What makes British Columbia – and Canada – a haven for money launderers

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Dirty money is not a problem in casinos.

John Lehmann / Globe and Mail / John Lehmann / Globe and Mail

This week, British Colombians have learned the price paid by ordinary people for money laundering by organized crime.

Dirty money is not a problem contained in casinos and in luxury car trading. It involves billions of dollars falling through the real estate market, inflating prices at a time when residents are struggling with inaccessible housing.

The B.C. The NDP government has now released the last part of a series of reports on money laundering. Government experts have established that large-scale and transnational money laundering by organized crime is occurring throughout the provincial economy – estimated $ 5 billion in real estate alone last year.

The story continues under the publicity

B. C. Attorney General David Eby expects to meet the Federal Minister for Organized Crime Reduction Bill Blair to discuss the next steps and the B.C. the government will soon decide whether to call a public inquiry.

But the investigations of B.C. they also revealed that the province is not alone in its challenges. Ontario, Alberta and the Prairies face similar problems. "This issue appears to be a national crisis," Eby told reporters this week, a crisis that threatens confidence in the Canadian economy.

On Friday, speaking with journalists from Edmonton, Prime Minister Justin Trudeau called the conclusions "extremely alarming" and promised an action. "This is a real and urgent problem for Canadians and it is a problem all over the world that Canada will continue to lead in the fight against".

Money-laundering inflows and outflows,

2015

Canada is both a receiver and a sender of

criminal money for money laundering. Mayor

The estimated influx comes from the United States

and from Europe.

DIRECTION OF THE CRIMINAL MONEY FLOW

Note: the thickness of the arrow refers

to the amount of money.

CARRIE COCKBURN / THE GLOBE AND MAIL,

SOURCE: MINISTRY OF FINANCE

Money laundering inflows and outflows, 2015

Canada is both a receiver and a sender of criminal money

for recycling. The largest estimated inflow arrives

from the United States and Europe.

DIRECTION OF THE CRIMINAL MONEY FLOW

Note: the thickness of the arrow refers to the amount of money.

CARRIE COCKBURN / THE GLOBE AND MAIL,

SOURCE: MINISTRY OF FINANCE

Money laundering inflows and outflows, 2015

Canada is both a receiver and a sender of criminal money for money laundering.

The largest estimated influx comes from the United States and Europe.

DIRECTION OF THE CRIMINAL MONEY FLOW

Note: the thickness of the arrow refers to the amount of money.

CARRIE COCKBURN / THE GLOBE AND MAIL, SOURCE: MINISTRY OF FINANCE

CASINOS AS YEAST

Reports were initiated with Dirty Money, which was released in June 2018 and examined money laundering in casinos on the lower continent.

In that report, former RCMP commissioner Peter German said local casinos have for many years "unwittingly served as laundries for the proceeds of organized crime." He has cataloged a number of problems, including a flagship anti-money laundering system that didn't work. The job – Mr. German called it a "debacle" – and a confusing and ineffective regulatory regime.

The report was published with a video showing people entering casinos with huge bags of money and shopping bags, neatly stacked and held together with what looked like a rubber band. He described the Vancouver model, a system in which money is recycled in and out of Vancouver to other locations, including Mexico and Colombia.

In a case described in the report, investigators determined that $ 13.5 million, mostly in $ 20 bills, had passed through the cages of a casino in a month.

Canada must stop being a laundromat 24 hours dirty money

The first report of Mr. German contained 48 recommendations, including setting up a transaction analysis team and meeting at least every week to review all reports on suspicious transactions.

The British Columbia Lottery Corporation (BCLC) states that the number and value of suspicious transaction reports has plummeted, with the value of such reports falling from $ 27 million in July 2015 to $ 1 million in March 2019.

According to the BCLC rules that came into effect in January 2018, the B.C. casinos are required to collect detailed information on the source of player funds for all transactions of $ 10,000 or more.

The changes had an impact on casino operators.

Great Canadian Gaming Corp., which operates the River Rock casino in Vancouver and other gaming venues, including Hastings Racecourse (also in Vancouver), said in its first quarter report that revenues in 2018 decreased compared to Previous year with "a portion of the decrease in gaming revenues … due to the procedures on the BCLC origin funds."

Like this week's real estate report, the casino report highlighted how existing regulations, including the reporting requirements of the Financial Transaction Analysis Center and Canada (FinTRAC), the federal money-laundering watchdog, do not they were getting the desired effect.

The story continues under the publicity

It was a theme that Mr. Eby returned to his press conference on Thursday. "Many, many reports have been filed with FinTRAC from our casinos on cash transactions with few apparent actions," he said.

Money laundering estimated in Canada

Money laundering in Canada is currently

in tens of billions of dollars. Valued

amount of money laundering in Canada,

in billions of dollars.

THE GLOBE AND THE MAIL, SOURCE: MINISTRY OF FINANCE

Money laundering estimated in Canada

Money laundering in Canada is currently in the tens

of billions of dollars. Estimated amount of money

money laundering in Canada, in billions of dollars.

THE GLOBE AND THE MAIL, SOURCE: MINISTRY OF FINANCE

Money laundering estimated in Canada

Money laundering in Canada is currently in the order of tens of billions of dollars.

Estimated amount of money laundering in Canada, in billions of dollars.

THE GLOBE AND THE MAIL, SOURCE: MINISTRY OF FINANCE

RAPID CARS, CLEAN CASH

Mr. German has identified the luxury vehicles for the examination. He found that the province's inability to crack down on money laundering through car sales can be traced back to the absence of financial monitoring by provincial and federal control bodies. Unlike banks and casinos, car dealers are not required to report large or suspicious transactions to FinTRAC.

Mr. German noted that the provincial authority, The Vehicle Sales Authority of BC, focuses on consumer protection and that automotive associations do not consider money-based sales as a significant concern. As retailers deposit cash from vehicle sales to traditional financial institutions, there is a total lack of visibility.

Interviews with a number of B.C. car dealers reveal how their companies handle suspicious transactions, ranging from accepting six-digit cash sales, with no questions, to a policy of not accepting cash in amounts over $ 9,999. The German report called the last amount curious, as it is the maximum amount that a FinTRAC reporting entity, like the financial institution that receives the retailer's deposits, can accept without submitting a report on the cash transactions.

The German report reveals extensive money laundering in the B.C. luxury car market

The German report quoted a scheme run by a high-level drug dealer who acted as intermediary to guide buyers towards a particular company. He would have accepted a large cash deposit on a car from a tenant and the individual would have signed a multi-year lease. Within six months, the lessee would return and rent a more expensive car with an additional deposit. According to the report, the tenant could repeat the process several times and simply return to the dealership and ask for some of his deposits to be repaid by the company check, making the cash clean.

In other cases, the gangsters would take advantage of the rapidly growing gray export market of the B.C. More than 4,400 vehicles were exported to China in 2018, according to data from the provincial Ministry of Finance. Buyers of straw have been hired to buy vehicles for domestic use. So, according to the report, the vehicles would be shipped abroad, where the international market guarantees huge profits.

The story continues under the publicity

Due to the fentanyl crisis, too much attention has been paid to monitoring goods imported from abroad, while exports such as stolen vehicles may have escaped accordingly, according to the Insurance Board of Canada. At the beginning of this year, Inspector Brian MacDonald – Officer in Charge of the Municipal Integrated Self-Crime Team (IMPACT) – said he was concerned that "nobody is working in our carry as it should ".

A "LIGHT TOUCH": REGULAR REAL ESTATE

A series of local professionals working in the real estate sector of the B.C. they inevitably end up as guardians who facilitate money laundering by organized criminals, the reports published this week have concluded.

The real estate sector as a whole was characterized as subject to "light regulation" with some professionals subjected to heavy provincial and federal controls while others were not, the German report stated.

"The result is that we can see the mouse while digging through parts of the sector, but lose sight of it in other parts, only to find it emerge in another," his report stated.

Real estate agents, real estate agents, builders and about 300 notary notaries in the province are required to report suspicious transactions to FinTRAC.

But mortgage brokers, private lenders and lawyers – key links in the property chain – do not have to report to FinTRAC and both reports recommend federal laws to be amended to bring these professions under this regulatory regime.

The story continues under the publicity

Dirty money driving up to B.C. house prices to more than 40 billion dollars recycled throughout Canada in 2018

The provincial mortgage regulator told the German team that he has a "non-optimal window" on the number of unlicensed mortgage brokers, private lenders and mortgage investment companies. These companies are targets for money launderers because there is "no supervision in terms of who acts as a lender and does not control in terms of source of financing or repayment of loans".

Lawyers across the country have been exempted from reporting to FinTRAC by a 2015 Supreme Court of Canada decision in favor of the Federation of Law Societies, which has successfully argued that this would break the privilege of solicitor-client. The Parliament has not yet developed an alternative solution, such as the development of a third-party database that records only the name of a customer and the amount of money he has deposited, able to protect the lawyer's trusted accounts since money laundry.

Provincial law companies intervened to impose rules to help their members counter this sophisticated crime, but the B.C. "He has some of the strongest regulations in the country and still has several loopholes," said Mr. German.

Bill McCarthy, a Burnaby-based real estate developer and longtime real estate agent with a number of other professional designations, said it was an open secret in his industry that customers often try to pay deposits or even buy a house in cash . In the end, he said, all the professions involved in buying and selling property should report to FinTRAC because, he said, bad elements can always find available partners.

"I don't think anything in the German report has surprised those within the real estate, legal and mortgage businesses," McCarthy said. "Perhaps the purpose and scale, but not the details and this is a problem."

CASH IS BRINGING IN UNEXPECTED PLACES

Closing gaps in enforcement and regulation to prevent criminals from laundering their dirty money in British Columbia's economy is like playing the Whac-a-Mole arcade game: breaking down one problem, and another opening up .

The story continues under the publicity

In his final report on money laundering, the German has devoted a complete chapter to what he calls the Wack-a-Mole phenomenon – when organized crime moves from one vulnerable sector to another.

The problem, Mr. German noted, is that many sectors of the economy have no obligation to report suspicious transactions. When an individual enters an auction house or a law firm with large sums of money, FinTRAC officials hear nothing.

Canada needs a uniform obligation to report large cash transactions, he concluded. "Universal reporting, as it exists in the United States, is the easiest way to fill this gap."

B. C. Last year it curbed money laundering in its casinos, but here are some of the other creative ways in which organized crime can still launder bags of money without questions.

Good purchases, obscure properties: the report reveals the red flags of money laundering in the B.C. real estate market

Luxury toys and ornaments: "Much like luxury vehicles, motorboats and other luxury boats are popular items in which organized crime can park their money and continue to use the item, to recover most of the their cost during the resale, advised by a law firm that his lawyers manage $ 10 million a year for the sale of small pots, "remarked Mr. German, pointing out that many luxury homes in Greater Vancouver contain pianos for a value over $ 100,000. never played, they are an easy parking for money and will retain much of their value until resale.

Post-secondary institutions: the B.C. The government has set up a top line on money laundering to encourage insiders to come forward. Some of the protagonists describe the tactics in which international students enroll in the programs, pay their commissions in cash and then cancel before the start of classes. Then they receive a refund check. "On a recent occasion, a college faced a student who had to pay a fee of $ 150. The student participated with $ 9,000 in cash in a travel bag and asked to deposit the amount minus the $ 150 In effect, the institution was asked to act as a bank ".

Monetary services business: the MSBs are informal banking systems that can transfer money electronically to distant places – without international money transfers – by settling accounts by e-mail, WeChat or other informal means.

They have become a fixed element of the Canadian urban financial system, said the German, and "very little, if any, attention is given to unregistered MSBs, which transfer considerable sums on a daily basis. Those who register are subject to regulatory supervision. Those who do not register are off the proverbial radar screen. "

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