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British Columbia Western Canada: Dirty money, sky-high housing prices and the potential threat to Canada’s economy

Good morning! It’s James Keller here.

The story of Vancouver’s out-of-control housing prices has always had a dark undercurrent: suspicions that vast sums of dirty money from drugs and other crimes had infected the market and inflated the cost of homes for British Columbians.

A new report released by the province this week lays out the problem in stark detail, concluding that billions of dollars of illicit money has flowed through the real estate sector, increasing prices by as much as 5 per cent last year alone. And the problem extends far beyond housing, with criminals also using casinos and luxury cars to wash their dirty cash.

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Wendy Stueck, Mike Hager and Nick Laba break down the findings of the most recent report, as well as what we know from previous instalments of a wide-ranging review into money laundering in B.C.

Those findings fit into three areas:

Real estate: The most recent report blamed “light-touch regulation” and uneven systems of oversight for allowing the real estate market to become an easy target for money launderers. A big problem is that some people involved in real estate transactions are required to report suspicious sums of money, while others are not. For example, real estate brokers, realtors, developers and notaries all have reporting requirements under federal law. But mortgage brokers, private lenders and lawyers don’t share the same requirements, leaving a large hole that criminals have been eager to exploit.

Casinos: Money laundering and casinos have often gone hand-in-hand, and there are a range of federal and provincial rules designed to guard against it. But a report released last year by former RCMP deputy commissioner Peter German concluded B.C. casinos had “unwittingly served as laundromats for the proceeds of organized crime." Mr. German released surveillance footage that showed people walking into casinos with bags of cash as millions of dollars in $20 bills passed through casino cages. The report led to greater oversight to review suspicious transactions, and the province’s lottery corporation had already put in place stricter rules to track the source of money used by high rollers.

Luxury cars: Cash sales of high-end cars should be an obvious red flag, but Mr. German’s work has found that the rules around car sales are more often about protecting consumers than detecting dirty cash. He identified several ways criminals use car purchases to clean their money, such as putting down deposits for vehicles and later returning the cars for refunds; or using straw buyers to purchase vehicles and ship them overseas.

B.C. Attorney General David Eby plans to meet with federal Organized Crime Reduction Minister Bill Blair to discuss next steps, and the provincial government will soon decide whether to call a public inquiry.

But the problem extends beyond B.C. The latest money-laundering report found that Ontario, Alberta and the Prairies also faced significant amounts of money laundering – to a larger degree than even B.C.

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Mr. Eby described it as a “national-level crisis” that could threaten confidence in the Canadian economy, while Prime Minister Justin Trudeau says the latest findings are “extremely alarming” and he is promising action.

This is the weekly Western Canada newsletter written by B.C. Editor Wendy Cox and Alberta Bureau Chief James Keller. If you’re reading this on the web, or it was forwarded to you from someone else, you can sign up for it and all Globe newsletters here. This is a new project and we’ll be experimenting as we go, so let us know what you think.

Around the West:

Huawei: Executive Meng Wanzhou was back in a Vancouver court room Wednesday for proceedings that were mostly administrative. But during the appearance, her defence team revealed some of what will form their strategy for arguing Ms. Meng should not be extradited to the United States to face fraud charges. Her lawyers told court the Canadian government is withholding key evidence relevant to how and why she was arrested in December at Vancouver International Airport. The lawyers also argued her case should be tossed because: her arrest was an abuse of process; the fraud charge she is facing in the United States is for a crime that doesn’t exist in Canada; and the U.S. government’s extradition request represents an “abuse of power.”

Meanwhile, a Republican U.S. senator said Friday that his country would not rest until Canadians Michael Spavor and Michael Kovrig are released. The pair were detained by China in apparent retaliation of Ms. Meng’s arrest.

Idaho Senator Jim Risch, chair of the U.S. Senate foreign-relations committee, said he and his colleagues would not forget abut the two. His comments come as the China-U.S. trade war reached new extremes on Friday, with $200-billion in new U.S. tariffs on Chinese imports.

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Energy R&D: A researcher at the University of Calgary says she has developed a method of turning greenhouse gases into valuable carbon nanofibres. Mina Zarabian came up with the concept while completing her doctorate in chemical and petroleum engineering. The nanofibres have multiple industrial uses that included replacing metal in cars and airplanes, wind turbines, battery manufacturing and construction. Carbon fibres are expensive and currently cost about $100 a kilogram, she said.

Green win: Svend Robinson, a longtime NDP heavyweight who is running for the party in the next federal election following a 15-year absence from Ottawa, has suggested his party has some work to do to fend off the Green party. The Greens took the Nanaimo-Ladysmith seat from the NDP in this week’s by-election. The candidate who won had been rejected by the NDP as a candidate over comments he made six years ago, which party brass took as a criticism of the NDP. Mr. Robinson said the by-election results should serve as a wake-up call to the NDP.

60s scoop: The leader of Saskatchewan’s NDP has apologized for the Sixties Scoop, a policy under which thousands of Indigenous children were removed from their homes and placed with non-Indigenous families. Ryan Meili said past NDP governments in the province share responsibility for using the policy and he said the New Democrats must ask for forgiveness. Robert Doucette, a survivor and co-chair of a group called the Sixties Scoop Indigenous Society of Saskatchewan, was on hand for the apology and thanked Mr. Meili for this words.

Opinion:

Gary Mason on Alberta’s blue-ribbon finance panel: “The Premier’s panel is a positive first step. It’s acknowledging there is a problem and that something has to finally be done about it.”

Adrienne Tanner on gas prices: “B.C. has no new refineries on the way and Mr. Horgan’s suggestion that Alberta build one to help B.C. out seems a bit rich given the current relationship between the two provinces. If there were an easy fix for high gas prices, previous governments likely would have implemented it.”

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Globe editorial on China’s canola war: “Until recently, the name of the game in Ottawa was avoiding giving offence to Beijing, in the hope that corporate Canada would be rewarded. After Meng and canola, the game has changed.”

Brooks DeCillia on the Conservative position on climate change: “If Mr. Kenney and Mr. Scheer fail to meet expectations around the environment, it could be politically costly – and their ties and rhetoric limit the horizon of possibilities in their approach to climate change. They have positioned themselves as both champions of an idyllic, prosperous past while feinting at plans to effectively deal with climate change. They make no demands of Canadians, and do not suggest a need for real and pressing change.”

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