Sunday, October 25, 2020

Expert money-laundering panel recommends B.C. regulate foreign exchange, money transfer businesses


The B.C. government’s expert money-laundering panel says the province should regulate money transfer and money exchange businesses.

The recommendation suggests the province develop a regulatory regime for the businesses — commonly called money services businesses (MSBs) — to be overseen by the Financial Institutions Commission (Ficom), a provincial body that already regulates credit unions, insurance companies and mortgage brokers.

Across Canada, more than 800 MSBs — including more than 200 in the Lower Mainland — handle an estimated $39 billion a year in transactions.

The expert panel, led by Simon Fraser University professor of public policy Maureen Maloney, delivered recommendations last week.

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The panel, in its 184-page report, said there are many legitimate businesses providing money transfer and foreign exchange services, but businesses providing money-laundering services to criminals also provide the same services.

The panel noted MSBs are the largest source of suspicious transaction reports submitted to Canada’s financial intelligence gathering agency, Financial Transactions and Reports Analysis Centre (Fintrac).

However, the panel said regulation of financial businesses is not Fintrac’s core mission, and concerns have been raised about the effectiveness of the Fintrac registry as a regulatory regime.

A Postmedia investigation published in March of this year raised questions about the scrutiny of MSBs in B.C. as increasing attention was being put on money laundering in the province and how it is being policed.

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The expert panel said using Ficom as the MSB regulator would ensure a recommended specialized financial investigation unit would investigate MSBs.

The B.C. government has said it will have to prioritize the 29 recommendations from the expert panel.

“I can certainly say that all the recommendations look critical, and we’re certainly supportive of the recommendations, but we want to take some time,” B.C. Finance Minister Carole James said when the money-laundering report was released.

On Monday, the B.C. Attorney General office said the government is “committed to addressing all of the recommendations and findings in the reports, including considering a regulatory regime under Ficom for money services businesses.”

The attorney general’s office said it is working with the ministries of finance and solicitor general to do so.

Former deputy RCMP commissioner Peter German made a similar recommendation to licence MSBs in a 2018 report that found millions of dollars were being laundered through casinos.

The Postmedia investigation into money-services businesses — involving hundreds of pages of court records, corporate registry filings and property records — found two dozen MSBs in Vancouver, Richmond and on the North Shore are run out of condos and homes, others are run by real estate firms and property developers, and many that have no public face at the street level or online.

The investigation also uncovered that a property development company and owner was fronting a money-services business for another person, and found companies that had supposedly ceased business were still registered with Fintrac.

And court documents alleged the owner of an MSB was also involved in an underground banking scheme to move millions from China to Canada.

Quebec is the only province with a licensing system for MSBs.

Quebec’s licensing process requires applicants to provide a significant amount of information, including legal structure, officers, directors, partners and branch managers; the financial institutions with which it deals; its business plan; and financial statements. The business and its owners must also meet conditions of suitability and obtain a security clearance from Quebec provincial police.

The B.C. government is also considering merging Ficom with two real estate regulatory bodies, a recommendation from a separate review released in September 2018.

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