Crimes of Persuasion

Schemes, scams, frauds.

Laws Available to Deter and Prosecute Consumer Fraud

Jurisdictional Issues Which Hamper Law Enforcement Efforts

Telemarketing fraud has become a serious and expanding problem on both sides of the Canada - U.S. border. No single government, organization or agency in either country, working alone, can solve it.

Thousands of North Americans are losing money every day to scam artists operating beyond our respective boundaries. In many cases, these international crooks are sitting across the border in Canada - just far enough away from U.S. laws and jurisdiction to reduce the chances that American victims will ever recover their money. In almost as many cases, the opposite holds true as Canadian victims are being called by American hustlers.

U.S. law enforcement agents say that con artists may be setting up shop in neighboring countries to avoid prosecution under the Telemarketing Sales Rule, which sets operating standards for legitimate telemarketers, spells out stiff penalties for fraudulent ones, and for the first time, gives state law enforcement agents the power to prosecute across state lines.

Victims often assume they are dealing within their own country because long-distance con artists often give a "mail drop" address in a nearby city. In addition, Canada, the U.S. and most Caribbean island nations use telephone area codes that are integrated and accessible by direct dialing without obvious foreign "country-codes."

Even within the respective countries, criminals in one state or province will use that location as a base to victimize citizens of other states or provinces. They rely on jurisdictional barriers as well as geographical distance to avoid prosecution. If the victims were located in the same state or province as the boiler rooms, prosecution would be much easier.

Out-of-state cons know that sometimes elderly victims may die or become incapacitated before they can testify, particularly when the accused must be extradited before they can be prosecuted. Often the aged victims are physically unable to travel to testify at trials held in the jurisdictions of the offenders or other victims.

An effective campaign will require cooperation in developing strategies and options and in putting them into effect. With a sound strategy and the right combination of tools and tactics, the United States and Canada can cooperate to meet the increasingly international challenge of this serious white-collar crime.

Mutual Assistance At Odds With Information Sharing Restrictions

Mutual Assistance Treaties are limited to criminal matters and because they lack criminal authority, the FTC cannot use the U.S.-Canada MLAT to obtain information from Canadian law enforcement agencies about fraud schemes operating in Canada.

Further, both U.S. and Canadian law impose certain limits on information sharing. While there are substantive reasons why the law protects the confidentiality of certain information, these protections may in some cases hinder cross-border fraud prosecutions.

On the Canadian side, Section 29 of the Canadian Competition Act, prohibits the FTC counterpart, the Competition Bureau of Industry Canada, from communicating to any person other than a Canadian law enforcement agency or for the purposes of the administration or enforcement of the Act.

On the U.S. side, the nondisclosure provisions of the FTC Act also prevent them from sharing certain categories of investigative information with their foreign counterparts. The breadth of the FTC’s information-sharing constraints hampers their ability to coordinate cross-border law enforcement.

Although existing cross-border agreements allow for the sharing of some information–including, in particular, consumer complaints–there is other information the FTC is unable to share.

The FTC must withhold the affected categories of information from Canadian law enforcement authorities even when the same information may be shared with domestic law enforcement agencies, and even when sharing it would significantly advance the FTC’s own investigation.

While the FTC is unable to share significant information with their foreign counterparts, other U.S. agencies may be able to do so if they are covered by an MLAT similar to the U.S.-Canada one.  Even in instances when Canadian law enforcement agencies may have authority to obtain and share information in some of these categories with FTC staff, the FTC may not reciprocate.

Canada - US Cross-Border Co-operation

In 1997, as a result of a meeting between Prime Minister Jean Chrétien and President Bill Clinton, a binational group met to discuss cross-border deceptive telemarketing. They recommended a strong co-ordination of strategies between the two countries in terms of surveillance, education and investigations.

Two subgroups co-chaired by the Competition Bureau were created to address specific issues, namely Co-operative Strategy and Education.

Canadian and US authorities have since worked jointly to investigate telemarketing fraud through interagency task forces, one led by the RCMP in Montreal, called Project Colt and another, managed by the RCMP in Vancouver, called Project Emptor. A third interagency effort, although not a formal task force, operates in the Greater Toronto Area, under the leadership of the Ontario Attorney General's Department.

The task forces are focal points for both national anti-telemarketing enforcement and Canada-U.S. enforcement cooperation.

The Binational Telemarketing Fraud Group has become a permanent sub-group of the Canada-U.S. Cross Border Crime Forum.

Following are the key initial recommendations of the Working Group:

blue bullet point that the governments and agencies of both countries clearly identify telemarketing fraud as a serious crime;
blue bullet point that both countries explore the use of remote testimony in criminal proceedings, by video-teleconferencing or similar means, to reduce costs;
Note: New legislation permits the use of video and audio-link technology for the purpose of providing testimony from witnesses located in Canada or abroad.
blue bullet point that the legal and technical potential and limits of electronic surveillance as a tool against telemarketing fraud be explored further;
Note: Bill C-20 extended the Criminal Code wiretap provisions to authorize electronic surveillance where telemarketing offences are investigated.
blue bullet point that both governments examine the regulation of telephone services and options for denying telephone services to telemarketing offenders;
Note: Following the passage of Bill C-20, it is now possible to obtain orders concerning telephone service providers in order to deny service to a criminal telemarketer who has been convicted.
blue bullet point that the scope of the existing mutual legal assistance arrangements be considered to determine whether they might be expanded to deal more effectively with telemarketing-fraud cases;
Bill C-40 amended the Mutual Legal Assistance in Criminal Matters Act by providing that an order may be obtained from a Canadian judge (based on a foreign request) to compel a witness to provide a statement by audio or video-link.
blue bullet point that both governments clarify the circumstances under which mutual legal assistance requests are needed, by providing information and advice to the agencies involved;
blue bullet point that extradition arrangements be examined, and if possible modified, to facilitate and accelerate extradition in telemarketing fraud cases;
Note: A new Extradition Act which came into force in June 1999 simplifies and expands Canada’s capacity to extradite.
Bill C-40, in amending the Extradition Act, relaxed the evidentiary burden by permitting the extradition judge to receive as evidence a certified "record of the case" rather than the previously required first-person non-hearsay affidavits from all of the victims and other witnesses.
blue bullet point that federal deportation laws which might apply to foreign nationals engaging in telemarketing fraud be reviewed, and that enforcement agencies be given information about when deportation may be an option;
blue bullet point that research be conducted into offenders, victims and other aspects of telemarketing fraud to create effective educational materials and strategies to prevent it;
blue bullet point that governments and agencies cooperate as closely as possible in developing, maintaining and disseminating educational materials, and in coordinating education and prevention efforts;
blue bullet point that strategies to control telemarketing fraud be coordinated between the United States and Canada at the agency, regional and national levels;
blue bullet point that an ongoing binational working group serve as an overall coordinator and deal with national and binational telemarketing fraud issues as they arise;
blue bullet point that regional task-forces be encouraged to cooperate across the international border to the maximum extent possible; and
blue bullet point that, to further coordination, governments and agencies examine privacy and other laws relevant to cross-border shared access information systems with a view to expanding access to such systems to the maximum extent possible.
Note: Recent agreements between the RCMP and the U.S. law enforcement agencies provide reciprocal direct access to each other’s criminal databases.

11/01/02 FTC Chairman Timothy J. Muris presented the FTC's new Five-Point Plan for attacking cross-border fraud and highlighted the complementarities of consumer protection and competition policies. Speaking before the Fordham Corporate Law Institute's Twenty-Ninth Annual Conference on International Antitrust Law and Policy in New York, Muris outlined that under the Five-Point Plan, the FTC will:

blue bullet point Advocate adoption of an OECD Recommendation on Cross-Border Fraud;
blue bullet point Seek legislative changes to improve the FTC's ability to fight cross-border fraud;
blue bullet point Hold a workshop on public/private sector cooperation to combat cross-border fraud;
blue bullet point Enter into new multilateral and bilateral agreements, and strengthen existing arrangements, to combat cross-border fraud through cooperation and coordinated enforcement activities; and
blue bullet point Provide targeted technical assistance to developing countries.

Muris suggested that efforts to promote cooperation and convergence in consumer protection could draw upon the international hard-core cartel enforcement experience, and that the convergence process could begin with a concerted attack on international consumer fraud. The site offers consumers introductory treatment of financial fraud matters including a collection of laws, court decisions, articles, news, and opinions. The focus is on common law fraud, securities fraud, consumer protection fraud, loan and lending violations and other statutory unlawful business practices.

Law Links:

blue bullet point U.S. Federal Rules of Evidence (2001).
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blue bullet point Lawyers Weekly : Top Legal Web Picks.
blue bullet point Ed-u Law Page The education mega-site.
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blue bullet point The Internet Legal Resource Guide.
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blue bullet point United States Law Sources on the Web.
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