Warning signs lead to real estate investigation
Rob Shaw
The Province
B.C. has ordered a new review of the real estate, luxury automobile and horse racing sectors over worries they’ve been used by criminals to launder illegal money.
Attorney General David Eby said Thursday he’s authorized an independent probe into money laundering that builds upon a similar investigation done earlier this year into how duffel bags full of dirty cash were allowed to flow improperly through B.C.’s casinos.
The new review will focus on sectors of the economy where criminals could use funds to purchase luxury items, like homes and high-end automobiles. In particular, Eby flagged the use of trust accounts by lawyers to mask the source of money used in real-estate transactions and the misuse of builders’ liens in the construction sector.
“We don’t know yet the extent of criminal activity that may be occurring in these sectors, but we have no intent of ignoring the many warning signs,” said Eby. A final report is expected by March 2019.
“Quite frankly we’re all giving our heads a shake wondering what’s behind all this,” said Blair Qualey, president of the New Car Dealers Association of B.C. “All of our members, whether they are selling Fords or Maseratis are all under the scrutiny of pretty big global vehicle manufacturers who have some pretty darn high standards (and) who expect dealers to conduct themselves and follow all the rules.”
The Law Society of B.C., which regulates lawyers, said it began adopting a no-cash rule for depositing funds into lawyer’s trust accounts as far back as 2004.
“The Law Society’s compliance audit program ensures that all law firms who operate trust accounts are audited at least once within a six-year cycle, and we recently adopted a plan to re-audit law firms in high risk areas and to conduct compliance audits of law firms that practice in the areas of real estate and wills and estates every four years,” said spokesperson David Jordan.
It’s unclear what part of horse racing is susceptible to money laundering, and Eby did not elaborate. Great Canadian Gaming Corporation, which owns Hastings Racecourse in Vancouver, said in a statement it “welcomes the newly announced review of the horse racing industry.”
Real estate firms are required by law to report suspicious transactions and all cash transactions over $10,000, as well as have compliance measures in place, conduct a money-laundering risk assessment and keep proper records.
Canada’s financial intelligence watchdog, the Financial Transactions and Reports Analysis Centre of Canada, or Fintrac, found “significant” and “very significant” deficiencies in the anti-money-laundering controls at 88 per cent of real estate entities examined in B.C. over the last two years, according to data obtained in July by Postmedia News.
It’s clear there’s work to do to improve Fintrac reporting, said Darlene Hyde, CEO of the BC Real Estate Association, which represents the province’s 22,000 licensed realtors.
“We’re in support of any effort to make sure proceeds of illegal activities don’t make their way into our economy,” said Hyde. “We’re deeply concerned that the real estate sector may be vulnerable to abuse by organized crime, so we support the review’s focus.”
A former RCMP deputy commissioner, Peter German, who probed money laundering inside B.C. casinos earlier this year, will conduct the new investigation as well.
However, German’s casino report only flagged around $100 million from money laundering in casinos over 10 years. Eby was asked Thursday whether $100 million could truly distort $363 billion of residential real estate sales that occurred during the same 10 years.
“That is exactly the question we’re asking,” said Eby.
The NDP has criticized the previous Liberal government for allowing money laundering to proliferate. “If there is suspicious activity in the real-estate market in British Columbia obviously it needs to be exposed,” Liberal leader Andrew Wilkinson said Thursday,
Also on Thursday, the government announced a new “expert panel” on money laundering regulations, to be chaired by Simon Fraser University professor Maureen Maloney.
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