The High Cost of Money Laundering in Canada

[whatnext]

It's not just a BC problem. Given how intertwined money laundering has become with real estate, you have to wonder how many projects across the country are tainted with dirty money? From today's Globe & Mail:


Canada-China political relations continue their downward spiral following the arrest of Huawei executive Meng Wanzhou in Vancouver, with ongoing retaliatory actions and threats by the Chinese government. As a result, Canadians are increasingly asking themselves what sort of government they are dealing with.

A glimpse into Chinese money laundering helps us understand the struggles within an authoritarian state awash with cash, and how it dumps some of its problems on countries like Canada.

International money laundering, which is a criminal offence in Canada and China, occurs when individuals “clean up” or launder proceeds from crime by investing in foreign assets so that the dirty monies enter the conventional financial system. More broadly, international money laundering also takes place when a person transfers legally earned money across a border without disclosure to their home government...

...First, this money laundering occurs on a massive scale. According to The New York Times, US$1 trillion recently left China in an 18-month time period around 2015-16. Most of this money comes from wealthy Chinese individuals who secretly store away their legally earned money overseas. What began as a trickle 20 years ago has now become a tidal wave of capital outflows with stories of middle-class Chinese now opening bank accounts in Canada and the United States. In part, the amount of money moving offshore can be tied to the incredible economic growth that has raised Chinese household incomes for thirty years...

...Many of the individuals identified within this leak were family members of the rulers of the CCP, including the tiny group of seven men within the Politburo Standing Committee who run China. For instance, the data leaks showed that Chinese President Xi Jinping’s son-in-law Deng Jiagui maintained companies based in secretive tax havens (although the usage of such companies may have been legal).

Finally, Chinese money laundering is tied to Canada’s number one public health crisis, namely the nearly 4,000 fentanyl overdose deaths per year. According to Canadian law enforcement, most of this fentanyl – including the deadly tainted version of the drug – is manufactured by and shipped from China-based factories through online sales to Canadian drug users and traffickers.....

...To launder these illegal sales within British Columbia, organized crime linked to China cleaned up $1-billion in 2016 alone; they did so by buying Vancouver real estate. An additional $1.7-billion was laundered between 2013 and 2017 by pumping money into casino earnings. These Vancouver mobsters make and move so much dirty money they make Tony Soprano look like a two-bit crook.

Senator Vernon White, a former police officer, has called for punitive trade sanctions against China until their government acts to stem the production and sale of fentanyl from state-regulated factories...

https://www.theglobeandmail.com/opin...ing-in-canada/

[WhipperSnapper]

Real estate is hot and it almost gets too much attention in this regards. Money is being hidden or laundered in everything. Any Canadian company that deals in CAD owned by Chinese is an ideal laundering vehicle. It's only going to get worse until financial institutions face serious repercussions from laundering money from one country to another. Revoking their banking charters is one way.

[Dengler Avenue]

Originally Posted by WhipperSnapper

Real estate is hot and it almost gets too much attention in this regards. Money is being hidden or laundered in everything. Any Canadian company that deals in CAD owned by Chinese is an ideal laundering vehicle. It's only going to get worse until financial institutions face serious repercussions from laundering money from one country to another. Revoking their banking charters is one way.

In that case, U.S. is so gonna do something about it.

[ssiguy]

Harper and Trudeau both turned a blind eye to the obvious money laundering because it is outside money being brought into the country and hence helping to prop up the economy especially in real estate which has become obscenely too important to our economic growth and dangerously so in BC. I am also sure that Campbell/Clark in BC applied a lot of pressure on Ottawa to not investigate, tighten the rules, or even discuss the matter or it could devastate the real estate dependent BC economy which has been the darling of Canada's economy since the financial crisis. Christy Clark actually shut down a money launderinbg investigation to keep the dirty money flowing BC & Ottawa wanted those low unemployment numbers for both political gain and the tax revenue if provided thru housing construction/flipping.

[llamaorama]

The stuff about fentanyl and condos makes Vancouver kind of sound like a alternate universe version of 1980s Miami. Instead of tropical beaches its snowy mountain peaks, instead of coke its meth, but otherwise its the same.

[ssiguy]

Did anyone see the latest W5 program on Saturday? It was all about the obscene level of money laundering going on in BC Casinos, real estate, expensive cars, {Vancouver is the super luxury car capitol of NA states Van Sun/Huff Post} and how it is based on drug money. Even for me it was unbelievable and the Christy government knew all about it as did the BCLC. $1.2 billion............... a year and that's all we know about as no doubt there is more. Now you know why BC's economy and treasury are doing so well.

Throughout the world BC is known as a major international money laundering centre and it was so easy that it even has it's own name by criminal organizations......'The Vancouver Model.' The whistleblower in the whole thing was actually fired from his job as head of the anti-money laundering section of BCLC because he was asking to many questions and demanding too many answers as to why suitcases of money were brought in the River Rock Casino {in Richmond of course} by the Chinese {yes he blamed it almost all on the Chinese criminal activity} with sometimes hundred of thousands of dollars in $20 bills as he was informed quite clearly that he was never to ask them where they got the money from even if they were doing it several times a week. There is actual Chinese Bank set up in Richmond exclusively for laundering money from China.

The name of the W5 episode is quite fitting...................."The Laundromat".

[whatnext]

Interesting that we haven't seen this in Canada....yet.

China has recruited the services of former police detectives in Australia and other Western countries to help it recover millions of dollars in alleged "hot money" taken out of the country.

Four Corners has spoken to several former law enforcement operatives who have been engaged through a third-party company in Hong Kong as part of an operation code-named "Project Dragon".

Their mission is to recover proceeds of crime from China that have been transferred out of the country, or legitimate funds that have allegedly been illegally siphoned out to places such as Canada, the United States and Australia.

Four Corners has also seen correspondence showing that under the arrangements, any illicit funds or assets recovered overseas are to be returned to China and the foreign investigators or operatives paid a commission....

...Former undercover Royal Canadian Mounted Police officer Bill Majcher is also involved in Project Dragon.

A specialist in financial crime, Mr Majcher is the president of the Hong Kong-based asset recovery firm EMIDR.

"As long as the claim is valid and as long as we're doing everything lawfully and properly, I'm a hired gun to help either large corporates or governments to get back what is rightfully theirs," he said.

...But Mr Majcher is cautious when describing his role in helping China's Ministry of Public Security.

"I have a commercial relationship with entities that are in themselves associated in some form or another with policing authorities in China. And a big part of their mandate is focused on economic crime, financial crime, money laundering," he said.

"We know how to operate more clearly I think than a country like China or personnel from China in our own jurisdictions. We have a familiarity."

The use of private operatives comes on top of China's official efforts to recover billions in alleged hot money. In 2015, China launched Operation Sky Net, a global mission tasked with recovering funds and arresting international fugitives, including corrupt officials...

https://www.abc.net.au/news/2019-02-...28?pfmredir=sm

[whatnext]

Not just a Vancouver problem:

Toronto housing has become magnet for money launderers, with $28 billion in real estate bought by anonymous owners: study

Toronto’s housing market has become a target for money laundering or “snow washing,” thanks to anonymous property ownership, weak regulation and lax enforcement, according to a new study.

Since 2008, $28.4 billion worth of housing was acquired in the Toronto region largely through private entities where owners can remain anonymous, according to a report released Thursday by Transparency International Canada, Canadians for Tax Fairness and Publish What You Pay Canada.

In that period, $9.8 billion of housing was bought by companies through cash purchases, largely bypassing anti-money laundering checks on fund sources and beneficial owners, according to the study, which analyzed more than 1.4 million residential sales dating back to 2008...

https://leaderpost.com/real-estate/t...c-e11e534a697e

[whatnext]

This is embarassing. Singled out by the USA as a major money0laundering destination:

Canada needs to do more to curb money laundering, U.S. report says
MIKE HAGER
VANCOUVER
PUBLISHED APRIL 2, 2019

Canada was one of the world’s major money-laundering jurisdictions last year and, while the country has adequate intelligence on how this dirty money is being washed, more work is needed on the way this sophisticated crime is investigated and prosecuted, according to a recent U.S. State Department report.

The 2019 International Narcotics Control Strategy Report, the annual assessment of how key countries are fighting the illicit drug trade around the globe, found transnational organized crime groups and professional money launderers are operating in Canada, laundering cash from “drug trafficking, fraud, corruption, counterfeiting and piracy, and tobacco smuggling” as well as ill-gotten gains from other countries.

Much of this dirty money likely comes from the illicit drug trade, as the report also labelled Canada one of the globe’s three dozen countries that are “major sources of precursor or essential chemicals used in the production of illicit narcotics," along with others such as Brazil, China, Colombia, India, Indonesia, Mexico and Britain. In its report, the State Department analyzed the money-laundering threats in Canada and roughly 80 other countries around the world...(bold mine)

https://www.theglobeandmail.com/cana...s-report-says/

[misher]

Originally Posted by whatnext

This is embarassing. Singled out by the USA as a major money0laundering destination:

Canada needs to do more to curb money laundering, U.S. report says
MIKE HAGER
VANCOUVER
PUBLISHED APRIL 2, 2019

Canada was one of the world’s major money-laundering jurisdictions last year and, while the country has adequate intelligence on how this dirty money is being washed, more work is needed on the way this sophisticated crime is investigated and prosecuted, according to a recent U.S. State Department report.

The 2019 International Narcotics Control Strategy Report, the annual assessment of how key countries are fighting the illicit drug trade around the globe, found transnational organized crime groups and professional money launderers are operating in Canada, laundering cash from “drug trafficking, fraud, corruption, counterfeiting and piracy, and tobacco smuggling” as well as ill-gotten gains from other countries.

Much of this dirty money likely comes from the illicit drug trade, as the report also labelled Canada one of the globe’s three dozen countries that are “major sources of precursor or essential chemicals used in the production of illicit narcotics," along with others such as Brazil, China, Colombia, India, Indonesia, Mexico and Britain. In its report, the State Department analyzed the money-laundering threats in Canada and roughly 80 other countries around the world...(bold mine)

https://www.theglobeandmail.com/cana...s-report-says/

This whole money laundering in Canada issue is driven by massive amounts of propaganda and populism. People need a target to blame for real estate prices and they've been thrown money laundering as the newest one (before it was foreigners and speculators). There is no evidence that money laundering is worse in our two expensive cities than anywhere else in Canada, and no evidence that it has led to higher home prices in Canada than say Mexico or America who both suffer from the exact same issue.

Reading through this report note that Canada is listed among more than 50 other nations, many of them being major first world nations. The report also notes that we're great at detecting and monitoring money laundering, just we're bad at enforcing and prosecuting. This is likely largely because we have so many human rights and hurtles to prosecute criminals here. People scream that we need to do more about money laundering, but the US is saying we're doing enough. The problem is our justice system which needs to be completely overhauled. Based on this report its clear that this call to inquire into money laundering or examine it more or put in protections against it is stupid. What we need to do is enforce and prosecute it.

And for those BC NDP supporters here, that means that the BC Liberals weren't lax because as the US says, we're great at detecting and monitoring, its the federal government who has to enforce and prosecute!

The full list from the US report is below:
https://www.state.gov/documents/organization/290502.pdf

The following countries/jurisdictions have been identified this year:
Major Money Laundering Jurisdictions in 2018:
Afghanistan, Albania, Algeria, Antigua and Barbuda, Argentina, Armenia, Aruba, Azerbaijan,
Bahamas, Barbados, Belgium, Belize, Benin, Bolivia, Bosnia and Herzegovina, Brazil, British
Virgin Islands, Burma, Cabo Verde, Canada, Cayman Islands, China, Colombia, Costa Rica,
Cuba, Curacao, Cyprus, Dominica, Dominican Republic, Ecuador, El Salvador, Georgia, Ghana,
Guatemala, Guyana, Haiti, Honduras, Hong Kong, India, Indonesia, Iran, Italy, Jamaica,
Kazakhstan, Kenya, Laos, Liberia, Macau, Malaysia, Mexico, Morocco, Mozambique,
Netherlands, Nicaragua, Nigeria, Pakistan, Panama, Paraguay, Peru, Philippines, Russia, St. Kitts
and Nevis, St. Lucia, St. Vincent and the Grenadines, Senegal, Serbia, Sint Maarten, Spain,
Suriname, Tajikistan, Tanzania, Thailand, Trinidad and Tobago, Turkey, Ukraine, United Arab
Emirates, United Kingdom, United States, Uzbekistan, Venezuela, and Vietnam.

And a nice quote from the report about Canada:

ENFORCEMENT/ IMPLEMENTATION ISSUES AND COMMENTS
Canada has a rigorous detection and monitoring process in place but should further enhance its
enforcement and prosecutorial capabilities. As noted by international experts, when the
magnitude of the identified money laundering risks are taken into account, Canada’s money
laundering conviction rate appears to be low; from 2010-2014 (most recent data available), only
169 trials on charges of money laundering led to a conviction. In addition to the offense of
laundering the proceeds of crime, the possession of proceeds of crime (PPOC) is also a criminal offense.
The same penalties apply to both laundering and PPOC convictions involving more
than approximately U.S. $3,740 ($5,000 Canadian). Of PPOC charges brought in 2014, 17,191
resulted in a conviction on at least one charge.
Canada adopted legislation regulating virtual currencies in 2014 that, when it comes into force,
will subject persons and entities to the same reporting requirements as MSBs. The law will not
come into force until a second package of regulatory amendments is completed, which is
expected in 2019. Digital currency exchanges will have to register with FINTRAC. Financial
institutions will be prohibited from establishing and maintaining accounts for virtual currency
businesses not registered with FINTRAC.

The populist propaganda based on little to no evidence in Canada has really gotten out of control, its insane.

[someone123]

If you listen to David Eby, BC's attorney general, talk in an interview, you can hear him explain how BC casinos dutifully filled out reports on people bringing in millions of dollars of cash in bags. The reports were then ignored.

The fact that the ignored reports exist somewhere doesn't mean that money laundering is not a problem in BC. It's the opposite; if there were good monitoring and enforcement there would be few reports. The reports show that there is a problem.

There is nothing wrong with wanting to limit the black market economy, or feeling bad about paying 10x more taxes than somebody who can outbid you on a property using ill-gotten gains. This isn't a "populist" concern, it's a concern about some of the most basic aspects of how our society functions.

We also had just under 1,500 overdose deaths in BC last year, so there is clearly some kind of black market for drugs that is not under control.

[misher]

Originally Posted by someone123

If you listen to David Eby, BC's attorney general, talk in an interview, you can hear him explain how BC casinos dutifully filled out reports on people bringing in millions of dollars of cash in bags. The reports were then ignored.

The fact that the ignored reports exist somewhere doesn't mean that money laundering is not a problem in BC. It's the opposite; if there were good monitoring and enforcement there would be few reports.

There is nothing wrong with wanting to limit the black market economy, or feeling bad that you're paying 10x more taxes than somebody who can outbid you on a property using ill-gotten gains.

Just a friendly suggestion, might want to edit your last post a little as you listed monitoring. As stated by America:

Canada has a rigorous detection and monitoring process in place but should further enhance its enforcement and prosecutorial capabilities.

Personally I believe Eby is full of crap and is doing publicity stunt after publicity stunt to keep his seat. Enforcement and prosecution is Federal not Provincial and anyone who understands the way government works knows this.

As for your second point. Yes the black market economy exists worldwide and is estimated at 5%. And yes that 5% does compete with us for investments. But can we attribute our entire real estate crisis to it when its existed across Canada for 100's of years? I'm not against improving our enforcement and prosecution of it. But I am saying we have much bigger fish we need to be focusing on if we want to help improve affordability. Focusing on stuff we know will make little difference is a huge distraction.

[whatnext]

Originally Posted by someone123

If you listen to David Eby, BC's attorney general, talk in an interview, you can hear him explain how BC casinos dutifully filled out reports on people bringing in millions of dollars of cash in bags. The reports were then ignored.

The fact that the ignored reports exist somewhere doesn't mean that money laundering is not a problem in BC. It's the opposite; if there were good monitoring and enforcement there would be few reports. The reports show that there is a problem.

There is nothing wrong with wanting to limit the black market economy, or feeling bad about paying 10x more taxes than somebody who can outbid you on a property using ill-gotten gains. This isn't a "populist" concern, it's a concern about some of the most basic aspects of how our society functions.

We also had just under 1,500 overdose deaths in BC last year, so there is clearly some kind of black market for drugs that is not under control.

The BC Liberals are no better than two-bit crooks, they deliberately looked the other way while this money laundering occurred. By doing so they are complicit in fentanyl overdose deaths. They are a party beholden to the snake-oil salesmen developers and realtors who fill their coffers. They deserve to be out of power for at least two terms.

[misher]

Originally Posted by whatnext

The BC Liberals are no better than two-bit crooks, they deliberately looked the other way while this money laundering occurred. By doing so they are complicit in fentanyl overdose deaths. They are a party beholden to the snake-oil salesmen developers and realtors who fill their coffers. They deserve to be out of power for at least two terms.

So your saying the Americans are lying when they say we detected and monitored well? Or that the BC Liberals are responsible for federal issues?

If you want to blast the BC Liberals because you dislike them or for other things sure, but what specifically do you feel they did wrong here given the evidence of the American report? The popular narrative is to blast the BC Liberals for lack of monitoring of money laundered through casinos but the Americans are saying when looking at other nations around the world we did an above average job.

[someone123]

Originally Posted by misher

So your saying the Americans are lying when they say we detected and monitored well? Or that the BC Liberals are responsible for federal issues?

Detection of money laundering is a necessary part of effectively dealing with the problem but it's not sufficient on its own. In fact it's useless on its own. Money launderers are not deterred if there's a report they may not even know about that nobody ever follows up on.

There's nothing wrong with BC's provincial government lobbying the federal government to fix problems that fall under federal jurisdiction and affect BC. That is completely standard provincial government activity and there are many active examples of it in many domains. The federal government agreed with BC that this is a problem now; they dedicated more money to dealing with money laundering in the budget.

[misher]

Originally Posted by someone123

Detection of money laundering is a necessary part of effectively dealing with the problem but it's not sufficient on its own. In fact it's useless on its own. Money launderers are not deterred if there's a report they may not even know about that nobody ever follows up on.

There's nothing wrong with BC's provincial government lobbying the federal government to fix problems that fall under federal jurisdiction and affect BC. That is completely standard provincial government activity and there are many active examples of it in many domains. The federal government agreed with BC that this is a problem now; they dedicated more money to dealing with money laundering in the budget.

Unfortunately what the federal government is doing will have little true benefit as what we're lacking is on the enforcement and prosecutory sides. Its basically just a PR stunt rather than an effective measure. True effectiveness requires massive amounts of money given to our prosecution system's budget and an overhaul of our judicial and criminal legislation. What America is identifying aren't issues with our investigations there issues with our overall justice system which hinder prosecuting all crimes.

[whatnext]

Editorial from the Globe & Mail today:

Canada needs to stop being dirty money’s 24-hour laundromat

The span of guesses as to the scale of money laundering in Canada is as vast as the distance from Victoria to St. John’s.

A British Columbia government report from 2018 guessed that at least $100-million a year was being washed through the province’s casinos. An international report pegged the flow coursing through the entire B.C. economy at more than $1-billion a year. A draft report for the federal government estimated the national number at between $5-billion and $40-billion annually. And this week, a C.D. Howe Institute study concluded the amount of dirty money laundered annually from coast to coast could be as high as $130-billion – as much as Canada’s three biggest banks, combined, book in revenue each year.

Canada has a money-laundering problem. It is large, and possibly very large. And it’s an issue the country has been slow to grapple with.

B.C. is the epicentre of the problem, and it’s where the fight back has started. Peter German, a former RCMP deputy commissioner, has been investigating the issue for the provincial government since the fall of 2017. His first report last summer concluded B.C. casinos had become “laundromats.” This week came his findings on luxury cars, a market where suspicious transactions go unreported and expensive rides – including one car worth more than $200,000 – are bought with bags of cash, no questions asked...

...All governments east of Victoria would do well to follow B.C.’s lead. Money launderers go where their work is easiest. B.C. had been exploited for years but tougher rules could change that: After the province made it harder to wash cash through casinos, the flow of suspicious money eased....

....Policing is important, but it would be a lot easier with the right tools. This week’s C.D. Howe Institute report – the one that pegged money laundering at as much as $130-billion a year – correctly concluded that a national ownership registry, such as the one in the works in B.C., is essential.

Money laundering may be invisible but, like a punch you never saw coming, it hurts. When Canadian real estate is used as an international dirty-money laundromat, it harms law-abiding Canadians by artificially pushing up housing prices.

The real estate market has long operated behind opaque information. Money launderers benefit from this. Drawing back the curtain and shining more light into real estate transactions is an essential step for the good health of the housing sector – the place where most Canadians make the biggest investment decision of their lives.

https://www.theglobeandmail.com/opin...ur-laundromat/

[Nite]

Can anyone tell me what is the problem of foreigners investing in Canadian companies and real estate is? I understand why foreign governments are against it but it seems it a big benefit to Canada as a whole as it's free money entering our economy.

[someone123]

Originally Posted by Nite

Can anyone tell me what is the problem of foreigners investing in Canadian companies and real estate is? I understand why foreign governments are against it but it seems it a big benefit to Canada as a whole as it's free money entering our economy.

One problem is that it's not compatible with our tax system and urban planning rules.

We have a bunch of subsidies like capital gains exemptions on primary residences and deferred property taxes. These were meant for groups like the elderly who paid in for years. They don't interact well with foreign flows of capital. They encourage foreign investors to channel their money into poor investments and they make it so that millionaire investors pay lower taxes than people earning $40,000 a year in Canada.

On top of this we have NIMBYism so it's often not practical to build a new supply of housing for the investors. This means that everybody gets pushed down the housing ladder, people have worse commutes, some neighbourhood businesses struggle, etc.

Then we have investor-class immigration which is just a poor financial trade-off and many other issues.

I have no problem with foreign investors here per se, but we have to be careful about how it is handled.

[whatnext]

Originally Posted by Nite

Can anyone tell me what is the problem of foreigners investing in Canadian companies and real estate is? I understand why foreign governments are against it but it seems it a big benefit to Canada as a whole as it's free money entering our economy.

Much of the money is connected to the drug trade, particularly fentanyl:
The U.S. Department of State has designated Canada a “major money laundering country” where foreign drug-trafficking gangs are exploiting weak law enforcement and soft laws...
https://globalnews.ca/news/5102137/u...ering-country/

Regardless of that, how could you possibly see as remotely positive something which makes it impossble for middle class Canadians to afford a home where they work? Your profile doesn't say where you are based, but I can assure that contrary to the postings of some newcomers here, Canada pre-2000 was not some gawdawful shithole just waiting for an economic boost from laundered money.

Take a look at just one snippet from the report:
..One of the largest buying sprees, defined as more than three purchases within two years, involved a homemaker acquiring more than a dozen downtown Vancouver row houses for a total of $4.1-million between 2004 and 2007, according to the report. Those properties were recently assessed at a total of $15-million, the report stated...
https://www.theglobeandmail.com/cana...g-in-property/

Those were homes taken out of the local market. They were used as a speculative investment and helped drive prices through the roof.