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Chinese citizens cannot legally transfer more than $50,000 (U.S.) a year out of China without government permission. (Tomohiro Ohsumi/Bloomberg)
Chinese citizens cannot legally transfer more than $50,000 (U.S.) a year out of China without government permission. (Tomohiro Ohsumi/Bloomberg)

‘Suspicious transactions’ reported by B.C. banks tied mostly to China Add to ...

Vancouver-area banks reported suspicious transactions involving Mainland Chinese clients 17 times more often than those tied to citizens of any other outside country in recent years.

Financial institutions are required to make the reports to FinTRAC, the federal intelligence unit that monitors money laundering and people who finance terrorist groups. It is unclear if any Canadian laws were broken in the Vancouver-area cases. One expert says it is likely the statistics are evidence of more money entering Vancouver’s hot housing market.

Between January, 2012, and July, 2015, financial institutions in Vancouver, Richmond, West Vancouver and North Vancouver reported more than 8,600 suspicious transactions to the Financial Transactions and Reports Analysis Centre of Canada. The reports are triggered when the sum is larger than $10,000, when third parties conduct frequent wire transfers to a bank client or when multiple deposits go into one account from people who are not customers of the institution.

The Globe and Mail obtained details of these transactions through an Access to Information Request. The vast majority – 5,895 – do not include the citizenship of the clients. (Although bank employees must make a reasonable effort to include citizenship in FinTRAC filings, a passport is not needed to open an account at many Canadian financial institutions.) Another 1,660 of the transactions were tied to Canadian citizens.

In the remaining 1,045 reports, transactions in accounts belonging to Mainland Chinese clients were flagged more than any other foreign nationality, at 865. The next largest group was from Hong Kong, at 50, and then 43 involving Taiwanese people.

Despite the legal requirement to disclose such transactions, Canadian banks can still process them and do not have to shut down the accounts. An earlier Globe investigation quoted a court case that showed at least one Canadian bank helped clients wire-transfer money out of China.

Prema Thiele, a Toronto-based corporate lawyer at Borden Ladner Gervais and expert on FinTRAC compliance, said Canadian banks should not shy away from accepting transactions from China. She said high flows of this capital to B.C.’s South Coast are most likely due to the area’s history of immigration and long-standing cultural ties.

However, Christine Duhaime, a lawyer and expert witness on international financial transactions, said the numbers add weight to suggestions that international cash is having a trickle-down effect on the affordability in Greater Vancouver’s real estate market, where the average price of a detached home reached $1.58-million in November.

Ms. Duhaime said only the banks “know for sure” if these transactions bring money into Vancouver’s housing market, but added that she can “only surmise pretty accurately that if the funds are from China and involve large volumes, they are for real estate purchases, because there is not much else foreign nationals from China buy in Canada that would trigger a [suspicious transaction report].”

A Globe investigation this fall showed how local banks helped wealthy East Asian investors circumvent China’s banking laws to bring capital into British Columbia. Chinese citizens cannot legally transfer more than $50,000 (U.S.) a year out of China without government permission.

The Globe investigation found many wealthy investors get around that by having family and friends send millions of dollars in wire transactions to banks in Metro Vancouver. Real estate agents who specialize in luxury housing have told The Globe that many of their clients get the money they use to buy homes in Canada through these transactions.

A B.C. Supreme Court case last year heard that CIBC regularly helped rich clients use such methods to bring money out of China even though the bank is familiar with Chinese laws on international transfers. The transactions as outlined in the court case would trigger the bank’s obligation to report them as suspicious, even though no Canadian laws are broken.

Agency spokesman Darren Gibb said about 80 per cent of all transactions FinTRAC analyzes come from the banks.

“They are the front line of the legitimate economy,” he said.

FinTRAC says it passed along 1,260 pieces of evidence to police last year, with 1,000 related to money-laundering investigations. Of those, it could not say how often foreign investors were involved.

Even when Canadian police are made aware of possible money laundering activity, they do not have the funding to undertake many high-level cases, according to financial crimes specialist and former RCMP investigator Kim Marsh.

“There’s no accountability, there’s no deterrence,” said Mr. Marsh, who is based in Vancouver and has worked with Chinese institutions to recover laundered assets. “If you’re talking about Chinese nationals buying property here, you can’t tie it to a crime because you don’t know what happened back in China and how they got the money,” he said.

“You can determine if it’s suspicious or not, the guy was a pig farmer 10 years ago and now he’s a multimillionaire.”

Both Mr. Marsh and Ms. Duhaime question whether the banks should continue making money by facilitating such suspicious transactions.

But Ms. Thiele noted China does not have “secretive banking laws like Panama” and the G8 anti-money laundering task force has not sanctioned the country as presenting an “ongoing and substantial” risk, such as the North Korea and Iran.

“China and Hong Kong are at least known, by international standards, as having adequate or more than adequate [anti-money laundering] systems,” she said.

With a report from Kathy Tomlinson

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