B.C. needs new, dedicated unit to successfully solve 'staggering' money laundering problem: report
Politicians 'could have done more' to stop problem, but commissioner says no evidence corruption was motivator
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 B.C.
"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 Centre, or FINTRAC — is "ineffective" and that B.C. 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 have been laundered in B.C.
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 B.C., 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 B.C. 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."
'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 was motivated by corruption," he concluded.
Mike de Jong, one of three former gaming ministers named in the report, said he found it "gratifying" that the commission said there was no evidence of political or personal corruption.
He went on to say the report puts to rest the notion that the previous government did nothing to address the issue, although he admits more could have been done.
"Those of us who served in the previous government need to acknowledge that, and I certainly do," he said.
Speaking Wednesday, B.C. Attorney General David Eby said the previous government failed at the job they were elected to do.
"As a politician, I wouldn't be satisfied with a sash awarded by the commissioner that says 'not corrupt.' I hold myself to a higher standard," he said.
Finding fault in FINTRAC
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 B.C.
He said FINTRAC's results compare poorly to other nations with comparable systems.
As for who would serve as anti-money laundering commissioner in B.C., 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.
Eby said the report makes it clear that federal enforcement bodies have not provided the province with the support it had hoped for. He also said recent announcements from Ottawa, such as a crackdown on trade-based money laundering, have "already essentially collapsed."
"It's hard not to reach the conclusion that the commissioner clearly did that the province needs to assume responsibilities that previously the federal government would have done," Eby said.
In a statement, the federal Department of Finance said it is already taking actions to address issues raised by the commission.
The most recent budget announced $89.9 million in FINTRAC funding over five years. Budget 2022 also vowed to establish a new Canada Financial Crimes Agency, which Ottawa said "will become Canada's lead enforcement agency in this area."
The federal government said it will conduct a comprehensive review of its anti–money laundering and anti-terrorist financing regime, which will be informed in part by the Cullen Commission's final report.
The B.C. Lottery Corporation said it will review the report and work with the government to respond to its recommendations. Chief compliance officer Marie-Noelle Savoie said in a statement that BCLC hopes to build off the significant work it has done in recent years to protect casinos in the province from financial crimes.
In 2008, CBC journalists took $24,000 in cash to B.C. casinos to see just how easy money laundering would be. Turns out it wasn't hard at all:
Money laundering not causing housing unaffordability
While acknowledging the work the province has already done to track ownership of real estate and crack down on dirty money flowing through B.C.'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 B.C. 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 B.C. should create a regime to report transactions over $10,000.
Although many of Cullen's recommendations centre 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."
ABOUT THE AUTHOR
With files from Catharine Tunney
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