International organized crime groups have been using thousands of “straw buyers” to help them export vehicles from Metro Vancouver to China – all while avoiding tens of millions of dollars in provincial sales tax.
That is one of several money-laundering tactics identified on Tuesday in a new report from retired senior Mountie Peter German that analyzed how criminals are exploiting British Columbia’s substantial luxury-vehicle sector in the absence of any regulatory oversight.
“In the luxury-car market, there is no financial reporting of large cash purchases, no oversight of international bank wire transfers and no apparent investigation or enforcement," Attorney-General David Eby told reporters at a news conference in Victoria. “The report also uncovered a complicated luxury-vehicle export scheme.”
The analysis, part of a wider review that will soon be released and include how dirty cash is being washed through B.C.'s real estate sector, did not include any formal recommendations or provide an estimate for how much money has been laundered through the sector in recent years. Mr. German’s team interviewed high-end car dealers who reported seeing clients pay for luxury cars using bags of cash filled with as much as $240,000, but explained this sector has no obligation to report such suspicious transactions to the federal anti-money-laundering agency.
The review did provide some figures for the explosive increase over the past five years in vehicle exports to China. Transnational criminal networks have been caught in other jurisdictions around the world purchasing high-end cars with the proceeds of crime, then shipping them overseas for resale. Often, these criminals use recruits – or straw buyers – who get paid to purchase the vehicle in B.C. and then resell it back to the network within a short time frame to export it, according to the report. The provincial sales tax (PST), which can be 20 per cent for vehicles worth $150,000 or more, is then refunded and deposited to the straw buyer, the report noted. B.C. tax law exempts buyers from paying PST on a vehicle if they can prove it is not going to be used in the province.
B.C. Ministry of Finance staff handling these PST refunds linked 1,000 of these straw buyers to a single exporter and more than 4,000 such recruits in total.
Data from the ministry showed fewer than 100 such applications annually prior to 2014. Then annual refunds jumped to 700 in 2014 and the following year before multiplying by 500 per cent to 3,674 applications in 2016, forcing the ministry to hire extra staff to process these rebates, according to the report. Since 2014, almost $85-million in refunds have been given out, the report noted.
Provincial employees identified numerous red flags including: vehicle-registration documents appearing to be altered; suspicious inconsistencies on generic export documents; straw buyers struggling to explain these anomalies; PST refunds going directly to vehicle exporters, rather than the purchasers of the vehicles.
Mr. Eby said the report’s findings, which also found no money laundering at the province’s two horse-racing tracks, have been forwarded to police, as well as the provincial agency in charge of car sales and the Crown corporation that insures vehicles.
Marie-Emmanuelle Cadieux, a spokeswoman for Bill Blair, the federal Minister of Border Security and Organized Crime Reduction, stated on Tuesday that his office is working with Mr. Eby and Mr. German on reducing all manner of money laundering in B.C. and across the country. The latest federal budget provided funding for a new centre to tackle trade-based money laundering, she noted, as well as an extra $69-million for the RCMP over the next five years.
Michael Lee, a BC Liberal MLA and critic of the attorney-general, said his party wants the province to focus on catching and prosecuting money launderers.
In Mr. German’s report, several new luxury car dealers reported gangsters turning to leasing instead of outright cash purchases in recent years, in part to avoid losing these high-priced cars if targeted by police and the provincial civil-forfeiture office. These dealers also noted many suspicious transactions involved WeChat Pay and UnionPay, cards that draw from from Chinese bank accounts, which Mr. German noted are out of the reach of Canadian investigators.