B.C. asks feds to back potential public inquiry into money laundering

B.C. Attorney General David Eby and federal Minister of Border Security and Organized Crime Reduction Bill Blair said they’re on the same page in tackling the problem

Attorney General David Eby

B.C.’s Attorney General David Eby has called on federal Minister of Border Security and Organized Crime Reduction Bill Blair to lend support for a provincial public inquiry into money laundering, should the BC NDP government choose that path.

 

Eby said Blair was open to his requests.

 

On Wednesday Eby and Blair pledged support for one another’s plans to address money laundering in the province at a short press conference in Victoria, following their one-on-one meeting.

Eby said it was his understanding that the public wanted a public inquiry to address political accountability for the issue and to “identify if there is rot in the system.”

“The premier has been clear about keeping the option open to a public inquiry,” he said.

But Eby said any decision made by the BC NDP cabinet will be made following the release of two special reports – one from investigator Peter German on money laundering in the real estate sector and another from Maureen Maloney that will look at potential gaps in financial regulations, enforcement, consumer protection and jurisdictional matters related to addressing money laundering in the real estate sector.

While the province regulates real estate, federal regulators and the RCMP enforce financial crimes such as money laundering.

This month Blair’s Liberal government announced measures in its 2019 budget to better address money laundering, such as establishing a working group on real estate with B.C. A new pilot program, the Anti-Money Laundering Action, Coordination and Enforcement (ACE) Team will strengthen inter-agency coordination over five years, for $24 million. Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) will get a $16.9 million boost over five years to expand operational capacity and $1.9 million annually to maintain that capacity. The budget also adds $1 million to Statistics Canada to improve monitoring of real estate.

“I’m heartened by the fact the feds have stepped up in this way,” said Eby, who said B.C. should be seeing the majority of resources from the budget “because we have a very serious issue here.”

“We can see the impact [money laundering] is having in our country and in our neighbourhoods.… It’s a significant problem,” Blair said.

The extent of money laundering in real estate is unknown however, although anti-financial crime advocacy group Transparency International Canada suggests tens of billions of dollars of criminal proceeds could be washed annually in the Toronto and Vancouver markets.

One money service alone, Silver International in Richmond, was alleged to have laundered between $220 million and $1 billion annually.

Charges against Silver International were stayed last November. Global News reported investigators may have erroneously identified an informant in submitted evidence.

Global News initially reported on the investigation into Silver International, identifying what international money laundering experts called the Vancouver Model, in which drug cash, including from the deadly fentanyl trade, is washed through casinos and into assets such as luxury cars and real estate. Money also comes in from China and is exchanged through underground banks, such as Silver.

Between 2010 and 2016 detached homes in Vancouver doubled in price, and the number of luxury vehicles registered in the province reportedly doubled between 2013 and 2016.

German’s report is said to be a follow-up to the many cases the media have drawn to the government’s attention.

The Canadian government also tied money laundering to holes in tax compliance and enforcement.

“Together, tax non-compliance and money laundering can push up the cost of housing, making home ownership less affordable for middle-class Canadians,” the federal budget noted.

In 2015 the Canada Revenue Agency augmented its compliance program for B.C. and Ontario real estate audits. Last month the agency issued a report claiming it had collected $140.7 million from 1,417 real estate audits in B.C. alone, from April, 2018, to December, 2018.  That’s $99,294 per audit, well above the three-year average of $45,182 per B.C. audit, and miles ahead of Ontario’s average of $17,241 per audit.

The federal budget is diverting more money to tax audits and improving the monitoring system. It notes B.C.’s new speculation and vacancy tax enhances the CRA’s monitoring capabilities for real estate by linking home ownership to income tax returns.