Sunday, October 25, 2020

Author of B.C. casino money laundering report to focus on real estate


While all eyes were on a report about money laundering in casinos released Wednesday, experts are expecting more revelations as investigator Peter German works on a second report, this one focusing on B.C.’s real estate sector.

In his 250-page report, German showed how B.C.’s casinos became havens for laundering hundreds of millions of ill-gotten cash and made a series of recommendations to close the many loopholes in the sector.

German is now moving to examine B.C.’s real estate sector. While his casino report took nine months to complete, the former RCMP deputy commissioner for western and northern Canada expects real estate to be a more challenging investigation. Both reports have been commissioned by the B.C. government.

“Real estate is a really important one … It’s one of the sectors that have been overlooked from the federal oversight perspective, from the provincial oversight perspective,” said Christine Duhaime, a lawyer who specializes in counter-terrorist financing and anti-money laundering law.

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Worldwide, luxury property is one of the most common ways money is laundered, said James Cohen, director of programs and engagement at Transparency International Canada. A 2016 Transparency International Canada study found that 45 per cent of the most valuable residential properties in Greater Vancouver are held through corporate structures that hide the owners.

“To have as opaque a beneficial ownership system as we do in Canada makes us very attractive for people to store money,” Cohen said, referring to the ability to hold property in corporations, shell companies or trusts and conceal the identity of the owner.

In a press conference on Wednesday, David Eby, B.C.’s attorney general, said that when more scrutiny is placed on one area of money laundering, “it’s like pressing down on a waterbed” with the ripple moving to another area.

Real estate, other types of gambling such as horse racing, and luxury goods such as cars and jewelry are other areas it will now be important to watch closely, added German.

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In his report, German described one known link between money laundering, casinos, real estate and the illegal drug trade. The method was named “the Vancouver model” by Australian academic John Langdale. Chinese citizens wanting to relocate some of their wealth from China to Canada, which is difficult because of strict limits set by China, agree to accept cash in Canada from a lender. The person wanting to move money out of China then takes the cash they’ve been loaned to a casino and exchanges it for chips, gambles, then converts the chips into cash again when they leave the casino.

“A complex network of criminal alliances has coalesced with underground banks at its centre,” wrote German. “Money is laundered from Vancouver into and out of China and to other locations, including Mexico and Colombia. Illegal drug networks in North America are supplied by methamphetamines and precursor chemicals from China and cocaine from Latin America. In addition, ‘high rollers’ from China facilitate the flight of capital from China using Canadian casinos, junket operations and investment in real estate.”

Duhaime said luxury goods would likely be a much more minor area than real estate. She warned that German will have a more difficult time finding out what is going on in real estate than he did when investigating casinos, who know their clients well and collect identification information from them.

“He may be able to get some of that information and look up contracts, then he’ll have to talk to realtors, and then he’ll have to identify suspicious transactions,” Duhaime said.

German will then likely encounter property ownership shrouded in secrecy behind trusts or shell companies, Duhaime predicted.

“As soon as he hits that, that’s like a wall. He’s going to have a really difficult time figuring out who’s behind those entities because it’s not obvious who’s behind them or who the beneficiaries are of the trusts.”

B.C.’s finance minister has promised to create a public registry showing who owns real estate in the province, although government will have to consult with stakeholders and introduce legislation before the registry is up and running. There may well be privacy concerns that will need to be worked through, Duhaime said.

“I think what’s important is greater transparency in the area,” Cohen said. “To clean out who’s using it for money laundering, for kleptocracy, for proceeds of criminal actions or terrorist actions as well as tax dodging.”


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