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April 2009 | Volume 27 / Number 11
Compliance Desk

Canada No Haven for Telemarketing Fraudsters…

By Brendan B. Read
Senior Contributing Editor, Customer Interaction Solutions

Fraudsters operating out of Canada who abuse telemarketing and other channels to rip off residents and businesses in other countries, like the U.S. can be prosecuted in Canada even if they leave their fellow Canadians alone. And they can no longer use legal advice as an excuse for their acts.

The Ontario Court of Appeal ruled recently that those who make false and misleading representations to the public can be prosecuted in Canada even if they make the representations only to people outside the country. A lower court had earlier decided that prosecution in Canada was possible only if some of the victims were located in Canada.

"The fact that the only victims are outside of Canada does not make the activity any the less unlawful or mean that no crime has been committed in Canada when there exists 'a real and substantial link' or connection to this country," wrote the Court. "The principle of extraterritoriality has not prevented courts from taking jurisdiction over transnational offences whose impact is felt within the country."

The Court of Appeal also ruled that an accused cannot rely on legal advice as a defense. Those engaged in fraudulent marketing practices often ask lawyers to approve their promotions or telemarketing scripts according to the Competition Bureau (www.competitionbureau.gc.ca), an independent federal agency. According to this decision, such legal advice cannot be used to excuse illegal activity.

The court decision came about from the case of an Ontario resident, David Stucky, who was accused of marketing lottery programs under names such as International Monetary Funding and Canadian Lottery Buyers Association that were alleged to have greatly exaggerated what consumers could win. They also falsely misled consumers to believe that the promotions were affiliated with government.

Stucky was also accused of marketing sweepstakes offers to 200 countries that alleged to have provided recipients the false impression that they were to receive a $5,000 or £3000 cash prize, or some other valuable prize. In reality, nearly every respondent received a predetermined prize of an inexpensive piece of jeweler. The Court of Appeal ordered a new trial. The Competition Bureau has been very active in efforts to thwart telemarketing fraud. It is participant, along with the Royal Canadian Mounted Police and the Ontario Provincial Police in PhoneBusters, which runs Canada's anti-fraud contact center. "We are very pleased that the Court of Appeal recognized that the Competition Act applies to representations made to those outside of Canada," said Andrea Rosen, Deputy Commissioner, Competition Bureau, "This ruling will enhance our ability to ensure that Canada will not be a haven for scammers targeting foreign victims."

…But More Awareness Needed For Telemarketing Fraud's Actual (and Huge) Harm
Yet in spite of successes such as the Stucky case and the ongoing enforcement and public information efforts by The Competition Bureau, PhoneBusters, and various provincial agencies, more needs to be done to combat fraudulent and unscrupulous telemarketing in Canada if not elsewhere. Competition Bureau sources say that courts need to hear the harm that telemarketing scams cause to not just the direct victims of their crimes but also to the legitimate contact centre business, so that tougher sentences can be imposed to deter this harmful criminal activity.

To get that message across, Thomas Steen, strategy policy advisor at The Competition Bureau suggests the teleservices industry can help through identifying the harm that fraudulent telemarketers cause to their industry and by calling for stiffer sentencing, which will also encourage more enforcement activity through public information campaigns. The industry would not be able to intervene as the cases taken are criminal. Yet it may be possible someone from the industry could testify in a sentencing hearing about the harm caused by fraudulent telemarketing.

"The victims of telemarketing fraud are not just the individuals that were targeted by those responsible, but it also includes the entire telemarketing industry and the many people who work in it," Steen points out. "The few who perpetrate telemarketing fraud have made it difficult for the many businesses to use telemarketing to reach out to consumers and businesses, and for them to benefit from the goods and services offered by telemarketers by giving the channel a bad reputation. The courts need to hear this so that they can make decisions that reflect the real harm that is being done."

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