Anti-money laundering inquiry calls for sweeping changes to tackle dirty money in BC

The commissioner of British Columbia’s public inquiry into money laundering said the federal anti-money laundering regime is not effective and the province needs to go its own way if it hopes to tackle the problem of dirty money washing through its economy.

In a final report released Wednesday, Supreme Court Justice Austin Cullen said the province needs to establish a dedicated provincial money laundering intelligence and investigation unit and appoint a commissioner to oversee the government’s approach to the problem.

Speaking to reporters immediately after the release of his report, Cullen said the public was right to be suspicious about the lack of response to what appeared to be a huge amount of dirty money flowing into BC

“For too long, money laundering has been kept on the sidelines,” he said. “It’s time for that to change.”

Cullen said the agency tasked by the federal government to identify money laundering threats – the Financial Transactions and Reports Analysis Center, or FINTRAC – is “ineffective” and that BC needs to strike out on its own to make progress.

“If the province is to achieve success in the fight against money laundering, it must develop its own intelligence capacity in order to better identify money laundering threats,” Cullen said in his report, which is more than 1,800 pages long.

Cullen’s report contains a total of 101 recommendations covering areas from law enforcement to real estate and banking regulations.

The proposed anti-money laundering commissioner would be a new, provincially established agency responsible for tracking how Cullen’s recommendations are put in place.

‘Staggering’ amounts of money have been laundered in BC: report

Cullen was appointed to lead the inquiry into money laundering in 2019 after reports of illicit funds washing through the province’s casinos, housing and luxury car markets.

The commission’s final report comes after testimony from nearly 200 witnesses, including former politicians, law enforcement officials and academics.

While Cullen said it is impossible to come up with an exact dollar amount for the money laundered in BC, he put the amount in the billions – calling money laundering a “significant problem requiring strong and decisive action.”

“Sophisticated professional money launderers operating in British Columbia are laundering staggering amounts of illicit funds,” the report said.

Cullen said “an unprecedented volume of cash was laundered through BC casinos” during the period he studied from 2006 to 2016. He found the agencies responsible for stopping the problem were aware of the issue, but “failed to intervene effectively.”

Surveillance video highlighted in 2019 showed bundles of $ 20 bills being dumped at a BC casino in an example of apparent money laundering. (BC Ministry of Attorney General)

‘No evidence’ politicians were corrupt, commissioner says

The commissioner also said he found no evidence of corruption among the elected officials who oversaw the various ministries responsible for cracking down on money laundering while dirty money was flowing into casinos.

“While some could have done more, there is no evidence that any of the failures were motivated by corruption,” he concluded.

Cullen’s report makes a series of sweeping recommendations, including a more vigorous approach to asset seizure and the introduction of unexplained wealth orders to “discourage foreign corrupt officials and others from moving their illicit wealth to British Columbia through the purchase of real estate and other valuable assets” . “

In faulting FINTRAC, Cullen said the federal anti-money laundering regime has encouraged “defensive reporting” – through which entities responsible for reporting potential suspicious activity err on the side of caution by making a report at the slightest sign of uncertainty.

He said that’s led to high-volume, low-value intelligence gathering. From 2019 to 2020, the agency received 31 million individual reports but only sent a little more than 2,000 intelligence packages to law enforcement – 355 of them to police in BC

He said FINTRAC’s results compare poorly to other nations with comparable systems.

As for who would serve as anti-money laundering commissioner in BC, should the province create the position, Cullen stressed he would not be the one to take the role – despite the time he has spent examining the problem.

In 2008, CBC journalists took $ 24,000 in cash to BC casinos to see just how easy money laundering would be. Turns out it wasn’t hard at all:

2008 CBC money laundering investigation

Investigation lauded in last week’s Peter German report on BC casinos

Money laundering not causing housing unaffordability

While acknowledging the work the province has already done to track real estate ownership and crack down on dirty money flowing through BC’s red-hot housing market, Cullen said the field is still highly vulnerable to money laundering.

“Money laundering in the real estate sector often involves the use of loans, mortgages and, in some cases, lawyer’s trust accounts and the legal system,” he said.

He said the body that regulates real estate in BC needs a clear mandate to combat money laundering. He also faulted real estate agents themselves for their “poor record of anti-money laundering reporting and compliance.”

Cullen’s final report said the province also needs more effective regulation of the mortgage lending industry and suggested – among other measures – that the province establish a transparent corporate beneficial ownership registry.

He also said BC should create a regime to report transactions over $ 10,000.

Although many of Cullen’s recommendations center around the real estate market and the role of lawyers and real estate agents in transactions that have seen housing prices rise dramatically across the province in recent years, he stressed money laundering is not the source of housing unaffordability.

“I am unable to conclude that money laundering is a significant cause of housing unaffordability in the residential real estate market,” Cullen said.

“Money laundering should be addressed, to be sure, but steps taken to counteract money laundering should not be viewed as a solution for housing unaffordability.”

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