illuminance
Legacy Member
Crime pays in Montreal's underground economy
Money laundering and tax evasion have spread their tentacles into all sorts of legitimate areas of business
By PAUL DELEAN, The GazetteApril 18, 2010
MONTREAL – Montrealers must be starting to wonder if they're living in some sort of economic Wild West.
On March 18, two people died in a hail of bullets in a ritzy boutique called FlawNego, one of two reportedly owned by alleged gang leader Ducarme Joseph on a high-rent section of St. Jacques St. W. This week, Ducarme was sentenced in an unrelated matter to 10 months in jail for assault and possession of a silencer.
In the March 30 Quebec budget, which introduced a steep new health "contribution" and fee hikes for the general public, the government devoted several pages to the issues of economic crime, tax avoidance and evasion, which it called "priority" concerns. It estimated the province's underground economy at $10 billion, with tax losses from the construction sector alone about $1.4 billion a year.
This past week, a strip club on a well-travelled section of Ste. Catherine St. W. had its permit suspended temporarily because of concerns about public safety, specifically the danger of a retaliatory shooting related to the St. Jacques St. slayings. One of its co-owners is believed to be the leader of a rival gang, who police said bought "at least 50 per cent" in 2008 in association with members of the Montreal Mafia.
With numerous café bombings and multimillion-dollar investment frauds also part of its recent history, the city is developing a bit of a reputation for unsavoury businesses.
While there is no clear picture of how widespread criminal activity and tax evasion is in Quebec or even if it's getting worse, studies suggest the underground economy has more than doubled since the 1970s, with some estimating it now amounts to as much as 15 per cent of the gross domestic product.
The Quebec government, which evaluates its tax losses at $3 billion a year, clearly is feeling political pressure to take action.
In the last provincial budget, it mentioned that "infiltration of the legal economy" by criminal groups "has been observed, in particular over the course of the past year."
Money laundering, by which cash obtained through crime or illegal activity is processed to appear legitimate (for a fee that usually runs around 20 per cent), is now a fact of life here, as it is throughout the world.
It can be as near as the neighbourhood coffee shop that somehow stays in business despite apparently having few customers, the gallery that sells pricey art to unidentified clients who pay cash, or the no-name automated-teller machine (ATM) at the local bar or dépanneur.
The sophistication of today's money launderers is such that only a small percentage ever get caught. They know that any bank deposit over $10,000 is scrutinized, so they act accordingly, usually dealing in smaller amounts, often using one or more underlings and several trips or institutions to do the actual depositing and collecting.
Michel Mailloux, a longtime Montreal bank executive who now gives seminars to the financial-services professionals in Quebec on topics such as ethics and money-laundering laws, said tax departments often don't detect it because on paper, the numbers seem genuine.
"The best way to hide $100 million is to declare $20 million. That throws off the tax department. It's looking for hidden money, not money that's declared. There are no red flags about lifestyle, either. The lifestyle difference between someone declaring $3 million or $1 million of income is not obvious," Mailloux said.
Forensic accountant Phil Levi said another particularity of money laundering is that it doesn't victimize its patrons - at least not directly.
They're still getting money from the cash machine or clothes from the boutique financed by the proceeds of crime. The crime is happening elsewhere.
The consequences for society as a whole, however, are significant. With government deficits spiraling and Quebec taxpayers who pay their fair share near the breaking point, dollars hidden or withheld from the taxman are putting a major strain on public services and finances.
The government said as much in last month's budget, where it vowed to get tougher with cheats, in part by increasing the maximum prison sentence for tax evasion from two years to five years less a day.
"Fighting tax evasion and avoidance is essential to the implementation of any measure seeking to restore balance to public finances," the budget said. "While most taxpayers satisfy their tax obligations, large amounts escape the tax authorities. Apart from the tax cheats themselves, nobody gains from tax evasion."
The perception that everybody's doing it also is part of the problem, Mailloux said.
"Tax evasion is a function of the fiscal pressure people are under. If they feel they're paying too much tax, and others don't pay enough, or are hiding money, they're more likely to try themselves."
As part of its new offensive against tax evasion, the government has prominently targeted the restaurant and construction industries, two perennial sore spots.
Offshore tax havens also are a lingering problem for Canadian tax collectors, with companies hiding cash and or avoiding taxes with a variety of elaborate schemes, often involving mortgages and inter-company loans.
"Looking at the records, you can't really tell what's going on. But you have to ask yourself why an offshore bank would issue a mortgage to this company, if it's paying higher interest than it could get at home," Levi said.
Michel Nadeau of the Institut sur la gouvernance d'organisation privées et publiques said the offshore problem begins at home, in the Montreal office towers where lawyers and accountants come up with the "aggressive" tax-avoidance strategies.
There are countless other forms of avoidance or outright evasion, from the home renovators and plumbers who take only cash (and never declare it), to the corporate executives (and even government workers and politicians) writing off personal disbursements, meals and entertainment as legitimate business expenses.
But Levi, for one, is not convinced the problem is getting worse. "If more of it is coming out now," he said, "it's because people are more aware and notice it more."
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How the scams work
ATMs: laundry machines
An automated-teller machine is the perfect vehicle for money laundering. It dispenses cash, and therefore needs a constant supply. Large quantities of small bills obtained, for example, from the sale of drugs, can be used to stock ATMs that are privately owned. The ATM users are paid (unknowingly) with the dirty money, cash is drawn from their clean bank accounts, and the site where the ATM is located gets a share as commission.
The provincial government clearly is aware of the problem, as it served notice in the March 30 budget that it planned to table a bill governing the operation of money-services businesses involved with cheque-cashing, fund transfers and private ATMs.
Artful scams
The art world is another choice haunt for laundering. A typical scam involves placing a supposedly precious item at a gallery or auction that an accomplice comes to see, loves at first sight and pays a bundle for, no questions asked. (Unlike many countries, Canada has no requirement that buyers or sellers identify themselves).
The consignor, who may well have provided the dirty money to the accomplice, gets a cheque or a bank draft from the vendor, minus the store's commission, and that money suddenly is back in the economic mainstream.
Casinos: a sure bet
Casinos are another laundering haven. At the Montreal Casino, you need to identify yourself only when transacting $10,000 or more (though you risk being intercepted if observed moving from one cashier to another).
Bogus building bills
The construction industry in Quebec is notorious for its use of phony invoices, by which shell companies provide invoices for non-existent goods or services to other firms. A cheque drawn on the payer's account gets cashed, with most of the money returned to him, minus a percentage for the provider of the bogus service. The scheme serves the dual function of inflating expenses and reducing the taxes of the paying firm, and providing an untraced cash injection to the company owner.
Overbilling is another favourite tactic. How many trucks of cement came to pour the foundation, or truckloads of lumber were delivered? Maybe not as many as the customer was charged. "The construction industry doesn't have a computer tracking everything that comes in," forensic accountant Phil Levi notes.
The resto dodge
Restaurants in the province have a long history of not declaring all their receipts, inflating supply costs and spoilage, and not remitting all taxes collected. Some Montreal eateries don't even make a pretense of collecting tax; it isn't even shown on their handwritten bills. Quebec, which figures
it's being denied more than $400 million a year by restaurant scams, intends to introduce mandatory microcomputers that are supposed to record every sale and ensure the taxman gets his due. That assumes, of course, that all sales are rung up to a connected cash register. Restaurants with a hidden system, or a cash drawer, will still get around it
Read more: http://www.montrealgazette.com/news...ound+economy/2917755/story.html#ixzz0lbQE0vJq
http://www.montrealgazette.com/news/Crime+pays+Montreal+underground+economy/2917755/story.html
all this really means is watch out - they know you a lying piece of shit tax dodging criminal & ur biz is really a front!? :dunno:
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