Sunday, May 12, 2019
CRIMINAL CAPITALISM
What makes British Columbia - and Canada - a haven for money launderers.
What makes British Columbia - and Canada - a haven for money launderers.
This week, British Columbians learned the price paid by ordinary people for money laundering by organized crime.
Dirty money is not a problem contained to casinos and the luxury car trade. It involves billions of dollars tumbling through the real estate market, inflating prices at a time when residents are struggling with unaffordable housing.
The B.C. NDP government has now released the final instalment of a series of reports on money laundering. The government’s experts have established that large-scale, transnational money laundering by organized crime is taking place throughout the provincial economy − an estimated $5-billion just in the real estate sector last year.
B.C. Attorney-General David Eby plans to meet with federal Organized Crime Reduction Minister Bill Blair to discuss next steps, and the B.C. cabinet will soon decide whether to call a public inquiry.
But B.C.'s investigations also revealed that the province is not alone in its challenges. Ontario, Alberta and the Prairies face similar problems. “This issue feels like a national-level crisis,” Mr. Eby told reporters this week, a crisis that threatens confidence in the Canadian economy.
On Friday, speaking to reporters in Edmonton, Prime Minister Justin Trudeau called the findings “extremely alarming,” and promised action. “This is a real and pressing problem for Canadians and it’s a problem around the world that Canada is going to continue to lead in the fight against.”
CASINOS AS LAUNDROMATS
The reports kicked off with Dirty Money, which was released in June, 2018 and looked at money laundering in Lower Mainland casinos.
In that report, former RCMP deputy commissioner Peter German said local casinos had for many years “unwittingly served as laundromats for the proceeds of organized crime." He catalogued a host of problems, including a flagship anti-money-laundering software system that didn’t work – Mr. German called it a “debacle” – and a confusing, ineffective regulatory regime.
The report was released with video that showed people entering casinos with shopping bags and oversized handbags full of cash, neatly stacked and held together with what look like rubber bands. It described the Vancouver model, a system in which money is laundered in and out of Vancouver to other locations, including Mexico and Colombia.
In one instance described in the report, investigators determined that $13.5-million, mostly in $20 bills, had passed through the cash cages of one casino in a month.
Canada needs to stop being dirty money’s 24-hour laundromat
Mr. German’s first report contained 48 recommendations, including that a transaction analysis team should be set up and meet at least weekly to review all suspicious transaction reports.
The British Columbia Lottery Corporation (BCLC) says the number and value of suspicious transaction reports has plummeted, with the value of such reports falling from $27-million in July of 2015 to $1-million in March, 2019.
Under BCLC rules that took effect in January, 2018, casinos in B.C. are required to gather detailed information on the source of player funds for all transactions of $10,000 or more.
The changes have had an impact on casino operators.
Great Canadian Gaming Corp., which runs the River Rock casino in Vancouver and other gambling venues, including the Hastings Racecourse (also in Vancouver), said in its first-quarter report that revenues in 2018 decreased from the previous year with “a part of the decrease in gaming revenues … due to the BCLC source-of-funds procedures.”
Like this week’s real estate report, the casino report highlighted how existing regulations, including reporting requirements of the Financial Transactions and Reports Analysis Centre of Canada (FinTRAC), the federal money-laundering watchdog, were not having the desired effect.
It was a theme Mr. Eby returned to at his Thursday press conference. “Many, many reports were filed with FinTRAC from our casinos about bulk cash transactions with little apparent action,” he said.
FAST CARS, CLEANED CASH
Mr. German singled out luxury vehicles for scrutiny. He found that the province’s inability to crack down on money laundering through car sales can be traced to the absence of financial tracking by provincial and federal watchdogs. Unlike banks and casinos, car dealerships aren’t required to report large or suspicious transactions to FinTRAC.
Mr. German found that the provincial authority, The Vehicle Sales Authority of BC, is focused on consumer protection, and that vehicle industry associations don’t view cash-based sales as a significant concern. Because dealers deposit the cash from vehicle sales into mainstream financial institutions, there’s a complete lack of visibility.
Interviews with a number of B.C. car dealers reveal the way their businesses handle suspect transactions, ranging from accepting six-figure, no-questions-asked cash sales, to a policy of not accepting cash in amounts exceeding $9,999. The German report called the latter amount curious, as it’s the maximum amount a FinTRAC reporting entity, such as the financial institution receiving the dealer’s deposits, can accept without submitting a large cash transaction report.
German Report reveals extensive money-laundering in B.C.'s luxury car market
The German report cited one scheme operated by a high-level drug dealer who functioned as a broker to steer buyers to a particular company. He would accept a large cash deposit on a car from a lessee and the individual would sign a multiyear lease. Within six months, the lessee would return and lease a more expensive car with an additional deposit. According to the report, the lessee could repeat the process multiple times and simply return to the dealership and ask for some of his deposits to be refunded by company cheque, rendering the cash clean.
In other cases, gangsters would take advantage of B.C.’s rapidly growing grey market of overseas exports. More than 4,400 vehicles were exported to China in 2018, according to data from the provincial Ministry of Finance. Straw buyers were hired to purchase the vehicles for domestic use. Then, the report says, the vehicles would be shipped overseas where the international market ensures massive profits.
Due to the fentanyl crisis, too much attention has been placed on monitoring goods imported from overseas, while exports such as stolen vehicles could be slipping through as a result, according to the Insurance Board of Canada. Earlier this year, Inspector Brian MacDonald − the officer in charge of the Integrated Municipal Provincial Auto Crime Team (IMPACT) − said he remains concerned that “no one is working our ports like they should be.”
A ‘LIGHT TOUCH:’ REGULATING REAL ESTATE
A host of local professionals working in B.C.’s real estate sector inevitably end up as gatekeepers that facilitate the laundering of dirty money by organized criminals, the reports released this week concluded.
The real estate industry as a whole was characterized as being subject to “light-touch regulation” with some professionals subject to heavy provincial and federal oversight while others were not, Mr. German’s report stated.
“The result is that we can view the rat as it burrows through parts of the industry but lose sight of it in other parts, only to find it emerge in yet another,” his report stated.
Real estate brokers, realtors, developers and some 300-odd notaries in the province are required to report suspicious transactions to FinTRAC.
But mortgage brokers, private lenders and lawyers – key links in the chain of property ownership – do not have to report to FinTRAC and both reports recommended federal laws be amended to bring these professions under this regulatory regime.
Dirty money driving up B.C. home prices as more than $40-billion laundered across Canada in 2018
The provincial regulator of mortgages told Mr. German’s team that it has a “less-than-optimum window” on how many unlicensed mortgage brokers, private lenders and mortgage-investment corporations are operating. These firms are targets for money launderers because there is “no oversight in terms of who acts as a lender and no oversight in terms of their funding source or the payment back of mortgages.”
Lawyers across the country have been exempt from reporting to FinTRAC since a 2015 Supreme Court of Canada decision in favour of the Federation of Law Societies, which successfully argued that doing so would infringe upon solicitor-client privilege. Parliament has yet to develop a workaround − such as developing a third-party database that merely records a client’s name and the amount of money they deposited – that could protect lawyer trust accounts from money laundering.
Provincial law societies have stepped in to impose rules to help their members counter this sophisticated crime, but B.C. has some of the strongest regulations in the country and still has several loopholes, Mr. German noted.
Bill McCarthy, a Burnaby-based real estate developer and long-time realtor with a host of other professional designations, said it is an open secret in his industry that clients often try to pay deposits or even purchase a home with cash. In the end, he said, any and all professions involved in buying and selling property should report to FinTRAC because, he said, bad elements can always find willing partners.
“I don’t think anything in the German report has surprised those within the real estate, legal and mortgage businesses,” Mr. McCarthy said. “The scope and scale maybe, but not the details of it and that’s a problem.”
CASH IS FLOWING IN UNEXPECTED PLACES
Closing gaps in enforcement and regulation to stop criminals from laundering their dirty money in British Columbia’s economy is akin to playing the arcade game Whac-a-Mole: Knock down one problem, and another pops up.
In his final report on money laundering, Mr. German devoted a full chapter to what he calls the Wack-a-Mole phenomenon − when organized crime moves from one vulnerable industry to another.
The problem, Mr. German found, is that many sectors of the economy have no obligation to report suspicious transactions. When an individual walks into an auction house or law firm with large sums of cash, officials at FinTRAC don’t hear a thing.
Canada needs a uniform obligation to report large cash transactions, he concluded. “Universal reporting, as it exists in the U.S., is the simplest way to close this gap."
B.C. clamped down on money laundering in its casinos last year, but here are a few of the other creative ways organized crime can still launder bags of cash without question.
Buying sprees, obscured ownership: Report reveals red flags of money laundering in B.C.'s property market
Luxury toys and adornments: "Much the same as luxury vehicles, speed boats and other luxury craft are popular items in which organized crime can park its money and still have the use of the item, until recouping most of their cost when reselling. We were advised by one law firm that its lawyers handle $10-million per year in small-vessel sales,” Mr. German noted. He also noted that many high-end homes in Greater Vancouver contain pianos valued in excess of $100,000. Even if they are never played, they are an easy parking spot for money and will retain much of their value until resale.
Postsecondary institutions: The B.C. government set up a tip line on money laundering to encourage insiders to come forward. Some of the leads described tactics where international students sign up for programs, pay their fees in cash, and then cancel before classes begin. They then get a refund cheque. “On a recent occasion, one college was faced with a student who was required to pay a charge of $150. The student attended with $9,000 in cash in a duffel bag and asked to deposit that amount minus the $150 owing. In effect, the institution was being asked to act as a bank.”
Money service business: MSBs are informal banking systems that can move money electronically to distant locations − without international money transfers − by settling accounts through e-mail, WeChat or other informal means.
They have become a fixture of the urban Canadian financial system, Mr. German said, and “very little, if any, attention is being paid to unregistered MSBs, who are moving considerable money on a daily basis. Those that register are subject to regulatory oversight. Those that don’t register, are off the proverbial radar screen.”
SOCIALISM
Every person, whether or not they have children, exists as both a successor and an ancestor. We are all born into a world we did not make, subject to customs and conditions established by prior generations, and then we leave a legacy for others to inherit. Nothing illustrates this duality more profoundly than the problem of climate change, which calls into question the very future of a habitable planet.
Today, I’d guess that most of us are more able to imagine an environmental apocalypse than a green utopia. Nuclear holocaust, cyber warfare, mass extinction, superbugs, fascism’s return, and artificial intelligence turned against its makers—these conclusions we can see, but our minds struggle to conjure an image of a desirable, credible alternative to such bleak finales, to envision habitation rather than ruin.
This incapacity to see the future takes a variety of forms: young people no longer believe their lives will be better than those of their parents and financial forecasts give credence to their gloomy view; political scientists warn that we are becoming squatters in the wreckage of the not-so-distant liberal-democratic past, coining terms such as dedemocratization and postdemocracy to describe the erosion of democratic institutions and norms alongside an ongoing concentration of economic power. Meanwhile, conservative leaders cheer on democratic regression under the cover of nostalgia—“Make America Great Again,” “Take Our Country Back”—and seek to rewind the clock to an imaginary and exclusive past that never really existed.
Conservative Leader Andrew Scheer promises detailed climate plan by end of world
Atlantic Canada — Progressive Conservative Leader Andrew Scheer says he will present his party’s climate change plan by the end of life as we know it on the blue planet, at the very latest.
Speaking to reporters gathered at the legislature in Fredericton, N.B., Scheer said that talk is cheap but that action is what the PC party is all about.
“I know we said we’d reveal our plan — and we do have a plan, believe me — by the end of spring, but I just got busy and shit kept coming up, so now that’s being pushed slightly. Now the goal is to let everyone in on it sometime between this summer and the demise of humankind, assuming that’s not happening this year.”
Every year, the world’s five largest publicly owned oil and gas companies spend approximately $200 million on lobbying designed to control, delay or block binding climate-motivated policy.
BP has the highest annual expenditure on climate lobbying at $53 million, followed by Shell with $49 million and ExxonMobil with $41 million. Chevron and Total each spend around $29 million every year.
How life on Earth affected its inner workings
It is well known that life on Earth and the geology of the planet are intertwined, but a new study provides fresh evidence for just how deep—literally—that connection goes. Geoscientists at Caltech and UC Berkeley have identified a chemical signature in igneous rocks recording the onset of oxygenation of Earth's deep oceans—a signal that managed to survive the furnace of the mantle. This oxygenation is of great interest, as it ushered in the modern era of high atmospheric and oceanic oxygen levels, and is believed to have allowed the diversification of life in the sea.
Subscribe to:
Posts (Atom)