Ottawa must crack down on Toronto underground banks, community leaders say

Click to play video: 'Iranian community leaders want Ottawa to crack down on underground banks'
Iranian community leaders want Ottawa to crack down on underground banks
WATCH: Kaveh Shahrooz, human rights lawyer says Iranian community says Global News investigation highlights money laundering crisis ignored by federal government – Jan 27, 2021

Iranian-Canadian community leaders and anti-money laundering experts say Canada is failing to police the explosive growth of Toronto-based underground currency exchanges that are laundering drug money, financing foreign terrorist groups, and supporting the Iranian regime.

Kaveh Shahrooz, a lawyer and human rights activist, and Reza Banai, a Toronto businessman and former president of the Iranian Canadian Congress, said details of a Global News investigation into money laundering in the Toronto currency exchanges highlight a crisis that was already recognized in the Iranian community.

The investigation revealed that alleged RCMP mole Cameron Ortis is accused of selling RCMP operations plans to the transnational criminal network of Altaf Khanani, a money laundering kingpin with links to foreign terrorist organizations and the Iranian regime.

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Khanani’s global network included a number of Toronto currency traders and laundered billions annually for international drug cartels and terror groups including Hezbollah, according to U.S. government investigations and statements from the U.S. Treasury Department on sanctions.

“For years activists have been trying to draw the attention of Canadian officials that money is pouring into the country and people are under threat,” Shahrooz said. “Hopefully (the Ortis case) should drive home the point that this is a serious crisis. The Iranian community needs to be protected from international money laundering and terrorist networks with ties to Iran.”

Ortis faces a trial on numerous information security charges. His lawyer has not responded to repeated requests for comment from Global News.

Banai said the RCMP and Canadian Revenue Agency need to crack down on “a mushroom of growth of foreign exchange stores” and suspicious transactions in Toronto.

“I’m concerned about the volume of the exchange transfers from Iran without any monitoring by the Canadian government,” Banai said. “Because we know the Iranian economy is controlled by the Islamic Revolutionary Guards (in Iran) and lots of criminal money is infiltrating into the Iranian economy, in many means.”

Sources including former RCMP anti-money laundering expert Garry Clement said since 2010 — when international banking sanctions were placed on Iran — Toronto has become an important conduit for underground banking through the Middle East. The currency shops involved help the Iranian regime evade sanctions that restrict international banking transactions.

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One Toronto currency trader with knowledge of RCMP investigations said that before 2010, there were only about five currency shops in Toronto’s Iranian community. But now within several blocks of Steeles Avenue and Yonge Street in Toronto, there are over 70 currency exchanges, according to the source. This is where the RCMP raided the currency shop of Farzam Mehdizadeh in 2016. Mehdizadeh was charged for allegedly laundering $100 million in Montreal and Toronto in a single year.

Project Collector

Probes of Khanani and Mehdizadeh were related to the RCMP drug-money laundering investigation called Project Collector.

In 2019, the RCMP announced charges against 17 Canadian suspects in a “vast international money laundering network” connected with Iran, China, Dubai, Lebanon, Mexico and Colombia.

Police alleged two of those charged, Nader Gramian-Nik, 57, of Vaughan, Ont., and Mohamad Jaber, 52, of Laval, Que., are the kingpins of the drug-trafficking cells targeted in Project Collector.

Operatives in Montreal and Toronto were collecting cash for drug cartels and laundering the funds through a number of Toronto currency exchanges, police said. And the funds were often wire transferred to Dubai — a trading zone used by the Iranian regime to evade sanctions — and transferred for drug exports in Mexico and Colombia.

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But a currency trading source told Global News massive drug money laundering related to Project Collector networks has continued unimpeded through Toronto currency shops, despite the RCMP’s investigations.

Click to play video: 'Former RCMP expert says up to 50 Iranian underground banks in Toronto'
Former RCMP expert says up to 50 Iranian underground banks in Toronto

Clement told Global News he has identified about 50 currency shops in the Yonge and Steeles area. He said shops are often hidden in jewellery stores or back offices in the area’s strip malls. And he believes some of these currency exchanges are not reporting transactions to Fintrac, Canada’s anti-money laundering agency.

Clement said he has repeatedly shared his private investigation findings with Ottawa. He shared a letter with Global News that he sent to former Finance Minister Bill Morneau and current Finance Minister Chrystia Freeland in 2017, warning of the “expansion of the underground market for Iranian transfers.”

Clement said he believes global money launderers like Khanani have turned Canada into a hub for Iranian state-sponsored terror financing because of Canada’s lax enforcement.

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“You have to have weapons and move money to carry out terror attacks. So you need an Altaf Khanani who has this financial network, basically with the reach of a big-five Canadian bank, in order to operate,” Clement said.

“And Canada is showing itself to be a weak link in enforcing against money laundering. Because what we are seeing in Toronto is identical to the underground banking we are seeing on the west coast with money laundering, and how it relates to the regime in China. In Toronto, it relates to the regime in Iran.”

The RCMP would not confirm or deny estimates of up to 70 currency trading shops in north Toronto, some of which are believed to be involved in underground transfers with Iran, according to Clement and other sources.

“The RCMP does not regulate or track money exchanges therefore, we could not validate or speak to the number of related money services businesses,” Sgt. Lucie Lapointe said.

Lapointe said the RCMP has “specialized financial crime resources across the country” that receive intelligence and determine “whether a financial criminal investigation is warranted.”

But critics, including Clement, say the RCMP has little ability to investigate international money laundering, and chose to disband its Ontario financial crimes unit in 2020 despite increasing threats in Canada from organizations like Khanani’s.

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Meanwhile, in response to questions about the estimated number of currency exchanges in Toronto that could be facilitating underground banking to Iran, spokesman Darren Gibb stated, “Fintrac does not actively maintain data on the communities served by money services businesses.” Currently, there are 1,943 money services registered with Fintrac in Canada, he said.

But Gibb cited a 2019 “operational alert” from Fintrac that says underground banks in Canada, which informally transfer funds between countries, are “often exploited in an effort to evade sanctions, state currency control restrictions, and to facilitate criminal activities such as money laundering.”

“Looking the other way”

Both Banai and Shahrooz said they believe pro-Iranian regime groups are increasing their political and financial influence in Canada by means of underground banking. Yet despite repeated warnings from the Iranian community, Ottawa seems to be turning a blind eye.

Banai said that in Toronto commercial real estate, stories of business people asking others to accept payments for goods and services with bags of cash are becoming common. He said he suspects Ottawa is ignoring suspicious international transactions because the government wants to see funds flowing into Canada’s economy. But underground banking is causing home prices to rise and squeezing out legitimate businesses in Toronto, he said.

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“Absolutely, the underground banking and currency exchanges are impacting the real estate prices,” Banai said. “The number one threat is this is impacting the lives of everyday people.”

And Shahrooz said in the Iranian community “there are well known cases of recent arrivals in Canada with known or suspected ties to the regime, and vast sums of money.”

“The worry is those with money are able to buy their way in with investments and the Canadian government is looking the other way,” Shahrooz said. “We worry that Hezbollah and the Iranian regime is making inroads in Canada. And they are involved in intimidation of the community and also skewing the public debate in Canada.”

Both Banai and Shahrooz said they have recognized that wealthy pro-Iranian regime businessmen in Toronto appear to increasingly take community leadership positions and seek to fund political candidates.

Banai said he thinks Canadian political parties could be influenced by political fundraisers who are involved in the Toronto currency trading business.

Previously, Global News reported that currency exchange owner Alireza Onghaei donated $240 to MP Majid Jowhari’s Richmond Hill Liberal riding association on Dec. 3, 2019.

On Nov. 27 and 28, 2019, Onghaei was interviewed by the Canadian Security Intelligence Service, which alleged he had admitted to “assisting the government of Iran in the clandestine wiring of monies into Canada” through Dubai.

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Onghaei denied any wrongdoing in the case, and no charges have been laid against him.

And the MP said he was “not aware of the serious allegations” until they were reported by Global News.

“Had I known about them, I would not have associated myself with Mr. Onghaei,” he said. “I denounce any foreign interference in Canada.”

In another example, Global News has found that one of the RCMP’s targets in the Altaf Khanani investigation is a Toronto currency trader involved in major real estate development and significant political donor activities in Ontario.

Finance Minister Chrystia Freeland was asked to respond to concerns about underground banking from Iran and previous warnings, such as the 2017 letter from Garry Clement.

“Money laundering, terrorist financing and tax evasion continue to represent a threat to the safety and security of all Canadians, and harm the integrity and stability of our economy,” a response from the ministry said.

“That is why the government has made significant investments in new initiatives to strengthen Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime.”

In December, Public Safety Minister Bill Blair announced his government is funding nearly $100 million for new anti-money laundering units in B.C., Alberta, Ontario and Quebec by the end of March.

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Blair’s announcement came after B.C. Attorney General David Eby criticized Ottawa for failing to provide anti-money laundering resources promised by the Liberals in the last federal election.

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