More than $7-billion in dirty money was washed through British Columbia’s economy last year – driving up the cost of buying a home by at least 5 per cent, according to reports released on Thursday by the B.C. government.
The distorting effects of illicit proceeds of criminal activities being laundered through real estate, gambling and luxury goods are felt throughout the Canadian economy, and the most serious failures in law, regulations and enforcement that have allowed this to happen will require federal changes to tackle, according to the reports from Peter German, a former RCMP deputy commissioner, and law professor Maureen Maloney, the chair of B.C.'s expert panel on money laundering in real estate.
In fact, Prof. Maloney’s investigation found that Ontario, Alberta and the Prairies had an even bigger problem.
“Clearly this is a national issue,” B.C. Attorney-General David Eby said. Mr. Eby described the scale of money-laundering uncovered in the reports as shocking, and noted that, using only publicly accessible data, the two reviews still uncovered thousands of properties and transactions at high risk for money laundering or tax evasion.
B.C. Finance Minister Carole James told reporters that British Columbians have paid a price, with home prices spiralling out of reach in major markets, especially in Metro Vancouver. “Money laundering in our housing market is not a victim-less crime," she said.
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The Maloney report said real estate accounted for, in a cautious estimate, $5-billion of the total amount of money believed to have been laundered through B.C. in 2018. The province estimates based on this that money laundering boosted the benchmark price of a typical home (including detached houses, condos and townhouses) in the Vancouver region by $50,000. However, the authors of the two reports said on Thursday that it may be higher, as the five per cent estimate was averaged out across the province.
According to Prof. Maloney’s report, commissioned by the Finance Minister to examine the role of financial regulations, B.C. ranks fourth among Canada’s regions for the amount of dirty money being laundered, behind Alberta, Ontario and the Prairies. The total amount of money laundered in Canada last year, her task force estimates, exceeds $40-billion.
Dr. German has been conducting his investigation about the enforcement side of the issue for the Attorney-General since the fall of 2017. His first report, last summer, said a dysfunctional regulatory regime for casinos allowed large-scale, transnational money laundering by organized crime.
In his report released on Thursday, which focuses on other vulnerable parts of the economy, Dr. German criticized Canadian rules that prevent law enforcement officials from accessing the federal financial intelligence database, FinTRAC. Other official money-laundering watchdogs around the world have a two-way flow of such information with their police forces. FinTRAC is the federal agency that tracks money laundering and terrorist financing in Canada.
“Many reporting entities are critical of FinTRAC due to the absence of tangible results for the hundreds of thousands of reports which are submitted annually,” his report said.
In a statement on Wednesday, FinTRAC said it operates within federal privacy law, but that has not hindered the agency’s effectiveness, adding that Canada’s police, law enforcement and national security agencies are seeking out FinTRAC’s financial intelligence at an unprecedented rate.
Mr. Eby said the B.C. NDP is the first government to address the issue. The findings of the reports it ordered, he said, “are stark evidence of the consequences of an absence of oversight, the weakness of data collection, the total indifference of governments – until now – to this malignant cancer on our economy and our society.”
Earlier this spring, Mr. Eby called on Ottawa to increase policing resources after learning that the federal RCMP team responsible for money-laundering crimes in British Columbia is running with a skeleton staff that refers files to the provincial civil forfeiture office rather than conducting criminal investigations and laying charges.
The B.C. government has already taken steps to curb money laundering in real estate, introducing the Land Owner Transparency Act, the first of its kind in Canada. The legislation will create a public real estate registry, clearly listing who owns what. An estimated one-third of the most expensive properties in the Vancouver region in 2016 were owned by opaque entities such as numbered companies.
B.C. real estate associations have said they do not have the tools to detect money laundering in the sector, and are calling for changes to federal legislation to facilitate information sharing and crack down on misconduct in the sector. However, Mr. German said the industry has not done all it can. “Reporting of suspicious transactions to FinTRAC, by realtors, has been dismal at best,” the German report concluded.
Mr. Eby said his government will look at additional changes, but warned that without federal support, organized crime will just find new ways to launder illicit cash.
The latest revelations have refreshed demands for a public inquiry. Mr. Eby said cabinet is considering whether to call one.