$5 billion laundered through B.C. real estate in 2018, drove up home prices
VICTORIA – A report that estimates $5 billion was laundered through British Columbia’s real estate market last year also lifts the lid on the extent of illegal cash moving across Canada.
Some $7.4 billion overall was laundered in B.C. in 2018, out of an estimated total of $47 billion in Canada, concluded the report by an expert panel led by former B.C. deputy attorney general Maureen Maloney.
The report is one of two released Thursday and says B.C. ranks fourth for money laundering among a division of six regions in Canada, behind Alberta, Ontario and the Prairies – collectively Saskatchewan and Manitoba.
The report says the higher estimates of money laundering in Alberta and the Prairies may be ”surprising,” but crime rates are rising in those provinces and illegal cash finds homes in jurisdictions where real estate is more affordable than B.C.
”What this report makes clear is this is not an issue simply for B.C.,” Finance Minister Carole James said at a news conference. ”This is an issue for all of Canada. This is an issue for all jurisdictions.”
B.C. tabled legislation last month aimed at preventing tax evasion and money laundering by shining a spotlight on anonymous real estate owners hiding behind shell and numbered companies.
”The key here is we’re not waiting,” said James. ”Yes, we need to work with the other provinces. Yes, we need to work with the federal government.”
Attorney General David Eby said money laundering is a national crisis and until recently the federal government was not paying proper attention.
Eby and Federal Organized Crime Reduction Minister Bill Blair have met in recent months to discuss strategies to fight money laundering.
”Wealthy criminals and those attempting to evade taxes have had the run of our province for too long, to the point that they are now distorting our economy, hurting families looking for housing, and impacting those who have lost loved ones due to the opioid overdose (crisis),” Eby said.
”The party is over,” he added.
The provincial government commissioned two reports last September to shed light on money laundering by organized crime in the province’s expensive real estate market, following last June’s report on dirty money in casinos by former deputy RCMP commissioner Peter German.
German was then tasked to write a second report on real estate, and he says in the document that the infusion of illicit money into the B.C. economy led to a frenzy of buying in real estate.
Maloney’s report estimated that illegal cash in the market last year hiked the cost of buying a home in the province by five per cent.
There are thousands of specific properties worth billions at high risk for potential money laundering, German’s report says.
”His findings are stark evidence of the consequences of an absence of oversight, the weakness of data collection, and the total indifference of governments until now to this malignant cancer on our economy and our society,” Eby said of German’s report.
Eby took aim at the former B.C. Liberal government for allegedly turning a blind eye to the crisis.
Michael Lee, Opposition Liberal critic for the attorney general, issued a statement Thursday saying the government now needs to turn its attention to action.
”The BC Liberals are calling on John Horgan and the NDP to carefully consider the reports and move quickly to engage with the federal government and take action to ensure that those who break the law are prosecuted and ultimately convicted.”
Eby said he was under no illusions the problems the province faces are unique.
He said B.C.’s cabinet is currently deciding whether to call a public inquiry. Green Leader Andrew Weaver said German’s report lays out a ”direct rationale” for such an inquiry.
”Namely, that it would improve public awareness, play a crucial role in fault finding, and would help to develop full recommendations,” Weaver said in a statement.
Maloney’s report makes 29 recommendations, including calling for B.C. to launch a financial investigations unit.
Portions of German’s latest report were previously released, including on the limited police resources dedicated to fighting money laundering in B.C. and links to luxury vehicle sales and horse racing.
Eby said earlier this week he was shocked to hear some criminals laundering money through B.C.’s luxury car sector were getting provincial sales tax rebates when they sent the car out of the province.
The attorney general said the government will move to plug tax loopholes to prevent the rebate that cost the province almost $85-million dollars since 2013.
Several regulatory and professional agencies anticipated the findings of the reports and put anti-money-laundering policies in place last month.
The B.C. Real Estate Council said it would be partnering with the federal Financial Transactions and Reports Analysis Centre of Canada, or FINTRAC, to identify and deter money laundering and terrorist financing in the industry.
The B.C. Real Estate Association, the body that serves 23,000 realtors in B.C., said in April that it would join with four other agencies to keep the proceeds of crime out of real estate.
The other participating organizations include the Appraisal Institute of Canada, BC Notaries Association, Canada Mortgage Brokers Association and the Real Estate Board of Greater Vancouver.
Each organization has committed to sharing information and accepting only verified funds.
They also recommended making anti-money laundering education mandatory for all real estate professionals.
Begs an immediate cynical comment. A little late in the game to broadcast this reality – a situation known to have been in play for so many years. Convenient situation for the provincial and federal governments… billions fueling real estate growth and all the associated pluses of jobs and taxes. Then there is the classic state playbook move of enabling/creating a negative situation- waiting- pointing fingers at a multitude of causes, then riding in on a fake plastic white horse proposing solutions that include more laws, penalties, and bureaucratic support systems. My recent residential mortgage process included being grilled on source of funds used as a down payment, including recent bank statements. Something does not add up here, and that is no surprise given the high probability of government incompetence if not collusion.
They might want to look at the big boys, Cressey, Bosa, Concorde Pacific. I bet lots of money was filtered through those giants. It would be a lot easier to launder hundreds of millions through big jobs than it would through the small jobs…single family, townhomes and condos less than 50 units in size, etc.