Salam Toronto Weekly English February 06, 2020 74 Why money laundering thrives on Canada’s West Coast By Robert Diab, Associate Professor, Faculty of Law, Thompson Rivers University People have long beendrawn toVancouver’s idyllic coastal mountain setting. The region’s strong civil liberties and stable economy convince many of them to stay, and Vancouver has thrived with its diverse set of residents. But the city has also become a haven for illicit capital flight and money laundering, drawing a host of criminal organizations with links to China, Mexico and Iran. For more than a decade, authorities in B.C. have tried to staunch the flow of dirty money through the province, but as recent reports commissioned by the B.C. government reveal, the efforts have largely failed. Buyers from high-risk laundering jurisdictions continue to pour tens of millions of dollars intoVancouver real estate under laws that make it easy to conceal sources of cash and the identity of true owners. Casinos and luxury car dealers still receive large amounts of cash in small denominations. And a host of other players, from money lenders to builders, abet laundering by dealing in large cash sums. Money laundering poses real threats. It destabilizes the real estate market and helps to fuel the drug trade, gang warfare, gun violence and car theft. The 2018 B.C. money laundering reports were authored by laundering expert Peter German, a former RCMP deputy commissioner, and others. They offer a detailed picture of dirty money flowing through B.C. casinos, real estate, the luxury vehicle trade and horse racing. A public inquiry is currently underway in the province, headed by Superior Court justice Austin Cullen and aimed at probing the matter further. The Cullen Commission will do important work, but will likely make similar recommendations to those set out in the 2018 reports - tighter reporting by casinos, car dealers and home buyers, more funding for police and prosecutors. Yet as the reports make clear, B.C.’s problems with money laundering run so deep, they’ll be hard to resolve in the short term. Many of the challenges involve areas of law that I watch closely as a lawyer and legal scholar. Why B.C. is a magnet for money laundering If you’re in the Pacific Rim and you’ve got a pile of money to launder, Vancouver is Vancouver is also close to the Canada-U.S. border and has easy access to Mexico and a host of international banks. The city also has a bustling tech industry with expertise on encryption and crypto currency. If you run into trouble along the way, Canada’s criminal justice system is more lenient, with strong constitutional protections. Our extensive pre-trial disclosure requirements tend to bring complex laundering cases to a grinding halt. Who’s doing what Money laundering in B.C. involves a complex interplay of money flowing among crime groups with links to China, Iran and Mexico, involving drugs, cars and real estate. In what has become known among experts as the “Vancouver Model,” underground bankers, receiving funds in far-flung places, work with trusted contacts in B.C. who Criminal organizations don’t have to go to extremes to launder their money here. Many use private mortgages, builders’ liens or renovations to move cash through multiple hands and accounts. Construction suppliers, money lenders and some workers accept the cash willingly and without much oversight. Fast cars and big houses German’s reports note that the rate of auto theft in Canada had dropped for a period but began to rise again in 2016. Roughly 18% of vehicles stolen in 2017 were not recovered. A disproportionate number of these were luxury vehicles, suggesting that organized crime is exporting them. Cash is then concealed through luxury car and home purchases in B.C., avoiding currency controls or potential corruption charges abroad. Many high-end car dealers accept large cash sums, then deposit the funds in conventional banks without needing to identify the buyers. B.C.’s land title system and rules around lawyers’ trust accounts helped foreigners buy some $16 billion worth of property in recent years, often remaining anonymous. Cash from what are considered high-risk buyers - foreign companies and trusts - makes up for 20 to 60 per cent of purchases. Some 3% of B.C. titles (roughly 33,000) list owners with occupations like student, homemaker or unemployed - with roughly a quarter of them holding clear title. The whack-a-mole problem German expressed fears in his reports that as banks, casinos and other agencies tighten oversight of the flow of cash into B.C.’s economy, criminals will migrate to other industries. Among the oldest tricks he said he doubts will disappear - and one prevalent in Vancouver - involves “paying debts of legitimate businesses and receiving a cheque or other negotiable instrument in return.” Other possible avenues include luxury boats, auction houses, private colleges, crypto-currencies and the cultivation of marijuana. At present, German’s research indicates a “noticeable decline” in laundering investigations and prosecutions. The challenges involve more than money. Money-laundering cases often involve millions of documents, overwhelming the time and staff that police and prosecutors can devote. The Supreme Court of Canada has recently imposed strict time limits on trials. And reporting requirements in casinos, the land title office and luxury retail still have a long way to go to effectively track sources of cash. British Columbia should therefore tighten rules around the flow of cash in many of these hot spots. But some things that make the Vancouver area ideal for laundering - geography, civil liberties, global connections - can’t easily change. The Cullen Commission has a noble cause, but in the short term, money laundering in Vancouver is here to stay. ……………………… This article is republished fromThe Conversation under a Creative Commons license. Disclosure information is available on the original site. Read the original article: https://bit.ly/38a9T6l Estimated money laundering (in billion dollars) in Canada. (SOURCE: Combatting Money Laundering in BC Real Estate) Chapter 4: Estimated Effect of Money Laundering on BC Real Estate Expert Pan l onMoney Laundering in BC Real Estate CombattingMoney Laundering in BC Real Estate 48 Given the limitations to the model described above, it is reasonable to conclude that money laundering in Canada is currently in the 10s of billions of dollars, likely in excess of $40 billion. Figure 10: Estimated money laundering in Canada Figure 11: Comparison of money laundering estimates The amount of money laundering estimated by the model for BC in 2015 is $6.3 billion, which represents 2.5 percent of GDP. Assuming that the proportion of BC GDP that is money laundering activity remained constant, BC money laundering in 2018 is estimated to be $7.4 billion. It is reasonable to conclude that money laundering activity in BC is indeed significant and a matter that deserves serious government attention. With an estimate of more than $30 billion in money laundering activity in other provinces, it is also reasonable to conclude th t money laundering is just s significant across the rest of Canada and requires the serious attention of every senior government across the country. Chapter 4: Estimated Effect of Money Laundering on BC Real Esta e Expert Panel onMoney Laundering in BC Real Estate CombattingMoney Laundering in BC Real Estate 48 Given the limitations to the model described above, it is reasonable to conclude that money laundering in Canada is currently in the 10s of billions of dollars, likely in excess of $40 billion. Figure 10: Estimated money laundering in Canada Figure 11: Comparison of money laundering estimates The amount of money laundering estimated by the model for BC in 2015 is $6.3 billion, which represents 2.5 percent of GDP. Assuming that the proportion of BC GDP that is money laundering activity r mained constant, BC money laundering in 2018 is estimated to be $7.4 billion. It is re sonable to conclude that money launderi g activity in BC is indeed significant and a matter that deserves serious govern e t atte tion. With an estimate of more than $30 billion in money laundering activity in other provinces, it is also reasonable to conclude that money laundering is just as significant across the rest of Canada and requires the serious attention of every senior government across the country. Comparison of money laundering estimates. (SOURCE: Combatting Money Laundering in BC Real Estate) your destination. As German has noted, the city has a large international airport with flights from several Asian cities and a big international port for container shipping across the Pacific Rim. release funds locally without cash having to be transferred over borders. Players settle accounts here and abroad by exchanging drugs, cars, land or other favours for cash.