Why are B.C. institutions hiding information on money laundering?

Photo: LeslieLauren, GettyImages

It’s been more than two years since the landmark report Dirty Money Part 2 dropped like a political bombshell, with explosive allegations about drug money being laundered through British Columbia real estate. Since then, government-linked bodies have blocked our attempts to access the data behind those claims.

This is part of a general trend of secrecy in Canada. While we point our fingers at offshore tax havens where oligarchs and criminals secretly stash their wealth, many don’t realise that provinces like B.C. are the same in many respects. You can own property anonymously through a company that even law enforcement will struggle to investigate. 

It’s a perfect place for organized criminal groups to hide their cash. And they do.

“I can say, with some exceptions, that Canada’s legislation actually encourages money laundering,” said Antonio Nicaso, a lecturer at Queen's University and Mafia expert. 

“Private corporations and trusts are not required to disclose the beneficial owner or the person who owns, controls or exercises ultimate effective control of the legal entity, arrangement or property.”

Nicaso says this, along with Canada being a transit country for cocaine, a source country for synthetic drugs and a hub for cybersecurity technology makes it a target destination for organized crime groups. 

“If organized crime were to create a country, it would look a lot like Canada.” 

A B.C. government panel estimated that $5.3 billion was laundered in 2018 alone in B.C. real estate. The Dirty Money 2 report examined how cash was laundered, but that was  based on indicators –– cash buys, or people buying multiple properties in a short period of time, for example –– and did not identify specific
cases of individuals or companies laundering illicit funds.
 

We work with the Organized Crime and Corruption Reporting Project (OCCRP), an investigative journalism organization with a track record of uncovering money laundering networks around the world. We figured that if we dumped the B.C. real estate data into our system and cross referenced it with other datasets, we might find some interesting connections that could be a jumping off point for further investigation.

We thought the authorities in possession of the dataset — the Ministry of the Attorney General, the Land Title Survey Authority (LTSA) and BC Assessment (BCA) — would be happy to help us try to expose criminals who have contributed to the current housing crisis by dumping dirty money into real estate.

We were wrong.

We first asked the ministry for the dataset containing ownership records of B.C. properties. While officials seemed eager to share it, they had signed a contract saying they couldn’t. So we filed a Freedom of Information (FOI) request. The ministry said we needed to instead ask the LTSA and BCA to release the dataset, as they had compiled it. Those organizations rejected our requests.

We appealed for a review of both rejections, and the Office of the Freedom of Information and Privacy Commissioner sided with BCA, which is a Crown corporation. It said the data should not fall under FOI legislation, and that there was no point in reviewing the LTSA refusal for the same reason. The Commissioner’s office found that it was “plain and obvious” that the data was available for purchase — for the discounted price offered by BCA of $93,000, plus tax.

The crux of the argument was that a member of the public could buy each of the individual records that BCA had compiled into a dataset upon request of the Attorney General, which researchers analysed for Dirty Money Part 2. We contended that the dataset should be considered a separate entity from the records inside it, and that it was not available for purchase in that cumulative form. 

To some degree the dispute is esoteric. The dataset could have been shared if the authorities cared to share it. There was no privacy risk, and it would not have created work for staff, as the dataset had already been compiled.

In its letter to us, the commissioner’s office pointed out that BCA can provide information free of charge when the “provision of the data for no or reduced fee is in the public interest.” But BCA did not respond to our request to waive the fee.

Why wouldn’t BCA want to share data that could potentially help expose money launderers? We don’t know, although BCA pointed out that selling records represents a small part of its revenue. BCA declined to respond to our point that the information is clearly in the public interest, and declined to comment on whether $93,000 (plus tax) was a reasonable amount to charge a non-profit journalistic organization. 

BCA also refused to answer repeated questions on what steps it is taking — if any — to implement anti-money laundering measures, as recommended by two reports commissioned by the provincial government. 

As we pointed out in letters to BCA and the Commissioner’s office, the public interest behind our request was underscored by the fact that the provincial government commissioned reports to look into money laundering. Even more so, the government launched the Cullen Commission – a public inquiry to “make findings of fact respecting money laundering in British Columbia.”

The Cullen Commission’s final report will likely outline myriad ways that our laws and institutions facilitate money laundering, but it probably won’t deeply investigate specific cases or present incriminating evidence about them to the public. Like the earlier studies, the commission’s report will no doubt highlight the mechanisms of secrecy around property and company ownership.

The Commission may point out, for example, that B.C. law does not require the disclosure of company shareholders, nor does it prohibit the use of nominee directors who know little to nothing about the company's affairs. There isn’t even a legal requirement that at least one director of the company be a B.C. resident.  

So, the company can have just one director, and that director can be a lawyer, an accountant or an employee of a corporate service firm in some offshore tax haven who simply takes instruction from an undisclosed shareholder. While B.C. law requires the company to have a registered address in the province, that address can be provided by a law firm, accounting firm or corporate service provider. 

In other words, B.C. law effectively enables tax cheats and money launderers to use companies to hide their criminal activities in complete secrecy.

There are some moves towards company transparency. 

The B.C. government recently passed legislation requiring companies to keep a record of beneficial owners. But it remains to be seen if criminal-connected companies will do so, and whether the new law will be adequately enforced. In the meantime, criminals can continue to benefit from B.C.’s system of institutionalised opacity, not only through companies, but also trusts, which are subject to even less oversight.  

The government has also created a Land Owner Transparency Registry, with a deadline of Nov. 30 for people to declare their interest, including those who own properties through trusts and corporations. Unfortunately, weaknesses in reporting requirements mean it will “likely do little to stop money laundering in B.C. real estate,” according to a report by the C.D. Howe Institute

Among other flaws laid out in the report, the registry does not verify information, and land owners are not even required to submit government-issued photo identification. 

“They can just make up a name, because they don’t even need to file any of that identification documentation,” said Kevin Comeau, a corporate attorney who authored the report.

“Make no mistake about it — organized crime is going to lie,” he said. “And it’s not just organized crime, it’s kleptocrats around the world. The amount coming in from corrupt politicians is at astronomical levels, we assume.” 

If by chance money launderers do get caught, they won’t go to jail, but will only be required to pay a fine, according to the regulations.

“Money launderers have lots of money; it’s just dirty,” said Comeau. “So it’s no big deal for them to come up with money for the fine.”

At this point, we have multiple reports and another one coming from the Cullen Commission that point to rampant money laundering in B.C. The problem has been made crystal clear. Yet, there seems to be little coordinated effort to investigate the perpetrators of crimes that spurred the government to launch these initiatives. And when we wanted to access the data to do just that, we were denied.

Canada’s lackluster approach to tackling money laundering, along with its reputation as a relatively corruption-free country, makes it an ideal target for criminals.

“Canada is seen as one of the cleanest countries in the world, but that’s only because we don’t measure the amount of dirty money that comes in,” said Comeau. “And we’re doing little or nothing to stop that.”

The terms “snow washing” and the “Vancouver Model” — in which drug money is funneled through underground banks, law firms and casinos in B.C. and used to purchase property — are now commonly used by experts internationally to describe Canada’s money laundering problem.

While we are quick to condemn opaque jurisdictions overseas, we are failing to address the lack of accountability at home. Whatever the reasons were for creating such an opaque system in the first place, they are out of step with zeitgeist. There is more and more scrutiny of systems like ours that allow money to be squirrelled away in secret accounts, companies and properties. 

People around the world are calling for transparency, and it’s time that Canada — and B.C. in particular — lifted its own veil of secrecy.

Jared Ferrie is an editor with the Organized Crime and Corruption Reporting Project (OCCRP) who previously worked as a reporter in Vancouver and as a correspondent in Asia and Africa. 

Katarina Sabados is a former researcher with OCCRP, and now investigates international supply chains at the University of British Columbia’s Global Reporting Centre.