deposit To The Credit Of The Payee 00502-590 1 NATIONAL TRUST COMPANY FEB '91' 10 FEB '91' 10 FEB 10 1991 BANK OF C.I.B.C. DATA CENTRE 21 KING ST EAST NOVA SCOTIA MONCTON, N.B. MONCTON, N.B. EASTERN PC 1 00502-590

3 1i 4 The cheque was processed as follows: 1. Deposited at National Trust Company; 2. Processed through proof machines of the C1BC Main branch for National Trust Company; 3. Processed through the crBc Moncton Data Centre; and 4. Processed through the Bank of Nova Scotia's Eastern Processing • Centre.

95 Crime 0 Detection "Proceeds of Crime" Chapter 5 Financial Investigation Techniques

Not all cheques will be cashed at a financial institution in the same province or country. If the payee deposits this cheque at a bank in the United States, the back of the cheque will appear as follows:

FIGURE 5.8

CN:51280 DA:10/02/91 TR:57124-324 FEB '91' 11 C.I.B.C. INTERNATIONAL For Deposit To The Credit CENTRE Of The Payee MONTREAL, PQ. 57124-324 1 CHASE MANHATTAN BANK FEB '91' 12 FEB '91' 12 BANK OF C.I.B.C. FEB 10 1991 DATA CENTRE NOVA SCOTIA MAIN BRANCH-54 STREET MONCTON, EASTERN PC N.B. NEW YORK CITY, NY 1 57124-324

4 1

The cheque was processed as follows: 1. Deposited at Chase Manhattan Bank, New York City; 2. Processed through proof at Chase Manhattan Bank, NYC; 3. CIBC International Centre, Montreal (the Canadian clearing bank for Chase Manhattan); . 4. C1BC Data Centre, Moncton; and 5. Bank of Nova Scotia Eastern Processing Centre

96 Crime 0 Detection "Proceeds of Crime" Chapter 5 Financial Investigation Techniques

When examining cheques, you will find some stamps overlap or bleed, rendering some information illegible. In order to ascertain any illegible information, the financial institution from which the cheque was drawn can check the institutional relationships to detemine the clearing institutions. In proceeding with the investigation, the next point in the development of the audit trail would be to determine the financial institution, branch, and account of the payee. In the case of this example, the targeted source documents required to further the investigation and maintain the audit trail are: • deposit slip that credited the $75,000 to Pacielli's Fine Foods account at the C1BC Main branch; • client profiles of both Maritime Fisheries Corporation and Pacielli's Fine Foods; and • bank account statements of both Maritime Fisheries Corporation and Pacielli's Fine Foods. •

•

91 Crime 0 Detection "Proceeds of Crime" Chapter 5 0 Financial Investigation Techniques

Inuesbgabng a Deposit Deposit slips are used for any deposits made in person to an account. Deposits can be made to an account by persons other than the account owner. Chequing (personal and business) deposit slips are usually micrencoded. Savings (passbook) deposit slips usually have the account number handwritten on the front. Deposit slips are used by a financial institution to record a credit to a client's account. Deposits can be credited to a customer's account in two ways: by posting it through a computer terminal in the branch, or by sending it to the Data Centre. Microfilmed copies of micrencoded deposit slips (front and back) that were processed at the Data Centre are available. Originals are stored at the branch or administration centre for up to two years and then sent to storage for another four years. Deposit slips are retained by financial institutions for up to six years. All of the deposit slips processed at a branch in one day are bundled together and filed by that transaction date. If three deposits appear on the account statement on December 7, 11, and 19, the deposit slips will be located in the branch in the deposit slip bundles for December 7, 11, and 19. Within each date the slips are filed by account number in ascending order. Banking machine deposits generally do not produce deposit slip vouchers. The records from this type of transaction need to be obtained from where the banking machine is located The banking machine deposit transaction appearing on the statement or passbook should also indicate the branch transit number where the transaction took place. If not, the branch of account will have a daily report of all banking machine transactions by the branch's clients. This report will indicate the banking machine location and the branch responsible for that banking machine. Have the employee contact that branch, requesting details of the deposit, such as cash or cheques, and certified true copies of the front and back of all cheques deposited. When deposits are made at service branches, while requests for information can be made for records at the home branch, the tracing information about deposits made at service branches will be located at the service branches. When an account is being investigated, ask the manager if these service

98 Crime 0 Detection "Proceeds of Crime" Chapter 5 • Financial Investigation Techniques

arrangements exist, as he or she might not think to note this. If a service branch is being used, it may be valuable to actually inter- view the staff Some transactions conducted by the suspect at the service branch may not show up on records. Such transactions could be cash purchases of drafts, money orders, or wire transfers. You will require the original deposit slip or a legible certified true copy of the front and back. The front of a micrencoded deposit slip is made up of several elements. The main information is: Transit Number: The branch where the account is held. Institution Number: The financial institution where the account is held. Account Number: The account that the deposit is made to. Deposit code: Indicates a deposit. Cheques on Deposit: Individual items on deposit. Cash on Deposit: Total cash. Date: The date the deposit was made. Account Name: May appear on the deposit slip. Initiais: The person who made the deposit and the teller who accepted it.

FIGURE 5.9 Financial Institution Date Initials and Branch deposit is Cheques on being made to Deposit

TORONTO-DOMINION BANK BLOOR & BATHURST BRANCH _ TORONTO, ONTARIO

2.1] ES ,, INITIAIS CASH • Feteme,10,11 POSITOR TELLE 8,000 @1 ER PLO 4,500 5 ©I0 = 150 CREDIT 0 @20 = 1600 ACCOUNT OF 0 @50 = 1500 Account Name NEW TECHNOLOGIES INC. 1115,© 100= 1000, TÔTALCHEGIUES 1 12,500 CASH::: 4250 TOTAeSEPOSrf 16,75 .00

004 1: 11 m11111 r 51 800001675000 I 10

• Transit Institution Account Deposit Cash on Number Number Number Code Deposit 99 Crime 0 Detection "Proceeds of Crime" Chapter 5 0 Financial Investigation Techniques

A deposit appearing on any account record and the corresponding deposit slip are essential to the identify what was deposited (cash, cheques, or other payment instruments), and the successful tracing of these items. If the date of the deposit is unknown, the investigator must first locate the deposit on an account statement, passbook, or other record. Then the investigator will request and review microfiche copies of either the monthly statements or account history for statement accounts or an account history for passbook accounts. Once the date of the deposit is discovered, it is necessary to the branch to produce the original deposit slip or a certified copy of the original. Deposit slips are completed by the customer and verified by the teller. The slip is supposed to indicate what was deposited, but often a slip may only have a total of the deposit and no disposition as to what was deposited. Figure 5.10 displays an example of a cash deposit. Since cash transactions are frequent in financial institutions, there are internal vouchers completed to record incoming and outgoing cash. These vouchers go by different names but are sometimes called cash audit slips. There are two copies of an audit slip. One copy is forwarded to proof. The other copy is retained by the teller or central teller for balancing at the end of the day. Both copies are retained by the branch that handled the cash. Cash is of value to whoever has it and is therefore considered an asset. An increase in an asset is a DEBIT and a decrease in an asset is a CREDIT. When the financial institution receives cash its assets increase and therefore a DEBIT cash audit slip is prepared. When the financial institution pays out cash its assets decrease and therefore a CREDIT cash audit slip is prepared.

IN Cnme * Hetecbon "Proceeds ot Crime" Chapter 5e Financial Inuestigation Techniques • For example, a client deposits $100 cash to a passbook account. The CREDIT would be the deposit slip. The DEBIT would be the debit cash audit slip. DEBIT CREDIT Cash Audit Slip $100 Deposit Slip $100 In figure 5.10, the customer has exchanged the $100 cash asset for the bank account balance asset of $100.

FIGURE 5.10

Date Particulars Delit Credt Balance

Jan 1 Jan 2 •

CASH AUDIT SLIP

Debit Audit Slip

5x$20

$100.00 • DEBIT CREDIT 101 Crime 0 Detection "Proceeds of Crime" Chapter 5 0 Financial Investigation Techniques

ram* This example illustrates the elements of information found on the front of the completed business deposit slip that was used to deposit the example of the cheque deposited in "Investigating a Cheque." The details of this record are: Transit Number: 0002 Main Branch Institution Number: 010 C1BC Account Number: 11 11111 Deposit Code: 51 Cheques on Deposit: 1 @ $75,000 Cash on Deposit: None Date: February 10, 1991 Account Name: Pacielli's Fine Foods Initials: SB

FIGURE 5.11 Financial Institution Date Initials and Branch deposit is Cheques on being made to Deposit

CANADIAN IMPERIAL BANK OF COMMERCE MAIN BRANCH MONCTON, NEW BRUNSWICK

CHEQUES INITIALS CEPOS OR I TEU- e @2 @5 - CREDIT @10 - @20 = ACCOUNTOF Name of @ 5° - account to PACIELLrS FINE FOODS © 100 which deposit is ïêi;i' iieniieli- 75.000 CASH I being made rAta)Epprer. 75,000.00

11 11111

Transit Institution Account Deposit Number Number Number Code

102 Crime 0 Detection "Proceeds of Crime" Chapter 5 0 Financial Investigation Techniques

If an investigation was begun with this deposit slip, the objective of the investigation would be to determine what was deposited. Since we know that the deposit slip was processed through the proof machine on the day of the deposit, we will examine the back of the deposit slip to help us determine where on the proof tape we can find these entries.

FIGURE 5.12 Branch Trace Number Date Number

Proof stamp CNt00529DA:10/02/91 10

For Deposit To The Credit Of The Payee

00002-010 1 CANADIAN IMPERIAL BANK OF COMMERCE FEB '91' 10 FEB 10 1991 DATA CENTRE MAIN BRANCH - COMMERCE COURT TOR, ONT. TORONTO, ONTARIO 1 00002-010

Processing Teller's stamp Centre stamp

The teller's and processing centre's stamps indicate that the deposit was accepted and processed on February 10, 1991. The proof stamp, in this case found on the top left corner, also gives us the date and branch where the deposit was processed: Date: 10/02/91 Branch Number: 0002. More importantly, the proof stamp indicates the trace number of the deposit slip: 00529. The stamp shows that the deposit slip was the 529th item processed through the proof machine on that day. With that trace number, the transaction can be located on the proof tape quicldy.

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The investigator has discovered a deposit of $75,000 to the account of Pacielli's Fine foods dated February 10, 1991. In order to determine the source of the funds that were deposited, the copy of the cheque deposited is required to show the account, branch, and financial institution that the cheque was dravvn on. The cheque will probably also have the name of the individual or company that issued the cheque printed on it.

10q Crime o Detection "Proceeds of Crime" Chapter 5 • financial Inuestigation Techniques • Investigating a Proof Tape The proof tape or proof machine is used by a financial institution to maintain accuracy of the accounting and transactions entries it processes every day. The machine adds transactions (debits and credits) and ensures that all entries processed by the branch are balanced (properly added), micrencoded with an amount (for those entries that will go to the data centre that evening), stamped by the proof machine (to identify the branch that processed the entries), and numbered so that tracing of items can be completed if required. Note: When a transaction (credit and debit) is processed through proof, they are processed together. As each item is keyed into the system, the voucher is dropped through a track which prints the amount of the item on the front, and the financial institution, branch, and trace numbers, as well as the date, on the back. An adding machine style tape also registers the transaction, recording the type of transaction, whether it is a debit voucher or a credit voucher, the amount, and the trace number. This same trace number is stamped on the back of the voucher. This proof tape acts like an index, telling the financial institution employee where to obtain a copy of the voucher. The numbering system is a simple counter that increases by '1' as each item is processed. The tape has two copies. One is kept at the branch. The other is forwarded to the data centre with the micrencoded items. At the data centre, the 'proof batches' are verified for accuracy. The cheques and deposits are sorted by financial institution and distributed by a machine similar to a proof machine. At this point the items are copied.

Example A deposit transaction of $500.00 would have two vouchers, a (CREDIT) Deposit Slip $500.00 and a (DEBIT) cheque of $500.00. When processed they would be 'run' as a Credit $ 500.00 000001 Debit $ 500.00 000002 •

IOS Crime Detection "Proceeds of Crime" Chapter 5 Financial Investigation Techniques

The trace number is an integral part in the location of the item by the branch and the copying of the item by the processing centre. To trace items on deposit, the financial institution employee must: 1. Identify the date of the transaction. 2. Locate the proof tape for that day. 3. Locate the transactions on the proof tape. 4. Fill out a form using the information on the proof tape to request a copy of the item.

FIGURE 5.13

0001 25000.00 C01 — A credit or deposit slip 0002 5000.00 04 — Represents cash (cash debit audit slip) 0003 15000.00 02 — 0004 750.00 02 — Trace Number: The / 0005 750.00 02 — Represents debits on deposit counter increases by one 0006 750.00 02 — such as cheques, drafts or digit as each item is 0007 500.00 02 — money orders. entered and is stamped on the back of the respective 0008 250.00 02 item. 0010 500.00 02 0011 500.00 02 0012 500.00 02 BALANCE 0.00 — No errors in addition. The above debits and credits total zero.

0013 100000.00 CO1 — A credit for a wire transfer 0014 100000.00 02 — The payment (cheque) BALANCE 0.00

0015 750.00 C01 — Credit portion of a money order sold 0016 750.00 04 — The payment (cash) BALANCE 0.00

0017 12500.00 C01 — U.S. $ to CDN $ customer credit 0018 12500.00 02 — Bank gives value for $10,000.00 BALANCE 0.00 U.S. @ 1.25

106

Crime 0 Detection "Proceeds of Crime" Chapter 5 0 Financial Inuestigation Techniques • Inuestigating a Cheque on Deposit In order to obtain a copy of the cheque deposited, the transaction entries (deposit and cheque on deposit) that were processed by the branch on the day of deposit must be located on the proof tape for that day. In the example of the cheque for $75,000 payable to Pacielli's Fine Foods: The deposit slip was the Credit. 75,000.00 The cheque on deposit was the Debit. 75,000.00 The proof tape for that day is examined until transaction number 00529 is located. FIGURE 5.14 Proof Tape 01 100.00 00527 02 100.00 00528 0 01 150,000.00 00529 02 150,000.00 00530 0 01 750.00 00531 07 750.00 00532 0

Once the deposit has been located, the investigator can see that the cheque deposited follows directly after the deposit slip on the proof tape. The proof tape also indicates the trace number of the cheque (00530 in this case). It is with this number that the financial institution can obtain a copy of the cheque that was deposited from its processing centre.

• Crime 0 Detection "Proceeds of Crime" Chapter 5 0 Financial Inuestigation Techniques

This example indicates a deposit of 4 cheques each of $10,000 for a total of $40,000.

FIGURE 5.15 CANADIAN IMPERIAL BANK OF COMMERCE MAIN BRANCH -COMMERCE COURT TORONTO, ONTARIO

DATE A EPOSTOR TELLE 10,000.00 Febuay10,91 @ 1 BIZBR I givrei 10,000.00 @2 = @ 5 - CREDIT 10,000.00 10 = @20 ACCOUNT OF 10,000.00 50 '` INTERNATIONAL INVESTMENT @ 100 = CORPORATION eAsit:1 DTAtiDEPOSIT 40,000.00

100002 Hi 010 11 Hi 11111 rr 51 00001000000 10

You would be able to obtain copies of all of the cheques deposited, which would further the investigative trail, in the same way that you obtained a copy of single cheque being deposite d. The proof tape for this transaction would appear as follows: FIGURE 5.16 01 40000 00541 02 10000 00542 02 10000 00543 02 10000 00544 02 10000 00545 0

108 Crime 0 Detection "Proceeds of Crime" Chapter 5 0 Financial Investigation Techniques

hweshgating a Wire Transfer The purpose of investigating a Wire Transfer is to determine the source of the funds (incoming) or the destination of the funds (outgoing). A Wire Transfer Form and Activity Report are used by financial institutions to record the instructions on incoming and outgoing wire transfers. To send a wire transfer, an application is completed at the branch and signed by the customer. The customer and the branch each keep a copy. The wire transfer clerk can assist you in getting copies of wire transfer records. The original Wire Transfer Form is stored in the branch of the transfer or in an Administration Centre for a period up to two years. After that period, the branch vouchers are stored at a records storage company for up to six years. The Wire Transfer Activity Report will give details on all incoming and outgoing wire transfers. Each business day, the report is produced at the branch and the international centre recording all of the details of the wire transfers that occurred the previous business day. By examining the Wire Transfer Form or the Wire Transfer Activity Foi-m, you can obtain the following details relating to the transaction. • The ordering customer's name and address. • The amount, currency and Canadian equivalent for foreign currency transfers. • The beneficiary's country, name, address and telephone number, the destination bank, branch and account number. • The beneficiary may not have an account at the destination bank. In this case, instructions may be given to call the beneficiary to come and pick up either cash or a draft. You require the original wire transfer form or a certified true copy; or the branch Wire Transfer Activity Report, or an account statement indicating a vvire transfer transaction. Because all of the transactions are internal within the financial institutions, the approach that is taken with examining cheques and deposit slips for trail markers is impractical and unnecessary. The Wire Transfer Forms and Activity Reports give all of the necessary information required to determine the destination financial institution, • branch, customer and account of wire transfers.

109 Crime 0 Detection "Proceeds of Crime" Chapter 5 0 Financial Investigation Techniques

FIGURE 5.17

Bank of Montreal CURRENCYNANE . USDOLLARS RATE FOREIGN CURRENCY AMOUNT(EXCEPT U.S.) RATE U.S. DOLLARS 1.1657 APPLICATION FOR MAIL & TELEGRAPHIC TRANSFER CANADAN 32nd Street 00457 Feb. 8/91 EQUIVALENT 25,000.00 US.AMOUNT RATE CONIViSSION EfiAtCH TRANSITNO. US.AMOUIVT RAIE AIR MAIL OR CAI3LECHARGES PLEASETRANSFER AT MY/OUR RISK BY: TOTAL 25,003.(X) 0 MAIL(ATTACHRBVIITTANCE) RATE °VYING TO INTERNAMONALCENTRE CAI3LE (CRJELEGRAPHICTRANSFERPAYNENTACCOUNT) 1/2 corvivessioN AIR MAIL OR CABLE CHARGES TOTALOWINGTOINTERNATIONALCBVTRE

TRANSACTION REF. NO. QUOTED BY INTTERNATIO NAL CENTRE 45678921354

NAM E OF CO RRESPONDENT IN DI CATED BY I KfTERNATIONAL CENTRE Chase Manhattan Bank

ORDERING CUSTOMER- NAME AN D ADDRESS International Investments Ltd. 190 Bay Street, Toronto, Ontario M5G 1X0

DESTINATION BANK- IF SPECI Fl ED BY ORDE RING CUSTOMER San Francisco Bank 1245 Bayview Road Branch

BENEFI CIARY CUSTOM ER - NAME &ADDRESS (0 R ACCO U NT NO.) West Coast Realty Holdings 66457

DETAILS OF PAYMENT- REFERENCE, INVOICE NOS ETC .

BANKTO BANK I NF-ORMATION -SPECIAL INSTRUCTIONS RE PAYMENT

SGNATURE FREPAREDBY CHECKEDBY TELDESP. INITOF RECEIVING OFFICER AT INT'L C ENTR E.

110 Crime 0 Detection "Proceeds of Crime" Chapter 5 0 Financial Investigation Techniques • Incommg Wire Transfer& All of the information required to determine the source of funds wire transferred into an account can be obtained from the Wire Transfer Activ- ity Report at the branch of account and the International Centre. The transactions are processed through the international centre where a micro-filmed copy of the transaction may be stored. The name and address of the ordering customer combined with tracing the payment method tell you the source of funds. The next step in the creation of the audit trail is to investigate the cheque/account that was used to wire transfer the funds.

Outgomg Ohre Transfer& When fimds are wire transferred, the financial institution which has been requested to transfer funds deposits the cheque the customer uses to pay for the wire transfer into an internal account. The financial institution then uses those funds to pay the destination financial institution. For example, a customer approaches Bank A to wire transfer $10,000 to Joe Smith at Bank C located in London, England. The customer pays Bank A $10,000 using a draft from Bank B. Bank A cashes the $10,000 draft from Bank B, depositing the money into its internal account. Bank A then sends $10,000 from its internal account to Bank C with instructions to credit Joe Smith. The destination of funds is determined in part by the wire transfer application itself which indicates the beneficiary name, the destination bank, branch, account number or money order number. Further pursuit of the destination of the funds relies on cooperation from the destination financial institution. The next step in the creation of the audit trail is to investigate the account to which the funds were wire transferred to determine the destination of the funds. •

III Crime 0 Detection "Proceeds of Crime" Chapter 50 Financial Investigation Techniques

Investigating a Money Order/Draft Purchase Money Orders and Drafts are forms of guaranteed payment sold to clients by financial institutions. These instruments can be cashed almost anywhere in the world. The original draft/money order is given to the client. The client gives the original to the payee who will deposit or cash it. The cashing financial institution will return the draft for payment to the original fmancial institution where it was purchased, and that original will be kept on file at a central location for a period of time. The selling financial institution can now provide a copy of the front and back which will indicate where and by whom the instrument was cashed. The same techniques for investigating a cheque can be used. The financial institution keeps copies of these instruments from the time of the sale. The credit copy is sent to the processing centre, where the micrencoded serial number, date and amount are read by computer and a report of issued drafts and money orders is produced. When the draft or money order is returned cashed, it will be removed from this report. There is a theory that a branch that has been used extensively by smurfs will have many long-outstanding items (Drafts/Money orders sold but not cashed) on this report.

FIGURE 5.18

BANKOFMONTREAL IHIRDAVENUEERANCH 9912230 VANCOUVER,BRITISHCOLUMBIA 9auertij D 91

PAYTOTHE ORDEROF 9stioutaflogat 91Webbtœiti3 £tS. 0513 3,300.00

TIckez fitoumutd, &tee luuteted CANADIANDOLLARS

TOTHEBANKOFMONTFEAL Hari Soseé14e SIMED SIGNA1UFESTAMP

ERNel-IllidinnelhankihIRMet COUNTERSIGNS) SIGNATUFESTAMP

9912230 1:02526 III 001 999 I. 659112r 79 00000330000 80

02 Crime o Detection "Proceeds of Crime" 5 Financial Investigation Techniques • Chapter Another copy of the draft/money order is stored in the branch of account or in an Administration Centre for a period of up to two years. After that period, the branch vouchers are stored at a records storage company for up to 6 years.

Source of ['ads To determine how the draft/money order was paid for will involve reviewing the financial institution's records for that business day. The first step is to locate the credit portion of the draft/money order (financial institution copy) which the branch can easily retrieve. The second step is to examine the back of the credit portion of the draft/money order for the proof machine stamp. The proof stamp will indicate the day the credit was processed through the proof machine and the trace number. The trace number will tell the financial institution employee the date and where on the proof tape to look for the offsetting debit. From the proof tape the employee can determine whether the draft/money order was paid for by cash or cheque. If it was paid for by cheque, the branch will complete a trace request to produce a copy of the front and back of the cheque. For example, the credit voucher is located by the branch. By examining the reverse of the credit, the trace number 00545 was found. The proof tape for that day is then examined and trace number 00545 is located. Credit Voucher $10,000.00 00545 Cheque (payment) $10,000.00 00546 The tape indicates that a cheque was used to pay for the Draft/Money Order and the trace number was 0000546. With that number, the branch can now request the copy of the cheque. If the draft/money order was paid for by cash, the proof can also confirm this using nearly the same methods. Credit Voucher $10,000.00 0000545 Cash $10,000.00 0000546 The source of the funds is the method used to pay for the purchase of • the draft or money order.

113 Crime 0 Detection "Proceeds of Crime" Chapter 5 0 Financial Investigation Techniques

If the customer has an account at that financial institution, a cheque or withdrawal from an account may be used. However, even clients with accounts at the branch have been known to use cheques drawn off another financial institution as payment. The only way to determine this is by investigating the other account, or by asking the branch employee who sells drafts if he or she remembers whether the draft was paid for with a cheque drawn off another financial institution. The branch that sold the instrument can determine the method of payment by tracing the voucher that was processed with their copy of the draft or money order.

Use of Funds To determine the destination of the funds, the reverse of the original draft/ money order must be examined. As mentioned earlier, once it has been cashed, it is retu rned to the selling institution for filing. A copy of the front and back of a cash draft/money order can be obtained by determining the number of the draft/money order, the amount, and the date it was purchased. Using this information, the branch can trace the draft/money order and produce a copy of the front and back. Once a copy of the cash draft/money order has been obtained, apply the same techniques for investigating a cheque to ascertain by whom and where the draft/money order was cashed. The next step in the creation of the audit trail is to investigate the individual who deposited or cashed the draft/money order to determine the destination of the funds.

IN Crime 0 Detection "Proceeds of Crime" Chapter 5 0 Financial Investigation Techniques

Inuestigabng a Client Profile The client profile card is a financial institution's computer record of a client. These will vary in appearance from one financial institution to another. The client profile could be viewed onscreen or you could obtain a paper printout. Electronically stored and accessed, this is a record of personal information about the customer, a record of all types of accounts owned and the date each account was opened, as well as a record of services used by the customer. Use this profile to quicldy determine how many accounts the individual under investigation has and the how far back the investigation needs to date back to (the date the account was opened). It may also indicate undiscovered accounts at other branches, loans, FIGURE 5.19 safety deposit boxes, credit cards, etc.

H8XP0095 CLIENT PROFILE DISPLAY SRF002 CLIENT NO 459241356C RESP TRANSIT ACCT MGR NO INTERNATIONAL INVESTMENTS LTD. 190 BAY STREET CIS ENTITLEMENT...CURRENT ACCOUNT TORONTO CIS DELIV METHODS...BRANCH SER ON M5G 1X0 CATS POS HOME BR TRANSIT 00457 MAIL DESTINATION. CANADIAN ADDRESS CLIENT STATUS ACTIVE RESIDENCE CODE 03500 NR -TAX 0 DUNS NUMBER 98798747 BUS SEGMENT CODE 100-BUS-CURRENT SIC CODES 13830488 CONTACT PERSON STEVEN DANIELS SEX LANGUAGE SIN BIRTH DATE 06/07/52 DRIVERS PERMIT HOME PHONE BUSINESS PHONE (416) 988-2325 EXT. CONSL WARNING CD CLT DATE OPENED. 1989/NOV CAPS. .NO BCRMS..NO PCI..NO CLIENT COMMENT NSF FOR 91=0 MAINT TRAN/DATE 00457 1991/FEB/26 INT MAINT/DATE.VSA/LD 1991/FEB/05

CLIENT NO: 459241356C SERVICE ACCOUNT NUMBER DATE OPENED REL JOINTPTY/ NAME/ A CCT DESC ADDR CURR 1124119 1989-NOV-05 SO 1 VISA 4512984785334 1990-JAN-30 SO 1 LOAN 711311901 1990-APR-16 SO-1

115 Crime 0 Detection "Proceeds of Crime" Chapter 5 0 Financial Investigation Techniques

Inuestigatmg Foreign Exchange In order to ascertain the volume of foreign currency transactions in a particular branch, the daily increases of foreign currencies can be compared for unusual increases. These amounts appear on tellers' balancing blotters, which will show the previous day's total and that day's ending balance. Compare incoming foreign currency shipments for each branch at cash clearing centres of the financial institution. Look for regular foreign currency shipments significantly above the branch's limit. Branches keep a nominal working amount of foreign currency on hand and ship the excess with the regular weekly armoured car shipment to cash clearing.

Currency Source Declarations A currency source declaration is a form that financial institutions have their customers complete for suspicious or large cash deposits or transactions (usually over $10,000). The declaration identifies the customer by name and indicates the amount of funds, currency, account number if any, what the funds are being used for (such as buying a money order), and the source of funds. If the declarant is not a customer of the financial institution, identification is recorded on the form. The currency declaration may be taken by the teller or customer service representative, or by a senior officer of the branch. The customer signs a statement that the fimds are not from an illegal source. Generally, the statement also permits the financial institution to turn the information about the transaction over to the police, should the financial institution decide if such action is appropriate. The currency declaration might either be kept on file at the branch or sent to the security department for further review and investigation. If it is deemed suspicious, the security group will turn the information over to the police for review and investigation.

116 Crime 0 Detection "Proceeds of Crime" Chapter 5 0 financial Investigation Techniques • Summary Once the source of the trail has been established, the financial institution will be approached by the investigative team. At this point an effective methodology must be developed to keep the time factors in control. The time factors pertain to: 1. How long it takes to locate the records required. 2. How long it takes to attain certified copies of those records. 3. Ensuring that the data from the bank stays organized so as not to waste time putting it back in order later.

Gathering hionnabon The first piece of information that you should request to examine immediately is the branch client profile or general records. This could be found on printed cards or, in most cases, on a computer system. Get a printout! You can refer to it easily and take it with you. This record will include the name and address and account mailing addresses (if available) of the account owner. It will also list personal identification taken from the client and when accounts were opened. All of the accounts held by the client at that branch should be listed on the card. In some cases accounts held at other branches will also be included. If no accounts at other branches are listed, request a separate name search to double check. If a company is being investigated, ask to see the authorizations the bank is holding on the company. Also, ask the bank employee who is responsible for the management of the account if he or she has additional files on the client. If the original lead is on the business account/name then repeat the request for the general files (if any) on the owners of the company. If the lead is on the owners, ask for information on any business accounts. The names of the various companies might be different and therefore the bank might keep separate unconnected files on the other companies. Ask the bank employee responsible for that type of account (the current account clerk) if there are other connected companies owned by the same person. If you don't ask, the bank employees might not think to tell you. If you or a bank employee are uncertain of an answer to a question, • verify if there is any other employee who can help.

In Crime 0 Detection "Proceeds of Crime" Chapter 5 0 Financial Investigation Techniques

Once you have these records (they should be available immediately), take a step back and examine the types of accounts and the dates they were opened. In most cases you will find most business accounts are statement accounts which return cancelled cheques to the client. The customer has original cheques and statements. There will probably be a microfiche showing copies of the bank statements every month. Initially this will be your first exposure to the activity on the account. Microfiche are kept in the branch for a certain period of time before they are shipped to a storage company (There will be a record of what is in storage). You can use a machine which allows you to look at the microfiche copies of the statements inunediately. Next you need to request copies of all of the statements from the opening date of the account to the present day. Information for ordering copies of the cheques listed on the statement may be on this fiche. Information may also be available on a weekly or biweekly fiche that lists the trace numbers of the cheques shown on the monthly statement. Once you have the copies of the statements, you can enter the data into a computer that can keep track of all the dollar values processed through the account. This will also monitor individual transactions on the accounts and remind you that copies of the cheque or deposit are still outstanding from the banlc. In addition, a computer can add all of the payments or transfers to the same individuals, organizations, or through the same banks and summarize the information for you. Once the statements are available, copies of the cheques can be ordered (if they have not been ordered already) and copies of the deposits can be taken. The deposit slips are kept by most banks in the branch, so they should be available immediately. From the deposit slips you will get information about whether the deposits were cheques or cash. If there were cheques or money orders deposited, request copies of the items on deposit. This is important because the cheques could be written on unknown accounts at unknown banks by the organization you are investigating. This may also lead to another trail. If you discover cheques have been written by different organizations, you might consider investigating them.

118 Crime 0 Detection "Proceeds of Crime" Chapter 5 6 Financial Investigation Techniques

You should also investigate drafts purchased consistently at one bank branch, or wire transfers which have been sent consistently from the same person. A useful technique for detennining smurfing activities at a branch is to request a list of long outstanding money orders and drafts purchased but not yet cashed. This should be kept on one computer-based reporting system. Any incoming wire payments deposited into the account vvill only show wire payments on the account statement. The details that would be available are the name of the sender, the sending bank, and the currency. If insufficient information is available at the branch, then the details will be available at the bank's international centre. If there are large deposits of cash (over $10,000), ask for the cash declarations taken from the customer by most financial institutions. Ask the manager or current account teller if the company makes deposits at any service branches. If a deposit was made at a specific service branch, then the record of what was deposited will be kept there. If a company does deal at other branches then it would probably be wise to have the employees at those branches questioned about any fre- • quent cash transactions such as wire transfers out, draft purchases, or currency exchanges. These questions should also be asked at the home branch because such transactions would not show up in the account records. When a draft or money order is purchased at the bank, a copy should be requested because this will show where it was cashed and by whom, possibly leading to another part of the trail. Once the information on the accounts is available, you must determine who payments are from and to whom they are made. The next step is to pursue the trail through the financial institutions that the cheques on deposit came from, and the banks at which the cheques issued were cashed. If a payment is made to an organization then it must be determined for what purpose the payment was made. For instance, what was a cheque to a stock broker used to purchase? Talk to the broker. If 1,000 shares of IBM were purchased, what was the certificate number. Who was it payable to? Have they ever purchased through this broker before? If yes, when and what did they purchase? How did they pay? Ask the broker for a copy of the cheque used to pay the broker. Did they sell any stocks through the broker? If yes, get a copy of the cheque the broker used to • pay the launderer.

119 Crime 0 Detection "Proceeds of Crime" Chapter 5 0 Financial Investigation Techniques

Contact D3M. Who is their trust agent on shares? Have these shares been redeemed? If yes, when and where? Contact someone where they were redeemed. If they were sold by another stock broker, what other business has this stock broker done for this company? Get a copy of the cheque that the broker issued to pay for the 1,000 shares of IBM stock. It has been cashed at another bank where there is a business account. The whole process starts again! This could take an investigator through real estate transactions and personal accounts. Each step must be meticulously recorded for seize and freeze enforcement under the Proceeds of Crime Act.

Io financial Inuestigation Summary and linalysis

• •

• 22 Crime 0 Detection "Proceeds of Crime" Chapter 6 0 Financial Investigation Summary and finalysis • This chapter may be used as a reference book for the acccompanying video. It illustrates the process of constructing a Source and Use of Funds Worksheet using banking documents, and explains the purpose of a Net Worth Analysis using the case examples.

Source and Use of Funds Q. What is required to complete a source and use of funds worksheet? A. The starting point requires copies of the bank statements for the particular bank ac,count we have discovered. This provides the dates and amounts of entries so that the bank can fmd copies of the source documentation behind these entries. Typically, the next step is typically to get copies (or originals) of all deposits to the account. These deposit slips reveal whether the deposit is cash or cheque. Some deposits come direct to the account by wire from another bank. For these deposits there vvill be a credit memo prepared by the receiving branch. When cheques are noted on the deposit slip a further step is undertaken to ask the banker to provide a micro film copy of the deposited cheque. of withdrawals ... A further request is made to the banker for the microfilm made from the bank account. On a spreadsheet, all the details are recorded: for deposits the payor, and for withdrawals the payee. The spreadsheet can be used to sort the transactions by payee and payor to arrive at a simple one page court exhibit for this bank account showing the flow of fimds into and out of the account. Q. What is the intention in completing the worksheet? The source and use of funds analysis does several things for an investigator: - Provide an organized approach to analyiing the flow of funds into and out of an account; - Provide an investigative aid in identifying further bank accounts; - A summary of cash deposits can be readily prepared for the account (which can be convincing at trial); - A simple summary describing activity in the account may be prepared, which can become the court exhibit; - Finally, the detail within the source and use of fimds spreadsheet will • associate specific funds to their specific use. 23 Crime 0 Detection "Proceeds of Crime" Chapter 6 Financial Investigation Summary and Rnalysis

SpeaficTracmg In order for a judge to issue a special warrant to seize assets, you will likely need to be able to demonstrate the assets were indeed purchased from proceeds of crime. How can the source and use of funds analysis help? You will want to show that the purchase of an asset was financed or paid for by the monies deposited to the account, which can be shown to be proceeds of crime. A very useful appendix to your Information to Obtain the Special Warrant which you provide to the judge, would be an accounting schedule which dem- onstrates this financing. The follovving pages demonstrate the creation of a source and use of funds worksheet, following the statement used in the video. - Crime 0 Detection "Proceeds of Crime" Chapter 6 0 Financial Investigation Summary and finalysis

FIGURE 6.1

ROYAL IIANK OF CANADA 32nd Street Branch Toronto, Ontario

International Investments Ltd. 190 Bay Street Toronto, Ontario M5G 1X0 Account #: 112-411-9 Statement Date: 02/27/91

01/28 Balance Forward $ 23,200.00 02/01 Deposit $ 35,000.00 $ 58,200.00 02/02 Cheque $ 800.00 $ 57,400.00 02/03 Deposit $ 8,500.00 $ 65,900.00 02/07 Cheque $ 4,000.00 $ 61,900.00 02/08 Wire $ 25,000.00 $ 36,900.00 02/10 Debit Memo $ 10,000.00 $ 26,900.00

Total Credits 50,000

12S Crime 0 Detection "Proceeds of Crime" Chapter 6 financial Investigation Summary and Ilnalysis

Take each transaction in order. Look at the first transaction.. .a deposit foi $35,000.

FIGURE 6.2 Account Statement

ROYAL BANK OF CANADA 32nd Street Branch Toronto, Ontario

International Investments Ltd. 190 Bay Street Toronto, Ontario M5G 1X0 Account #: 112-411-9 Statement Date: 02/27/91

Seiefit al.an.de

01/28 Balance Forward $ 23,200.00 02/01 Deposit $ 35,000.00 $ 58,200.00

126 Crime 0 Detection "Proceeds of Crime" Chapter 6 0 Financial Investigation Summary and Ilnalysis •

FIGURE 6.3 Deposit Slip

ROYAL BANK OF CANADA 32nd STREET BRANCH TORONTO, ONTARIO

DATE INIT ALS CHEQUES,' DEPO9TOR1 TELLER Massif 2. el 8000 3600 @1 @2 = 2500 3875 FRONT SD FIR @ 5 = CREDIT 3300 2325 @10 — @20 = ACCOUNT OF 5200 4500 @50 = I@ 100 - INTERNATIONAL INVESTMENTS LTD. 1700 190 BAY STREET eO8tr 000.00 CASH:1 TORONTO, ONTARIO MSG 1X0 35,000.00

1:00457 oi 003 I: 112 411 o91' 51 01 0003500000 Ili • CN:00785 DA:01/02/91 TR:00457-003

For Deposit To The Credlt Of The Payee BACK 00457-003 5 ROYAL BANK OF CANADA FEB '91' 01 ROYAL BANK FEB 01 1991 DATA CENTRE 32ND STREET BRANCH TOFL ONT. TORONTO, ONTARIO 5 00457-003

•

In Crime 0 Detection "Proceeds of Crime" Chapter 6 0 Financial Inuestigation Summary and Ilna'gm

FIGURE 6.4 Cheques Deposited

THE ROYAL BANK HAZELTON LANES BRANCH 9700583 OF CANADA TORONTO, ONTARIO

"ffleee&yefe 19 eef

PAY TO THE ORDER OF e .4 e„ wee CAD cgoaaar

egbfeememeeee CANADIAN DOLLARS

R E

TO THE ROYAL BANK OF CANADA ,Werre ewe SIGNED SIGNATURE STAMP

unANcH Hazelton Lanes, Toronto 114414 Mies* COUNTERSIGNED SIGNATURE STAMP

9700563 105652 le 003 1: 999 • 555 it9r 79 100000850000 ill

THE CANADIAN IMPERIAL 124th STREET BRANCH . 9912588 BANK OF COMMERCE VANCOUVER, BRITISH COLUMBIA Decennber 1 2 19 90

PAY TO THE ORDER OF International Investments Ltd. CAD 2,500.00

Twenty-five hundred CANADIAN DOLLARS

R E

TOTHECANADIANIN1FERIALBANKOFCCIMMERCE Larry Tseng SIGNED SIGNATURE STAMP

Wecyyte Marie BRANCH 124th Street Branche Vancouver COUNTERSIGNED SIGNATURE STAMP

9912568 1:32567 to 010 I: 999 M654117r 79 100000250000 ill

128 Crime 0 Detection "Proceeds of Crime" Chapter 5 0 Financial Investigation Summary and Ilnalysis • BANK OF MONTREAL 'THIRD AVENUE BRANCH 9912230 VANCOUVER, BRITISH COLUMBIA

(Taney 8 19 9i

PAY TO THE /gtee,ratkealAvestmees ORDER OF CAD 3, 300. 00

nett tIcecea,y4 th»te kieleed CANADIAN DOLLARS

R E

TO THE BANK OF MONTREAL fife :awe* SIGNED SIGNATURE STAMP

BRANCH Third Avenue Branch, Vancouver Sun Greene COUNTERSIGNED SIGNATURE STAMP

9912230 1:02526 o 001 1: 999 01659 79 ill 0000330000 111

D THEBANK OF GRAFTON STREET BRANCH 886453 NOVA SCOTIA HALIFAX, NOVA SCOTIA bewail. 1.2 19 9

PAY TO THE ORDER OF .901eutationai .9étemioneoù cAD 5,-200.00

gitie lhoiaaeid,Ii hid4ed CANADIAN DOLLARS

R E

TO THE BANK OF NOVA SCOTIA 141 ealIt SIGNED SIGNATURE STAMP (.7- BRANcii Grafton Street Branch mfAA COUNTERSIGNED SIGNATURE STAMP

886453 1:02036 in 002 1: 999 122111r 79 00000520000 01

• 129 Crime 0 Iletecbon "Proceeds of Crime" Chapter 6 • Financial Investigation Summary and Rnalysis

THE TORONTO-DOMINION BANK QUEEN STREET BRANCH 664564 WINNIPEG, MANITOBA

19 e

PAY TO THE ORDER OF /4.1eileeeo4d leeet14+4444. W. CAD 1,700 DO

Oet det4■44e4i, «ute 1444.440.41 CANADIAN DOLLARS

R E

TO THE TORONTO-DOMINION BANK sumleue...t SIGNED SIGNATURE STAMP

BRANCH Queen Street Branch &detail loluatoa COUNTERSIGNED SIGNATURE STAMP

664564 1:00321 004 I: 999 ri 665 air 79 0000170000

THE BANK OF MONTREAL 1366 rue Ste. Catherine 785252 Montreal, Quebec

,lanuaty 8 19 91

PAY TO THE ORDER OF .0e:iv:national grum5lentnis CAD 3,600.00

dotasancl, air Le:dud CANADIAN DOLLARS

R E

TO THE BANK OF MONTREAL SIGNED SIGNATURE STAMP 1366 RUE STE. CATHERINE BRANCH Neee 14" COUNTERSIGNED SIGNATURE STAMP

785252 1:40267 lo 001 I 999 la442 gar 79 01 0000360000

130

Crime 0 Detection "Proceeds of Crime" Chapter 6 0 Financial Investigation Summary and Analysis •

G THE CANADIAN IMPERIAL 31 5th Avenue 978321 BANK OF COMMERCE Calgary, Alberta

3cou4aey 20 1 9 9 1

PAY TO THE ORDER OF 3vvieenationial Cm/eel-men-1-s Ltd. CAD 3,875.00

Tkeee -1-kousanci, ekkfkuncleed end severdy -five CANADIAN DOLLARS

R E

TOTHECANADIANIMFERIALBANKOFCOMMERCE Scwak IieHi SIGNED SIGNATURE STAMP

rrgewe BRANCH 315th Avenue g COUNTERSIGNED SIGNATURE STAMP

978321 1:05023 le 010 1: 999 el 8611119r 79 0000387500 VI

H THE BANK OF River Street Branchy 875623 NOVA SCOTIA Saskatoon, Saskatchewan

January 8 19 91

PAY TO THE ORDER OF International" Investments Ltd. CAD 2/325i 0

Two thousand, three hundred and twenty-five CANADIAN DOLLARS

R E

TO THE BANK OF MONTREAL Ann Levy SIGNED SIGNATURE STAMP

Brent Devlin BRANCH River Street Branch COUNTERSIGNED SIGNATURE STAMP

875623 1:53021 002 1: 999 11 857 rsr 79 01 0000232500 ill • 131 Crime 0 Detecbon "Proceeds of Crime" Chapter 6 0 Financial Investigation Summary and llnalysis

THEROYAL BANK King Street 795321 OF CANADA Gander, Newfoundland

January 24 19 91

PAY TO THE International Investments Ltd. ORDER OF CAD 4, 500 . 00

Fourthousand, five hundred CANADIAN DOLLARS

R E

Christine Martin E SIGNED SIGNATURE STAMP

BRANCH King Street Branch Wayne Sartor COUN TERSIGNED SIGNATURE STAMP

795321 1:05874 a 003 1: 999 • 442 lor 79 10 0000450000 ul

A number of drafts were deposited (Figures A - 1),In Figure 6.5, these drafts have been captured in the 'source of funds" column. The next step is to contact the banks from which these drafts were purchased. (See the front of the draft for details on the name of the bank and branch).

132 • •

FIGURE 6.5 SOURCE AND USE OF FUNDS WORKSHEET

SOURCES DATE PAYCR AN1GUNT C. CI-EQUE BANK& BRANCH DATE DESCRIPTION DEBT CREDIT BALANCE 01/28 Balance Forward $ 23,200.00 02/01 Intl Inv. 35,000.00 8,000.00 Royal, Hazelton Lanes, Toronto 02/01 Deposit $ 35,000.00 $ 58,200.00 2,500.00 OBC, 124th St, Vancouver 3,300.00 Bank of Montreal, 3rd Ave. Vancouver 5,200.00 BNS, Grafton Street, Halifax 1,700.00 TD, Queen St., Winnipeg 3,600.00 BM, 1366 rue Ste. Cath, Montreal 3,875.00 C1BC, 31 5th Ave., Calgary 2,325.00 BNS, River St, Saskatoon 4,500.00 Royal, King St., Gander Crime Detection "Proceeds of Crime" Chapter 6 o Financial Investigation Summary and Analysis

Let's look at the next transaction. It's a cheque to a car leasing company.

ROYAL E3AN K 0 F CANADA 32nd Street Branch Toronto, Ontario

International Investments Ltd. 190 Bay Street Toronto, Ontario M5G 1X0 Account It: 112-411-9 Statement Date: 02/27/91

sore 01/28 Balance Forward $ 23,200.00 02/01 Deposit $ 35,000.00 $ 58,200.00 02/02 Cheque $ 800.00 $ 57,400.00

International Investments Ltd.

February 01 19 91

PAY TO THE OftDER OF Mire Automobiles g 800.00

Eight hundred xx DOLL4RS THE ROYAL BANK OF CANADA 103 32nd Street Branch Toronto, Ontario

MEMO Steven )anie

1:00457 e 003 112 i 411.9r 0000080000

CN:000341 DA:01/02/91 TR:00025-001

For Deposit To The Credit of The Payee

01752-580 3

ROYAL TRUST FEB '91' 02 FEB '91' 01 FEB 01 1991 ROYAL BANK BANK OF MONTREAL BAY &WELLINGTON ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 01752-580 1311 • • ▪

SOURCE AND USE OF FUNDS WORKSHEET

USES DATE DESCRIPTION DEW CREDIT BALANCE WE PAYEE AMOUNT BAAKCASHEDAT ACCOUNTNUIVEIER 01/28 Balance Forward $23,200.00 02/01 Deposit $35,000.00 $58,200.00

02/02 Cheque $800.00 $57,400.00 02/02 Fine $800.00 Royal Trust Automobiles Bay and Wellington

01 o

5- 5 G CD e.•r p., re• o re- •= o a -cz

r.= CD = o- CL. t=i "C- J Ca-1 cY, Crime o Detection "Proceeds of Crime" Chapter 6 • Financial Investigation Summary and Onalysis

Next we've got another deposit— a cheque for $8500 from Yonge Hold- ings Corporation. They show up a lot on our Source and Use ofFunds worksheet.

ROYAL BANK 0 F CANADA 32nd Street Branch Toronto, Ontario

International Investments Ltd. 190 Bay Street Toronto, Ontario M5G 1X0 Account #: 112-411-9 Statement Date: 02/27/91

Date Description

01/28 Balance Forward $ 23,200.00 02/01 Deposit $ 35,000.00 $ 58,200.00 02/02 Cheque $ 800.00 $ 57,400.00 02/03 Deposit $ 8,500.00 $ 65,900.00

136 Crime 0 Detection "Proceeds of Crime" Chapter 6 • Financial Investigation Summary and Analysis

Deposit

ROYAL BANK OF CANADA 32nd STREET BRANCH TORONTO, ONTARIO

DATE I NIT ALS DEPOSITOR1 TELLER February 3, 91 8500 @1 @2 =

SeD @ 5 - CREDIT @10 - @20 - ACCOLIIVT OF @ 5° - INTERNATIONAL INVESTMENTS LTD. @ 100 - 190 BAY STREET THiiie..6IPCHIF4:1 8500.00 CASH: TORONTO, ONTARIO M50 1X0 e:ITAL:DEPOgf 8500.00

1:00457 is 003 1: 112 411189r 51 0 0000850000 10

CN:002686 DA:03/02/91 TR:00457-003

For Deposit To The Credit of The Payee

00457-003 3 THE ROYAL BANK OF CANADA FEB '91' 03 FEB '91' 04 ROYAL BANK C.LB.C. FEB 03 1991 DATA CENTRE ONTARIO PC 32nd STREET BRANCH TORONTO, TORONTO, ONTARIO ONTARIO 3 00457-003

• 131 Crime 0 Detecbon "Proceeds of Crime" Chapter 60 Financial Investigation Summary and Rua!gm

Cheque on Deposit

Yonge Holdings Corporation

February 01 19 91

PAY TO $ THE ORDER OF International Investments Ltd 8,500.00

Eight thousand, five hundred XX DOLLARS THE CANADIAN IMPERIAL BANK OF COMMERCE 100 1 Verne Street Weer Toronto, °nude

MD110 Ron Mair

1:00457 • 010 1: 75 • 85642 r 0000850000

CN:002687 DA:03/02/91 TR:00457-003

For Deposit To The Credit of The Payee

00457-003 3 THE ROYAL BANK OF CANADA FEB '91' 03 FEB '91' 04 ROYAL BANK C.LB.C. FEB 03 1991 ONTARIO PC DATA CENTRE 32nd STREET BRANCH TORONTO, TORONTO, ONTARIO ONTARIO 3 00457-003

138 • s •

SOURCE AND USE OF FUNDS WORKSHEET

SOURCES DATE PAYCR Amcue CAS-I 0-ECLE BANK&BRANCH DATE DESCRIPTION DI331T CREDIT BALANCE 01/28 Balance Forward $ 23,200.00 02/01 Intl Inv. 35,000.00 8,000.00 Royal, Hazelton Lanes, Toronto 02/01 Deposit $ 35,000.00 $ 58,200.00 2,500.00 CIBC, 124th St., Vancouver 3,300.00 Bank of Montreal, 3rd Ave. Vancouver 5,200.00 BNS, Grafton Street, Halifax 1,700.00 TD, Queen St., Winnipeg 3,600.00 BM, 1366 rue Ste. Cath, Montreal 3,875.00 C1BC, 31 5th Ave., Calgary 2,325.00 BNS, River St., Saskatoon 4,500.00 Royal, King St., Gander 02/02 Cheque $800.00 $57,400.00

02/03 Int'l Inv. $8500.00 $8,500.00 SD Royal Bank, 32nd St 02/03 Deposit $8500.00 $65,900.00 Crime o Detection "Proceeds of Crime" Chapter 6 oñnancial Investigation Summary and Rnalysis

Another cheque. This one is payable to Steven Daniels. Look at the back and fmd out which bank and branch it was deposited at. This may lead us to one of his personal accounts, and that could give us lots more useful information. Cashed at the CIBC, Jones and Maitland Street. Acccount Number 11457-22.

ROYAL ElANK 0 F CANADA 32nd Street Branch Toronto, Ontario

International Investments Ltd. 190 Bay Street Toronto, Ontario M5G 1X0 Account #: 112-411-9 Statement Date: 02/27/91

alanee;

01/28 Balance Forward $ 23,200.00 02/01 Deposit $ 35,000.00 $ 58,200.00 02/02 Cheque $ 800.00 $ 57,400.00 02/03 Deposit $ 8,500.00 $ 65,900.00 02/07 Cheque $ 4,000.00 $ 61,900.00

ND Crime 0 Detection "Proceeds of Crime" Chapter 6 0 financial Inuestigation Summary and ilnalysis

International investments Ltd.

February 07 19 91

PAY TO THE ORDER OF SYeven Daniels $ 4000.00

Four thousand XX DOLLARS THE ROYAL BANK OF CANADA 32nd Street Branch Toronto, Ontario

Steven Danieù MEMO

1:00457 nu 003 I; 112 is 411119r 0000400000

CN:004489 DA:07/02/91 TR:34002-010

For Deposit To The Credit of The Payee

34002-010 2

C.I.B.C. FEB '91' 07 FEB '91' 07 FEB 07 1991 ROYAL BANK c.LB.C. DATA CENTRE JONES & MAITLAND STREETS ONTARIO PC TORONTO, MARKHAM, ONTARIO ONTARIO 2 34002-010

NI SOURCE AND USE OF FUNDS WORKSHEET

USES DATE DESCRIFBON DEBIT DREW BALANCE DATE PAYEE imicuNr BANKCAS1-EDAT ACCOUM-NUNIER 01/28 Balance Forward $23,200.00 02/01 Deposit $35,000.00 $58,200.00

• Crime 0 Detection "Proceeds of Crime" Chapter 6 0 Financial Investigation Summary and Analysis s Next we've got a wire transfer.

ROYAL I3AN K OF CANADA 32nd Street Branch Toronto, Ontario

International Investments Ltd. 190 Bay Street Toronto, Ontario M5G 1X0 Account #: 112-411-9 Statement Date: 02/27/91

•

PO Cnme 0 Detection "Proceeds of Crime" Chapter 5o financial Investigation Summary and Analysis

There's quite a long form here. This looks pretty straightforward. The ordering customer's name and address are listed. That's the source of fimds. Then we've got the amount, the currency — US dollars— and the Canadian equivalent, $25,000. Plus it lists the destination of funds: the benficiary's country, name, address and telephone number, and a destination bank, branch and ac,count number. Everything's here!

Bank of Montreal CURRENCYNAME US DOLLARS RATE FORBGNCURRENCY AMOUNT(EXCEPTU.S.) RATE U.S. DOLLARS 1.1657 APPLICATION FOR MAIL & TELEGRAPMC 'TRANSFER CANADAN 32nd Street 00457 Feb. 8/91 EQUIVALENT 25,000.00 US.AMOUNT RATE CONIVISSION I:RANCH TRANSITNO. DkIE US.AMOUNT RATE AIR MAIL OR CABLECHARGES PLEASETRANSFERATNTWOURRISKBY: TOM. 25,000DO MAIL(ATTACHREMITTANCE) RATE OWNGTO INTERNATIONALCENTRE CABLE (CKTELEGRAFHICTRANSFER PAYNENTACCOUNT) 1/2 COMMISSION AIR MAIL OR CABLE CHARGES TOTALOWINGTOINTERNATIONALCENTRE

TRANSACIIONREF.NO.QUOTEDBYINTERNATIONALCENTRE 45678921354

NAIVEOFCORRESPONDENTINDICATEDBYINMfiNATIONALCENTME Chase Manhattan Bank

ORDERINGCUSTOMER-NAMEANDADIXESS International Investments Ltd. 190 Bay Street, Toronto, Ontario M5G 1X0

DES11NATIONBANK-IFSFECIFIEDBYORDERINGCUSTOMER San Francisco Bank 1245 Bayview Road Branch

BENEFICIARYCUSTOMER-NANE&MDFESS(ORACCOUNTNO.) West Coast Realty Holdings 66457

DETAILSOFPAYMENT- REFERENCE, INVOICENOS ETC.

BANKTOBANKINFORMATION-SF'ECIALINSTRUCTIOr•SREPAYIVENT

SIGNATURE FREPARED BY CHECKEDBY TELDESP. INITOF RECEIVING OFFICER ATINT' LCENTRE. pIq • • •

SOURCE AND USE OF FUNDS WORKSHEET

USES DATE DESCRIPTION DEBIT CREDIT BALANCE DeifE PAYEE AN'CUIT BANKCASHEDAT ACCOUNTIVIIVBER 01/28 Balance Forward $23,200.00 02/01 Deposit $35,000.00 $58,200.00

Crime o Detection "Proceeds of Crime" Chapter 6 o Financial Investigation Summary and Analysis

One more, a debit memo for a lump sum loan payment for $10,000 to loan account number 711311901.

ROYAL BANK OF CANADA 32nd Street Branch Toronto, Ontario

International Investments Ltd. 190 Bay Street Toronto, Ontario M5G 1X0 Account #: 112-411-9 Statement Date: 02/27/91

32nd STREET BRANCH TORONTO ONT Fe/A.4.m./ 1019 12 DATE OF DEPOSIT AMT. OF DEPOSIT C/A PCA S/A ACCOUNT NUMBER TRAN. CODE 0 ERROR BRINGING 0 CHEQUE SEE REVERSE TOTAL FORWARD MISSING 11240/ 0 ERROR 0 U.S. LISTED AS LISTED AS CORRECT SUBTRJADDIT. CDN/CDN AS U.S.

PARTICULARS AMOUNT/ADJUSTMENT 1, 114, 44-4-....-0,•444.4-$40.nenci

D ______14€44,44041.1.4yeeee44 1/1-- TOTAL OF FORMS ATTACHED E "el B SUBTOTAL I &.... LESS CHARGES T TOTAL 00,000

1:00457 u 003 I: 112 .411119r 42 00001000000 111

P16 • • or

SOURCE AND USE OF FUNDS WORKSHEET

USES

DA1E DESCRIPTION DEBIT CREW BALANZE DeCIE PAVE ftmoure E3ANKCAS1-EDAT ACCOUNTNUNBER 01/28 Balance Forward $23,200.00 02/01 Deposit $35,000.00 $58,200.00

02/02 Cheque $800.00 $57,400.00 02/02 Fine $800.00 Royal Trust ? Automobiles Bay and Wellington 02/03 Deposit $8,500.00 $65,900.00 02/07 Cheque $4,000.00 $61,900.00 02/07 Steven $4,000.00 CIBC ? Daniels Jones & Maitland 02/08 Wire $25,000.00 $36,900.00 02/08 West Coast $25,000.00 San Francisco Bank 66457 Realty Holdings 02/10 Debit Memo $10,000.00 $26,900.00 02/10 Loan # $10,000.00 Royal Bank 711311911 32nd Street Branch Crime 0 Detection "Proceeds of Crime" Chapter 6 0 Financial Investigation Summary and Ilnalysis

Ilet Worth Analysis When you calculate your net worth or equity you simply add up the value of what you own and subtract the amount of what you owe. The difference is your net worth. For a proceeds of crime investigation the first step in a net worth analysis has already been done. The source and use of funds analysis will assist in identifying assets acquired or sold and liabilities accumulated or paid off. The second and most useful step is to have searched all known banks where a relationship exists looking, in particular for statements of net worth (or sometimes called statements of affairs or simply a listing of assets and liabilities). These statements are required to be filled in by a borrower when obtaining a loan (car loan, mortgage loan or business loan). Or you may find one if a search is being done on the drug dealer's residence. The best of all possible .worlds is to have obtained two: one at the beginning of the time period you're investigating and one near the end. Then we can look at changes between the two and hopefully a significant increase will have occurred. By significant, I mean that the increase in net worth exceeds that which would result from lmown sources of income. This helps convince a court that the drug dealer must have illegal funds in his possession. g by chance, you have not found any of these statements then you will have to start the more laborious process of building tvvo of them - one at the start and one at the end of the time period. Whether you find them or build them, various adjustments will need to be made to them in order to reflect an increase in net worth which is due only to cash in or cash out of the drug dealers' hands and not other causes such as: 1. Market Value Increases - A frequent reason for an increase in an individual's net worth is the increase in the value of his residence due simply because of a higher market (at least it was before this current recession). This type of increase has to be subtracted from any increase in net worth that is otherwise calculated.

2. Market Value Decreases - Similar to the above, if at the beginning of our time period the dealer had purchased $50,000 in gold which on his current net worth he has shown as worth only $30,000 - then we would want him to have the non cash effect of a $20,000 reduction to the calculation of the increase in his net worth. Similarly, depreciation in the value of can be between 2 dates is a type of market value decrease. Having calculated an increase in net worth after adjustments, we next want Nfl Crime 0 Detection "Proceeds of Crime" Chapter 6 0 Financial Investigation Summary and Analysis s to test whether or not this increase is reasonable in relation to what increase could (in an overview sense) have occurred from the dealer's lcnown level of income in the period. I-Es known level on income should be evident from either or both the source and use of funds analysis and his tax return. However, from this income level we will need to deduct actual or reasonably inferred living expenses. For example, fi-om the source and use of funds analysis let's say the dealer has paid a mortgage on his residence by cheque each month. We therefore have an exact figure to deduct for some of his residence expenses. Other expenses such as gasoline and car repairs may be evident from the use of a credit card. However, other items such as food and household supplies are often paid for by cash and if such is the case, it is reasonable to deduct a further amount conservatively determined. After deduction of living expenses what is left we will call net income and we can easily determine sufficient net income is available to account for all of the increase in net worth.

•

IU Cnme 0 Detection"Proceeds of Crime" Appendix 0 Lecture Scene Transcripts

R 0 ISO •

APPE1101M Lecture Scene Transcripts

•

• •

......

ne lS2 Crime 0 Detection "Proceeds of Crime" Rppendix 0 Lecture Scene Transcripts • Lecture Theatre A source and use of funds analysis organizes and presents the financial information you acquire. The funds we are talking about are those recorded by our Canadian Banking payments system, unless, of course, you are lucky enough to seize a ledger of receipts and disbursements of cash which has been made and recorded by the drug dealer. The banks do a good job of taking pictures on microfilm of all of the items being deposited to or withdrawn from a bank account. With a search warrant, you can get copies of these pictures. Using them, we can identify the total amotmt of cash deposited to an account, or the existence of other bank accounts from which fimds came or were sent. We want to do this to identify proceeds of crime, usually cash or bank drafts, being deposited to an account and then to trace or connect them to the use of these funds, particularly when the funds are used to purchase assets we could identify and seize, or when funds are transferred somewhere else to purchase drugs.

•

R 0 153 Crime o Detection "Proceeds of Crime" Appendix o Lecture Scene Transcripts

The starting point requires copies of the bank statements for the particular bank account we have discovered. This provides the dates and amounts of entries so that the bank can find copies of the source documentation backing up these entries.

Toronto Dominion Bank 165 East Avenue Moncton, NB M6N 2Y4

fPacielli's Fine Foods 510 Strachan Ave. W. Account Number: 89 26417 Moncton, NB Statement Date: March 1, 1991 M4G 4L8

('Date Transaction Debit Credit Balance

Feb. 3 Balance Forward 7600.00 Feb. 3 Cheque 7,000.00 600.00 Feb. 10 Deposit 150,000.00 150,600.00 Feb. 19 Withdrawal 30,000.00 120,600.00 Feb 27 Wire Transfer 100,000.00 20,600.00

\ .J sure Crime 0 Detection"Proceeds of Crime" Appendix 0 Lecture Scene Transcripts

The next step is typically to get certified true copies (or the originals) of all deposits to the account. These deposit slips • reveal whether the deposit is cash or cheque.

TORONTO-DOMINION BANK BLOOR it BATHURST BRANCH TORONTO, ONTARIO

DATE I NIT ALS HEQUES CASH Weeded/it DEPOSITOR' TELLE 8,090 @1 = @2 = 4,500 ER I PW @ 5 = CREDIT 15 @10 = 150 80 @20 = 1600 ACCOUNT OF 30 @ 50 '1500 NEW TECHNOLOGIES INC. 10 @ 100 = 1000 TOTAL CHEQUES J 12.500 CASH1 4250 ::TOTAIdtEPOSIT: 16,750.00

1:32645 is 004 1: 11 • 11111 r 51 00001675000 if' • CN:00614 DA:10/02/91 TR:32645-004

For Deposit To The Credit Of The Payee 32645-004 1 TORONTO DOMINION BANK FEB '91' 10 T-D FEB 10 1991 DATA CENTRE BLOOR A. BATHURST BRANCH TOR, ONT. TORONTO, ONTARIO 1 32645-004

11 o ' SS

Crime 0 Detection "Proceeds of Crime" Appendix • Lecture Scene Transcripts

Some deposits come direct to the account by wire from another bank. For these deposits there will be a credit memo prepared by the receiving bank.

MAIN BRANCH MONCTON, N.B. FieMeg 10 19 92

DATE OF DEPOSIT AMT. OF DEPOSIT C/A PCA S/ft ACCOUNT NUMBER TRAN. CODE 0 ERROR BRINGING 0 CHEQUE SEE REVERSE TOTAL FORWARD MISSING 89 26417 0 ERROR 0 U.S. LISTED AS LISTED AS CORRECT SUBTR./ADDIT. CON/CON AS U.S.

PARTICULARS AMOUNT/ADJUSTMENT Xesté ewe mimed fa lux, mud kW« 457983542

IAN:EUP D Paddle a Fine. Fulda et TOTAL OF FORMS ATTACHED E SUBTOTAL B LESS CHARGES T TOTAL $10,000

100002 a 010 1: 89 N26417 r 42 01 0001000000 ill

CN:05321 DA:10/02/92 TR: 00002-010

For Deposit To The Credit of The Payee 00002-010 1 CANADIAN IMPERIAL BANK OF COMMERCE FEB '92' 10 C.LB.C. FEB 10 1992 DATA CENTRE MAIN BRANCH MONCONT, N.B. MONCTON, N.B. 1 00002-010

1101S6 Crime 0 Detection"Proceeds of Crime- Appendix 0 Lecture Scene Transcripts • For withdrawals from the bank account, a further request is made of the banker for copies of those vouchers.

Maritime Fisheries Corporation

February 10

PAY TO THE ORDER OF Pacielli's Fine Foods $ 75,000.00

Seyeniy-fiye Thousand XX DOLLARS THE BANK OF NOVA SCOTIA 100 MAIN STREET BRANCH 87 MAIN STREET MONCTON,NEW BRUNSWICK

Ma40 'Fred goseph

1:30241 IN 002 1: 123 it 456 .7r

CN:00530 DA:10/02/91 TR:0002- 010 For Deposit To The Credit of The Payee

00002-010 1 CANADIAN IMPERIAL BANK OF COMMERCE FEB '91' 10 FEB '91' 10 BANK OF C.LB.C. FEB 10 1991 DATA CEN'TRE NOVA SCOTIA MAIN BRANCH MONCONT, N.B. EASTERN PC MONCTON, N.B. 1 00002-010

•

11 0 151 Crime 0 Detection "Proceeds of Crime" Appendix 0 Lecture Scene Transcripts

For all this detail, we record in a spre,adsheet for deposits the payor and for withdrawals the payee. Then we can use the spreadsheet to sort the transactions by payee and payor, to arrive at a simple 1-page court exhibit for this bank account showing the flow of funds into and out of the account.

Schedule Showing the Sources & Uses of Funds for Bank Account No. 1234 for the Period February 1, 1991 - March 15, 1991

Sources Wm. J. Smith $11,000.00 B. Buchanan 27,500.00 R. Smith 40,500.00 B. MacDonald 48,000.00 Beginning bank balance 100,000.00 Cash 11,250.00 $238,250.00

Uses Investments $190,000.00 Property - 222 Main Street 9,500 Ending bank balance 38,750.00 $238,250.00

fi 0 158 Crime o Detection"Proceeds of Crime Oppendix o Lecture Scene Transcripts • The source and use of ftmds analysis does several things for an investigator. First, it provides an organized approach to analysing the flow of funds into and out of an account. Second, it can provide an investigative aid in identifying further bank accounts. Third, it allows a summary of cash deposits to be readily prepared for the account. This summary can be very useful at a trial. Also from the source and use of funds analysis a simple stumnary can be prepared which often becomes the course exhibit describing the activity in the account. Finally, the detail vvithin the source and use of funds spreadsheet will also show tracing of funds to their specific use.

Summary of Cash Deposits for Bank Account No. 1234 for the Period February 1, 1991 - March 15, 1991

Date Amount Description

Feb. 3 $500.00 5 x $100

Feb. 8 4,000.00 3 x $1000 3 x $100 10 x $ 450 10 x $20

Mar. 1 3,000.00 20x $100 15 x $50 12 x $20 lx $10

Mar. 5 1,000.00 6 x $100 4 x $50 10 x $20 10 x $10

Mar. 15 2,750.00 20 x $00 8 x $50 10 x $20 15 x $10 $11,250.00

II 159 Crime c. Detection "Proceeds of Crime" Appendix .» Lecture Scene Transcripts

When examining a cheque, the arrangement of information will always be the saine but the micrencoded account numbers on the bottom front of the cheque will differ. This is because the numbers indicate from which financial institution the cheque has been drawn.

19_

PAY TO THE ORDER OF 0

DOLLARS THE ROYAL BANK OF CANADA 1C0 HAZELTON LANES BRANCH 87 AVENUE ROAD TORONTO, ONTARIO MER 3R9

19 ____ PAY TO THE ORDER OF $

DOLLARS THE TORONTO DOMINION BANK 103 noon ek BATHURST BRANCH 787 BLOOR STREET TORONTO, ONTARIO MER 3R9

MEMO

106870 88 004 1: 45 li 75426 r

PAY TO THE ORDER OF $

DOLLARS THE CANADIAN IMPERIAL BANK OF COMMERCE 10D BAY e« BLOOR BRANCH 2 BLOOR STREET EAST TORONTO, ONTARIO

MEMO

11° 160 Crime Detection "Proceeds of Crime'. Lecture Scene Transcripts Appendix

Microfilmed copies of the front and back of a cheque can be obtained at the financial institution from where it was cashed and from the institution f-rom which it was drawn. When examining the front of a cheque, there are many elements that provide information. The payee is the person or organization receiving the fimds, in this case Pacielli's Fine Foods.

Maritime Fisheries Corporation

February 10 19 91

PAY TO Fine Fois $ 75,000.00 THE ORDER OF Seventy-five Thousand .XX DOLLARS THE BANK OF NOVA SCOTIA 100 MAIN STREET BRANCH 87 MAIN STREET MONCTON,NEW BRUNSWICK

MEMO Fred"5oseph

1:30241 si 002 1: 123 mu 456117 r

The value of the cheque, in this case seventy-five thousand.

Maritime Fisheries Corporation

February 10 19 91

PAY TO Pacielli's Foods $ (7570 0 THE ORDER OF Fine (TSeventy-fhousrmd Xr DOLLARS -7TII. TCO IA 1C0 MAIN STREET BRANCH 87 MAIN STREET MONCTON,NEW BRUNSWICK

MEMO Fredgoseph

1:30241 81 002 1: 123 ei 456 lor

The branch of the account on which the cheque is drawn, here 30241, which is the Main Street branch.

Maritime Fisheries Corporation

February 10 19 91

PAY TO Pacielli's Fine Foods $ 75,000.00 THE ORDER OF

Seventy-five Thousand X.X DOLLARS THE BANK OF NOVA SCOTIA 100 AIN STREET BRANCH 87 MAIN STREET MONCTON,NEW BRUNSWICK • MEMO (Fredgoseph .302‘11 002 1: 123 au 456 Or 110161 Crime 0 Detection"Proceeds of Crime" Appendix 0 Lecture Scene Transcripts

The financial institution where the account is located. 002 is the number for the Bank of Nova Scotia.

Maritime Fisheries Corporation

February 10 19 91

PAY TO $ 75,000.00 THE ORDER OF, Pacielli's Fine Foods ,Se_e_ter -fivp Thousand_ XX DOLLARS THE BANK OF NOVA SCOTIA 103

87 MAIN STREET MONCTON,NEW BRUNSWICK

MEMO Tredioseph

1:30241 002 Ill 123 *456 e r

The account from which the cheque has been drawn. This account number is 123 4567.

Maritime Fisheries Corporation

February 10 19 .2L _

PAY TO THE ORDER OF Pacielli's Fine Foods $ 75,000.00

Seventy-five Thousand X.X DOLLARS THE BANK OF NOVA SCOTIA 100 MAIN STREET BRANCH 87 MAIN STREET MONCTON,NEW BRUNSWICK

MEMO Trec goseph

1:30241 « 002 1: (123 » 456 er

You can also find out the date the cheque was written.

Maritime Fisheries Corporation

CFebruary 10 19 91)

PAY TO THE ORDER OF Pacielli's Fine Foods $ 75,000.00

Seventy-five Thousand XX DOLLARS THE BANK OF NOVA SCOTIA 100 MAIN STREET BRANCH 87 MAIN STREET MONCTON,NEW BRUNSWICK

MEMO Tred5oseph

1:30241 Is 002 1: 123 is 456 er

11 0 162 Crime 0 Detection "Proceeds of Crime" Rppendix 0 Lecture Scene Transcripts

The account name may appear on the cheque. For example, Maritime Fisheries Corporation.

Maritime Fisheries Corporation

February 10 19 9/

PAY TO Pacielli's Fine Foods $ 75,000.00 THE ORDER OF

Seventy-five Thousand xx DOLLARS THE BANK OF NOVA SCOTIA 1C0 MAIN STREET BRANCH 87 MAIN STREET MONCTON,NEW BRUNSWICK

MS41 0 'Fred Yoseph

1:30241 si 002 1: 123 • 456 or

The signing authority on the account, in this case Fred Joseph.

Maritime Fisheries Corporation

February 10 19 91

PAY TO Pacielli's Fine Foods $ 75,000.00 THE ORDER OF

Seventy-five Thousand XX DOLLARS THE BANK OF NOVA SCOTIA 1C0 MAIN STREET BRANCH 87 MAIN STREET MONCTON,NEW BRUNSWICK

ME11,10 105Cr

1:30241 002 1: 123 456a7r

Information that is gathered from a single document begins to construct an audit trail and establish relationships.

In this example, a financial relationship exists between Maritime Fisheries Corporation and Pacielli's Fine Foods. Further to that relationship, a transfer of assets of $75,000 between Maritime Fisheries and Pacielli's has occurred. The date of that transfer may be on, or any day for six months after, February 10, 1991.

Maritime Fisheries Corporation • • • February 10 19 91

PAY TO Pacielli's Fine Foods $ 75,000.00 THE ORDER OF

Seventy-five Thousand XX DOLLARS THE BANK OF NOVA SCOTIA 100 MAIN STREET' BRANCH 87 MAIN STREET MONCTON,NEW BRUNSWICK

MEMO Tred goseph

1:30241 n 002 1: 123 .456 .7r

11 0 163 Crime 0 Detection "Proceeds of Crime" Appendix 0 Lecture Scene Transcripts

There is also a relationship between Maritime Fisheries Corporation and Fred Joseph who is authorized to draw funds from the company.

Maritime Fisheries Corporation • • • February 10 19 . • 2L PAY TO Pacielli's Fine Foods. • • $ 75,000.00 THE ORDER OF, • Seventy-five Thousand • XX DOLLARS • • iCO THE BANK OF NOVA SCOTIA • MAIN STREET BRANCH • 87 MAIN STREET MONCTON,NEW BRUNSWICK • •

MEMO Tredgoseph

C30241 • 002 C 123 8456 871'

Additionally, there is a relationship between Maritime Fisheries and the Bank of Nova Scotia through its Main Street branch where account 123 456 7 is held.

Maritime Fisheries Corporation • • February 10 • 19 2L. • PAY TO Pacielli'seine Foods $ 75,000.00 THE ORDER OF • Seventy-five Thottsand• XX DOLLARS THE BANK OF NOVA SCOTIA 100 MAIN STREET BRANCH 87 MAIN STREET MONCTON,NEW BRUNSWICK

MEMO 'Fredgoseph 1:30241 • 002 C 123 n 456 n7r

Sununary of relationships established from the front of this cheque:

Maritime Fisheries Pacielli's Fine Foods Corporation

1 Fred Joseph transfer of $ 75, 000.00 assets

1 BANK OF NOVA SCOTIA CANADIAN IMPERIAL MAIN STREET BRANCH BANK OF COMMERCE MAIN BRANCH

0 164 Crime 0 Detection "Proceeds of Crime"

Appendix 0 Lecture Scene Transcripts

The back of a cheque that has been cashed also provides important information about how that cheque was processed and about the payee who cashed it. When deposited or cashed at the financial institution where the payee has an account, the payee either endorses the cheque or the teller stamps it with a DEPOSIT TO THE CREDIT OF THE PAYEE stamp.

For Deposit To The Credit of The Payee

00002-010 1 CANADIAN IMPERIAL BANK OF COMMERCE FEB 10 1991 MAIN BRANCH MONCTON, N.B. 1 00002-010

The stamps left on the back of a cheque create a trail that indicates which institutions and employees processed the cheque and on what date. This will lead you to the bank and branch that cashed it. The cheque was presented to the CIBC Main Branch by FacieIli's Fine Foods for deposit.

CN:00530 DA:10/02/91 TR:0002-010

For Deposit To The Credit of The Payee

00002-, CANADIAN IMPERIAL OF COMMER FEB '91'10 FEB '91' 10 BANK OF C.LB.C. 91 NOVA SCOTIA DATA CENTRE mo...... «.:11B757RANCH MONCONT, N.B. EASTERN PC

1 00002-010

This was transacted on February 10, 1991, by teller #1.

CN:00530 DA:10/02/91 TR:0002-010

For Deposit To The Credit of The Payee

00002-010 CANADIAN IMPERIAL BANK OF COMMERCE FEB '91' 10 FEB '91' 10 BANK OF C.LB.C. DATA CENTRE NOVA SCOTIA MAIN BRANCH MONCONT, N.B. EASTERN PC MONCTON, N.B. 00002-010

11 .16S Crime 0 Detection "Proceeds of Crime"

Appendix 0 Lecture Scene Transcripts

The cheque was processed that day through the CIBC proof machines, and the trace number on the proof tape is 00530. Trace Number Date Branch and Institution Number

For Deposit To The Credit of The Payee

00002-010 CANADIAN IMPERIAL BANK OF COMMERCE FEB '91' 10 FEB '91' 10 BANK OF C.LB.C. FEB 10 1991 DATA CENTRE NOVA SCOTIA MAIN BRANCH MONCONT, N.B. EASTERN PC MONCTON, N.B. 1 00002-010

The cheque cleared the C1BC processing centre in Moncton on February 10, 1991

CN:00530 DA:10/02/91 TR:0002-010

For Deposit To The Credit of The Payee

00002-010 CANADIAN IMPERIAL BANK OF COMMERCE FEB '91' 10 FEB '91' 10 BANK OF C.LB.C. FEB 10 1991 DATA CENTRE NOVA SCOTIA MAIN BRANCH MONCONT, N.B. EASTERN PC MONCTON, N.B. 1 00002-010

and was processed through the Bank of Nova Scotia's Eastern Processing Centre on February 10, 1991, where the account was electronically debited.

CN:00530 DA:10/02/91 TR:0002-010

For Deposit To The Credit of The Payee

00002-010 CANADIAN IMPERIAL BANK OF COMMERCE ' FEB '91' to FEB '91' 10 BANK OF C.LB.C. FEB 10 1991 DATA CENTRE NOVA SCOTIA MAIN BRANCH MONCONT, N.B. EASTERN PC MONCTON, N.B. 1 00002-010

D °166 Crime o Detection "Proceeds of Crime" Appendix Lecture Scene Transcripts

Having examined the trail markers on the back of the cheque, the investigator has determined the destination of the transfer of assets, and has developed the audit trail from one corporation and bank to two corporations and two banks. If that cheque had been deposited at a Canadian trust company, the stamps on the back of the cheque would probably include a third party bank's stamp because many Canadian trust companies do not have their own processing centre. They rely on a bank to process their clearing.

CN:00530 DA:10/02/91 TR:0002- 010 For Deposit To The Credit Of The Payee 00502-590 NATIONAL TRUST COMPANY FEB '91' 10 FEB '91' 10 FEB 10 1991 BANK OF C.LB.C. DATA CENTRE 21 KING ST EAST NOVA SCOTIA MONCTON, N.B. MONCTON, N.B. EASTERN PC

1 00502-590

The back of this cheque indicates that the cheque was processed as follows: Deposited at National Trust Company.

For Deposit To The Credit Of The Payee 00502-590 1 NATIONAL TRUST COMPANY FEB 10 1991 21 KING ST EAST MONCTON, N.B.

1 00502-590

Processed through proof machines of the ClBC Main Branch for National Trust Company.

CN:00530 DA:10/02/91 010

Processed through the CIBC Moncton Data Centre. FEB '91' 10 C.LB.C. DATA CENTRE MONCTON, N.B.

Processed through the Bank of Nova Scotia's Eastern Processing Centre. FEB '91' 10 BANK OF NOVA SCOTIA EASTERN PC II 161 Crime 0 Detection "Proceeds of Crime" Appendix 0 Lecture Scene Transcripts

Not all cheques will be cashed at a financial institution in the saine province or country. If the payee deposits this cheque at a bank in the United States, the back of the cheque will appear as follows:

CN:51280 DA:10/02/91 TR:57124- FEB '91' 11 324 C.LB.C. INTERNATIONAL For Deposit To The Credit Of CENTRE The Payee MONTREAL, PQ. 57124-324 1 CHASE MANHATTAN BANK FEB '91' 12 FEB '91' 12 FEB 10 1991 BANK OF C.LB.C. NOVA SCOTIA DATA CENTRE MAIN BRANCH-54 SIREET EASTERN PC MONCTON, N.B. NEW YORK CITY, NY 1 57124-324

Deposited and processed through proof at Chase Manhattan Bank, New York City.

For Deposit To The Credit Of The Payee 57124-324 1 CHASE MANHATTAN CN:51280 DA:10/02/91 TR:57124- BANK 324 FEB 10 1991 MAIN BRANCH-54 SIREET NEW YORK CITY, NY 1 57124-324

Processed through CIBC International Centre, Montreal, the Canadian clearing bank for Chase Manhattan. FEB '91' 11 CI.B.C. INTERNATIONAL CENTRE MONTREAL, PQ.

Processed through the OBC Data Centre, Moncton. FEB '91' 12 C.LB.C. DATA CENTRE MONCTON, N.B.

Processed through the Bank of Nova Scotia Eastern Processing Centre. FEB '91' 12 BANK OF NOVA SCOTIA EASTERN PC

fi o168 Crime 0 Detection"Proceeds of Crime" Rppendix 0 Lecture Scene Transcripts • When examining a cheque, you will find some stamps overlap or bleed, making it hard to read. In that case, the financial institution the cheque was drawn on can determine what the clearing institutions were. At each processing point, the cheque is microfilmed. Therefore a record can be found at any of these points.

\ Tie e. ■I / • 4 *V,. It ..1. m 'get is 4" lee:Ase .8e4eelif

r: ammo pe 'Ad \d

re, tit ••• . geI , .111P ......

e ..e. ? - r-è <4 .:-... -.4» •4"--1":7- --. .e..;77.-1.

,-- Ce +al ...,;:— •.4 +c• CM ..1, . s. ,-, à ° ... e . - i C.0 ,= ::.e IS: MR '93' 15 ,-- .z. -. i .1 - ...a >1;le -I. .. rs.... . - ,- 2, es i ,

:X.: r..1 Lie: 4-- -.— I= (...3 t".. - me: Lte•—•;.: ...... e. '2-- : . : e.ii- % •;:at.e..::. ;;;:e., ce ,— .êt " 4 • -e. :72' = z:-..— ..cr cp +et" L,L4 = r•-:. CA 4... ..•••• ro• L; • 169 Crime 0 Detection "Proceeds of Crime" Appendix 0 Lecture Scene Transcripts

The earliest stamp is the most important. This should be the payee or teller's stamp. It tells you the destination of the funds — the financial institution and branch where the cheque was deposited or cashed.

For Deposit To The Credit Of The Payee 00502-590 1 NATIONAL TRUST COMPANY FEB 10 1991 21 KING ST EAST MONCTON, N.B. 1 00502-590

0 110 Crime 0 Detection "Proceeds of Crime"

Appendix 0 lecture Scene Transcripts • The next topic is tracing deposit slips. Original deposit slips are kept by the financial institutions. Slips for recent deposits may be stored at the branch and be available immediately. Micrencoded deposit slips are handled at the processing centre. Other deposit slips are posted on computer at the branch at the time of the deposit. All of the deposit slips processed in a day are bundled together and filed by that transaction date. The date of the deposit can be determined from the passbook or account statements, and the deposit slip gotten from storage. When cash is deposited, a debit cash audit slip is completed. This lists the total amount of cash deposited, and usually includes a breakdown, such as fifteen tens, eighty twenties, etc. It is initialled by the employee who accepts the deposit. The slip has two copies. One is kept with the deposit slip for balancing in proof. The other is kept with the cash so that the cash can be recounted and the total verified.

Debit Audit Slip

15 x 10= 150 80 x 20 = 1600 • 30 x 50 = 15oo 10 ,c 1W= woo

TORONTO-DOMINION BANK BLOOR Jr. BATHURS1' BRANCH TORONTO, ONTARIO

DATE I NIT ALS Feleeese10, 11 DEPOSITOR 1 TELLER ER I PW CREDIT ACCOUNT OF NEW TECHNOLOGIES INC. • 1:32645 ii 004 I: 11 • 11111 r 51 111 0001675000 ill non

Crime 0 Detection "Proceeds of Crime" Appendix 0 Lecture Scene Transcripts

The deposit slip may have a trace number stamped on the back of it.

CN:00614 1DA:10/02/91 TR:32645-004

For Deposit To The Credit Of The Payee 32645-004 1 TORONTO DOMINION BANK FEB '91' 1O T-D FEB 10 1991 DATA CENTRE BLOOR & BATHURST BRANCH TOR, ONT. TORONTO, ONTARIO 1 32645-004

Examine the proof tape for that date to find the deposit entry identified by that trace number. There will be an offsetting debit for the same amount to an internal cash account. The voucher for this debit entry was the debit cash audit slip. You do not require the debit cash audit slip. The entry to the internal cash account is sufficient to show that cash was deposited.

0603 15000.00 02 0604 750.00 02 0605 750.00 02

0606 750.00 02

0607 500.00 02

0608 250.00 02 0609 500.00 02 0610 500.00 02 0611 500.00 02 BALANCE 0.00

0612 100000.00 CO1

0613 100000.00 02 BALANCE 0.00

16,750.00 Deposit 8,000.00 C--°06re616 4,500.00 02 Cheques on deposit zT 0617 4,250.00 04 Cash on deposit BALANCE 0.00

0618 12500.00 CO1

0619 12500.00 02

BALANCE 0.00

11 0 n2 Crime 0 Detection"Proceeds of Crime" flppendix 0 Summaries of Records

Appendix I] Summaries of Records •

•

D 0 ri3 Crime 0 Detection "Proceeds of Crime" Appendix D 0 Summaries of Records

B 0 RI Crime 0 Detection "Proceeds of Crime" Rppendix 0 Summaries of Records

Source of Original and Backup Records

Record Original Backup Alternative Account Statement Mailed to client Microfiche at Microfilm at data branch centre Cheque drawn on Mailed to client Microfiche at Microfiche at statement account data centre of data centre of institution on institution at which cheque was which cheque was drawn deposited Cheque drawn on Stored at branch or If posted, microfiche Microfiche at passbook account storage centre at data centre of data centre of institution on institution at wlùch cheque was which cheque was drawn deposited Cheque on deposit Returned to client who If posted, microfiche Microfiche from wrote cheque or stored from data centre data centre on at branch or storage that processed deposit which cheque was centre at institution on drawn which cheque is drawn Client Profile At branch of account Deposit slip Stored at branch or If posted, microfiche storage centre at data centre Money Orders/Drafts Given to purchasing Credit copy at branch Report of issued purchased client who will give that sold item drafts/money orders it to payee Passbook Kept by client Account history Account history reports at branch reports at data centre Proof Tape Stored at branch Wire Transfer out Wire Transfer Form At branch that Wire Transfer sent wire transfer Activity Report Wire Transfer in Wire Transfer Form At branch that Wire Transfer received wire transfer Activity Report For further information you need to contact the branch that sent the wire transfer for the wire • transfer out information.

13 • I1S Crime O Detection "Proceeds of Crime" Appendix R • Summaries of Records

Audit Trail Documents

Record Source of Funds Use of Funds Âccount statement/passbook Deposit slips Cancelle,d cheques Credit memos Debit memos Electronic credits Electronic debits Withdrawal slips

Deposit slips Cash audit slips Account statement Cheques deposited Account passbook Proof tapes

Cheque Account statement Reverse of cheque for: Account passbook - cashing or depositing fmancial institution, branch and date Deposit slip

Credit memo Balancing debit voucher Account statement i.e. cheque, financial Account passbook institution General Ledger (GL) debit, etc.

Debit memo Account statement Balancing credit voucher Account passbook i.e. credit memo, financial institution GL credit, etc.

Electronic credit Financial institution GL Account statement or other activity report Account passbook

Electronic debit Account statement Financial institution GL or Account passbook other activity report

Wire transfer in Credit memo Accourtt statement Electronic credit Account passbook Financial institution report

Wire transfer out Wire transfer form Wire transfer form Debit memo or cheque Financial institution report Account statement Deposit slip or draft at receiving Account passbook financial institution

Dens Crime 0 Detection "Proceeds of Crime" Rppendix • Summaries of Records •

Record Source of Funds Use of Funds

Withdrawal slip Account statement Proof tape

Account passbook - Credit cash audit slip

- Deposit slip

Loan history report Electronic debit from account Electronic credit to account Cheques Credit memo Draft/Money Order

Term deposit history report Electronic debit from account Electronic credit to account Cheque Credit memo Debit memo Corporate cheque •

• Dom Crime 0 Detection "Proceeds of Crime"

ne Crime o Detection "Proceeds of Crime" • Glossary Branch cash holdings limit - The amount of cash a branch is allowed to have on hand. Cancelled cheques - Cheques that the account ownerrs wrote, that have been cashed and have cleared. Cleared - The money to pay a cheque has been withdrawn from the account owner's account and paid to the account at the financial institution of the person or company that cashed the cheque. General Ledger (GL) account - An internal account used by financial institutions for accounting purposes. Payee - Individual, entity, or account to whom a cheque is payable. Payment instruments - Items such as cheques, deposit slips, money orders, drafts, etc. that represent payments to or from an account. Posted - Items are posted when the transaction is inunediately entered into the financial institution's computerized system.

•

119 Crime 0 Detection "Proceeds of Crime"

180 Crime 0 Detection "Proceeds of Crime" • hdnotes 1 Alliance for a Drug-Free Canada; Ottawa, Ontario. 2 Conunittee on the Judiciary, (N> 10) p. 305. Quote in Ingo Walter, Secret Money (London: Unwin Hyman Limited, 1989) p. 158. 3 Thurston Clarke and John J. Tigue, Jr., Dirty Money (New York: Simon and Schuster, 1975), p. 102. 4 Ibid., p. 102. 5 Diane Francis, Contrepreneurs (Toronto: Seal Books, 1988), p. 211-212. 6 Robert E. Tayler, `Ex-Smuggler Tells of Huge Drug Profits Laundered, Placed at Major US Banks,' Wall Street Journal, 12 February 1988. Quote in Walter, p. 156. 7 Clarke and Tigue, p. 144. 8 Ibid., p. 130-131. 9 Ibid., p. 135. 10 James Cook, "Everybody's Favorite Laundry Man," Forbes, 5 December 1983. Quoted in Walter, pp. 161-162. 11 Information to develop this section has been drawn from Walter, pp. 210-228. 12 Christopher Stoakes, 'The People vs Confidentiality,' Euromoney, August 1986. Quoted in Walter, pp. 273-275. • 13 Walter, pp. 273-274.

• 181 •

■IIIIIIIII‘

2 •

• •

Workbook e

• •

•

• • Table of Contents

Module 1 - Video 5 Module 2 - Money Laundering Techniques 6 Module 3 - Canadian Banking System 10 Module 4 - Financial Investigation Techniques Part 1 15 Module 5 - Financial Investigation Techniques Part 2 17 Module 6 - Source and Use of Funds 34 Module 7 - Case Study follows page 54 e

• •

• Crime 0 Detection"Proceeds of Crime" Workbook • MODULE 01 0 UMEll

Introduction The video, Crime and Detection, Proceeds of Crime, is designed to be viewed throughout this self- study course. The video is approximately 1 hour long and is a realistic dramatization of a proceeds of crime investigation. Although actors have been used to portray a fictional investigation, the story follows an investigation in a realistic manner. The investigative techniques used in the case are an accumulation of methods used by top investigators, experts, and forensic accountants who have contributed their expertise to the development of this course. The characteristics of an investigation, the type of criminal activity, the number of suspects involved, at what stage in the enterprise crime investigation you initiate the proceeds of crime investigation, and the investigation procedures that your police force uses may alter how you approach a particular proceeds of crime investigation. For learning purposes, the case in the video illustrates as many investigative techniques as possible. The degree to which these various techniques would be applied would be based upon the unique requirements of the case and the discretion of the investigator.

Module Instructions Watch the video which will familiarize you with the topic and provide you with an overview to a proceeds of crime investigation. Later on in this course, you will watch the video with the intention of recognizing the application of specific investigative techniques. Once you have viewed the tape, proceed to Module 2.

Study Illatenals Crime and Detection, Proceeds of Crime Video

• UJ S Crime o Detection "Proceeds of Crime" Workbook

MODULC 02 0 MOREY LAMMERS TCCHIIINES

Introduction The term money laundering implies the cleansing of dirty money. Money is called dirty when it is has been earned through criminal activity. The wealth and power that dirty money brings is the motivation behind certain criminal activities. The more organized and larger the criminal activity or enterprise, the more dirty money and wealth generated. Historically, law enforcement efforts have focused on investigating criminal activities that earned the dirty money. Evidence of conspicuous wealth was used, in absence of legitimate explainable income, as an indication that criminal activity was taking place. It was a good validation of suspicion. However, over the last twenty years, experience and diligence on the part of law enforcement officers have shown that: • Dirty money is the strongest motivation behind criminal enterprises. The existence of dirty money or assets obtained from criminal activity could prove to be a liability to criminal organizations. • Proceeds of crime makes an effective target for law enforcers. • The eventual removal of those criminal profits could seriously undermine a criminal organization's ability and motivation to continue. Pioneered in the United States and recently implemented in Canada, legislation has been enacted that specifically targets proceeds of crime. This has empowered police agencies to investigate, freeze, and seize assets, and lay charges against those possessing proceeds of crime. Criminals have long avoided unwanted attention despite having large quantities of cash. But with the threats of proceeds of crime investigations and increased public awareness about dirty money, criminal organizations are finding it takes more effort to "lay low." The problems are: • When criminals get paid for whatever activity they are involved in, it's usually cash from the street. The more "business" done, the more cash comes in, usually in small bills. • Having and transferring large unexplainable amounts of cash excites suspicion that it may be dirty money, the result of criminal activity. • Criminals like to live the good life and enjoy their profits. To accomplish this, criminals launder their money. That is to say, they try to disguise it, using various methods, so they can exchange all that cash into something they can work with without suspicion. They also require an appearance of legitimate explainable income so as not to raise suspicion.

W 6 Crime Detechon -Proceeds of Crime" Workbook

Module 2 deals with the subject of money laundering from its objectives, its history, and techniques used. It is written from the money launderer's perspective looking at what conditions they would look for to set up a money laundering operation. We will look at the conditions that facilitate and prevent money laundering.

Module Instructions Read Chapter 1 on Money Laundering and Chapter 2 on Secrecy Havens in your Reference Guide. When you have finished, complete the exercises and proceed to the Module 3.

flues-bons 1. What are six methods money launderers use? 2. All financial transactions have a and a 3. Who could a launderer approach for incorporation services? 4. What are payment instruments? 5. What are the first three steps in setting up a money laundering operation? 6. What advantages to the money launderer are there to establishing service fronts? 7. Name five methods that could be used to load dirty money into the banking system. 8. At what value of cash transactions do many Canadian financial institutions complete currency declarations? 9. Why are bank records more reliable than a company's accounting recorrds? 10.Name six things a launderer relies on to deter investigators.

Study Materials Proceeds of Crime Reference Guide: Chapter 1, Money Laundering Chapter 2, Money Laundering and Secrecy Havens

ill 0 1 Crime 0 Detection"Proceeds of Crime" Workbook

Rowers 1. What are six methods money launderers use? Altering the perception of the source of funds. Manipulating the flow of cash. Creating a network of financial transfers. Using an impersonal financial network. Manipulating payments. Using secrecy havens (banking and corporation tax havens).

2. All financial transactions have a true source and a true destination.

3. Who could a launderer approach for incorporation services? A lawyer or an accountant.

4. What are payment instruments? Paper vouchers that represent payments to or from a bank account. Some examples are cheques, deposit slips, and money orders.

5. What are the first three steps in setting up a money laundering operation? 1) Establish a front corporation. 2) Open a bank account. 3) Load dirty money into the bank account.

6. What advantages to the money launderer are there to establishing service fronts? 1) Because revenues are not tied directly to inventory or production, it is easy to add dirty money to the revenues, creating fictitious receipts. 2) Provides legitimate business representation in the community. 3) Provides an apparent source for income.

7. Name five methods that could be used to load dirty money into the banking system. 1) Personal deposits by smurfs. 2) Night deposit. 3) Service branches. 4) Bank machine deposits. e W 0 8 Crime 0 Detection"Proceeds of Crime- Workbook

5) Cash purchases by smurfs of money orders. 6) Cash purchases by smurfs of drafts. 7) Cash purchases by smurfs of traveller's cheques. 8) Cash purchases by smurfs of wire transfers. 9) Cash payments to credit card accounts. 8. At what value of cash transactions do many Canadian financial institutions complete currency declarations? $10,000.00,

9. Why are bank records more reliable than a company's accounting recorrds? Financial institution records should be more objective — they are a record of what actually happened, not of what the company says happened.

10.Name six things a launderer relies on to deter investigators. 1) Lack of knowledge on the part of the investigator. 2) Lack of experience on the part of the investigator. 3) Lack of skills on the part of the investigator. 4) Privacy laws. 5) Distance. 6) Time.

• Ill 0 9 Crime 0 Detection"Proceeds of Crime" Workbook

MODULE 03 C111111011111 0 11111106 SYSTEM Introduction In order to understand the techniques involved in proceeds of crime investigation, it is important to completely understand the principal vehicle of choice for launderers: bank accounts. Module #2, Money Laundering, discussed the methods and reasons criminals strive to discreetly get their cash into the banking system and what types of transactions are used to wash it. Module #3, Banking Systems, gives you an in-depth look at the way financial institutions are organized and the way they keep records. This is your first look at what will be a deep immersion into finance and asset tracing. From the moment money enters the banking system, a detailed but sometimes complex trail of any movement of that money is recorded by the financial community. This record of money movement, or audit trail, is created through the financial institutions' individual and summary records. These records provide clues to the investigator hot on the trail of proceeds of crime, as well as evidence in court during trials. As a proceeds of crime investigator you must learn: • The various payment instruments used in transactions. • What types of primary and back-up records are created for each transaction. • What each record can tell you about the movement of funds. • Where to find records and how to ask for them. • How one type of record can lead you along the audit trail to another record. As investigations grow, a paper battle begins. You must learn a system for filing and storing these records and how to prepare records for acceptance in court. Banking Systems will give you your initial orientation to how financial institutions are organized and what their records look like. Module 4, Financial Investigation Techniques, will show you how to read and analyse the records.

Module Instnictions Read Chapter 3 on The Canadian Banking System in your Reference Guide. When you have finished, complete the exercises and proceed to Module 4.

Study &tends Proceeds of Crime Reference Guide: Chapter 3, The Canadian Banldng System and Financial Transactions and Records

W 0 10 Crime 0 Detechon"Proceeds of Crime" Workbook

Ouesbons 1. What information could you obtain from an International Centre? 2. What branch employee could provide you with information about the transactions conducted by a business client? 3. Who is responsible for branch operations? 4. What bank records can provide information about the owner of an account? 5. Name four ways to deposit money into an account. 6. Surf Shop

Sept. 13 19 93

PAY TO THE ORDER OF Windsurfing Plus Equipment $ 14,000.00

Fourteen thousand XX DOLLARS THE TORONTO-DOMINION BANK 100 OCEANVIEW BRANCH 27 OCEANVIEW DRIVE VANCOUVER, BRITISH COLUMBIA V6C 2Y1

MEMO Va *all

1:00756 it 004 1: 456 NI 324 u 9r 100015000000

a) 'What branch is this cheque drawn on? b) What is the branch number? c) What account number is this cheque drawn on? d) In what name is this account held? 7. When has a cheque been cashed? 8. When has a cheque cleared? 9. Tom has an account at a branch of the Bank of Montreal. He writes a cheque for $45 to Wendy, who cashes it at a branch of the CIBC where she has an account. Describe the clearing process for this cheque. 10.What will happen to the cheque Tom wrote after it has cleared? 11.Name three payment instruments that are guaranteed funds. 12.Where can you obtain a copy of a draft or money order? 13.What information is recorded by a branch sending a wire transfer? 14.What information can you obtain from a loan file? • 15.What is the purpose of the Personal Property Securities Act (PPSA)? W II Crime 0 Detection -Proceeds of Crime" Workbook

Rnswers 1. What information could you obtain from an International Centre? You could obtain information about cheques, drafts, and wire transfers to and from foreign countries.

2. 'What branch employee could provide you with information about the transactions conducted by a business client? The current account/business teller/csr.

3. Who is responsible for branch operations? The branch administration officer or customer service manager.

4. What bank records can provide information about the owner of an account? 1) Client profile. 2) New account form. 3) File on a business account that includes proof of registration and account operation documents identifying the owners and officers of the company. 4) Signature card.

5. Name four ways to deposit money into an account. 1) Personal deposit. 2) Bank machine deposit. 3) Night deposit. 4) Fast deposit (in branch). 5) Service branch. 6. a)What branch is this cheque drawn on? Oceanview branch

b)What is the branch number? 756

c)What account number is this cheque drawn on? 4563249

d)In what name is this account held? Surf Shop

Wela Crime 0 Uetection"Proceeds of Crime" Workbook

7. When has a cheque been cashed? A cheque has been cashed when the payee receives payment for it.

8. When has a cheque cleared? A cheque his cleared when the account of the person who wrote the cheque (payor) has been debited and the institution that cashed the cheque receives payment for it.

9. Tom has an account at a branch of the Bank of Montreal. He writes a cheque for $45 to Wendy, who cashes it at a branch of the CIBC where she has an account. Describe the clearing process for this cheque. 1) The CIBC gives Wendy $45 cash. 2) The cheque is run through proof at the C1BC branch. 3) The cheque is sent to the CIBC data centre. 4) The value of the cheque ($45) is added to the value of all other cheques cashed by the CIBC drawn on the Bank of Montreal. 5) The CIBC sends the actual cheques drawn on the Bank of Montreal and a request for payment to the Bank of Montreal's data centre. 6) The Bank of Montreal's data centre electronically debits the individual accounts the cheques were drawn on. Tom's account is debited $45. The Bank of Montreal pays the crBc the money it is owed. 7) The actual cheque is returned to Tom's branch, or an administration centre, where it will be filed.

10. What will happen to the cheque Tom wrote after it has cleared? If Tom has a statement account, the cheque will be mailed to Tom with his next statement. If Tom has a passbook account, the cheque will be filed at the branch or an administration centre under the date it cleared.

11. Name three payment instruments that are guaranteed funds. 1) Money order. 2) Draft 3) Wire transfer.

12. Where can you obtain a copy of a draft or money order? • At the branch that sold it. 010 1) Crime 0 Detection"Proceeds of Crime" Workbook

13. What information is recorded by a branch sending a wire transfer? 1) Name of the ordering/sending customer. 2) Amount of money and type of currency. 3) Beneficiary's country. 4) Beneficiary's financial institution. 5) Beneficiary's name, address, and account number, OR instructions to pay upon notification. 6) Identification from the ordering/sending customer.

14. What information can you obtain from a loan file? 1) Personal identification information. 2) Income levels and verification. 3) Credit bureau report. 4) Form outlining the terms of repayment.

15. What is the purpose of the Personal Property Securities Act (PPSA)? This act provides for the public recording of registered liens or claims against property.

WeN . Crime 0 Detection"Proceeds of Crime" Workbook • MODULE 04 0 FMMICML MUESTIGOTHM TECHMOUES PORT I

hiroduction There are several sources of financial information other than financial institutions. These sources are public information systems designed to record the financial history on individuals and assets. Businesses and financial institutions often use or contribute to these public information systems in their normal course of doing business. During a proceeds of crime investigation, they are particularly useful in determining unlcnown financial relationships that the target of your investigation has with financial institutions. For instance, during your investigation you have identified an expensive car that the target is using. By conducting a PPSA search on the vehicle, you are able to determine that the vehicle was partially financed by a bank. This is indicated on the PPSA because the bank placed a lien on the car as security for the loan. Through that search, you are able to contact the bank that issued the loan. By examining the loan records, you find a credit application, a bank account, links to other bank accounts through examina- tion of deposits, etc.

Module Instructions Read Chapter 4 on Financial Investigation and Public Information Systems in your Reference Guide. When you have finished, complete the exercises and proceed to the Module 5.

Study Matenals Proceeds of Crime Reference Guide: Chapter 4, Financial Investigation and Public Information Systems

questions What steps could you take to identify further financial information and relationships and to determine whether there are any other unknown "legitimate" investments using the following observations you have made during your investigation? • The target is in possession of two vehicles and a boat. • The target has a home. • The target appears to operate several businesses. • ID 0 15 Crime o Detection"Proceeds of Crime" Workbook

Answers What steps could you take to identify fiwther financial information and relationships using the following observations that you have made during your investigation: The target is in possession of two vehicles and a boat. Conduct a PPSA search on both the vehicles and the boat.

The target has a home. Conduct a search for registered mortgages.

The target appears to operate several businesses. Conduct a search of who controls the company and who acts for the company (lawyer) with the Ministry of Consumer and Commercial Relations.

To determine if there are any other unknown "legitimate" investments. Obtain copies of the tax filed returns. This may show if the target has declared legitimate investments (through declaration of the income).

W°16 Crime 0 Detection "Proceeds of Crime" Workbook

MiMULE 05 • FRIDCIAL «STOUR TECHRUCS PORT 2

Introduction Financial investigation techniques are used to take evidence such as financial documents, results from searches, and identified assets, and use that evidence to reconstruct the financial events such as income and expenditures surrounding the target of the investigation. A financial investigation begins with the establishment of a financial relationships with financial institutions and ownership relationships with assets. The preliminary financial profile is started on the target of the investigation while pursuing the enterprise crime investigation such as the drug investigation. Activities such undercover operatives, confidential informants and surveillance will in their normal course of operation identify potential financial leads that begin the profile: trips to a financial institution, the credit card used to pay for gas or a meal, the vehicle or house that the target has. When the enterprise crime investigation has progressed to the point of arrests and search warrants, then the Proceeds of Crime investigator will proceed with search warrants on identified properties looking for further evidence that will lead to financial relationships or assets. Generally this will appear in the form of banking documents such as passbooks, old bank statements and cancelled cheques, insurance documents etc. It's from these initial documents that the race begins to identify assets and other financial relationships before the target has the opportunity to move them. Module 5 will show you how these banking records are used to trace assets and construct a detailed financial profile.

Modtde Instructions Read Chapter 5 on Financial Investigation Techniques in your Reference Guide. When you have finished, complete the exercises and proceed to the Module 6.

Study Materials Proceeds of Crime Reference Guide: Chapter 5, Financial Investigation Techniques Appendix A - Video Lecture Scene Transcripts Appendix B - Records, Sources of Original and Backup • won Crime o Detection "Proceeds of Crime" Workbook

Quesbons 1. What is a cancelled cheque? 2. Where would a branch obtain a copy of a statement that has been mailed to a customer? 3. How can you identify the first statement or passbook record for an account/ 4. Where can you find an explanation of the codes used on a statement or passbook? 5. How much time does it take to trace one item? How long does the tracing process take? 6. What factors affect the length of time required to complete the tracing process? 7. Which part of this proof machine stamp is the trace number? CN: 06217 DA: 12/03/93 TR: 05341-003 8. If money is deposited to an account at 100 King Street, London, Ontario, using a bank machine at 30 River Road, Kitchener, Ontario, which branch will be able to provide records regarding the deposit? 9. What kinds of transactions conducted at a service branch might not show up on records at the home branch? 10.What is one clue that suggests a branch is being used to launder money?

• W 18 Crime 0 Detection"Proceeds of Crime" Workbook

Feennes Exercise #1

THE KUMITE KOMPANY1

April 3 i .2L. PAY TO Canine Nutrition Ltd. $ 745.67 THE ORDER OF Seven hundred and forty-jive 67 DOLLARS THE BANK OF NOVA SCOTIA 100 BIRCHSTREET BRANCH 87 BIRCH STREET SPRYFIELD, NOVA SCOTIA

MEMO Anne Myc

1:30654 to 002 1: 3245 IN 783 ir 74567

CN:05342 DA:10/04/92 TR:0321-004

For Deposit To The Credit of The Payee

00321-004 3 TORONTO DOMINION BANK APR '92' 11 APR '92' 10 BANK OF T-D APR 10 1992 DATA CENTRE NOVA SCOTIA PLAZA BRANCH HALIFAX, N.S. EASTERN PC DARTMOUTH, N.S. 3 00321-004

1. What financial institution was this cheque written on? 2. What branch? 3. What is the account number? 4. When did the cheque clear the account? 5. When was the cheque deposited or cashed? 6. Who cashed this cheque? • 7. Where did the payee cash or deposit this cheque? W 0 19 Crime 0 Detection "Proceeds of Crime" Workbook

Exercise #2

ABC DRUG MART

Oct. 25 19 92

PAY TO Supplies Inc. $ 12,546.89 THE ORDER OF Pharamaceutical Twelve thousand, five hundred and forty six 89 DOLLARS THE BANK OF MONTREAL 100 SUCCURSALE RUE ST. JEAN 458 RUE ST. JEAN DORVAL, QUEBEC

MEMO Pierre Anjou

1:20330 is 001 1: 143 11 25 r 1254689

CN:0534 DA:04/11/92 TR:5121-003

For Deposit To The Credit Of The Payee 00502-400 1 MONTREAL TRUST COMPANY NOV '92' 05 NOV '92' 4 BANK OF ROYAL BANK NOV 4 1992 MONTREAL OF CANADA 21 RUE ST. CATHERINE DATA CENTRE MONTREAL, QUE. QUEBEC PC DORVAL, QUE 1 00502-400

1. 'What financial institution was this cheque written on? 2. What branch? 3. VVhat is the account number? 4. When did the cheque clear the account? 5. When was the cheque deposited or cashed? 6. Who cashed this cheque? 7. Where did the payee cash or deposit this cheque?

W 0 20 Crime o Detection"Proceeds of Crime" Workbook

Exercise #3

JOHN SMITH

June 21 ig 92

PAY TO THE ORDER OF WalMart $ 56.75

67 DOLLARS THE BANK OF NOVA SCOTIA 100 FIRST AVENUE BRANCH 10 FIRST AVENUE SASKATOON, SASKACEWAN

MEMO "tnne Myc

1:30421 • 002 I; 5342 • 996 r 5675

CN:51280 DA:23/06/92 TR:57124-324 JUNE '92' 24 C.LB.C. INTERNATIONAL For Deposit To The Credit Of CENTRE The Payee MONTREAL, PQ. 57124-324 1 CHASE MANHATTAN BANK JUNE '92' 26 JUNE '92' 25 BANK OF C.LB.C. JUNE 23 1992 DATA CENTRE MAIN BRANCH-54 S1REET NOVA SCOTIA SASKATOON, SASK NEW YORK CITY, NY SASKATCHEWAN PC 1 57124-324

1. What financial institution was this cheque written on? 2. What branch? 3. What is the account number? 4. When did the cheque clear the account? 5. When was the cheque deposited or cashed? 6. Who cashed this cheque? 7. Where did the payee cash or deposit this cheque? • W • 21 Crime 0 Detection "Proceeds of Crime" Workbook

Exercise #4

TORONTO-DOMINION BANK BLOOR & BATHURST BRANCH TORONTO, ONTARIO

DATE INITIALS CHEQUES Hay 3, 1ti3 DEPOSITOR 1TELLER @ I = 20 @2 = 40 TV I G1-1 @ 5 = CREDIT 8 @10 = 80 11 @20 = 220 ACCOUIVT OF 2 @50 = 100 MULTITASK HOLDINGS @ 100 = TOTAL, CHEQUES CASH I 440 TOTAL,DÉPOSft 440.00

1:32645 1 004 I; 45 is 23377 r 51 1000044000 III

CN:00212 DA:03/05/91 TR:32645-004

For Deposit To The Credit Of The Payee 32645-004 1 TORONTO DOMINION BANK 111AY '93' 03 T-D MAY 3 1993 DATA CENTRE BLOOR 8c BATHURST BRANCH TOR, ONT. TORONTO, ONTARIO 1 32645-004

1.What financial institution was this deposit made to? 2. What branch? 3. What is the account number? 4. What was deposited?

W 0 22 Crime 0 Detection"Proceeds of Crime" Workbook

Exercise #5a

TORONTO-DOMINION BANK EGLINTON 8z. WESTON BRANCH TORONTO, ONTARIO

DATE INMALS CHEQUES • :CASH DEPOSITOR TELLER Hmt 23,1113 1 3,500 @I = @ 2 = 2,300 TV I GIGI—I @ 5 = CREDIT @10 = @20 = ACCOUNT OF @50 = BURROWS INVESTMENTS @ 100 = TOTAL CHEQUES 1 5,800 emu TOTAL DEPOSIT 5800.00

1 :31256 iu 004 1 54 •33227 r 51 00580000

CN:00563 DA:23/05/91 TR:32645-004

For Deposit To The Credit Of The Payee 31256-004 2 TORONTO DOMINION BANK MAY '93 23 T-D MAY 23 1993 DATA CENTRE EGL1N1ON &WESTON BRANCH TOR, ONT. TORONTO, ONTARIO 2 31256-004

1.What financial institution was this deposit made to? 2. What branch? 3. What is the account number? 4. When was it deposited? 5. What was deposited? 6. 'What further steps need to be taken to investigate this transaction?

• Ill 23 Crime 0 Detection"Proceeds of Crime" Workbook

Exercise #5b

These are copies of cheques on deposit obtained as a result of your request in Exercise 5a.

CHM Cameron

May 16 g 93

PAY TO THE ORDER OF Burrows Investments $ 3,500.00

Three thousand, five hundred XX DOLLARS THE BANK OF NOVA SCOTIA 100 BIRCHSTFIEET BRANCH 87 BIRCH STREET TORONTO, ONTARIO

MEMO Cliff Cameron

1:30654 al 002 1: 3245 783 r 350000

CN:00564 DA:23/05/91 TR:31256-004

For Deposit To The Credit Of The Payee 31256-004 2 TORONTO DOMINION MAY '93' 23 BANK T-D MAY '93' 23 DATA CENTRE MAY 23 1993 BANK OF TOR, ONT. EGLINTON Bz, WESTON BRANCH NOVA SCOTIA TORONTO, ONTARIO TORONTO PC 2 31256-004

W el Crime 0 Detection"Proceeds of Crime" Workbook •

Mary Bull

April 3 g 92

PAY TO THE ORDER OF Burrows Investments $ 2,300.00

TWO thousand, three hundred XX DOLLARS ROYAL BANK OF CANADA 100 QUEEN & YONGE BRANCH 1 QUEEN STREET WEST TORONTO, ONTARIO

MEMO 3fienj_Du

1:05234 IN 003 765 778 ri 230000

CN:00565 DA:23/05/91 TR:31256-004

For Deposit To The Credit Of The Payee 31256-004 2 • TORONTO DOMINION MAY 193 1 23 BANK T-D MAY '93' 24 DATA CENTRE MAY 23 1993 ROYAL BANK TOR, ONT. EGLINTON at WESTON BEtANCH OF CANADA TORONTO, ONTARIO CENTRAL PC 2 31256-004

Using these cheques on deposit, answer the following. 1.What was the source of the funds deposited? 2. Name the two individuals and their financial institutions that this investigation may be expanded to.

W 0 25 Crime 0 Detection "Proceeds of Crime" Workbook

Exercise #6

BANK OF NOVA SCOTIA King & Water Branch Winnipeg, Manitoba

Jeweller's Wholesale 175 Cumberland Ave., Suite 111 Winnipeg, Manitoba

M3R 5V6 Account #: 3969 - 651 Statement Date: Jan. 29, 1993

Debits Credi'ts Balance:

12.30 Balance Forward $ 8,760.00 01/03 Deposit $ 4,000.00 $ 12,760.00 01/06 Cheque $ 10,560.00 $ 2,200.00 01/07 Deposit $ 3,500.00 $ 5,700.00 01/08 Deposit $ 4,800.00 $ 10,500.00 01/10 Cheque $ 5,000.00 $ 5,500.00 01/15 Wire Transfer $ 25,000.00 $ 30,500.00 01/16 Deposit $ 2,800.00 $ 33,300.00 01/18 Cheque $ 11,500.00 $ 21,800.00 01/22 Wire Transfer $ 15,000.00 $ 6,800.00 01/23 Deposit $ 5,300.00 $ 12,100.00 01/27 Cheque $ 9450.00 $2650.00

- PLEASECHECKTHISSTATEMENT:WITHOUrDELAY.

Assuming this is the first and only statement that you have seen on a target of a proceeds of crime investigation, what two requests should you make to the financial institution?

111026 Crime 0 Detectioniroceeds of Crime" Workbook • Exercise #7 Using the statement in Exercise 6, record for each of the following entries on the statement the source voucher you should obtain for further information.

Date Amount Description Source Voucher

•

• W 0 21 Crime o Detection "Proceeds of Crime" Workbook

QnsWerS to Questions 1. What is a cancelled cheque? A cheque that has been cashed and has cleared.

2. Where would a branch obtain a copy of a statement that has been mailed to a customer? 1.From its own microfiche, microfilm, or electronic records. 2. From the microfiche, microfilm, or elecctronic records of an administration/storage centre. 3. From the microfiche, microfilm, or electronic records of the data centres that processed the cheque.

3. How can you identify the first statement or passbook record for an account? The very first entry should be "acccount opened," "new," or a similar term.

4. 'Where can you find an explanation of the codes used on a statement or passbook? 1. On the back of the statement. 2. At the bottom of the passbook pages or on the last page of a passbook. 3. Ask a branch employee for an explanation.

5. How much time does it take to trace one item? 15 minutes per item. How long does the tracing process take? Days or weeks.

6. 'What factors affect the length of time required to complete the tracing process? 1.Number of items being traced. 2. Completeness and accuracy of information provided for tracing request. 3. Age of the item — the older the item, the longer it will take to trace. 4. Availability of alternate backup records.

7. Which part of this proof machine stamp is the trace number? CN: 06217 DA: 12/03/93 TR: 05341-003

W 28 Crime 0 Detection "Proceeds of Crime" Workbook

8. If money is deposited to an account at 100 King Street, London, Ontario, using a bank machine at 30 River Road, Kitchener, Ontario, which branch will be able to provide records regarding the deposit? 30 River Road, Kitchener.

9. What lcinds of transactions conducted at a service branch might not show up on records at the home branch? Cash purchases of drafts, money orders, wire transfers.

10.What is one clue that suggests a branch is being used to launder money? There are many long-outstanding items on the report of issued drafts and money orders.

Answers to Exercises Exercise 1 1. 'What financial institution was this cheque written on? The Bank of Nova Scotia.

2. What branch? Birch Street branch.

3. What is the account number? 3245-783

4. When did the cheque clear the account? April 11, 1992

5. When was the cheque deposited or cashed? April 10, 1992

6. Where did the payee cash or deposit this cheque? • Toronto Dominion Bank, Plaza Branch, Dartmouth, Nova Scotia Ill • 29 Crime 0 Detection "Proceeds of Crime" Workbook

Exercise 2 1. What financial institution was this cheque written on? The Bank of Montreal.

2. What branch? Rue St. Jean

3. What is the account number? 143-25

4. When did the cheque clear the account? November 5, 1992

5. When was the cheque deposited or cashed? November 4, 1992

6. Where did the payee cash or deposit this cheque? Montreal Trust Company, 21 rue St. Catherine, Montreal, Quebec

Exercise 3 1. What financial institution was this cheque written on? The Bank of Nova Scotia.

2. What branch? First Avenue branch.

3. What is the account number? 5342-996

4. When did the cheque clear the account? June 26, 1992

W 0 30 . Crime 0 Detection"Proceeds of Crime" Workbook

5. When was the cheque deposited or cashed? June 23, 1992

6. Who cashed this cheque? A representative of WalMart.

7. Where did the payee cash or deposit this cheque? Chase Manhattan Bank, Main Branch, 54th Street, New York City

Exercise 4 1. What financial institution was this deposit made to? Toronto Dominion Bank

2. What branch? Bloor and Bathurst branch

3. What is the account number? 45-23377

4. What was deposited? Cash: 20 $2 bills 8 $10 bills 11 $20 bills 2 $50 bills

• W 0 31 Crime 0 Detection "Proceeds of Crime" Workbook

Exercise 5a 1. What financial institution was this deposit made to? Toronto Dominion Bank

2. VVhat branch? Eglinton and Weston branch.

3. What is the account number? 54-33227

4. When was it deposited? May 23, 1992

5. VVhat was deposited? Two cheques, one for $3500 and one for $2300.

6. What further steps need to be taken to investigate this transaction? Request a certified copy of the front and back of all cheques on deposit.

Exercise 5b 1. What was the source of the fimds deposited? Cheques

2. Name the two individuals and their financial institutions that this investigation may be expanded to. Cliff Cameron, The Bank of Nova Scotia, Birch Street Branch Mary Bull, Royal Bank of Canada, Queen and Yonge Branch

Exercise 6 1. Assuming this is the first and only statement that you have seen on a target of a proceeds of crime investigation, what two requests should you make to the financial institution? Request a copy of the client profile, and certified true copies of all statements for this account from the time it was opened to the present day.

111032 • Crime 0 Detection -Proceeds of Crime" Workbook e Exercise 7

Date Amount Description Source Voucher

Jan 3/93 $4000 Deposit Certified true copy of front and back of deposit slip and certified true copies of fronts and backs of items on deposit

Jan 6/93 $10,560 Cheque Certified true copy of front and back of cheque

Jan 7/93 $3500 Deposit Certified true copy of front and back of deposit slip and certified true copies of fronts and backs of items on deposit

Jan 8/93 $4800 Deposit Certified true copy of front and back of deposit slip and certified true copies of fronts and backs of items on deposit

Jan 10/93 $5000 Cheque Certified true copy of front and back of cheque

Jan 15/93 $25,000 Wire transfer in Certified true copy of credit memo crediting amount to account. Copy of wire transfer report and any forms completed upon receipt ofwire transfer identifying information as to the source of funds.

Jan 16/93 $2800 Deposit Certified true copy of front and back of deposit slip and certified true copies of fronts and backs of items on deposit

Jan 18/93 $11,500 Cheque Certified true copy of front and back of cheque

Jan 22/93 $15,000 Wire transfer out Copy of wire transfer form. Copy of debit memo debiting account for payment, if not cash payment.

Jan 23/93 $5300 Deposit Certified true copy of front and back of deposit slip and certified true copies of fronts and backs of items on deposit

Jan 27/93 $9450 Cheque Certified true copy of front and back of cheque

• HI 0 33 Crime o Detection "Proceeds of Crime" Workbook

MODULE 05 0 SOURCE MID USE IF FUNS

Introduction Modules 4 and 5 discussed the process of identifying financial relationships and gathering the records for further analysis. Module 6 discusses how to use the source and use of funds worksheet to summarize the financial information that has been gathered. Through the source and use of funds worksheet, you will summarize the total cash in and total cash out you have uncovered in the investigation. It is an objective record and summary of the transactions as they have taken place. The source and use of funds report is used to present: a) The total value of incoming funds and where they came from. b) The final destination of those funds or how they were spent. It is an effective and easy to understand way to present the findings of a complex, large financial investigation and is often used as a court exhibit. The source and use of funds worksheet can also be used to manage all of the financial data and records generated by a proceeds of crime investigation. When the various documents such as bank statements, cheques, deposits, etc. are gathered, the pertinent information is transferred to the source and use of funds worksheet. Then the individual documents can be filed away as supporting evidence to the conclusions derived from completing the source and use of funds worksheet. This is a meaningful summary of the valuable information derived from the hundreds or thousands of financial documents gathered. It eliminates the need to continually refer to these documents. Otherwise, you may not be able to see the forest for the trees! Once a source and use of funds worksheet has been completed, information it provides about income and assets can be transferred to a net worth analysis for further summary.

Module Instructions Read Chapter 6 on Financial Investigation Summary and Analysis in your Reference Guide. When you have finished, complete the exercises and proceed to the Module 7.

Study &tends Proceeds of Crime Reference Guide: Chapter 6, Financial Investigation Sununary and Analysis

111 0 3(1 Crime o Detection"Proceeds of Crime" Workbook

Cxerases Using this statement from and its supporting records on the following pages, complete a source and use of funds worksheet. The headings for the worksheet are provided on the next page. Use them to create a working copy of the worksheet on larger paper.

BANK OF NOVA SCOTIA King & Water Branch Winnipeg, Manitoba

Jeweller's Wholesale 175 Cumberland Ave., Suite 111 Winnipeg, Manitoba M3R 5V6 Account #: 3969-651 Statement Date: Jan. 29, 1993

I Date: IDescrjption :. Debits Credits: ,• • •:Balance:::, 12.30 Balance Forward $ 8,760.00 01/03 Deposit $ 4,000.00 $ 12,760.00 01/06 Cheque $ 10,560.00 $ 2,200.00 01/07 Deposit $ 3,500.00 $ 5,700.00 01/08 Deposit $ 4,800.00 $ 10,500.00 01/10 Cheque $ 5,000.00 $ 5,500.00 01/15 Wire Transfer $ 25,000.00 $ 30,500.00 01/16 Deposit $ 2,800.00 $ 33,300.00 01/18 Cheque $ 11,500.00 $ 21,800.00 01/22 Wire Transfer $ 15,000.00 $ 6,800.00 01/23 Deposit $ 5,300.00 $ 12,100.00 01/27 Cheque $ 9450.00 $2650.00

PLEASE CHECK THIS STATEMENT WITHOUT DELAY.

• DJ 35 E SOURCE AND USE OF FUNDS WORKSHEET E g, 0 ej w. SOURCES USES =r cm 0 DATE PAYOR AMOUNT CASH CHEQUE BANK & BRANCH DATE DESCRIPTION DEBIT CREDIT BALANCE DATE PAYEE AMOUNT BANK CASHED AT ACCOUNT NUMBER em i= .=. CD ei. CD CI r-e■ C3 0 : '0 -1 0 C3 CD I=CD CD -0Pt - 2

CD :

• s • Crime 0 Detection "Proceeds of Crime" Workbook •

•

• Ill 0 31 Crime 0 Detection "Proceeds of Crime" Workbook

SOURCE AND USE • SOURCES

DATE PAYOR AMOUNT CASH CHEQUE BANK & BRANCH DATE DESCRIPTION DEBIT

12/30 Balance Forward 01/03 $4,000 $4,000 01/03 Deposit

01/06 Cheque $10,560

01/07 Dragon $3500 $3500 National Trust 01/07 Deposit Jeweller's Mountainview Dr., Vancouver

01/08 $4800 01/08 Deposit Pearls & Treasures $1300 Bank of Nova Scotia First Ave., Halifax, NS (contact branch that $3500 First SA Bank sold draft) First Street branch, Johannesburg, South Africa

01/10 Cheque $5,000

01/15 Premier $25,000 $25,000 (need copy of wire transfer report) 01/15 Wire Transfer American Jewellers

01/16 $2800 $2800 01/16 Deposit

01/18 Cheque $11,500 111,

01/22 Wire Transfer $15,000

01/23 $5,300 $5,300 01/23 Deposit

01/27 Cheque $9,450

• ID 0 38

Crime 0 Detection "Proceeds of Crime" Workbook

• OF FUNDS WORKSHEET USES

CREDIT BALANCE DATE PAYEE AMOUNT BANK CASHED AT ACCOUNT NUMBER

$8,760 $4,000 $12,760

$2,200 01/06 Gems and Rocks $10,560 BMO, Main & 3rd, Calgary (contact Main & 3rd

$3,500 $5,700

$4800 $10,500

$5,500 01/10 Colorado Gems $5,000 First National Bank (contact Denver) Eglinton & Weston, Denver, Colorado

$25,000 $30,500

$2,800 $33,300

$21,800 01/18 Best Watch Manufacturers $11,500 Royal, 2355 rue Ste. Catherine, Montreal (contact bank cashed at)

$6,800 01/22 JD Investments $15,000 Bank of Nova Scotia, Grand Caymans (contact branch money was sent to - may not be able to obtain ownership information)

$5,300 $12,100

$2,650 01/27 Gems andRocks $9,450 Bank of Montreal, Main & 3rd (contact branch Calgary, Alberta cashed at)

• W 0 39 Crime o Detection"Proceeds of Crime" Workbook

BANK OF NOVA SCOTIA KING &WATER BRANCH WINNIPEG, MANITOBA

DATE INMALS •.-CHEQUES CASH DEPOSITOR 1TELLER IL«. 3/13 @1 = @2 eJD I GGH H 60 @ 5 =1000 CREDIT I10@ 10 = 1100 80 @20 = 1600 ACCOUNT OF 20 @50 = 1000 JEWELLER'S WHOLESALE B 100 = TOTAT::CHECILIEil CASH eoo • Igyrp;12.oEpoarr 4000.00

1:60234 ii 002 1: 39690 651r 51 1000400000 ol

CN:00122 DA:03/01/93 TR:60234-002

For Deposit To The Credit Of The Payee 60234-002 5 BANK OF NOVA SCOTIA JAN '93' 03 BNS JAN 3 1993 DATA CENTRE KING &WATER BRANCH WESTERN WINNIPEG MANITOBA 5 60234-002

HMO - Crime 0 Detection -Proceeds of Crime" Workbook

Jeweller's Wholesale

Dec. 30 1 g 92

PAY TO 714E ORDER OF Gems and Rocks $ 10,560.00

ten thousand, five hundred and sixty X.X DOLLARS THE BANK OF NOVA SCOTIA 100 KING AND WATER BRANCH WINNIPEG, MANITOBA

MEMO oedI2

1:60234 • 002 1: 3969 u651 r 1056000

CN:00072 DA:05/01/93 TR:31256-001

For Deposit To The Credit Of The Payee 31256-001 2

JAN '93' 06 BANK OF MONTREAL BMO JAN '93' 06 DATA CENTRE JAN 5 1993 BANK OF ALBERTA MAIN ék.31W BRANCH NOVA SCOTIA CALGARY, ALBERTA WESTERN PC 2 31256-001

• W ell Crime 0 Detection "Proceeds of Crime" Workbook

BANK OF NOVA SCOTIA KING & WATER BRANCH WINNIPEG, MANITOBA

DATE INITIALS ..,:a2HEGUES :CASH DEPOSITOR 1 TEI1ER Jae, 3560 @1 @2 = JD 5b @ 5 CREDIT 10 = @20 = ACCOLIIVT OF @20 JEWELLER'S WHOLESALE @100 = •TOTAUCHEQUES1 3500 CASH :I 3590 ,-:.TOTAL DEPOSIT 3500.00

1:60234 is 002 1: 3969a 651r 51 III 00350000

CN:03245 DA:07/01/91 TR:60234-002

For Deposit To The Credit Of The Payee 60234-002 3 BANK OF NOVA SCOTIA JAN '93' 07 BNS JAN 7 1993 DATA CENTRE KING & WATER BRANCH WESTERN WINNIPEG MANITOBA 3 60234-002

Ill 0 12 Crime o Detechon"Proceeds of Crime" Workbook

Dragon Jewellers

Dec. 28 g 92

PAY TO 3,500.00 THE ORDER OF Jeweller's Wholesale $

Three thousand, five hundred XX DOLLARS NATIONAL TRUST 100 Mountainview Drive Vancouver, B.C.

MEMO Ecrt,:ye

1:00130 590 1: 04 oo 23051275 r 350000

CN:00465 DA:07/01/93 TR:60234-002

For Deposit To The Credit Of The Payee 60234-002 1 BANK OF NOVA SCOTIA JAN '93' 07 BNS JAN 7 1993 DATA CENTRE KING A WATER BRANCH WESTERN WINNIPEG, MANITOBA 1 60234-002

• W 0 43 Crime 0 Detection "Proceeds of Crime" Workbook

BANK OF NOVA SCOTIA KING & WATER BRANCH WINNIPEG, MANITOBA

DATE I NMALS • .CAsti DEPOSITOR TELLER 14.9 , 13 1 1390 @1 @2 = 3500 JD I GGI 1-1 @ 5 = @10 = CREDIT @20 = ACCOUIVT OF @50 " JEWELLER'S WHOLESALE @ 100 = YOTALCHEQUES I 4800 CASH 4800.00

1: 60234 si 0021: 3969 .6511r 51 III 00480000

CN:00073 DA:08/01/93 TR:60234-002

For Deposit To The Credit Of The Payee 60234-002 2 BANK OF NOVA SCOTIA JAN '93' 08 BNS JAN 8 1993 DATA CENTRE KING & WATER BRANCH WESTERN WINNIPEG, MANITOBA 2 60234-002

111 o 114 Crime 0 Detectœn"Proceeds of Crime" Workbook •

Pearls and Treasures

Dec. 31 ig 92

PAY TO THE ORDER OF Jeweller's Wholesale 1.300.00

One thousand, three hundred XX DOLLARS THE BANK OF NOVA SCOTIA 100 FIRST AVENUE BFtANCH HALIFAX, NOVA SCOTIA

MEMO

20218 a 0021: 4523 e 2251r 130009

CN:00074 DA:08/01/93 TR:60234-002

For Deposit To The Credit Of The Payee 60234-002 2 JAN '93' 09 BNS BANK OF DATA CENTRE NOVA SCOTIA JAN '93'08 F,ASTERN JAN 8 1993 BANK OF KING &WATER BRANCH NOVA SCOTIA WINNIPEG, MANITOBA WESTERN PC 2 60234-002

• Ill 0 45 Crime 0 Detection -Proceeds of Crime" Workbook

First SA Bank FIRST STFIEET BRANCH 7712364 JOHANNESBURG, SOUTH AFRICA

Deeestimn 15 19 92

PAY TO THE ORDER OF peweael:4 Maleactle CAD 3,500. 00

7ktee titasetlaset Pie dust:bled CANADIAN DOLLARS

TO THE CANADIAN IMPERIAL BANK OF COMMERCE 4arrest 'Weguee SIGNED SIGNATURE STAMP HRST STREET BRANCH, BRANcH Johannesburg eeectoyee ...7ir7e4/69 COUNTERSIGNED SIGNATURE STAMP

7712364 1:32567 ii 589 999 ov 223813r 79 nu 0000350000 PI

CN:00075 DA:08/01/93 TR:60234-002

JAN '93'08 BANK OF NOVA SCOTIA WESTERN PC For Deposit To The Credit Of The Payee 60234-002 2 BANK OF JAN '93' 09 NOVA SCOTIA Bank of Nova Scotia INTERNATIONAL JAN '93' 15 JAN 8 1993 CENTRE First SA Bank KING & WATER BRANCH TOR, ONT. DATA CENTRE WINNIPEG, MANITOBA Johannesburg 2 60234-002

W 0 t16 Crime 0 Detection"Proceeds of Crime" Workbook

Jeweller's Wholesale

Jan 2 ig 93

PAY TO THE ORDER OF Colorado Gems $ 5,000.00

Five thousand XX DOLLARS THE BANK OF NOVA SCOTIA 100 KING AND WATER BRANCH WINNIPEG, MANITOBA

MEMO ,,

I: 60234 un 0021: 3969 ii 651e 500000

CN:00564 DA:08/01/93 TR:01023-554

For Deposit To The Credit Of The Payee 01023-554 2 FIRST NATIONAL JAN '93' 09 BANK Bank of Nova Scotia JAN '93'23 INTERNATIONAL JAN 8 1993 BANK OF CENTRE EGLINTON tIt WESTON BRANCH TOR, ONT. NOVA SCOTIA DENVER COLORADO WESTERN PC 2 01023-554

• W 0111

Crime 0 Detection "Proceeds of Crime" Workbook

KING & WATER BRANCH WINNIPEG, MANITOBA dm...m./ /s ige DATE OF DEPOSIT AMT. OF DEPOSIT C/A RCA S/A ACCOUNT NUMBER TRAN. CODE $25,000 0 ERROR BRINGING 0 CHEQUE SEE REVERSE Jan 15, 1993 TOTAL FORWARD MISSING 3/0-6S/ S/ 0 ERROR 0 U.S. LISTED AS LISTED AS CORRECT SUBTRJADDIT. CDN/CDN AS U.S.

PARTICULARS AMOUNT/ADJUSTMENT V.144e. ebefslteA. enstepen z... us e2o,as@ 121 4ej I. ex. 1)41.4444. As.e>;.a4, Juiette»

c J, viel 1444 tilletelele nr TOTAL OF FORMS ATTACHED R SUBTOTAL LESS CHARGES D teamsr I TOTALS:4000 00 T 1:60234 a 002 1: 396911651r 51 III 0002500000 :0

CN:05334 DA:15/01/93 'TR:60234-002

For Deposit To The Credit Of The Payee 60234-002 1 BANK OF NOVA SCOTIA JAN '93' 015 BNS JAN 15 1993 DATA CENTRE KING & WATER BRANCH WESTERN WINNIPEG, MANITOBA 1 60234-002

w 118 Crime o Detection "Proceeds of Crime Workbook •

BANK OF NOVA SCOTIA KING & WATER BRANCH WINNIPEG, MANITOBA

DATE I NMALS CHEQUES. .CASH DEPOSITOR 1 TELLER lid6o. /61/3 @ 1 = 2 = e isbsb 5 = CREDIT 5 10 = 50 65 020 = 1300 ACCOUNT OF 9 050 = 450 JEWELLER'S WHOLESALE 10 0 100 = 1000 TOTAL CHEQUES 1 CASH 1 2800 TOTALDEPOSIT 2800.00

1:60234 u 002 I: 3969u 651 r 51 00280000

CN:01256 DA:16/01/93 TR:60234-002

For Deposit To The Credit Of The Payee 60234-002 3 BANK OF NOVA SCOTIA JAN '93' 16 DNS JAN 16 1993 DATA CENTRE KING & WATER BRANCH WESTERN WINNIPEG MANITOBA 3 60234-002

• 0 q9 Crime 0 Detection "Proceeds of Crime" Workbook

Jeweller's Wholesale

Jan 7 1 g 93

PAY TO THE ORDER OF Best Watch Manufacturers $ 11.500.00

Eleven thousand, five hundred XX DOLLARS THE BANK OF NOVA SCOTIA 100 KING AND WATER BRANCH WINNIPEG, MANITOBA

MEMO agaek-- , fAz-e,eqe 1: 60234 u 0021: 3969 II 651r 1150000

CN:03428 DA:17/01/93 TR:05152-003

For Deposit To The Credit Of The Payee 05152-003 2 ROYAL BANK JAN '93' 17 OF CANADA BANQUE ROYALE JAN '93'18 DATA CENTRE JAN 17 1993 BANK OF MONTFtEAL, QUE 2355 RUE STE. CATHERINE NOVA SCOTIA MONTREAL, QUEBEC WESTERN PC 2 05152-003

010 50 .

Crime o Detectioniroceeds of Crime" Workbook •

KING & WATER BRANCH WINNIPEG, MANITOBA 1ge

DATE OF DEPOSIT AMT. OF DEPOSIT Ch6 POP S/A ACCOUNT NUMBER TRAN. CODE 0 ERROR BRINGING 0 CHEQUE _.,SEE_E3F-YEIME TOTAL FORWARD MISSING 3/0-651 42 0 ERROR 0 U.S. USTED AS LISTED AS CORRECT SUBTRJADDIT. CDN/CDN AS U.S.

PARTICULARS AMOUNT/ADJUSTMENT W.«. 14,4+ #1342;

D Jegite.44 Wleies.4 ...u.Ff TOTAL OF FORMS ATFACHED E SUBTOTAL I LESS CHARGES cal T TOTAL 00

1:60234 ii 002 1: 3969m 651ir 42 ill 0001500000 ol

CN:00212 DA:22/01/93 TR:60234-002

JAN '93' 23 Bank of Nova Scotia INTERNATIONAL JAN '93' 22 CENTRE BNS TOR, ONT. DATA CENTRE WESTERN

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W 0 SI Crime 0 Detection "Proceeds of Crime" Workbook

Bank of Nova Scotia CURRENCY NAME CDN DOLLARS RATE FOREIGN CURRENCY AMOUNT (EXCEPT U.S.) RATE U.S. DOLLARS APPLICATION FOR MAIL & TELEGRAPHIC TRANSFER CANADIAN King & Water 60234 Jan. 22/93 EQUIVALENT U.S. AMOUNT RATE COMMISSION BRANCH TRANSIT NO. DATE U.S. AMOUNT RATE AIR MAIL OR CABLE CHARGES PLEASE TRANSFER AT MY/OUR RISK BY: TOTAL 15,000.00 D MAIL (ATTACH REMITTANCE) RATE OWING TO INTERNATIONAL CENTRE 0 CABLE (CR, TELEGRAPHIC TRANSFER PAYMENT ACCOUNT) 1/2 COMMISSION AIR MAIL OR CABLE CHARGES TOTAL OWING TO INTERNATIONAL CENTRE

TRANSACTION REF. NO. QUOTED BY INTERNATIONAL CENTRE 1375689423

NAME OF CORRESPONDENT INDICATED BY INTERNATIONAL CENTRE Bank of Nova Scotia

ORDERING CUSTOMER - NAME AND ADDRESS John Drennan 175 Cumberland Ave., Suite 111

DESTINATION BANK - IF SPECIFIED BY ORDERING CUSTOMER Bank of Nova Scotia Grand Cayman Islands

BENEFICIARY CUSTOMER - NAME & ADDRESS (OR ACCOUNT NO.) JD Investments

DETAILS OF PAYMENT - REFERENCE, INVOICE NOS ETC.

BANK TO BANK INFORMATION - SPECIAL INSTRUCTIONS RE PAYMENT

SIGNATURE PREPARED BY CHECKED BY TELDESP. INIT OF RECEIVING OFFICER AT INTL CENTRE

W 0 52 Crime 0 Detection "Proceeds of Crime" Workbook

BANK OF NOVA SCOTIA KING &. WATER BRANCH WINNIPEG, MANITOBA

DATE INMALS CHEQUES CASH DEPOSITOR1 TELLER ,/,f4. 23, Ile @1 = @2 = eJD I G I1—-I1 30 @ 5 = 150 6 @10 = 60 CREDIT 52 @20 = 1040 ACCOUNT OF 31 @50 = 1550 JEWELLER'S WHOLESALE 25 @ 100 = 2500 TOTAL CHEQUES CA511 I 5300 TOTAL DEPOSIT 5300.00

1: 60234 mg 0021: 3969 a 6511M 51 Ill 00530000 ill

CN:00142 DA:223/01/93 TR:60234-002

For Deposit To The Credit Of The Payee 60234-002 1 BANK OF NOVA SCOTIA JAN '93' 23 BNS JAN 3 1993 DATA CENTRE KING & WATER BRANCH WESTERN WINNIPEG, MANITOBA 1 60234-002

• 111053 Crime 0 Detection "Proceeds of Crime" Workbook

Jeweller's Wholesale

Jan 15 ig 93

PAY TO THE ORDER OF Gents and Rocks 9,450.00

Nine thousand, four hundred and fifty XX DOLLARS THE BANK OF NOVA SCOTIA 100 KING AND WATER BRANCH WINNIPEG, MANITOBA

MEMO Atta../Uceizaada 60234 a 0021: 3969. 651e 945000

CN:00582 DA:25/01/93 TR:31256-001

For Deposit To The Credit Of The Payee 31256.001 1

JAN '93' 26 BANK OF MONTREAL BMO JAN '93' 27 DATA CENTRE JAN 25 1993 BANK OF ALBERTA MAIN &3R1) BRANCH NOVA SCOTIA CALGARY, ALBERTA WESTERN PC 1 31256-001

W 0 Sti •

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Case Study

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• Crime 0 Detection"Proceeds of Crime" Case Study • MODULC el 0 CASE STUDY MUESTIGATIN

Introduction Module 7 is a case study designed to give you the opportunity to practise the skills you learned in the previous modules of this course. This case study exercise is based upon the video case of Steven Daniels and International Invest- ments. Your challenge is to take on the role of an investigator working with Rob, Ken and Anne-Marie to gather the evidence and complete the source and use of funds worksheet.

The Workbook. Bnef-mg Sheets and the Video Case Throughout this exercise, you will receive briefing sheets which will provide you with case information that has been identified by other investigators, or provide you with results of a search that you may conducted. These briefing sheets will serve as stages of your investigation. They correspond with the investigation days in the video. Investigation day titles appear in the video at the beginnings of scenes. As you proceed through this case study, you will receive instructions in this workbook to view certain scenes in the video. These scenes may provide you with information needed to complete your portion of the case study investigation. Watch only the scenes that the workbook instructs you to. Then return to the workbook to proceed with the case study.

Results of Searches As in an actual investigation, your efforts will lead you to conduct search warrants on locations and financial institutions. You may also decide to search for information on a public information system. For the purpose of this case study, included are several possible sources that may contain information pertinent to your investigation. These may be places on which you could execute a search warrant. There are several general headings: Locations, Financial Institutions, and Interviews.

LOCATIONS Locations contains information on the results of searches on individuals and properties. Within this • section, there are sub-headings of individuals and locations that you could determine a search on.

CS 0 3 Crime 0 Detection "Proceeds of Crime" Case Study • They appear unordered as follows: Ministry of Consumer and Commercial Affairs Search Results Financial Institution Search Results

FINANCIAL INSTITUTIONS Financial Institutions represents banking institutions by name which you could search. For each financial institution there are branches. They appear as follows: ROYAL BANK 32nd Street branch 22nd Street branch TORONTO DOMINION BANK 121st Street brancch BANK OF MONTREAL 8th Avenue branch CANADIAN IMPERIAL BANK OF COMMERCE • 18th Street branch At each of these branches you will find records pertaining to your investigation.

INTERVIEWS The last section is Interviews. It contains transcripts of your interviews with various individuals.

Module Instructions Read the instructions found in the first Briefing Sheet and view the selected scenes of the video. Then make your decision on how to proceed next, by either opening a Source and Use of Funds worksheet or conducting a search warrant.

Study Matenals , Case Study Briefing Sheets Crime and Detection, Proceeds of Crime Video Location Search Results

CS 0 4 Crime 0 Detection "Proceeds of Crime" Case Study

PHRTS OP THE ERSE STUDY

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Cs 0 5 Crime 0 Detection "Proceeds of Crime" Case Study •

PART I

Instructions

#1) Watch the video up to the beginning of Day 2, Investigation. #2) Read the Briefing Sheet - Day 1. #3) Conduct any Interviews. #4) Determine if there are any Searches of financial institutions or other locations to be done. #5) Conduct your Searches and review any evidence you may acquire. #6) Based upon your results, complete your document analysis.

e #7) Proceed to Part 2 - Instructions.

•

CS 0 6 Crime o Detection"Proceeds of Crime" Case Study •

MIT 2

Instructions

#1) Watch the video up to the beginning of Day 2, Investigation.

#2) Read the Briefing Sheet - Day 2. #3) Conduct any Interviews. #4) Determine if there are any Searches of financial institutions or other locations to be done. #5) Conduct your Searches and review any evidence you may acquire. #6) Based upon your results, complete your document analysis.

#7) Proceed to Part 3 - Instructions.

CS 01 Crime 0 Detection "Proceeds of Crime" Case Study

PM 3

Instructions

#1) Watch the video up to the beginning of Day 2, Investigation. #2) Read the Briefing Sheet - Day 3. #3) Conduct any Interviews. #4) Determine if there are any Searches of financial institutions or other locations to be done. #5) Conduct your Searches and review any evidence you may acquire. #6) Based upon your results, complete your document analysis.

#7) Proceed to Part 4 - Instructions.

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CS 0 8 Crime 0 Detection "Proceeds of Crime" Case Study •

HMO SUS e

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CS 0 9 Crime 0 Detection "Proceeds of Crime" Case Study s

DRICMD SECT

Dag I

You have just been through the initial briefing. As the briefing broke up, Detective John Matthews of the Drug Squad called and left a message that he may have further information on the Steven Daniels investigation. You have been assigned to follow up on it.

CS 0 10 Crime 0 Detection"Proceeds of Crime" Case Study •

MMHG SECT

Dag 2

You have checked into Anderson and White, Investments and have learned that they are a legitimate investment firm. The contact person is Larry Terrissi, who is the General Manager.

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CS 0 II Crime 0 Detection "Proceeds of Crime" Case Study

DRICFMG SET

Dag 3

You have executed your search warrant on Anderson and White, Investments. You have successfully completed the investigation on SD Investments having identified all sources and uses of funds. If you haven't already, complete your source and use of funds worksheet on SD Invest- ments. The $ 280,000 dollars in the account of Steven Daniels has been passed on to Ken and Anne-Marie who will work it back on the Steven Daniels Source and Use of Funds Worksheet. It would appear that Steven Daniels, through Prime Developments, was accumulating capital to make a major investment in real estate.

CS 0 12 Crime 0 Detechoniroceeds of Crime" Case Study •

SMIRCH RESULTS

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CS 0 0 Crime 0 Detection "Proceeds of Crime" Case Study • 111.

!bistro of Consumer and Commercial Relations Search Hest&

MADE ONE LTD

Made One Ltd. is an Ontario Registered Corporation located in Toronto. Steven Daniels is the listed President and Director.

CS 0 N Crime 0 Detection "Proceeds of Crime" Case Study •

Ministry of Consumer and Commercial Relabons Search Results

RETAIL CONCEPTS LTD

Retail Concepts Ltd. is an Ontario Registered Corporation located in Toronto. Steven Daniels is the listed President and Director.

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CS 0 IS Crime 0 Detection "Proceeds of Crime" Case Study •

Mmistry of Consumer and Commercial Relations Search Results

NEW AGE ELECTRONICS

New Age Electronics is an Ontario Registered Corporation located in Toronto. Steven Daniels is the listed President and Director.

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CS 0 16 Crime 0 Detection"Proceeds of Crime" Case Study •

Ministry of Consumer and Commercial Relations Search Results

PRIME DEVELOPMENTS

Prime Developments is an Ontario Registered Corporation located in Toronto. Steven Daniels is the listed President and Director.

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CS 0 1'1 Crime 0 Detection "Proceeds of Crime" Case Study •

Ministry of Consumer and Commercial Relabons Search Results

ANDREES

Andrees is an Ontario Registered Corporation located in Toronto. Steven Daniels is the listed President and Director.

CS 0 18 Crime 0 Detection "Proceeds of Crime" Case Study •

Financial Inshtubon Search Results

TORONTO DOMINION BANK 121ST BRANCH A client profile on SD Investments. 3 months statements on a business account.

•

CS 019

TORONTO DOMINION BANK 121st Street Branch Toronto, Ontario

SD Investments Ltd. 190 Bay Street Toronto, Ontario #: 114456 M5G 1X0 Account Statement Date: 11/27/91

..... ..

...... . redits: . . ...... „ escriPtion: ••••••..•••••. . ••.•• . •......

Account Opened $ 0.00 11/06/91 Deposit $ 5,000.00 $ 5,000.00 11/08/91 Deposit $ 5,000.00 $ 10,000.00 11/11/91 Cheque $ 7,500.00 $ 2,500.00 11/13/91 Deposit $ 10,000.00 $ 12,500.00 11/14/91 Cheque $ 700.00 $ 11,800.00 11/17/91 Deposit $ 15,000.00 $ 26,800.00 11/21/91 Cheque $ 10,000.00 $ 16,800.00 11/24/91 Deposit $ 8,000.00 $ 24,800.00 11/27/91 Cheque $ 14,000.00 $ 10,800.00 TORONTO DOMINION BANK • 121st Street Branch Toronto, Ontario

SD Investments Ltd. 190 Bay Street Toronto, Ontario #: 114456 M5G 1X0 Account Statement Date: 12/27/91

1..Date. Description: .Debits credits:. Balance: 11/27/91 Balance Forward $ 10,800.00 12/01/91 Deposit $ 10,000.00 $ 20,800.00 12/03/91 Deposit $ 13,000.00 $ 33,800.00 12/05/91 Cheque $ 20,000.00 $ 13,800.00 12/07/91 Deposit $ 10,000.00 $ 23,800.00 12/10/91 Cheque $ 700.00 $ 23,100.00 12/14/91 Deposit $ 15,000.00 $ 38,100.00 12/17/91 Cheque $ 20,000.00 $ 18,100.00 12/21/91 Deposit $ 7,000.00 $ 25,100.00 12/27/91 Cheque $ 15,000.00 $ 10,100.00

• TORONTO DOMINION BANK 121st Street Branch Toronto, Ontario

SD Investments Ltd. 190 Bay Street Toronto, Ontario Account #: 114456 M5G 1X0 Statement Date: 01/27/92

»0. ..:ue '' '':'.'h:::::.,.:1).eûdriOti.0i11::::::::, D'iiibit•-:':::::::,:-::::•.:.<.::::::'":':::.:Cifédità:e.:::.:::: ,,::::::.::::.::.::,

12/27/91 Balance Forward $ 10,100.00 01/02/92 Deposit $ 12,000.00 $ 22,100.00 01/04/92 Deposit $ 7,000.00 $ 29,100.00 01/07/92 Cheque $ 20,000.00 $ 9,100.00 01/11/92 Deposit $ 16,000.00 $ 25,100.00 01/16/92 Cheque $ 700.00 $ 24,400.00 01/18/92 Deposit $ 7,000.00 $ 31,400.00 01/21/92 Cheque $ 26,000.00 $ 5,400.00 01/25/92 Deposit $ 8,000.00 $ 13,400.00 01/27/92 Cheque $ 3,000.00 $ 7,400.00 SD INVESTMNENTS LTD.

November 11 ig 91

PAY TO Anderson and White Investments Ltd. $ 7,500.00 THE ORDER OF Seven thousand, five hundred XX DOLLARS TORONTO DOMINION BANK 121st Street Toronto, Ontario ce.eceiloaerizer MEMO

1:04456 N 004 11 • 4456 r 0000750000

CN:002687 DA: 11/11/91 TR:01005-002

For Deposit To The Credit of The Payee

01005-002 3 BANK OF NOVA SCOTIA NOV'91' 11 NOV '91' 11 TD BANK NOV 11 1991 B.N.S. ONTARIO PC DATA CENTRE MAIN BRANCH TORONTO, TORONTO, ONTARIO ONTARIO 3 01005-002

SD INVESTMNENTS LTD.

November 14 19 91

PAY TO THE ORDER OF Cash $ 700.00

Seven hundred xx DOLLARS TORONTO DOMINION BANK 100 121st Street Toronto, Ontario

MEMO Q5feewceerdr

1:04456 is 004 I: 11 « 4456 r 0000070000

CN:001156 DA:11/14/91 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK NOV 14 1991 NOV'91' 14 TD BANK 12Ist STREET BRANCH TORONTO, ONTARIO ONTARIO PC

• 3 04456-004 SD INVESTMNENTS LTD.

November 27 ig 91

PAY TO Anderson and White Investments Ltd $ 14,000.00 THE ORDER OF

9.• Fourteen thousand XX DOLLARS TORONTO DOMINION BANK 100 121st Street Toronto, Ontario Ceareceeeier MEMO

1:04456 si 004 I: 11 Is 4456 f 0001400000

CN:000556 DA:11/27/91 TR: 01005-002

For Deposit To The Credit of The Payee 01005-002 3 BANK OF NOVA SCOTIA NOV'91' 27 NOV '91'27 NOV 27 1991 Th BANK B.N.S. MAIN BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 01005-002

SD INVESTPANENTS LTD.

November 21 ig 91

PAY TO THE ORDER OF Prime Developments Ltd $ 10,000.00

Ten thousand XX DOLLARS TORONTO DOMINION BANK 100 121st Street Toronto, Ontario

MEMO œiefeeceere

1:04456 Is 004 I: 11 11 4456 r 0001000000

CN:000987 DA:11/21/91 TR:01121-001

For Deposit To The Credit of The Payee 01121-001 3 BANK OF MONTREAL NOV'91' 21 NOV '91' 21 NOV 21 1991 B TD BANK OF M ist STREET BRANCH DATA CENTRE TORONTO, ONTARIO ONTARIO PC TORONTO, ONTARIO 3 01121-001 • SD INVESTMNENTS LTD.

January 07 19 92

PAY TO $ 20,000.00 THE ORDER OF Anderson and White Investments Ltd. Twenty thousand xv DOLLARS TORONTO DOMINION BANK 100 121st Street Toronto, Ontario

MEMO CWeieff ceeedr

1:04456 004 1: 11 • 4456 r 0002000000

CN:001337 DA:01/07/92 TR:01005-002

For Deposit To The Credit of The Payee

01005-002 3 BANK OF NOVA SCOTIA JAN'92'07 JAN '92' 07 TD BANK JAN 07 1992 B.N.S. ONTARIO PC DATA CENTRE MAIN BRANCH TORONTO, TORONTO, ONTARIO ONTARIO 3 01005-002

SD INVESTMNENTS LTD.

January 16 ig 92

PAY TO Cash $ 700.00 TFIE ORDER OF Seven hundred XX DOLLARS TORONTO DOMINION BANK 100 121st Street Toronto, Ontario Ciftaelo&eee MEMO

1:04456 a 004 1: 11 1114456 r 0000070000

CN:001211 DA:01/16/92 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK JAN'92' 16 JAN 16 1992 TD BANK 12Ist STREET BRANCH ONTARIO PC TORONTO, ONTARIO

• 3 04456-004 SD INVESTPANENTS LID. January 21 1g 92 • PAY TO Prime Developments Ltd $ 26,000.00 THE ORDER OF •■• Twenty six thousand XX DOLLARS TORONTO DOMINION BANK 100 121st Street Toronto, Ontario ceemoaeïr MEMO

1:04456 a 004 1: 11 HI 4456 r 0002600000

CN:001257 DA:01/21/92 'IR:01121-001

For Deposit To The Credit of The Payee

01121-001 3 BANK OF MONTREAL JAN'92' 21 JAN '92' 21 JAN 21 1992 TD BANK B OF M 1st SfREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 01121-001 • SD INVESTMNENTS LTD.

January 27 ig 92

PAY TO THE ORDER OF Anderson and White Investments Ltd $ 3,000.00

Three thousand xx DOLLARS TORONTO DOMINION BANK 100 121st Street Toronto, Ontario

MEMO Ceemeceeee

1:04456 u 004 1: 11 u 4456 r 0000300000

CN:002078 DA:01/27/92 TR:01005-002

For Deposit To The Credit of The Payee

01005-002 3 BANK OF NOVA SCOTIA DEC'92' 27 DEC '92'27 DEC 27 1992 TD BANK B.N.S. MAIN BRANCH DATA CENTRE TORONTO, ONTARIO ONTARIO PC TORONTO, ONTARIO • 01005-002 SD INVESTMNENTS LTD.

December 0519 IL . • PAY TO 771E ORDER OF Steven Daniels $ 20,000.00

Twenty thousand XX DOLLARS TORONTO DOMINION BANK 100 121st Street Toronto, Ontario

MEMO Clgiarecaeedr

1:04456 • 004 1: 11 • 4456 ir 0002000000

CN:001225 DA:12/05/91 TR:00001-003

For Deposit To The Credit of The Payee 00001-003 3 THE ROYAL BANK OF CANADA DEC'91' 05 DEC '91' 05 TD BANK ROYAL BANK DEC 03 1991 DATA CENTRE ONTARIO PC MAIN BRANCH TORONTO, TORONTO, ONTARIO ONTARIO 3 00001-003

SD INVESTMNENTS L'TD. December 101 9 IL PAY TO $ 700.00 THE ORDER OF Cash Seven hundred XX DOLLARS TORONTO DOMINION BANK 100 121st Street Toronto, Ontario CWarffcaledr MEMO

1:04456 a 004 11 114456 1 0000070000

CN:000535 DA: 12/10/91 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK DEC'91' 10 DEC 10 1991 TD BANK 121st STREET BRANCH ONTARIO PC TORONTO, ONTARIO

3 04456-004 SD INVESTMNENTS LTD.

December 171 9 iL PAY TO Prime Developments Ltd THE ORDER OF $ 20,000.00 •

Twenty thousand XX DOLLARS TORONTO DOMINION BANK 100 121st Street Toronto, Ontario

MEMO Ceiabecaeredr

1:04456 a 004 1: 11 114456 r 0002000000

CN:001225 DA:12/17/91 TR:01121-001

For Deposit To The Credit of The Payee 01121-001 3 BANK OF MONTREAL DEC'91' 17 DEC 17 1991 DEC '91' 17 TD BANK B OF M 1st STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 01121-001

SD INVESTMNENTS LTD.

December 271g IL PAY TO THE ORDER OF Prime Developments Ltd. $ 15,000.00

Fifteen thousand xx DOLLARS TORONTO DOMINION BANK 100 121st Street Toronto, Ontario

MEMO Ceeeecalzeie

1:04456 a 004 1: 11 al 4456 r 0001500000

CN:002006 DA:12/27/91 TR:01121-001

For Deposit To The Credit of The Payee 01121-001 3 BANK OF MONTREAL DEC'91'27 DEC '91' 27 DEC 27 1991 TD BANK B OF M 1st STREET BRANCH ONTARIO DATA CENTRE TORONTO, ONTARIO PC TORONTO, ONTARIO 3 01121-001 • •

TORONTO DOMINION BANK 121st Street Toronto, Ontario

DATE INMALS ••••••CHEO UES • •,.•, • ..::ZASH•::. • • ,• EPOSITOR TELLER N.0 2500 @ 1 = @2 = 2500 SD IJHJH @ 5 = CREDIT @10 = ACCOUNT OF @20 = @50 = SD INVESTMENTS © 100 = lu l'ALCHEULIES.1 5,000.00

1:04456 Is 004 I: 110114456r 51 Ill 00500000 Ill

CN:001224 DA:06/11/91 TR:04456-004

For Deposit To The Credit Of The Payee 04456-004 2 TORONTO DOMINION

NOV191' 06 BANK TD NOV 6 1991 DATA CENTRE 121st Street CENTRAL TORONTO, ONTARIO 2 04456-004

• •

TORONTO DOMINION BANK 12Ist Street Toronto, Ontario

DATE INITIALS ASH EPOSITOR TEU.ER FLU it 1111 2500 @ 1 = rsf5 @ 2 = SD 2500 @ 5 = CREDIT @ 10 .. ACCOUNT OF @20 = SD INVESTMENTS @ 100 = [TOTAL: 2HEQUES:1 :nual 5,000.00

404456 11 004': 11m44561 51 00500000

CN:001555 DA:08/11/91 TR:04456-004

For Deposit To The Credit Of The Payee 04456-004 2 TORONTO DOMINION BANK NOV '91' 08 TD NOV 8 1991 DATA CENTRE 12Ist Street CENTRAL TORONTO, ONTARIO 2 04456-004

• •

TORONTO DOMINION BANK 121st Street Toronto, Ontario

DATE I NMALS CHEQUES EPOSITOR TELLER NM /3, fen 2500 @1 = @2 = 2500 SDS1) I JHJH @ 5 = CREDIT 2500 @10 = ACCOUIVT OF @20 = 2500 @50 = SD INVESTMENTS © 100 = TOTALCHEQUEI .CASHI • • TOTAL DEPOSIT1 10,000.00

1:04456 a 004 I: 11114456r 51 10 001000000 al

CN:002100 DA:13/11/91 TR:04456-004

For Deposit To The Credit Of The Payee 04456-004 2 TORONTO DOMINION

NOV '91' 13 BANK TD NOV 13 1991 DATA CENTRE 121st Street CENTRAL TORONTO, ONTARIO 2 04456-004

• TORONTO DOMINION BANK 121st Street Toronto, Ontario

DATE INMALS DEPOSITOR TELLER ?J.11M11 3500 @ 1 = SD rf5 5 @2 = SD 3500 @ 5 = CREDIT 3500 @10 = ACCOUNT OF @20 = 4500 @50 = SD INVESTMENTS @ 100 = rtcrteteitEtitlEs1 rnrA it 15,000.00

1:04456 II 004 1: 11.4456r 51 sO 001500000 Ul

CN:000986 DA:17/11/91 TR:04456-004

For Deposit To The Credit Of The Payee 04456-004 2 TORONTO DOMINION NOV '91' 17 BANK • TD NOV 17 1991 DATA CENTRE 121 81 Street CENTRAL TORONTO, ONTARIO 2 04456-004

• •

TORONTO DOMINION BANK 121 st Street Toronto, Ontario

DATE INMALS CH EDUES • •CASH • pEPOSITOR TFII FR 1 2500 @1 = Mai 24, 1111 @2 = 2500 SD I JH @ 5 = CREDIT 3000 @10 = ACCOUNT OF @20 = @50 = SD INVESTMENTS (a) 100 =

IALCHEQUESA CASIO •• ,--;TOTALDEPOSIT....y. 8,000.00

1:04456 a 004: 11114456r 51 ill 00800000 01

CN:001270 DA:24/11/91 TR:04456-004

For Deposit To The Credit Of The Payee 04456-004 2 TORONTO DOMINION

NOV '91' 24 BANK TD NOV 24 1991 DATA CENTRE • 12Ist Street CENTRAL TORONTO, ONTARIO 2 04456-004

• •

TORONTO DOMINION BANK 12Ist Street Toronto, Ontario

DATE INMALS EPOSFTOR TELLER DI&•ir /fit/ 2500 @1 = @2 = SD rs 2500 @ 5 = CREDIT 2500 @10 = ACCOUIVT OF @20 = 2500 SD INVESTMENTS @ 100

.11TriNtitilEouEs:1 oF,s01 ftÀiÉeösÉT 10,000.00

104456 ii 004 I: 11 a 445611' 51 111 001000000 ill

CN:001347 DA:01/12/91 TR:04456-004

For Deposit To The Credit Of The Payee 04456-004 2 TORONTO DOMINION DEC '91' 01 BANK • 11) DEC 1 1991 DATA CENTRE 12Ist Street CENTRAL TORONTO, ONTARIO 2 04456-004

• •

TORONTO DOMINION BANK 121st Street Toronto, Ontario

DATE INITIALS ::CHEQUES : EPOSITOR I TEU.ER De..3, eel 3500 @ 1 = R @ 2 = SD 3500 SD JII JI-1 @ 5 = CREDIT 3500 @I 0 = ACCOUNT OF @20 2500 @ 50 = SD INVESTMENTS @ 100 = cASR-.1 l'OTAL.DEPOSIT 13,000.00

1:04456 a 004i: 11184456r 51 al 001300000 al

CN:000660 DA:03/12/91 'TR:04456-004

For Deposit To The Credit Of The Payee 04456-004 2 TORONTO DOMINION

DEC91 1 03 BANK TD DEC 3 1991 DATA CENTRE 121st Street CENTRAL TORONTO, ONTARIO 2 04456-004

• • ••■•

TORONTO DOMINION BANK 121st Street Toronto, Ontario

DATE INMALS eCiiteline EPOSITOR TELLER Dge • 1 itn 2500 @1 - SD rsf5 @2 = 2500 @ 5 CREDIT 2500 @10 - ACCOUIVT OF @20 - 2500 @50 - SD INVES17AENTS @ 100 = IT0TAL::CHEDUE$1 ASHI 10,000.00

1:04456 HI 004': 1I .4456r 51 ill 001000000

CN:001221 DA:07/12/91 TR:04456-004

For Deposit To The Credit Of The Payee 04456-004 2 TORONTO DOMINION DEC '91' 07 BANK • TD DEC 7 1991 DATA CENTRE 121st Street CENTRAL TORONTO, ONTARIO 2 04456-004

• •

TORONTO DOMINION BANK 121st Street Toronto, Ontario

DATE INMALS CHEQUES DEPOSITOR TELLER @ 1 = . 1 3500 Dee 1th 1111 © 2 = SD J1 I -1 3500 @ 5 = CREDIT 3500 © 10 = ACCOUNT OF @20 = 4500 @ 50 = SD INVESTMENTS @ 100 = [TOTALCHEGUE ['WEI '1 •TOTAL.DEPOSIT 15,000.00

1:04456 0 0041: 11.4456r 51 ol 001500000 80

CN:001711 DA:14/12/91 TR:04456-004

For Deposit To The Credit Of The Payee 04456-004 2 TORONTO DOMINION

DEC,91' 14 BANK TD DEC 14 1991 DATA CENTRE 12Ist Street CENTRAL TORONTO, ONTARIO 2 04456-004

• •

TORONTO DOMINION BANK 12Ist Street Toronto, Ontario

DATE INMALS CASH EPOSITOR TELLER Die-21, tilt" 2500 @1 = SD rsf5 @2 = SD 3500 @ 5 = CREDIT @10 = ACCOUNT OF @20 = 5{) SD INVESTMENTS @ 100 = iTOTeleHEOVESI :Cast4 ,:torititeeposrril 7,000.00

1:04456 It 004 1: 11114456r 51 01 00700000 01

CN:000331 DA:21/12/91 TR:04456-004

For Deposit To The Credit Of The Payee 04456-004 2 TORONTO DOMINION

DEC '91' 21 BANK TD DEC 21 1991 DATA CENTRE 121st Street CENTRAL TORONTO, ONTARIO 2 04456-004 •

TORONTO DOMINION BANK 12Ist Street Toronto, Ontario

DATE INITIALS .... ,:CHEQUES • • -:" CASH •EPOSMOR TELLER 2,1/12 3500 @1 = @2 = SD I JI-1 3500 @ 5 = CREDIT 3200 @10 = ACCOUNT OF @20 = 2500 @50 = SD INVESTMENTS @ 100 = TOTALCHEQUES I CASH , 1 12,000.00

1:04456 a 004 11114456r 51 VI 001200000 I11

CN:000443 DA:02/01/92 TR:04456-004

For Deposit To The Credit Of The Payee 04456-004 2 TORONTO DOMINION

JAN '92' 02 BANK TD JAN 2 1993 DATA CENTRE 121st Street CENTRAL TORONTO, ONTARIO 2 04456-004

• •

TORONTO DOMINION BANK 12I 5t Street Toronto, Ontario

DATE I NMALS EPOSITOR TELLER Je.. ?”2 3500 @1 — SD rsf5 @2 = SD 3500 @ 5 = CREDIT @10 = ACCOUNT OF @20 = @50 = SD INVESTMENTS @ 100 = riteTALCHEQUES1 7,000.00

1:04456 is 004 11114456r 51 Ol 00700000 al

CN:001787 DA:04/01/92 TR:04456-004

For Deposit To The Credlt Of The Payee 04456-004 2 TORONTO DOMINION

JAN '92' 04 BANK ID • JAN 4 1992 DATA CENTRE 12Ist Street CENTRAL TORONTO, ONTARIO 2 04456-004

• •

TORONTO DOMINION BANK 121st Street Toronto, Ontario

DATE I NMALS • pEPOSITOR TELLER 1 3500 @1 11/2 = @2 = 3500 SD 1J11JH @ 5 = CREDIT 3500 @10 = ACCOUIVT OF @20 = 4500 @50 = SD INVESTMENTS @ 100 =

erALMIEQUES. .CASH[ 16.000,00

1:04456 a 004 1: 11114456r 51 III 001600000 PI

CN:000881 DA: 11/01/92 TR:04456-004

For Deposit To The Credit Of The Payee 04456-004 2 TORONTO DOMINION

JAN '92' 11 BANK TD JAN 11 1992 DATA CENTRE 121st Street CENTRAL TORONTO, ONTARIO 2 04456-004

• •

TORONTO DOMINION BANK 12Ist Street Toronto, Ontario

DATE INMALS cAS JEPCSITOR TEU.ER J•4./2, 3500 @1 @2 = SD rs1-5 3500 @ 5 — CREDIT @ 10 = ACCOUIVT OF @20 = @50 SD INVESTMENTS 100 = ITOTAL:CHEDUES.1 7,000.00

I:04456 111 004 I; 11 al 4456r 51 Ifl 00700000 ri

CN:001276 DA:18/01/92 TR:04456-004

For Deposit To The Credit Of The Payee 04456-004 2 TORONTO DOMINION BANK JAN '92' 18 JAN 18 1992 DATA CENTRE 12Ist Street CENTRAL TORONTO, ONTARIO 2 04456-004 •

TORONTO DOMINION BANK 12Ist Street Toronto, Ontalio

DATE INITIALS ':CASH XPOSITOR TELLER Ja4..2S,1 2 1 3500 @ I - q1 @ 2 = 4500 SDSI) I Jr1JH @ 5 CREDIT @I0 = ACCOUNT OF @20 = @ 50 — SD INVESTMENTS @ 100 = sALCHEQUESI •- >.,TOTAL.DEPOSIT 8,000.00

1:04456 IN 004 1: 11.4456r 51 10 onto» lo

CN:002197 DA:25/01/92 'FR:04456-004

For Deposit To The Credit Of The Payee 04456-004 2 TORONTO DOMINION

JAN '91' 25 BANK TD JAN 25 1992 DATA CENTRE 12Ist Street CENTRAL TORONTO, ONTARIO 2 04456-004

• MADE ONE LTD.

November 06 19 91

PAY TO SI) Investments Ltd. $ 2,500.00 THE ORDER OF • Two thousand, five hundred XX DOLLARS CANADIAN IMPERIAL BANK OF COMMERCE 100 18th Street Toronto, Ontario

MEMO o oaeedr

1:05689 si 010 1: 12211458 I' 0000250000

CN:0001225 DA:11/06/91 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK NOV'91' 06 NOV '91'06 NOV 06 1991 CIBC ID BANK 12Ist STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004

RETAIL CONCEPTS LTD. • November 06 19 91

PAY TO $ THE ORDER OF SI) Investments Ltd 2,500.00

Two thousand, five hundred XX DOLLARS ROYAL BANK OF CANADA 100 32nd Street Toronto, Ontario

MEMO ce caged

1:01225 II 003 1: 45511788 9 r 0000250000

CN:0001226 DA:11/06/91 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK NOV 06 1991 NOV'91' 06 NOV '91'06 TD BANK ROYAL BANK 12Ist STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004 • MADE ONE LTD.

November 08 g 91

PAY TO $ 2,500.00 THE ORDER OF SD Investments Ltd.

Two thousand, five hundred XX DOLLARS CANADIAN IMPERIAL, BANK OF COMMERCE 100 18th Street Toronto, Ontario

MEMO oaege:e'r

1:05689 m 010 I: 122.458 r 0000250000

CN:001556 DA:11/08/91 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK NOV'91' 08 NOV NOV '91'08 08 1991 TD BANK CD3C 121st STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004

RETAIL CONCEPTS LTD.

November 08 19 91

PAY TO THE ORDER OF SD Investments Ltd $ 2,500.00

Two thousand, five hundred XX DOLLARS ROYAL BANK OF CANADA 100 32nd Street Toronto, Ontario

MEMO Ce oeeedr

1:01225 003 I: 455. 788 9 r 0000250000

CN:001557 DA:11/08/91 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK NOV'91' 08 NOV 08 1991 NOV '91'08 TD BANK ROYAL BANK 121st STREET BRFUVCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO • 3 04456-004 MADE ONE LTD.

November 13 g 91 PAY TO $ 2,500.00 THE ORDER OF SD Investments Ltd

Two thousand, five hundred XX DOLLARS CANADIAN IMPERIAL BANK OF COMMERCE 100 18th Street Toronto, Ontario ceerdr MEMO

1:05689 al 010 I: 122.458 r 0000250000

CN:002101 DA:11/13/91 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK NOV'91' 13 NOV '91'13 NOV 13 1991 TD BANK CIBC 12Ist STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004

RETAIL CONCEPTS LTD. November 13 i o .2L . PAY TO THE ORDER OF SD Investments Ltd. $ 2,500.00

Two thousand, five hundred XJC DOLLARS ROYAL BANK OF CANADA 100 32nd Street Toronto, Ontario

MEMO Q5 came

1:01225 is 003 I: 455.788 9 r 0000250000

CN:002102 DA:11/13/91 TR:04456-004

For Deposit To The Credit of The Payee 04456-004 3 TORONTO DOMINION BANK NOV 13 1991 NOV'91' 13 NOV '91'13 TD BANK ROYAL BANK 121st STREET BRANCH DATA CENTRE TORONTO, ONTARIO ONTARIO PC TORONTO, ONTARIO 3 04456-004 NEW AGE ELECTRONICS • November 13 1 g 91 PAY TO THE ORDER OF SD Investments Ltd. $ 2,500.00

Two thousand, five hundred xx DOLLARS BANK OF MONTREAL 100 8th Avenue Toronto, Ontario

MEMO 05 eaerdr

1:07856 li 001 1: 2111s 548 r 0000250000

CN:002103 DA:11/13/91 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK NOV 13 1991 NOV'91' 13 NOV '91'13 TD BANK B OF M 121st STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO • 3 04456-004

ANDREE'S

November 13 1 g 91

PAY TO $ 2,500.00 THE ORDER OF SD Investments Ltd.

Two thousand, five hundred XX DOLLARS ROYAL BANK OF CANADA 100 22nd Street Toronto, Ontario caeier MEMO og

1:02210 a 003 1: 184m 456 7 r 0000250000

CN:002104 DA: 11/13/91 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK NOV'91' 13 NOV '91'13 NOV 13 1991 TD BANK ROYAL BANK 121st STREET BRANCH e DATA CENTRE ONTARIO PC TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004 MADE ONE LTD.

November 17 19 91 PAY TO • 3 500.00 THE ORDER OF SD Investments La $ ,

Three thousand, five hundred XX DOLLARS CANADIAN IMPERIAL BANK OF COMMERCE 100 18th Street Toronto, Ontario Ce (Jamie MEMO

i:05689 ni 010 1: 12211458 r 0000350000

CN:000987 DA:11/17/91 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK NOV'91' 17 NOV '91' 17 NOV 17 1991 TD BANK C1BC 121st STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004 • RETAIL CONCEPTS LTD.

November 17 19 91

PAY TO THE ORDER OF SD Investments Ltd. $ 3,500.00 Three thousand, five hundred XX DOLLARS ROYAL BANK OF CANADA 100 32nd Street Toronto, Ontario

MEMO cape.Wr.

1:01225 ni 003 1 45511788 9 r 0000350000

CN:000988 DA:11/17/91 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK NOV'91' 17 NOV '91' 17 NOV 17 1991 ID BANK ROYAL BANK I 2Ist STREET BRANCH DATA CENTRE TORONTO, ONTARIO ONTARIO PC TORONTO, ONTARIO • 3 04456-004 NEW AGE ELECTRONICS

November 17 ig 91

PAY TO SOO 00 THE ORDER OF Si) Investments Lte $ 3

Three thousand, five hundred XX DOLLARS BANK OF MONTREAL 100 8th Avenue Toronto, Ontario

MEMO ceazedr

1:07856 111 001 1: 21111548 r 0000350000

CN:000989 DA:11/17/91 'TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK 1991 NOV'91' 17 NOV '91' 17 NOV 17 TD BANK B OF M 121st STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004

ANDREE'S

November 17 19 91

PAY TO 4 500 00 THE ORDER OF Si) Investments Ltd. $ '

Four thousand, five hundred X.X DOLLARS BANK OF MONTREAL 100 22nd Street Toronto, Ontario

MEMO caeedr

1:02210 ni 003 1: 1840 456 7 r 0000450000

CN:000990 DA:11/17/91 'TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK NOV 17 1991 NOV'91' 17 NOV '91' 17 TD BANK ROYAL BANK 121st STREET BRANCH DATA CENTRE TORONTO, ONTARIO ONTARIO PC TORONTO, ONTARIO • 3 04456-004 NEW AGE ELECTRONICS November 24 19 91

PAY TO • 500.00 THE ORDER OF SD Investments Ltd $ 2,

Two thousand, five hundred XX DOLLARS BANK OF MONTREAL 100 8th Avenue Toronto, Ontario ceeeréer MEMO

1:07856 a 001 1: 21111548 r 0000250000

CN:001272 DA:11/24/91 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK NOV'91' 24 NOV '91' 24 NOV 24 1991 ID BANK B OF M 12Ist STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004 , • MADE ONE LTD.

November 24 19 91

PAY TO $ 2,500.00 THE ORDER OF SD Investments Ltd.

Two thousand, five hundred XX DOLLARS CANADIAN IMPERIAL BANK OF COMMERCE 100 18th Street Toronto, Ontario

caorielf MEMO

1:05689 a 010 I: 122" 458 r 0000250000

CN:001271 DA:11/24/91 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK NOV 24 1991 NOV'91' 24 NOV '91' 24 TD BANK CD1C 12Ist STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004 ANDREE'S

November 24 1 g 91

PAY TO 3 000.00 THE ORDER OF SD Investments Ltd. $ '

Three thousand XX DOLLARS ROYAL BANK OF CANADA 100 22nd Street Toronto, Ontario

MEMO 05 cea2edr

1:02210 11 003 I: 18411456 7 r 0000300000

CN:001273 DA:11/24/91 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK NOV 24 1991 NOV'91' 24 NOV '91' 24 ID BANK ROYAL BANK 121st STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004 •

• MADE ONE LTD.

December 01 19 91

PAY TO THE ORDER OF SD Investntents Ltd $ 2,500.00

Two thousand, five hundred XX DOLLARS CANADIAN IMPERIAL BANK OF COMMERCE 100 lath Street Toronto, Ontario

MEA40 Ce cCa7edr

1:05689 IN 010 1: 1221, 458 r 0000250000

CN:001348 DA:12/01/91 TR:04456-004

For Deposit To The Credit of The Payee 04456-004 3 TORONTO DOMINION BANK DEC 01 1991 DEC'91' 01 DEC '91' 01 TD BANK CJBC 12Ist STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004

RETAIL CONCEPTS LTD.

December 01 19 91

PAY TO THE ORDER OF SD Investments Ltd $ 2,500.00

Two thousand, five hundred XX DOLLARS ROYAL BANK OF CANADA 100 32nd Street Toronto, Ontario

MEMO 05 name

1:01225 • 003 1; 45511788 9 r 0000250000

CN:001349 DA:12/01/91 TR:04456-004

For Deposit To The Credit of The Payee 04456-004 3 TORONTO DOMINION BANK DEC 01 1991 DEC'91' 01 DEC '91' 01 TD ROYAL BANK BANK 12Ist STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004 NEW AGE ELECTRONICS

December 01 1 9 91 PAY TO THE ORDER OF SD Investments Ltd. $ 2,500.00

Two thousand, five hundred xx DOLLARS BANK OF MONTREAL 100 8th Avenue Toronto, Ontario

MEMO C)5 oaerdr

1:07856 at 001 1: 2111 548 r 0000250000

CN:001350 DA:12/01/91 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK DEC'91' 01 DEC '91' 01 DEC 01 1991 TD BANK B OF M 12Ist STREET BR_ANCH DATA CENTRE TORONTO, ONTARIO ONTARIO PC TORONTO, ONTARIO 3 04456-004

ANDREE'S

December 01 1 9 91

PAY TO $ 2,500.00 THE ORDER OF SD Investments Ltd Two thousand, five hundred xx DOLLARS ROYAL BANK OF CANADA 100 22nd Street Toronto, Ontario Ce caeroe MEMO

1:02210 isi 003 t: 1841456 7 r 0000250000

CN:001351 DA:12/01/91 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK DEC,91 1 01 DEC '91' 01 DEC 01 1991 TD BANK ROYAL BANK 12Ist STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO • 3 04456-004 MADE ONE LTD.

December 03 19 91

PAY TO 3 500.00 THE ORDER OF SD Investments Ltd. $ e

Three thousand, five hundred XX DOLLARS CANADIAN IMPERIAL BANK OF COMMERCE 100 18th Street Toronto, Ontario ae °awe MEMO

1:05689 a 010 1: 122.458 r 0000350000

CN:000661 DA:12/03/91 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK DEC'91' 03 DEC'91' 03 DEC 03 1991 TD BANK cmc 12Ist sluff BItANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004

NEW AGE ELECTRONICS

December 03 19 !! PAY TO $ 3,500.00 THE ORDER OF SD Investments Ltd.

Three thousand, five hundred XX DOLLARS BANK OF MONTREAL 100 ath Avenue Toronto, Ontario

MEMO 05 came

107856 a 001 I: 211.548 r 0000350000

CN:000663 DA:12/03/91 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK DEC'91' 03 DEC 03 1991 DEC'91' 03 TD BANK B OF M 12Ist MEET BItANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004 RETAIL CONCEPTS LTD.

December 03 19 91

PAY TO $ 3,500.00 THE ORDER OF SD Investments Ltd

Three thousand, five hundred .XX DOLLARS ROYAL BANK OF CANADA 100 32nd Street Toronto, Ontario

MEMO ceeee

1:01225 Is 003 1: 455m 788 9 r 0000350000

CN:000662 DA:12/03/91 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK DEC 03 1991 DEC'91' 03 DEC'91' 03 TD BANK ROYAL BANK 121st STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004

ANDREE'S

December 03 19 91

PAY TO 2 500 00 THE ORDER OF SD Investments Ltd

Two thousand, five hundred XX DOLLARS ROYAL BANK OF CANADA 100 22nd Street Toronto, Ontario

MEMO Qe icaerdf-

1:02210 r 003 1: 184111456 7 r 0000250000

CN:000664 DA:12/03/91 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK DEC'91' 03 DEC'91' 03 DEC 03 1991 TD BANK ROYAL BANK 121st STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO • 3 04456-004 RETAIL CONCEPTS LTD. December 07 19 91

PAY TO $ 2,500.00 THE ORDER OF SD Investments Ltd Two thousand, five hundred XX DOLLARS • ROYAL BANK OF CANADA 100

32nd Street 0> Toronto, Ontario

MEMO oaerdr

1:01225 111 003 45511788 9 r 0000250000

CN:001223 DA:12/07/91 TR:04456-004

For Deposit To The Credit of The Payee 04456-004 3 TORONTO DOMINION BANK DEC'91' 07 DEC '91' 07 DEC 07 1991 ROYAL BANK TD BANK 12Ist STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004

NEW AGE ELECTRONICS

December 07 1 9 91

PAY TO Z500.0000 THE ORDER OF SD Investments Ltd. $

Two thousand, five hundred XX DOLLARS BANK OF MONTREAL 100 8th Avenue Toronto, Ontario ceeze MEMO Ce

1:07856 ii 001 i 21111548 r 0000250000

CN:001224 DA:12/07/91 'TR:04456-004

For Deposit To The Credit of The Payee 04456-004 3 TORONTO DOMINION BANK DEC 07 1991 DEC'91' 07 DEC '91' 07 TD BANK B OF M 12Ist STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004 MADE ONE LTD.

December 07 g 91

PAY TO $ 2 500 00 THE ORDER OF SD Investments Ltd. • Two thousand, five hundred xx DOLLARS CANADIAN IMPERIAL BANK OF COMMERCE 100 18th Street Toronto, Ontario C15 cee-dier MEMO

1:05689 ii 010 1: 12211458 r 0000250000

CN:001222 DA:12/07/91 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK DEC 07 1991 DEC191' 07 DEC '91' 07 TD BANK CB3C 121st STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004

• ANDREE'S December 07 ig 91

PAY TO $ 2,500.00 THE ORDER OF SD Investments Ltd

Two thousand, five hundred XX DOLLARS BANK OF MONTREAL 100 22nci Street Toronto, Ontario

MEMO cagedr

1:02210 ii 003 1: 18411456 7 r 0000250000

CN:001225 DA:12/07/91 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK DEC 07 1991 DEC'91' 07 DEC '91` 07 TD BANK ROYAL BANK 121st STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO • 3 04456-004 NEW AGE ELECTRONICS

December 14 i g 9/

PAY TO $ 3,500.00 THE ORDER OF SD Investments Ltd. Three thousand, five hundred XJC DOLLARS 100 BANK OF MONTREAL 8th Avenue Toronto, Ontario ceeed.r MEMO

1:07856 II 001 I: 21111548 r 0000350000

CN:001714 DA:12/14/91 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK DEC'91' 14 DEC '91' 14 DEC 14 1991 TD BANK B OF M 121st STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004

MADE ONE LTD.

December 14 g 91

PAY TO THE ORDER OF SD Investments Ltd $ 3,500.00

Three thousand, five hundred XX DOLLARS CANADIAN IMPERLIL BANK OF COMMERCE 100 18th Street Toronto, Ontario

MEMO oaperàrr

1:05689 Ii 010 I: 12211458 r 0000350000

CN:001712 DA:12/14/91 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK DEC'91' 14 DEC '91' 14 DEC 14 1991 CD3C TD BANK 12Ist STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTAPIO 3 04456-004 RETAIL CONCEPTS LTD.

December 14 i g LL .. PAY TO $ 3,500.00 THE ORDER OF SD Investments Ltd

Three thousand, five hundred XX DOLLARS ROYAL BANK OF CANADA 100 32nd Street Toronto, Ontario inaeïr MEMO

1:01225 tu 003 I: 455111788 9 r 0000350000

CN:001713 DA: 12/14/91 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK DEC'91' 14 DEC '91' 14 DEC 14 1991 TD BANK ROYAL BANK 12Ist STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004

ANDREE'S

December 14 io 91 PAY TO THE ORDER OF Si) Investments Ltd. $ 4,500.00

Four thousand, five hundred XX DOLLARS ROYAL BANK OF CANADA 100 22nd Street Toronto, Ontario

MEMO oaeze

i:02210 11 003 1: 1801456 7 r 0000450000

CN:001715 DA:12/14/91 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK DEC'91' 14 DEC '91' 14 DEC 14 1991 TD BANK ROYAL BANK 121st STREET BRANCH DATA CENTRE TORONTO, ONTARIO ONTARIO PC TORONTO, ONTARIO • 3 04456-004 MADE ONE LTD.

December 21 19 91

PAY TO SD Investments Ltd. $ 3,500.00 THE ORDER OF • Three thousand, five hundred X.X DOLLARS .11V CANADIAN IMPERLIL BANK OF COMMERCE 100 18th Street Toronto, Ontario

MEMO 05 oaezier

1:05689 al 010 1: 122.458 le 0000350000

CN:000332 DA:12/21/91 TR:04456-004

For Deposit To The Credit of The Payee 04456-004 3 TORONTO DOMINION BANK DEC 21 1991 DEC'91' 21 DEC '91' 21 TD BANK CDIC 121st STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004

RETAIL CONCEPTS LTD.

December 21 19 iL PAY TO $ 3,500.00 THE ORDER OF SD Investments Ltd.

Three thousand, five hundred XX DOLLARS ROYAL BANK OF CANADA 100 32nd Street Toronto, Ontario

MEMO Ce came

1:01225 is 003 1: 455111788 9 r 0000350000

CN:000333 DA:12/21/91 TR:04456-004

For Deposit To The Credit of The Payee 04456-004 3 TORONTO DOMINION BANK DEC'91' 21 DEC '91' 21 DEC 21 1991 TD BANK ROYAL BANK 121st STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004 • MADE ONE LTD.

January 02 ig 92

PAY TO 111E ORDER OF SD Investments Ltd. $ 3,500.00

Three thousand, five hundred XX DOLLARS CANADIAN IMPERIAL BANK OF COMMERCE 100 18th Street Toronto, Ontario

MEMO ceeeà(1-

1:05689 u 010 12211 458 r 0000350000

CN:000444 DA:01/02/92 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK JAN'91' 02 JAN '92' 02 JAN 02 1992 TD BANK CIBC 12Ist STREET BRANCH DATA CENTRE TORONTO, ONTARIO ONTARIO PC TORONTO, ONTARIO 3 04456-004

NEW AGE ELECTRONICS

January 02 ig 92

PAY TO $ 2,500.00 THE ORDER OF SD Investments Ltd Two thousand, five hundred XX DOLLARS BANK OF MONTREAL 100 8th Avenue Toronto, Ontario 05 MEMO (came

1:07856 a 001 1: 211.548 r 0000250000

CN:000446 DA:01/02/92 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK JAN'91' 02 JAN '92' 02 JAN 02 1992 TD BANK B OF M 12Ist STREET BFtANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO • 3 04456-004 RETAIL CONCEPTS LTD.

January 02 ig 92

PAY TO $ 3,500.00 THE ORDER OF SD Investments Ltd.

Three thousand, five hundred XX DOLLARS ROYAL BANK OF CANADA 100 32nd Street Toronto, Ontario

MEMO ceee'r

1:01225 is 003 1: 4551788 9 r 0000350000

CN:000445 DA:01/02/92 TR:04456-004

For Deposit To The Credit of The Payee 04456-004 3 TORONTO DOMINION BANK JAN'91' 02 JAN '92' 02 JAN 02 1992 TD BANK ROYAL BANK 12Ist STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004

ANDREE'S

January 02 ig 92

PAY TO $ 2,500.00 THE ORDER OF SD Investments Ltd Two thousand, Jive hundred XX DOLLARS ROYAL BANK OF CANADA 100 22nd Street Toronto, Ontario

MEMO caere

1:02210 003 1: 184.456 7 r 0000250000

CN:000447 DA:01/02/92 TR:04456-004

For Deposit To The Credit of The Payee 04456-004 3 TORONTO DOMINION BANK JAN'91' 02 JAN '92' 02 JAN 02 1992 TD BANK ROYAL BANK 121st STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004 RETAIL CONCEPTS LTD.

January 04 .i g 92 PAY TO THE ORDER OF SD Investments 1,td $ 3,500.00

Three thousand, five hundred xX DOLLARS ROYAL BANK OF CANADA 100 32nd Street Toronto, Ontario

MEMO caeredr

1:01225 IN 003 1: 45515788 9 r 0000350000

CN:000789 DA:01/04/92 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK DEC'92' 04 DEC '92' 04 DEC 04 1992 TD BANK ROYAL BANK 121st STREET BRANCH DATA CENTRE TORONTO, ONTARIO ONTARIO PC TORONTO, ONTARIO 3 04456-004

MADE ONE LTD.

January 04 g 92

PAY TO 3 500.00 THE ORDER OF SD Investments Ltd. $ ) Three thousand, five hundred XX DOLLARS CANADIAN IMPERIAL BANK OF COMMERCE 100 18th Street Toronto, Ontario ce&-edr MEMO

0000350000 1:05689 ii 010 1: 122111458 r

CN:000788 DA:01/04/92 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK DEC'92' 04 DEC '92' 04 DEC 04 1992 TD BANK CI:BC 121st STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO • 3 04456-004 MADE ONE LTD. January 11 1 g 92

PAY TO SD Investments Ltd. 500.00 THE ORDER OF $ 3' • Three thousand, five hundred XX DOLLARS C... CANADIAN IMPERLIL BANK OF COMMERCE 100 18th Street Toronto, Ontario

MEMO Ce caerie

1:05689 li 010 I; 12211458 r 0000350000

CN:000882 DA:01/11/92 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK JAN 11 1992 JAN'92' 11 JAN'92' 11 TD BANK GIB C 121st STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004

RETAIL CONCEPTS LTD. January 11 1 g 92

PAY TO 3 500 00 ORDER OF SD InvestmentsTHE Ltd $ ' ' Three thousand, five hundred_ XX DOLLARS ROYAL BANK OF CANADA 100 32nd Street Toronto, Ontario

A4EMO Ce caewdr

1:01225 n 003 1: 45501788 9 r 0000350000

CN:000883 DA:01/11/92 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK JAN'92' 11 JAN'92' 11 JAN 11 1992 ROYAL BANK TD BANK 121st STREET BRANCH DATA CENTRE TORONTO, ONTARIO ONTARIO PC TORONTO, ONTARIO 3 04456-004 • NEW AGE ELECTRONICS

January 11 1 g 92

PAY TO $ 3,500.00 THE ORDER OF SD Investments Ltd.

Three thousand, five hundred XX DOLLARS BANK OF MONTREAL 100 8th Avenue Toronto, Ontario

MEMO 05 eagedr

1:07856 11 001 1: 21111548 r 0000350000

CN:000884 DA:01/11/92 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK JAN'92' 11 JAN'92' 11 JAN 11 1992 TD BANK B OF M 12Ist STREET BRANCH DATA CENTRE TORONTO, ONTARIO ONTARIO PC TORONTO, ONTARIO 3 04456-004

ANDREE'S January 11 1 g 92

PAY TO 500.00 THE ORDER OF SD Investments Ltd. $ 4' Four thousand, five hundred xx DOLLARS ROYAL BANK OF CANADA 100 22nd Street Toronto, Ontario 05 cea7-eidr MEMO

0000450000 1:02210 11 003 1: 18411456 7 r

CN:000885 DA:01/11/92 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK JAN.92' 11 JAN'92' 11 JAN 11 1992 TD BANK ROYAL BANK 121st STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO • 3 04456-004 NEW AGE ELECTRONICS

January 18 1 9 92

PAY TO $ 3,500.00 THE ORDER OF SD Investments Ltd Three thousand, five hundred XX DOLLARS • BANK OF MONTREAL 100 8th Avenue Toronto, Ontario

MEMO caeïr

1:07856 a 001 I: 2111 548 r 0000350000

CN:001277 DA:01/18/92 TR:04456-004

For Deposit To The Credit of The Payee 04456-004 3 TORONTO DOMINION BANK JAN 18 1992 JAN'92'18 JAN'92' 18 TD BANK B OF M 12Ist SI'REET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004

ANDREE'S

January 18 g 92

PAY TO 3 500.00 THE ORDER OF SD Investments Ltd $ ,

Three thousand, five hundred XX DOLLARS ROYAL BANK OF CANADA 100 22nd Street Toronto, Ontario

ceeffe MEMO ci

I:02210 a 003 I: 1841 456 7 r 0000350000

CN:001278 DA:01/18/92 TR:04456-004

For Deposit To The Credit of The Payee 04456-004 3 TORONTO DOMINION BANK JAN 18 1992 JAN'92' 18 JAN'92' 18 TD BANK ROYAL BANK 12Ist STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004 • NEW AGE ELECTRONICS

January 25 19 92 • PAY TO $ 3,500.00 THE ORDER OF SD Investments Ltd.

Three thousand, five hundred XX DOLLARS BANK OF MONTREAL 100 8th Avenue Toronto, Ontario

MEMO caereer

1:07856 ai 001 1; 211r 548 r 00003511000

CN:002198 DA:01/25/92 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK JAN 25 1992 JAN'92'25 JAN'92'25 TD BANK B OF M 12Ist STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 04456-004

ANDREE'S

January 25 19 92

PAY TO $ 4,500.00 714E ORDER OF SI) Investments Ltd.

Four thousand, five hundred Xr DOLLARS ROYAL BANK OF CANADA 100 22nd Street Toronto, Ontario

MEMO ci caerdr

1;02210 Is 003 1; 18411 456 7 r 0000450000

CN:002199 DA:01/25/92 TR:04456-004

For Deposit To The Credit of The Payee

04456-004 3 TORONTO DOMINION BANK JAN 25 1992 JAN'92'25 JAN'92'25 ID BANK ROYAL BANK 12Ist STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, • ONTARIO 3 04456-004 Crime 0 Detection "Proceeds of Crime" Case Study • Oa,

Nand Institubon Search Results

BANK OF MONTREAL 1ST STREET BRA_NCH A client profile on Prime Developments. 3 months statements on a business account.

•

CS 0 20 BANK OF MONTREAL 1st Street Branch Toronto, Ontario

Prime Developments 57 Avenue Road Toronto, Ontario

Account #: 7364 -21 Statement Date:Nov. 28, 1991

} Date: Description: Debits Credits: Balance

11/03 Account Opened $ 0.00 11/21 Deposit $ 10,000.00 $ 10,000.00

PLEASE CHECK THIS STATEMENT:WITHOUT . DELA

• BANK OF MONTREAL 1st Street Branch Toronto, Ontario

Prime Developments 57 Avenue Road Toronto, Ontario Account #: 7364-21 Statement Date: Dec. 28, 1991

Date ebit= eedità:

11/28 Balance Forward $ 10,000.00 12/17 Deposit $ 20,000.00 $ 30,000.00 12/27 Deposit $ 15,000.00 $ 35,000.00

!LEASECHECKI7HISSTÂTEMENTONITHOUPDELAYe

• • BANK OF MONTREAL ist Street Branch Toronto, Ontario

Prime Developments 57 Avenue Road Toronto, Ontario Account #: 7364-21 Statement Date: Jan. 28, 1992

Description: Debits Credits:

12/28 Balance Forward $ 35,000.00 01/21 Deposit $ 26,000.00 $ 61,000.00

• •

BANK OF MONTREAL 1st Street Toronto, Ontario

DATE INMALS EPOSITOR TELLER ?J. 21, ern 10,000 @ I = @ 2 = spSD I peg @ 5 = CREDIT @ 10 = ACCOUNT OF @20 @ 50 = Prima Developments 100 = rItoTmeHEQUESI 10,000.00

1:01121 11 001 1: 7364.21r 51 at 001000000 al

CN:000986 DA:21/11/91 TR:01121-004

For Deposit To The Credit Of The Payee 01121-001 1 BANK OF MONTREAL

NOV'91' 21 B OF M NOV 21 1991 DATA CENTRE 121st TORONTO, Street ONTARIO TORONTO, ONTARIO 1 01121-001 •

BANK OF MONTREAL 1st Street Toronto, Ontario

DATE I NMALS CASH EPOSITOR TELLER Dc.1111t1 20,0011 Yy @ 2 = sr)SD I @ 5 = CREDIT @10 = ACCOUIVT OF @20 = @ 50 = Prime Developments @ 100 = l'0TALCHECUES:.1 ' '70TA1...DEPOs1r 20,000.00

1:01121 111 001 1: 73641121r 51 002000000

CN:001224 DA:17/12/91 TR:01121-004

For Deposit To The Credit Of The Payee 01121-001 3 BANK OF MONTREAL

DEC '91' 17 B OF M DEC 17 1991 DATA CENTRE 121st Street TORONTO, TORONTO, ONTARIO ONTARIO 3 01121-001

• •

BANK OF MONTREAL let Street Toronto, Ontario

DATE INMALS UÉS EPOSITOR TELLER J.4.21, It* @ 1 = f5 @2 — SD I rs @ 5 = CREDIT @10 = ACCOUAfT OF @20 = @50 = Prime Development. @ 100 = ITOTAUHEOUES:1 26,000,00

1:01121 is 001 i: 7364 sair 51 III 002600000 I I/

CN:001256 DA:21/01/91 TR:01121-004

For Deposit To The Credit Of The Payee 01121-001 3 BANK OF MONTREAL

JAN '91' 22 B OF M JAN 21 1992 • DATA CENTRE 12Ist Street TORONTO, TORONTO, ONTARIO ONTARIO 3 01121-001

• • SD INVESTMNENTS LTD.

November 21 19 91

PAY TO Prime Developments Ltd. $ THE ORDER OF 10,000.00

Ten thousand XX DOLLARS TORONTO DOMINION BANK 100 121st Street Toronto, Ontario Ceeeeffeaeze MEMO

1:04456 a 004 I: 11 um 4456 i • 0001000000

CN:000987 DA: 11/21/91 TR:01121-001

For Deposit To The Credit of The Payee 01121-001 3 BANK OF MONTREAL NOV'91' 21 NOV 21 1991 NOV '91' 21 TD BANK B OF M 1st STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO • 3 01121-001

• •

SD INVESTPANENTS LTD.

December 1719 91

PAY TO Prime Developments Ltd. $ THE ORDER OF 20,000.00

Twenty thousand XX DOLLARS TORONTO DOMINION BANK 100 121s1 Street Toronto, Ontario Ogi ezéir MEMO aeece

1:04456 a 004 1: 11 4456 r 0002000000

CN:001225 DA:12/17/91 'TR:01121-001

For Deposit To The Credit of The Payee

01121-001 3 BANK OF MONTREAL DEC 17 1991 DEC'91' 17 DEC '91' 17 TD BANK B OF M 1st STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, • ONTARIO 3 01121-001

• •

BANK OF MONTREAL 1st Street Toronto, Ontario

DATE INITIALS ' EPOSETOR TELLER Dee 2), 15000 @1 = @2 = SD I JIdi-1 @ 5 CREDIT 10 = ACCOUNT OF @20 = @50 Prima Developments © 100 =

ITO1ALHEI12UES I CASh

::-TOTADEPOSIT 15,000.00

1:01121 Is 001 s: 7364.21r 51 1 0 001500000 Ill

CN:002005 DA:27/12/91 TR:01121-004

For Deposit To The Credit Of The Payee 01121-001 1 BANK OF MONTREAL

DEC '91' 27 • B OF M DEC 27 1991 DATA CENTRE 12Ist Street TORONTO, TORONTO, ONTARIO ONTARIO 1 01121-001

• •

SD INVESTMNENTS LTD. December 271 9 IL PAY TO 15,000.00 THE ORDER OF Prime Developments Ltd. $

Fifteen thousand xx DOLLARS TORONTO DOMINION BANK 100 121st Street Toronto, Ontario

MEMO Ceeleeceeelf

1:04456 004 1: 11 •4456 r 0001500000

CN:002006 DA:12/27/91 TR:01121-001

For Deposit To The Credit of The Payee 01121-001 3 BANK OF MONTREAL DEC 27 1991 DEC'91'27 DEC '91' 27 BANK BOFM ID It STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO 3 01121-001

• •

SD INVESTAANENTS LTD.

January 21 19 92

PAY TO THE ORDER OF Prime Developments Ltd. $ 26,000.00

Twenty six thousand XX DOLLARS TORONTO DOMINION BANK 100 121st Street Toronto, Ontario

MEMO Ceereceeee

1:04456 o 004 11 lb 4456 r 0002600000

CN:001257 DA:01/21/92 TR:01121-001

For Deposit To The Credit of The Payee

01121-001 3 BANK OF MONTREAL JAN'92' 21 • JAN '92' 21 JAN 21 1992 TD BANK B OF M 1st STREET BRANCH ONTARIO PC DATA CENTRE TORONTO, ONTARIO TORONTO, ONTARIO

3 01121 -001

• Crime o Detection "Proceeds of Crime Case Study •

Financial Institubon Search Results

BANK OF MONTREAL 8TH AVENUE BRANCH A client profile on New Age Electronics. An investigation showed that New Age Electronics was opened by Steven Daniels and remained open for 4 months. Your request for records and subsequent investigation showed the following history to the account: Cash Deposits: Small cash deposits at a frequency of about every second day in the amount of $1,500 each totalling $35,000 over four months. Cheques: • All funds were drawn out of the account through cheques payable to SD Investments, TD Bank, 121st Street Branch.

CS 0 21 Crime 0 Detection lroceeds of Crime" Case Study •

Financial Institution Search IlesniLs

CIBC 18TH STREET BRANCH

A client profile on Made One Ltd. An investigation showed that Made One Ltd. was opened by Steven Daniels and remained open for 4 months. Your request for records and subsequent investigation showed the following history to the account: Cash Deposits: Small cash deposits at a frequency of about every second day in the amount of $1,500 • each totalling $40,000 over four months. Cheques: All funds were drawn out of the account through cheques payable to SD Investments, TD Bank, 121st Street Branch.

•

CS 0 22 Crime 0 Detection"Proceeds of Crime" Case Study •

Financial Institution Search Results

ROYAL BANK 32ND STREET BRANCH

A client profile on Retail Concepts Ltd. An investigation showed that Retail Concepts Ltd. was opened by Steven Daniels and remained open for 4 months. Your request for records and subsequent investigation showed the following history to the account: Cash Deposits: Small cash deposits at a frequency of about every second day in the amount of $1,500 each totalling $40,000 over four months. Cheques: All funds were drawn out of the account through cheques payable to SD Investments, TD Bank, 121st Street Branch.

CS • 23 Crime 0 Detection "Proceeds of Crime" Case Study •

fmancial Insbtabou Search Results

ROYAL BANK 22ND STREET BRANCH

A client profile on Andrees. An investigation showed that Andrees was opened by Steven Daniels and remained open for 4 months. Your request for records and subsequent investigation showed the following history to the account: Cash Deposits: Small cash deposits at a frequency of about every second day in the amount of $1,500 • each totalling $40,000 over four months. Cheques: All funds were drawn out of the account through cheques payable to SD Investments, TD Bank, 121st Street Branch.

•

CS 0 211 Crime 0 Detection "Proceeds of Crime" Case Study

RIMS

CS 0 aS Crime 0 Detection "Proceeds of Crime" Case Study • TELEPHIME MTCIIUICM

Detective John Matthews

YOU Detective John Matthews please.

DETECTIVE MATTHEWS Spealdng.

YOU John, it's Detective Proceeds of Crime, returning your call. I understand you may have • some information on the Daniels investigation.

DETECTIVE MATTHEWS That's right. During our drug investigation, the surveillance teams observed Steven Daniels enter the Toronto Dominion Bank at 121st Street on a number of occasions.

YOU How long ago?

DETECTIVE MATTHEWS Right up to about a month before we popped him.

YOU • OK, I'll check it out. Is there anything else?

CS • 26 Crime 0 Detection "Proceeds of Crime" Case Sudy

4. •

DETECTIVE MATTHEWS No, that's it.

YOU Alright, thanks.

Dote& Results of the search warrants on Steven Daniels and International Investments have not turned up any reference to an account at T-D Bank, 121st Street. The head of security at the Bank is James Lowell.

CS021 Crime 0 Detection "Proceeds of Crime" Case Study e

TELEPHON MTCRUIEW

James Lomeli

YOU James Lowell please.

JAMES LOWELL Speaking.

YOU James, it's Detective Proceeds of Crime. I'm currently investigating a Steven Daniels and his Company International Investments Ltd. Mr. Daniels has been arrested and charged with drug trafficking. We have information that may suggest that Mr. Daniels or a company of his may have an account at your 121st Street Branch. Would you be able to look into that for me?

JAMES LOWELL Sure, just wait a moment. Hello, Nothing on Steven Daniels but he opened a business account at the branch. The company is called SD Investments, account number 114456, opened about 3 months ago.

YOU OK. I'll be arranging for a search warrant right away. I'll fax a copy to you first. Would you notify the branch that I'll be in?

JAMES LOWELL • OK. Let me lcnow if you need anything else.

CS 0 28 Crime 0 Detection"Proceeds of Crime" Case Study

el. TELENION EOM Larry Terms'

YOU Larry Terrissi please.

LARRY TERRES SI Speaking.

YOU Mr. Terrissi, it's Detective Proceeds of Crime. I'm currently investigating a Steven Daniels and his company SD Investments. Mr. Daniels has been arrested and charged with drug trafficking. Our investigation has shown that SD Investments has issued several cheques to your company over the last couple of months.

LARRY TERRISSI Yes, well we have acted as investment managers for SD Investments for the last six months.

YOU Is the account still open?

LARRY TERRIS SI Just one moment... hello, yes it is.

CS • 29 Crime 0 Detection "Proceeds of Crime" Case Study

YOU Is there an account statement that you keep on your customers listing all of their investment?

LARRY TERRISSI Yes, we keep a statement listing all account activities.

YOU Mr. Terrissi. I'll be arranging for a search warrant to obtain all of your records on this account. We may make an application to restrain the assets as well. Could you tell me what balance is in SD Investments account?

LARRY TERRIS SI $ 46,856.00

YOU Thank you.

LARRY TERRIS SI You're welcome.

YOU I should be in tomorrow.

LARRY TERRIS SI Fine, I'll see you then.

CS 0 30 Crime 0 Detection -Proceeds of Crime" Case Study • O.

YOU Goodbye...oh just one more thing...

LARRY TERRISSI Yes...

YOU Could you check to see if you have an account in the names of Steven Daniels or Interna- tional Investments?

LARRY TERRIS SI Oh yes, I think so, just a minute... hello, we have an account in the name of Steven Daniels.

YOU You do... what is the balance in that account?

LARRY TERRIS SI Two hundred and eighty thousand.

YOU Dollars!

LARRY TERRIS SI Yes.

CS °3I e

Crime and Detection Proceeds of Crime

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