Chapter 1: Threats and their Implications for Federal Policing
Special Report on the Federal Policing Mandate of the Royal Canadian Mounted Police
12. The operational environment in which the RCMP conducts its federal policing activities is complex. In particular, two powerful and interrelated trends, globalization and informatization, Footnote 17 significantly affect how crime is conducted and investigated. They also shape the major criminal threats facing Canada and its allies. This chapter briefly surveys these issues, discusses major criminal threats, and highlights the implications for the Federal Policing program.
The globalization of crime
13. Many serious criminal threats are global. The same trends that have facilitated faster flows of people, money, information and goods — free trade, deregulation, the exponential growth in transport modalities and exchange – have been a boon to organized crime groups. Footnote 18 The vast shipping and parcel delivery industries are used to traffic large volumes of illicit goods across borders. Footnote 19 A global “parallel underground financial system” enables a wide range of criminal activities from the illicit drug trade to tax evasion and money laundering. Footnote 20 The illicit drug trade is Canada’s largest criminal market, and many of these drugs come from outside the country. Footnote 21 One academic study estimated that in 2014, about 8% of the global economy, about $7.6 trillion USD, was hidden in tax havens around the world. Footnote 22 The Canada Revenue Agency estimated that in 2014, tax havens deprived the Canadian federal government of as much as $3 billion in tax revenue. Footnote 23 Professional money launderers in Canada launder the proceeds of crimes committed in other countries, Footnote 24 and they use foreign banks and companies to launder the proceeds of crimes committed in Canada. Footnote 25 Many other serious criminal threats also have an international dimension: violent extremists are inspired by transnational ideological movements or attacks in other countries; cybercriminals abroad target Canadian victims, and cybercriminals in Canada target victims elsewhere.
14. Ungoverned spaces and weak state capacity in many parts of the world allow organized crime and terrorist groups to operate with near-impunity. This leads to common-place violence in those countries, and the further decline or replacement of state institutions. Footnote 26 This has implications for Canada. Humanitarian crises and conflict around the world increase human trafficking and smuggling. Footnote 27 Instability in certain countries have made it more dangerous for Canadians who travel or work abroad, and Canadians have recently been taken hostage for profit by terrorist groups, Footnote 28 or have been killed in terrorist incidents abroad. Footnote 299 Instability in Afghanistan, especially after the withdrawal of the U.S. military in August 2021, has increased the global supply of opium and heroin, Footnote 30 and may have given international terrorists a safe haven from which to train or plot attacks. Footnote 31 Weak state capacity in South and Central America enabled the record-breaking high levels of cocaine and other drugs produced there in recent years, Footnote 32 which provide criminals with the opportunity to import higher amounts of drugs to Canada and has led in some instances to illegal migration caused by drug-related violence.
Crime and information
15. Digital technologies and the internet have transformed criminality. Criminals are often early adopters of new technology, as they seek the highest financial reward for the smallest risk of prosecution. Footnote 33 The proliferation of devices, applications (apps), and data have changed how criminals plan and commit crimes. Developments in smart phone technologies and social media enable criminals to communicate through multiple and varied means while challenging the police to keep up with each new technological innovation. Criminals can easily store information outside Canada in the cloud (networks of computer servers located all over the world), but many cloud or communication service providers in other countries cannot or refuse to disclose certain electronic data directly to Canadian police, or may not be able to do so in ways that support investigations. Footnote 34 Criminals also use encryption to protect their communications and hinder detection and investigation. Footnote 35 Many commonly used messaging apps are encrypted by default, and several organized crime groups have used cell phones that are designed to only communicate with other phones on an encrypted and closed network. Footnote 36 (In August 2022, the Committee launched a framework review of the lawful interception of communications by security and intelligence organizations.) Footnote 37
16. The internet plays a significant role in crime today. The internet allows criminals to plan, commit, and hide their crimes more easily, and to efficiently buy and sell illicit goods and services on online marketplaces. Many online marketplaces operate on the dark web and accept cryptocurrencies as payment, both factors that complicate investigations. The vast amounts of personal and financial information stored online by companies and businesses are lucrative targets for criminals to steal and sell or to extort victims. During the pandemic, millions of people worked from home and quickly became the targets of cybercrime. Footnote 38 Criminals also took advantage of the pandemic to spread misinformation about the novel coronavirus and sell fake goods on-line. Footnote 39
17. The internet is also used to spread misinformation, and plan attacks or unlawful demonstrations. For violent extremists, the internet is a venue for recruitment, facilitation and guidance about methods, tactics and weapons, and a means to meet, spread or amplify misinformation and propagate hate. Footnote 40 In recent years, conspiracy theories propagated online have spurred several Canadians to violent or threatening acts, including an individual who intended to arrest the Prime Minister in part because of a conspiracy theory about the origin of COVID-19. Footnote 41 The internet is also used by states for a wide range of malicious activities, some of which are crimes. These states use the internet to spread misinformation, stifle criticism of their regimes, influence Canadian voters and elections, create or amplify discord among Canadians, influence government decision-making, attempt to divide western alliances, and conduct cyber attacks against government systems and, increasingly, private sector and academic intellectual property. Footnote 42 Industrial control systems, the computer systems that control our electricity grid and various manufacturing processes, are often connected to the internet, which has made them vulnerable to cybercrime and other threats. Footnote 43
Key threats
18. The key threats investigated by Federal Policing are violent extremism, transnational and serious organized crime, financial crime, foreign interference, espionage, and cybercrime. These threats are not mutually exclusive. For example, violent extremists may buy weapons from organized crime groups, spying may involve remotely gaining unauthorized access to a computer, and some terrorist groups traffic illicit drugs and launder the proceeds. Footnote 44 Police are engaged when a threat activity is believed to constitute a criminal offence, regardless of the identity of the threat actor or their motivation. For example, unauthorized access to a computer system in Canada is contrary to the Criminal Code regardless of whether it is done for financial or geopolitical gain, and regardless of whether it was done by a foreign intelligence service abroad or an organized crime group in Canada. Footnote 45 The following surveys the criminal threat environment.
Violent extremism
19. Violent extremism and terrorism remain a threat to national security and public safety. Canada’s National Terrorism Threat Level has been ‘medium’ since early October 2014, which means that a violent act of terrorism could occur. Footnote 46 Between 2001 and June 2021, 62 individuals were charged with terrorism offences under the Criminal Code. Footnote 47 While sophisticated attacks have occurred in the past and cannot be discounted, violent extremists and terrorists have most recently acted alone and used more unsophisticated tactics, such as vehicle ramming or knife assaults, to attack people in unsecured public spaces. Footnote 48
20. Federal Policing focuses on the criminal activities of groups or individuals involved in planning or undertaking terrorist activity. The perpetrators are overwhelmingly young men, with 95% of Canadians recruited online to extremist groups being male with an average age of 27. The criminal activity can include threats, attempted attacks, or conspiracies to commit violent acts against people, property, or essential services, where the activity is wholly or partially motivated by an ideological, political or religious cause. Footnote 49
21. Ideologically motivated violent extremists and religiously motivated violent extremists are key extremist threats. Ideologically motivated violent extremism (IMVE) has a long history in Canada. Footnote 50 Individuals motivated by this ideology are driven by a range of influences, such as xenophobia, anti-government views and misogyny. Footnote 51 The rise of this violent extremism has been linked in Canada to racism, Islamophobia and antisemitism, and is reflected in the record-breaking number of hate crimes over the past five years. Footnote 52 Ideologically motivated violent extremism itself has increased in recent years. Footnote 53 Between 2014 and 2021, CSIS reported that individuals motivated at least in part by IMVE “killed 26 people and wounded 40 others on Canadian soil — more than any other form of violent extremism.” Footnote 54 For example, in January 2017 six people were killed when a gunman opened fire inside a mosque in Quebec City. In June 2021 an individual used a pick-up truck to murder four members of a Canadian Muslim family in London, Ontario, and seriously injure the fifth, which made many other Muslims fear for their safety. Footnote 55
22. Religiously motivated violent extremists remain a national security threat. This includes individuals inspired by or aligned with ISIS, al-Qaida or Hizballah, and Canadian-listed terrorist entities. Religiously motivated individuals in Canada finance terrorist groups, Footnote 56 such as the individual arrested in Toronto in December 2022 for allegedly fundraising for Daesh. Footnote 57 In the Sahel and other regions of Africa, groups aligned with Daesh and al-Qaida continue to pose a threat to Canadian individuals and businesses, and to Canadian Armed Forces personnel serving as part of Operation IMPACT. Footnote 58 The Committee recently examined terrorist kidnapping, specifically in the Sahel, as part of its review on the national security and intelligence activities of Global Affairs Canada. Footnote 59
Transnational and Serious Organized Crime
23. Transnational and serious organized crime remains a pervasive threat to national security, public safety and the integrity of our financial system and economy. Organized crime networks are ruthless in their pursuit of criminal profit by any means necessary, and are responsible for more deaths in Canada than any other security threat. Footnote 60 Organized crime networks engage in a range of interrelated crimes that have significant costs for society, including the trafficking of illicit drugs, weapons, goods and people, and financial crimes such as fraud, illegal gaming and market manipulation. Footnote 61 As Europol explains, “document fraud, money laundering and the online trade in illicit goods and services are the engines of organised crime. These cross-cutting criminal threats enable and facilitate most, if not all, other types of serious and organised crime.” Footnote 62 The illicit drug trade remains their most lucrative activity. Footnote 63 Illicit drugs endanger the health and safety of substance users, and can be lethal. For example, a record- breaking 7,993 Canadians died from the illicit use of opioids in 2021, Footnote 64 supplied in large part by organized crime groups.
24. The threat from organized crime has recently increased in at least two ways. Losses from fraud reported to the RCMP-led Canadian Anti-Fraud Centre in 2021 were the highest ever and represented an increase of 130% since the previous year. Footnote 65 Between 2014 and 2021, homicides linked to organized crime increased by about 124% from 82 to 184, and 2021 had the highest number and highest rate of gang-related homicides since data collection began in 2005. Footnote 66
25. The Committee includes serious and transnational organized crime in its definition of national security. However, most organized crime networks in Canada do not pose a national security threat. Footnote 67 According to the RCMP-led Criminal Intelligence Service Canada (CISC), in 2022 there were over three thousand organized crime groups in Canada, of which 647 warranted an assessment by CISC. Of these 647, the CISC considered 14 to be high-level threats. These 14 groups commit a range of serious crimes, use violence as an integral part of their strategy, maintain associations with other organized crime groups, infiltrate police and security agencies, and work across provincial or national borders. They use sophisticated money laundering techniques and legal businesses to facilitate their crimes. Footnote 68 Their associations with each other make them more complex, and thereby harder to investigate, than if their criminal operations were done by a single group from beginning to end. Footnote 69 As the Committee noted in its 2020 annual report, CISC's “definition of high-level threat groups is consistent with the Committee’s definition of national security threat, which are threats to the security of Canada as defined in the CSIS Act or criminality of national scope or gravity.” Footnote 70
Financial crime
26. Financial crime is a significant and persistent threat to the legitimate economy. Financial crimes undermine the legal economy, rely on corrupt professionals and public officials, and help maintain the global criminal economy. According to a 2022 Europol report, “vast international networks for illicit finance … rely on offshore tax havens, complex webs of legal business structures and corruption to facilitate a variety of criminal activities including tax evasion, fraud, and money laundering.” Footnote 71 Money laundering is a significant financial crime in and of itself, and it is integral to numerous other serious crimes. Between 2001 and 2022, the top three predicate offences related to financial intelligence disclosures made by FINTRAC to law enforcement were illicit drugs (33%), fraud (23%), and human smuggling or trafficking (15%). Footnote 72 A 2022 report by CISC noted that approximately half of the organized crime groups in Canada that launder money do so across borders, including by exploiting weaknesses in various countries’ regulatory regimes. Footnote 73 The same report also noted that many organized crime groups use sophisticated money laundering techniques including informal value transfer systems, trade-based money laundering, money services business, large-scale real estate investments, or cash-based businesses, including casinos. Footnote 74
27. Two recent public inquiries have shed light on the scale of money laundering in Canada. In 2019, the Expert Panel on Money Laundering in British Columbia Real Estate conservatively estimated the amount of money laundered in Canada from 2011 to 2015, and found that it consistently amounted to approximately 2.1% of gross domestic product (GDP), Footnote 75 or about $43.5 billion in 2022. Footnote 76 In 2022, the Cullen Commission of Inquiry into Money Laundering in British Columbia reported that professional money launderers “are laundering staggering amounts of illicit funds” in Canada, and that “a single money services business was involved in laundering upwards of $220 million per year.” Footnote 77 Between 2001 and 2022, over 84.5% of the disclosures of financial intelligence to FINTRAC were related to money laundering. Footnote 78 The U.S. State Department lists Canada on its short-list of “major money laundering countries,” noting in 2022 that “transnational organized crime groups and professional money launderers are key threat actors” and that “foreign-generated proceeds of crime are laundered in Canada.” Footnote 79
Foreign interference
28. The threat to Canada from foreign interference has increased. Foreign interference erodes trust in our elections and public institutions, and ultimately in our sovereignty. The Committee defined foreign interference as activities involving a foreign state or its proxies using clandestine or deceptive means to influence or manipulate Canadian ethnocultural communities, political parties or government officials. Footnote 80 One expert notes that foreign interference activities are “the output of large bureaucracies,” almost always “contain an element of disinformation,” and are “directed toward an end, usually to weaken the targeted adversary.” Footnote 81 As the Committee noted in its 2019 annual report, the Privy Council Office (PCO) and CSIS assess that Canada is a target of foreign interference due to its global standing, robust and diverse economy, large ethnocultural communities, membership in multilateral organizations such as the G7 and NATO, and its close relationship with the United States. Footnote 82 China and Russia are the primary threat actors conducting foreign interference against Canada through traditional (person to person) and cyber means. Footnote 83 Foreign interference often involves both traditional and cyber activities.
29. In its 2019 review of the federal government’s response to foreign interference, the Committee noted that traditional foreign interference predominantly threatens Canada’s democracy and public institutions. Footnote 84 States target the Canadian public and voters, elected and public officials, interest groups and community organizations, and the media. They do so by persuasion, disinformation, harassment, political donations, corruption and coercion. Footnote 85 Concern over foreign interference continues to increase. In its 2022-23 departmental plan, the RCMP identified its two key national security priorities as terrorism and foreign interference, Footnote 86 and began investigating reports of Chinese ‘police stations’ in 2022. Footnote 87 The Minister of Public Safety also recently noted plans to introduce legislative measures to address the threat. Footnote 88 On March 8, 2023, the Committee launched a review of Foreign Interference in Canada’s Democratic Processes.
Espionage
30. Espionage is a persistent threat to national security and the economy. State espionage involves foreign intelligence agencies stealing Canadian government or military secrets. Economic espionage involves foreign intelligence agencies or foreign companies stealing intellectual property and trade secrets from Canadian organizations. All espionage involves clandestine and illegal activities. Footnote 89
31. Hostile state actors steal information from Canadian governments and the military using a range of tactics from human source operations to cyber tools. In 2013, a Canadian Navy officer was investigated by the RCMP and convicted of providing information to Russia. According to a 2022 report by the Communications Security Establishment (CSE), the “state-sponsored cyber programs of China, Russia, Iran and North Korea continue to pose the greatest strategic cyber threat to Canada.” Footnote 90
32. While it is not new, economic espionage has received more attention in recent years. Economic espionage threatens Canada’s competitiveness and undermines our economic prosperity. Economic espionage activities are carried out by state or non-state actors. Economic espionage has targeted organizations big and small in almost all sectors of the economy, including biopharma and artificial intelligence. Footnote 91 Foreign states or companies steal sensitive trade secrets, data, and technology from companies or researchers, thereby benefiting themselves at Canada’s expense. As a think tank affiliated with the Brookings Institution noted, companies “are no longer simply competing with corporate rivals. They are competing with the nation-states supporting their corporate rivals — nation-states with enormous resources and capabilities and with very little restraint on what they will do to succeed.” Footnote 92
Cybercrime
33. Cybercrime is a significant threat to the security and economic well-being of Canadians and businesses. The RCMP defines cybercrime as any crime where the internet or information technologies have a substantial role in the offence either as a target or as an instrument. Footnote 93 Federal Policing prioritizes cyber-enabled criminal activity by organized crime groups of networks that are beyond the scope and capability of the local police or police of jurisdiction. In cyber-enabled foreign interference, Federal Policing prioritizes cyber-enabled criminal activity directed by or in support of a foreign state that targets Canadians, Canadian interests, or Canadian critical infrastructure. Footnote 94
34. Cybercriminals victimize individuals and organizations through, for example, identity theft, fraudulent websites or emails (phishing), and scams on social media. Footnote 95 Ransomware is a persistent and disruptive cybercrime threat to businesses, governments, and universities, in part because it hinders an organization’s ability to function and carries significant costs. Footnote 96 For example, in 2021 criminals used ransomware to disrupt and extort four health authorities in Newfoundland and Labrador. Footnote 97 Cybercriminals also target organizations of all types to steal intellectual property, trade secrets, and the personal information of customers or employees. Footnote 98
35. Cybercrime has increased in recent years. Between 2017 and 2021, the number of cybercrimes reported to police increased by 152%, from 27,829 to 70,288. Footnote 99 The Canadian Anti-Fraud Centre reported that “2021 saw $379 million in total reported fraud losses, which is 130% more than observed in 2020” and the highest amount ever reported to the Centre. Footnote 100 According to a survey by Statistics Canada, in 2021, Canadian businesses spent $10 billion on cyber security, and just under one-fifth (18%) of businesses were impacted by a cyber security incident. Footnote 101 These trends are likely to continue. By 2024, the collective global cost of data breaches could reach $5 trillion. Footnote 102
36. The cybercrime-as-a-service model, which allows novice cybercriminals to rent easy-to-use cybercrime tools, lowered the barrier for entry to criminals who want to launch malware or denial of service attacks. Footnote 103 The interconnectedness of computer systems among companies over the internet has also led cybercriminals to target the weakest link to gain access to the networks of multiple companies. Footnote 104 Criminals use their access to steal intellectual property, deploy ransomware, or add infected computers to botnets (groups of infected computers) to commit additional cybercrimes. Footnote 105
Implications for Federal Policing
37. The complexity of the threat environment imposes significant operational and organizational challenges for Federal Policing. The multi-jurisdictional nature of many crimes requires Federal Policing to collaborate with provincial and local police forces, federal security agencies, its international counterparts, and multinational police organizations such as Europol. Partnerships help to find linkages between crimes, avoid duplication, share the investigative workload, and efficiently use the expertise unique to each partner.
38. The role of digital technologies and the internet in modern crime requires Federal Policing to have a range of technical expertise to analyze large amounts of data from numerous sources. Essentially all major criminal investigations require numerous specialists, such as forensic accountants or data scientists, to collect, assess, analyze, store, and disclose large amounts of information, efficiently and to an evidentiary standard. This is especially true for highly technical crimes, such as money laundering or cybercrime. Modern information technology systems are then required to collect, store, share and analyze information; facilitate the identification of trends and linkages across multiple information technology systems; and facilitate information sharing among Canadian police agencies and federal departments.
39. The complexity of criminal threats also requires specialized expertise to conduct investigations. Detecting and investigating the international flow of illicit funds requires investigators to understand the complexities of international trade agreements and financial regulations in multiple countries, how money launderers commingle illicit and legitimate funds, and financial intelligence disclosures from FINTRAC, which can contain thousands of financial transaction reports. Footnote 106 Preventing and investigating IMVE threat actors requires investigators to possess in-depth knowledge of the indicators and complexities of radicalization, Footnote 107 and to understand implicated groups and communities. New trends in criminality requires personnel with the expertise and sophistication to join international partners in the employment of novel law enforcement methods. Footnote 108 These various requirements create important challenges for Federal Policing in areas as varied as recruitment, training and talent management. The Committee discusses these implications for Federal Policing’s ability to fulfill its mandate in its assessment in Chapter 7.