Report dissects 'Vancouver Model' of money laundering

Investigation details underground network of people using region’s casinos to cover their financial tracks

River Rock casino in Richmond. A new investigation details the underground network of people using the region’s casinos to cover their financial tracks | Shutterstock

The provincial report released Wednesday on money laundering at Lower Mainland casinos contained a detailed account of how organized crime has profited from laundering proceeds of crime and facilitating the movement of money out of China - a process that is now being called “the Vancouver Model.”

The model - which investigator Peter German said doubles a criminal operator’s profits by servicing both ends of the same transaction - was so prevalent and lucrative that the Australian academic who termed the phrase, Prof. John Langdale of Macquarie University, feared the same model landing in markets like Sydney, Australia.

“Professor Langdale fears that the Vancouver Model may soon find its way to Australia if preventative steps are not taken there,” the German report said. “In this regard, Sydney mirrors Vancouver in many respects. Its real estate is considered among the most desirable in the world; its casinos beckon high rollers; and money transfer companies are commonplace. Like Vancouver, there is also a high local demand for illegal drugs.”

The Vancouver Model, as described by Langdale, begins with Chinese citizens who want to relocate money from China to Canada. Those citizens would then make a deal with a lender in Canada to accept cash in Canada. The lender then links up with a Chinese underground banker in charge of those citizens’ accounts, and the two parties settle the transaction.

The German report said the cash received by the Chinese citizens in Canada “comes in the form of stacks of $20 bills, wrapped in a fashion (by elastic bands) that more closely resembles drug proceeds than it does cash originating at a financial institution.”

The Chinese person picking up the cash then buys in at a Canadian casino, gambles and receives either a cheque or a high-denominations bill upon leaving. The illegal lender would then profit not only from the transaction getting a person’s money out of China, but also from the laundering of money likely from illicit operations such as drug trafficking.

German said the Vancouver Model is one reason the report is asking Ottawa for more intense scrutiny and regulation on sectors like real estate, luxury goods, automobiles and boats. He said that organized crime groups may be using casinos to launder in the past, but may now shift the model to a different realm to continue to operations.

“Once the heat becomes too much in a particular sector, such as casino gambling, it should be no surprise that organized crime will move to another sector or methodology,” German said in the report. “This may be real estate, luxury goods, counterfeit products, or many other enterprises. The only criteria is that the new landing spot be lucrative, because organized crime is entrepreneurial by nature. It will not go away.”

German added that while there is global aspect to the Vancouver Model – the willingness of some Chinese citizens to move money to Canada – the general public in the Lower Mainland also bears significant responsibility for the phenomenon. So it would be unfair to characterize the casino money-laundering issue as one dominated by “Chinese gamblers,” he said.

“Definitely, there’s an Asian organized crime component,” German said. “… But it’s not exclusively that. At the end of the day, if we are talking about drug-trafficking proceeds being laundered, who is buying the drugs? It’s actually people in this province that are buying the drugs, or whichever other city, country or state where that money comes from. So it’s easy to point the finger elsewhere, like abroad, but we also have to realize that illegal drug sales occur right here. And that money gets laundered right here.”

cchiang@biv.com