Types of financial crime
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Proceeds of crime
When an investigation into proceeds of crime occurs, it focuses on organized crime groups' illegal financial gains. An investigation will track the flow of money and the acquisition of assets to determine if the goods are gained from illegal activities.
Proceeds of crime might include:
- Bank accounts
Proceeds of crime vs. offence-related property
Proceeds of crime are the financial gains resulting from committing a crime.
Offence-related property is any property, within or outside Canada, that is:
- Involved in the commission of an indictable offence
- Used in any manner in connection with the commission of such an offence
- Intended to be used for committing an offence
Organized crime groups use money laundering to disguise their profits made from crimes. Money laundering:
- Converts proceeds of crime into a less suspicious form
- Conceals the criminal origins and ownership of funds
- Creates a legitimate explanation for the source of the funds
Organized crime groups try to disguise the money by spending it in ways that makes it hard for police to detect.
Common businesses used for money laundering include:
- Law firms
- Money service businesses/Currency exchanges
- Real estate agencies
- Car dealerships
The impacts of proceeds of crime and money laundering:
- Both may have negative economic and social consequences
- Both can be used to support and strengthen organized crime groups or to fund terrorist activity, nationally and internationally
Serious fraud are fraud cases of provincial, national or international significance, in which one or more of the following elements are present:
- Substantial value and/or financial losses
- Substantial impact on victims
- High degree of criminal sophistication
- Requirement for special investigative expertise
- Municipal, provincial, or federal government are victims
- It is in the public or national interest to pursue an investigation
- Corporate fraud
- Investment fraud
- Securities fraud
- Mass marketing fraud
- Credit fraud
The impacts of serious fraud:
- Economic decline/destabilization of global economies
- Threatens the integrity of financial institutions
- Destabilising democracy (i.e. election rigging)
- Financial burden on victims
- Emotional and psychological burdens placed on the victims
Capital market fraud
Capital market fraud entails investment and securities fraud, also known as stock market fraud. Together, they encompass a variety of illegal activities and strategies.
Examples of capital market fraud include:
- Insider trading
Illegal insider trading occurs when privileged, non-public information is used to buy or sell a security.
- Market manipulation
Involves efforts to artificially increase or decrease a company's share price. Examples include: pump and dump schemes, high closing activities and volume manipulation.
- Pump and dumps
The fraudulent practice of encouraging investors to buy shares in a company in order to artificially inflate the price, and then selling one's own shares while the price is high.
- Illegal distribution
A sale of securities to investors that does not comply with securities law trading and disclosure requirements.
- False prospectus
When a corporation presents a false or distorted prospectus. A prospectus is one of the means by which the public is informed of the soundness of a corporation's venture.
The impacts of capital market fraud:
- Negative market reaction
- The collapse of companies/financial institutions
- Financial burden on victims
- Costs involved in conducting an investigation
Help us combat financial crime
Find out how to report different types of financial crime.
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