The federal government has proposed a new anti-money laundering task force to crack down on real estate, casino and trade-based money laundering, especially in high-risk areas such as Vancouver, Toronto and Montreal.
The plan for a multi-agency task force is one of a number of enforcement and intelligence sharing measures proposed in the 2019 federal budget, meant to improve Canada’s weak record for policing money laundering and tax evasion in real estate especially, which has harmed housing affordability.
“Together, tax non-compliance and money laundering can push up the cost of housing, making home ownership less affordable for middle class Canadians,” a budget document says.
The anti-money laundering budget measures, including investments of about $200 million in five years and additional ongoing funding, are a response to “growing concerns” that transnational organized crime and professional money laundering networks are flooding illicit funds through Canadian real estate, corporations, and trade, budget documents say.
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The most significant proposed reform would implement the so-called ACE (Anti-money laundering action and co-ordination) Team. Funded as a five-year pilot program at a cost of $24 million, ACE is designed to bring together experts from Canadian law enforcement and intelligence agencies, to share information and expertise on complex and international investigations. To start, ACE will include the RCMP, Fintrac, Canada Revenue Agency, and federal justice department prosecutors.
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Critics, including experts from Canadian law enforcement, have said these agencies operated within information silos, partly because Canada’s stringent privacy laws have prevented sharing of intelligence on criminal suspects.
But the ACE Team will find ways to share intelligence “while continuing to protect the privacy rights of Canadians,” according to budget documents.
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The RCMP will also receive $68.9 million over five years to improve its federal investigative capacity on issues such as organized crime, money laundering and terrorism financing, in addition to an increase of $20 million in annual funding.
And to complement the ACE Team, Fintrac and Canada Border Services will work together on a “Trade-based Money Laundering Centre of Expertise” — meant to fight growing use of import and export companies for hiding and transferring criminal funds. In briefings, Fintrac experts have informed Global News that they see underground banking and trade-based money laundering as the major channels through which criminal funds and narcotics flow in and out of Canada.
In these schemes, for example, proceeds of drug sales in Canada are used to produce goods which are sold in other countries, in order to pay back drug gangs in foreign currencies, and fund more drug imports into Canada. Fraudulent invoicing is also used to cover wire transfers used for criminal transactions.
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The anti-trade money laundering centre will receive $28.6 million over four years and $10.5 million per year in ongoing funding. Fintrac will also receive $16.9 million in funding over five years to strengthen its operations, specifically focused on better outreach and examinations in British Columbia’s real estate and casino sector.
Another major proposed budget change includes an amendment to Canada’s Criminal Code that would target professional money laundering networks. Experts have argued that money laundering has been especially difficult to prosecute in Canada because the crimes producing illicit funds must be proven, in addition to the act of actually laundering proven criminal money.
The proposed amendment would target laundering by professionals such as realtors or money services business owners, a Finance Canada official explained, by showing they operate with “recklessness.”
“This would criminalize the activity of moving money on behalf of another person or organization while being aware there is a risk,” budget documents say. “It would provide law enforcement with an important, practical tool in the fight against professional money launderers.”
The proposed budget measures would also include:
- $50 million over five years to the CRA to fund four real estate audit teams targeting tax evasion in high-risk regions, “notably B.C. and Ontario”
- a joint working group between the B.C. provincial and federal governments, to examine real estate money laundering in the Metro Vancouver region
- up to $1 million to Statistics Canada over two years to conduct a data needs assessment, regarding information on domestic and foreign real estate purchases, and tax evasion
- changes to Canada’s beneficial ownership transparency, so that law enforcement agencies “can more clearly know who owns which corporations in Canada”
- better information sharing partnerships between private businesses including banks and real estate companies, and Canadian law enforcement
WATCH BELOW: Timeline of money laundering in B.C. casinos
Failed money laundering probes
The proposed anti-money laundering reforms partly stem from Ottawa’s recognition that high-risk areas such as Vancouver, Toronto and Montreal have been exploited as havens for money laundering and transnational crime. The failure of some high profile cases involving alleged professional money laundering networks has also added to the urgency of the reforms.
For example, B.C. Premier John Horgan and Attorney General David Eby expressed extreme disappointment in November 2018 following the collapse of the RCMP’s so-called E-Pirate investigation into an alleged casino, real estate, and drug-money laundering ring tied to Chinese gangs.
The Financial Action Task Force, an international anti-money laundering agency informed by Canadian government data, estimated the alleged underground bank in Richmond, B.C., that was identified in E-Pirate was laundering over $1 billion per year for Chinese Triads, Latin American Cartels and Middle East crime groups.
And a Global News investigation into related crime networks revealed that more than $1-billion worth of Vancouver-area property transactions in 2016 were suspected to be linked to Chinese organized crime, according to an unreleased police intelligence study.
WATCH BELOW: Money laundering flowing through back door channels in B.C. casinos
Another Global News investigation showed that RCMP believe underground banking with links to global drug traffickers and real estate money laundering is deeply embedded in Toronto and Montreal, too.
In the case, a Toronto currency exchange owner was arrested in 2016 and accused of laundering $100 million in just one year in Toronto and Montreal. He faced 16 criminal charges, including laundering drug money, tax evasion, and possessing proceeds of crime. But the suspect has returned to his native Iran before appearing at trial. The RCMP linked his arrest to an international underground banker based in Dubai — and with alleged ties to terrorists — and reportedly capable of laundering about $16 billion per year for drug traffickers.
Also, in a potentially related case, in February 2019, the RCMP announced 17 arrests after a series of raids were carried out in Montreal and Toronto targeting what investigators believe is an extensive international money-laundering syndicate with ties to organized crime.
The RCMP alleged the underground banking network uncovered was moving drug cash globally, with “connections in Lebanon, the United Arab Emirates, Iran, the United States and China. The funds were often wired through Dubai, and then returned to drug-exporting countries, such as Colombia and Mexico.”
The investigation, dubbed “Collector” was cited in 2019 budget documents, which said a “vast money laundering network” was dismantled.
The methods of underground transactions are similar to the ones RCMP say they exposed in B.C. casino money-laundering investigations.
“The network moved money collected from criminal groups in Montreal, through various individuals and currency exchange offices in Toronto,” the budget documents say. “Dismantling complex money laundering networks that fuel criminal activity requires significant investment of time and resources, as well as co-operation across domestic and international law enforcement agencies.”
A Global News investigation found that Canada largely fails to effectively prosecute money-laundering cases, with just 321 convictions between 2000-2016. Roughly 809 cases were either stayed, withdrawn or dismissed, over that same time period, resulting in a conviction rate of around 27 per cent.
In B.C., just 10 people have been found guilty of money laundering since 2002, while Ontario has seen just 186 guilty verdicts since 2006.
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