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Canada can – and should – crack down on trade-based money laundering

Published

10 months ago

11 minute read

From the Macdonald Laurier Institute

By Jamie Ferrill for Inside Policy

Neglecting to take decisive action enables organized criminal networks whose activities cause significant harm on our streets and those of our international partners.

Financial crime bears considerable political and economic risk. For the incoming Trump administration, the threat that transnational organized crime and the illicit financial flows pose to global financial stability is a top priority. The threat of tariffs by the Trump administration makes the costs to Canada in enabling global financial crime all too apparent. In addition to the cost of tariffs themselves, the associated reputational risk and loss of confidence in Canada’s financial system has implications for investments, credit, supply chains, and bilateral co-operation and agreements.

Canada’s proximity to major international markets, stable economy, high standard of living, and strong institutions and frameworks make it an attractive place to do business: for both legitimate and criminal enterprises.

Trade is a key contributing sector for Canada’s economic security. It represents two-thirds of Canada’s GDP, and exports alone support nearly 3.3 million Canadian jobs. Trade is also highly vulnerable to criminal exploitation. Ineffective oversight, regulatory complexity, and lagging technology adoption, coupled with a lack of export controls, make it possible to move vast proceeds of crimes, such as those from drug trafficking, human trafficking, corruption, and tax evasion through the global trade system.

These vulnerabilities are well-known by transnational organized crime groups. They are able to effectively move billions of dollars of dirty money through the global trade system every year, a method commonly referred to as Trade-Based Money Laundering (TBML).

While any statistics must be interpreted with caution, evidence shows that TBML is a prevalent method of money laundering.

What is it?

There are several types of Trade-Based Financial Crimes such as terrorism financing through trade, sanctions evasion, and simply trade fraud. However, the TBML definition is necessarily specific. Essentially here, TBML is a money laundering method: the processing of criminal proceeds to disguise their illegal origin. TBML involves the movement of value through the global trade system to obfuscate the illicit origin. This is usually done through document fraud: undervaluing, overvaluing, phantom shipping, or multiple invoicing. Different techniques employ different aspects of the supply chain. And TBML may be just one method used within larger money laundering operations.

By way of example, US authorities allege that two Chinese nationals living in Chicago laundered tens of millions of dollars for the Sinaloa and Jalisco Cartels. Drugs were smuggled into the United States and sold throughout the country. The proceeds from these sales were collected by the Chinese nationals. Those proceeds were used to purchase bulk electronics in the United States, which were then shipped – with a falsified value – to co-conspirators in China, who sold them locally. The legitimacy provided by the electronics sales and the trade transaction provide cover to “clean” proceeds from precursor crime.

Either the importer and/or the exporter of the goods can shift value. Chances here are the electronics shipped were undervalued: on leaving the country, they are declared at a (much) lower value than they are actually worth. The importer in China pays the undervalued invoice, then sells the goods for what they are worth. The profit from those electronics now appears clean, since it was used for a “legitimate” sale. The ensuing value gap can be transferred informally or stored as illicit wealth. The value has now shifted, without fiat currency leaving the country of origin.

But the cycle does not stop there. The value and money itself continue to traverse around the world, through various intermediaries such as financial institutions or cryptocurrency exchanges. It then goes right back into the system and enables the very crimes and organized crime groups that generated it in the first place. It is, in short, the business model of organized crime.

The Canadian problem

Ultimately, the proceeds of crime that have been legitimised through TBML (and other money laundering methods) supports the criminal enterprises that generated the value in the first place. In the example, these are prolific cartels who have been behind the fentanyl crisis, migrant trafficking and abuse, corruption, and widespread violence that destabilizes communities and undermines governments across North America and beyond.

With new actors, drug routes, and ways of doing business, the cartels are very much active in Canada. The Sinaloa cartel in particular has established a significant presence in Canada where it controls the cocaine market, manufactures and distributes fentanyl, and is embedded in local criminal networks. This increases Canada’s role as a strategic location for drug trafficking and a base to export abroad, notably to Europe, the US, and Australia.

Hells Angels, Red Scorpions, ’Ndrangheta, and other organized crime groups are also exploiting Canada’s strategic location using their transnational links. These groups are active in criminal activities that generate proceeds of crime, which they launder through Canadian institutions. From drug trafficking to extortion to human and sex trafficking, the foundation of organized crime relies on generating and maximizing profits. The proceeds generally need to be laundered; otherwise, there are direct lines back to the criminal organizations. They are, without a doubt, exploiting the trade sector; the very sector that provides so much economic security for Canada.

Canada’s regulation, reporting, and prosecution record for money laundering is notoriously weak. Its record for regulation, reporting, and prosecution for trade-based financial crimes, namely here TBML, is even weaker.

As financial institutions and other regulated entities face increased scrutiny following the TD Bank scandal and the Cullen Commission’s inquiry into money laundering in BC, more criminal activity is likely to be displaced into the trade sector and the institutions it comprises.

TBML is difficult for financial institutions to detect, especially given that 80 per cent of trade is done through open accounts. It exploits established trade structures that are meant to protect the system –like documentation and invoicing processes – by manipulating transactions outside traditional payment systems, which requires more sophisticated anti-money laundering strategies to address these hidden vulnerabilities.

Addressing the problem

Trade is a gaping vulnerability. Yet, it attracts minimal attention in countering transnational financial crime. Containing the fentanyl crisis for one requires a collaborative effort to bolster supply chains and the trade sector against financial crime. This means global cooperation, technological advances (such as blockchain technology), appropriate resourcing, more scrutiny on high-risk countries and shippers, and regulatory innovation.

But political will is in short supply. The federal government’s Budget 2024 and the resulting proposed Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorism Financing Act will grant CBSA new authorities to counter TBML, but limited resources to make good on them. And CBSA cannot do it alone.

Transnational organized crime and the illicit financial flows that support it poses a threat to global financial stability. The enabling of financial crime hurts Canada’s reputation abroad. With a new political regime emerging in the US, Canada cannot afford to be seen as a weak link. Loss of confidence in a country and its financial system has implications for investments, credit, supply chains, and bilateral cooperation and agreements.

By neglecting to take decisive action, we inadvertently enable organized criminal networks whose activities cause significant harm on our streets and those of our international partners. With profits as their primary driver, it is imperative that we scrutinize financial pathways to disrupt these illicit operations effectively.

Organized crime groups are not bound by privacy laws, bureaucracy, political agendas, and government budgets. They are continually evolving and staying many steps ahead of what Canada is equipped to control: technologically, geographically, strategically, logistically, and tactically. Without appropriate regulations, technological advances, and resources in place, we will continue to be a laggard in countering financial crime.

More systematic change is needed across regulatory frameworks, law enforcement coordination and resourcing, and international partnerships to strengthen oversight, close loopholes, and enhance detection and disruption.  It would be a low-cost signal to the Trump administration that Canada is committed to upping its game.

Jamie Ferrill is senior lecturer in Financial Crime at Charles Sturt University and co-editor of Dirty Money: Financial Crime in Canada.

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UN, Gates Foundation push for digital ID across 50 nations by 2028

Published on October 13, 2025

By

From LifeSiteNews

By Tim Hinchliffe

With 30 nations enrolled, the UN and Gates Foundation’s digital ID campaign signals accelerating efforts to create a global digital infrastructure that centralizes identity and data.

The 50-in-5 campaign to accelerate digital ID, fast payment systems, and data exchanges in 50 countries by 2028 reaches a 30 country milestone.

Launched in November 2023, the 50-in-5 campaign is a joint effort of the United Nations, the Bill and Melinda Gates Foundation, and their partners to rollout out at least one component of Digital Public Infrastructure (DPI) in 50 nations within five years.

DPI is a civic technology stack consisting of three major components: digital ID, fast payment systems, and massive data sharing between public and private entities.

50-in-5 started with 11 first-mover countries, and with the count now at 30 the participating countries include:

Bangladesh, Brazil, Cambodia, Dominican Republic, Estonia, Ethiopia, France, Guatemala, Jamaica, Kazakhstan, Lesotho, Malawi, Mexico, Moldova, Nigeria, Norway, Senegal, Sierra Leone, Singapore, Sri Lanka, South Africa, South Sudan, Somalia, Togo, Trinidad and Tobago, Uganda, Ukraine, Uruguay, Uzbekistan, and Zambia.

The 50-in-5 campaign celebrated its 30-country milestone during a sideline event at the U.N. General Assembly in New York on September 22.

There, government officials, like Ukraine’s deputy prime minister, praised the work of 50-in-5 while the ministers of digital economy from Nigeria and Togo called for an interoperable digital identity system for the entire African continent.

“Nations want to maintain their own ID databases, but I think we have a unique opportunity to apply strong data exchange system interoperability,” said Tijani.

“I think a digital identity system that can go with you wherever you are going on the African continent would be a fantastic example,” he added.

In March 2025, the Nigerian government published a framework to develop national Digital Public Infrastructure that would leverage digital ID to track and trace “key life events” of every citizen from the cradle to the grave.

“Throughout a citizen’s life, from birth to old age, there are marked moments of significant life events requiring support or service from the government,” the paper begins.

“Some of these services include registration of births, antenatal healthcare, vaccines, school enrollment, scholarships, health insurance for business registrations, filing of taxes, etc.”

These “life events” require every citizen to have a digital ID:

The Federal Government of Nigeria is on a mission to appropriately deploy digital technology to support Nigerians through these significant and profound moments so they can integrate into the state and enjoy the benefits of citizenhood from cradle to old age.

Back at the 50-in-5 milestone event, Togo’s Minister of Digital Economy and Transformation Cina Lawson called for a free, cross-border, interoperable digital ID powered by the Modular Open Source Identity Platform (MOSIP).

MOSIP is a Gates-funded platform that “helps govts & other user organizations implement a digital, foundational identity system.”

Said Lawson, “We’ve initiated conversations with our neighbors, namely Benin, to have interoperability of our ID systems, but also Burkina Faso and other countries such as Senegal, because we’re using MOSIP platform, so what we do is that we host meetings of countries that are interested the platform, so that we could see how we [are] operating it and so on.”

“Our ID system, using the MOSIP platform, is really the ID that the majority of the Togolese will have because first of all it’s free, it doesn’t require to show proof of citizenship, and so on, so that is the ID card of the poorest of the Togolese,” she added.

Lawson also spoke at the 50-in-5 launch event in November 2023, where she explained that Togo’s DPI journey began with the arrival of COVID-19.

First, the government set up a digital payments system within 10 days.

“We deployed it, and we were able to pay out 25 percent of all Togolese adults, and we distributed $34 million that the most vulnerable Togolese received directly through their mobile phones,” said Lawson.

Then, came vaccine passports.

“We created a digital COVID certificate. All of a sudden, the fight against the pandemic became really about using digital tools to be more effective,” she added at the time.

To get an idea where DPI is heading, Ukraine’s Deputy Prime Minister Myhailo Fedorov gave a pre-recorded speech for the 50-in-5 milestone event, saying that his country was successful in building “the state in a smartphone” via the DIIA app, which had reached 23 million users.

“For every citizen, government should be simple, convenient, nearly invisible, and accessible in just a few clicks,” said Fedorov.

“Today, 23 million people use the DIIA app […] Since the launch of DIIA in 2020, Ukrainians and the state have saved about $4.5 billion to date.”

“This is the combined anti-corruption and economic effect of digitalizing services.”

“For us, it’s powerful proof of DIIA’s efficiency and the real impact of building a digital state,” he added.

Speaking at the World Economic Forum (WEF) Global Technology Governance Summit on April 7, 2021, Fedorov told the panelists of the “Scaling Up Digital Identity Systems” session, that it was Ukraine’s goal to “enable all life situations with this digital ID.”

“The pandemic has accelerated our progress […] People have no choice but to trust technology,” Fedorov said at the time.

“We have to make a product that is so convenient that a person will be able to disrupt their stereotypes, to break through from their fears, and start using a government-made application,” he added.

The 50-in-5 campaign is a collaboration between the Bill and Melinda Gates Foundation, the United Nations Development Program, the Digital Public Goods Alliance, the Center for Digital Public Infrastructure, and Co-Develop; with support from GovStack, the Inter-American Development Bank, and UNICEF.

The Center for Digital Public Infrastructure is backed by Co-Develop and Nilekani Philanthropies.

Nandan Nilekani is one of the architects of India’s digital identity system, Aadhaar.

Co-Develop was founded by The Rockefeller Foundation, the Bill & Melinda Gates Foundation, Nilekani Philanthropies, and the Omidyar Network.

The Omidyar Network is a funder of MOSIP.

The Digital Public Goods Alliance lists both the Gates and Rockefeller foundations in its roadmap showcasing “activities that advance digital public goods,” along with other organizations and several governments.

At last year’s Summit of the Future, 193 nations agreed to the non-binding “Pact for the Future,” which dedicates a section in its annex, the “Global Digital Compact,” to implement DPI in member states.

One year later, the U.K. announced it was going to force Britons into mandatory digital ID schemes under the guise of combatting illegal immigration.

Reprinted with permission from The Sociable.

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Business

Netherlands Seizes Chinese-Owned Chipmaker in Unprecedented Security Move

Published on October 13, 2025

By

Sam Cooper's avatar Sam Cooper

Court-approved removal of executive Zhang Xuezheng bears hallmarks of counter-intelligence concern

The Dutch government has taken control of Chinese-owned semiconductor manufacturer Nexperia, invoking an urgent national-security law directed at Beijing to safeguard Europe’s access to critical technology used across the automotive and electronics industries.

In a statement issued late Sunday, the Ministry of Economic Affairs said it had taken the “highly exceptional” decision to invoke the Goods Availability Act on September 30. The move followed “recent and acute signals” of such “significant scale and urgency” involving “serious governance shortcomings and actions within Nexperia” that Minister Vincent Karremans was compelled to intervene.

“The decision aims to prevent a situation in which the goods produced by Nexperia would become unavailable in an emergency,” the ministry said.

“These signals posed a threat to the continuity and safeguarding on Dutch and European soil of crucial technological knowledge and capabilities. Losing these capabilities could pose a risk to Dutch and European economic security.”

It is not known what specific information Dutch authorities gathered on Nexperia executive Zhang Xuezheng, who has been suspended from all management and board positions, but the move, approved by the Amsterdam Court of Appeal, has the hallmarks of a national security alert deemed severe by Dutch lawmakers.

Nexperia, headquartered in Nijmegen, produces semiconductors used widely in the European automotive industry and consumer electronics and is a key link in the continent’s industrial supply chain. The government said normal production will continue, but Karremans now has powers to block or reverse company decisions that could harm national or European interests.

The ministry’s order bars Nexperia and all its global subsidiaries, branches, and offices from making any adjustments to their assets, intellectual property, business operations, or personnel for one year.

Nexperia’s Chinese parent company, Wingtech Technology Co., a Shanghai-listed conglomerate placed on the U.S. Commerce Department’s Entity List in 2023, denounced the Dutch move, saying it “constitutes an act of excessive interference driven by geopolitical bias, not by fact-based risk assessment.” Wingtech said the measure “gravely contravenes the European Union’s long-standing advocacy for market-economy principles, fair competition, and international trade norms,” and “strongly” protested “discriminatory treatment toward a Chinese-owned enterprise.”

Wingtech disclosed to the Shanghai Stock Exchange that it had been notified of the Dutch order on September 30, but the government did not make the intervention public until October 12.

The Dutch government’s action marks the first time the Netherlands has used its emergency powers to seize control of Chinese-state linked company — an escalation that mirrors Washington’s strategic-industrial posture and signals Europe’s entry into a new era of techno-sovereignty.

In Britain, Nexperia’s ownership structure had already triggered alarm. In 2021, the company’s acquisition of Newport Wafer Fab, the UK’s largest semiconductor plant, was blocked by the Conservative government over national-security fears. The UK later ordered Nexperia to divest most of its stake under the National Security and Investment Act in 2022.

The controversy resurfaced this year amid the collapse of a high-profile espionage prosecution under Prime Minister Keir Starmer’s government. The Mail on Sunday reported, citing an unidentified source, that Christopher Berry—one of two men previously charged with spying for China—“sent details of the row within government on the Newport Wafer Fab semiconductor factory, which was initially sold to Nexperia but later blocked by the Conservative government over national-security fears.”

The Netherlands’ intervention follows escalating moves by allied governments to tighten control over critical-tech supply chains. Just days earlier, Beijing imposed sweeping export restrictions on rare-earth minerals, essential for cars, wind turbines, and electronics, citing “national security” grounds — mirroring Western justifications for semiconductor controls. The action drew a strong counter-threat from U.S. President Donald Trump, who warned that Washington could impose 100 percent additional tariffs on all Chinese goods if Beijing “weaponizes its mineral dominance.”

A semi-detente appeared to emerge after Trump’s weekend remarks suggesting a pause in escalation. But the Dutch government’s unilateral action underscores a global race to secure access to critical industrial components amid fears of spreading conflict in Europe and rising tensions in Asia.

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