B.C. could launch a money-laundering inquiry right now, experts say
Vancouver — it’s a city often called an important gateway to Asia’s markets.
But gangsters have also used it in a whole new scheme for laundering money.
Called the “Vancouver Model,” it works like this: the region’s casinos serve as hubs for VIP gamblers from China to buy casino chips with profits from the sale of deadly drugs like fentanyl.
Through underground bank exchanges, the VIPs can repay the bags of cash — “fronted” to them in B.C. by transnational drug traffickers — into gang-controlled bank accounts in Asia in order to fund more drug imports to B.C.
WATCH: What is the ‘Vancouver Model’?
Police believe some of the money has gone into luxury real estate — and that as much as $5 billion could have been laundered in Vancouver homes since 2012.
The scheme triggered a review by former deputy RCMP commissioner Peter German, who found, among other things, that drug traffickers are using chips from B.C. casinos as their currency.
It’s all been enough to trigger calls for a public inquiry into the issue — as many as three in four British Columbians support one, according to a poll released in June.
Now the BC Government and Service Employees’ Union (BCGEU), traditionally a strong supporter of the BC NDP, is calling for one, saying a public inquiry is “the best way to learn the truth about a crisis that has claimed thousands of lives, and has made B.C. the most unaffordable province to live in.”
WATCH: Poll says British Columbians want public inquiry into money laundering
B.C. Solicitor General Mike Farnworth and Attorney General David Eby are starting to argue for an inquiry behind the scenes, according to sources who have spoken to Global News. However, others — like Geoff Meggs, chief of staff to B.C. Premier John Horgan — have opposed the idea, party insiders said.
For now, Eby has tasked German with looking at the links between money laundering and real estate.
Eby said two developments have fuelled calls for an inquiry: a Global News report about luxury home purchases linked to transnational drug crime and the November collapse of one of the biggest money laundering cases in Canadian history.
That case collapsed because federal prosecutors had mistakenly exposed a police informant’s identity.
The federal case’s collapse removed a “significant barrier” to holding a public inquiry into money laundering, Eby said — but he still wants to hold off.
Earlier this month, the B.C. attorney general said that if German’s review of money laundering in real estate didn’t produce satisfactory answers, “then we will have to look at a public inquiry as a way to get that information out.”
But German’s not the only one investigating the issue: B.C. Finance Minister Carole James has also tapped an expert panel to look at the province’s real estate sector and “offer solutions to prevent market manipulation and money laundering.”
Premier John Horgan’s position on a public inquiry has evolved, but he remains cautious. He continues to say he’s “not ruling out” an inquiry. But after the collapse of E-Pirate, Horgan said the “rule of law” had failed in B.C., and he hinted that the bar for calling an inquiry had been lowered.
Legal experts, meanwhile, see strong value in an inquiry. They believe it could pull together the work B.C. is doing already and potentially net more money than it costs to investigate in the first place.
The province could do it now, too, they said.
WATCH: Charges stayed in Canada’s biggest drug money laundering investigation
Rob Gordon, a criminologist at Simon Fraser University, believes holding an inquiry makes more sense than having numerous reviews at once.
A former police officer in Hong Kong, he said the provincial government has responded to the money laundering issue by commissioning “various individuals to look at aspects” of the issue.
“I can see here that they are going to be falling over each other trying to explore different aspects of this particular area,” Gordon said.
An inquiry, he said, “will result in a synthesizing of a lot of information,” something the Braidwood Inquiry did when it probed the 2007 Taser death of Robert Dziekanski.
That inquiry had “good results,” Gordon said. It recommended an Independent Investigations Office (IIO) to oversee officer-involved shootings.
An inquiry imposes a “certain amount of judicial rigour,” which would help with an issue that is emerging as a “global problem,” Gordon said.
“Most certainly, the money laundering process — with respect to casinos in B.C. and real estate and drugs and so forth — that is not something that’s just contained to the province,” Gordon said.
What is a commission of inquiry?
Public inquiries are government-appointed commissions that look into matters of public interest.
Their job is to find facts, summarize them and make recommendations to government in a final report — and it’s up to governments to implement them.
They’re broadly divided into two missions: investigating matters of public policy or looking at wrongdoing. Sometimes, they do both.
Depending on how an inquiry is structured, it can involve interviews and oral testimony, and commissioners can have the power to subpoena witnesses.
They’re not courts, however — legal scholars Robert Centa and Patrick Macklem drew a clear distinction between the two in a 2001 paper.
“Commissions of inquiry that focus on retrospective allocations of fault and blame run the risk of being little more than poor imitations of our civil or criminal justice systems,” they wrote.
The Charbonneau Commission
Quebec’s Charbonneau Commission has served as an example for those calling for an inquiry into money laundering.
That commission spent four years looking into “collusion and corruption in the awarding and management of public contracts” in Quebec’s construction industry; it also looked at “any links to the financing of political parties.”
The inquiry found that corruption was more “deeply rooted” than investigators thought.
Engineering firms had colluded with companies to support political candidates so that they could obtain public contracts after elections, the inquiry found. Videos played at the inquiry showed alleged Mafiosi stuffing money into their socks.
WATCH: Charbonneau commission recommendations
Charbonneau Commission deputy chief prosecutor Simon Tremblay offered a firm “yes” when asked whether B.C. should hold an inquiry into money laundering.
The purpose of an inquiry, he explained, “is to understand the schemes, to understand what happened, where are the holes in the laws.”
Public inquiries are used to “understand what happened to make recommendations to ensure the government acts so it won’t happen again,” Tremblay said.
And such an inquiry, Tremblay said, could exist side-by-side with any other investigation in B.C.
When the Charbonneau Commission began, “the first month was experts testifying about how organized crime works,” Tremblay explained.
As the inquiry moved forward, the commission worked alongside the police. Eventually a provincial body that investigates corruption arrested 37 people including former Laval mayor Gilles Vaillancourt.
The former mayor was sentenced to six years in prison for fraud, conspiracy and breach of trust. He was ordered to pay $9 million to the city as part of his sentence.
Spend $35 million, make $95 million
The City of Laval, where Tremblay now works as head of the legal department, ultimately recovered over $40 million in funds associated with the awarding of contracts, he said.
That alone was more than the $35 million that was earmarked to hold the inquiry in the first place — deals were reached to repay as much as $95 million across Quebec.
And even that likely doesn’t capture the full breadth of what was recovered, Tremblay said.
“It’s huge money that we save,” he said. “And also, all the processes in place now are much better so, for me, it’s a huge investment.”
WATCH: Charbonneau inquiry comes to an end
Not all inquiries achieve their work to this degree, however.
The Somalia Inquiry was launched in 1995 after members of the Canadian Airborne Regiment tortured and killed Somali teenager Shidane Arone.
The inquiry encountered numerous delays, and the Liberal government of the time gave it a deadline that was six months earlier than what commissioners had requested to finish their work.
They never had a chance to probe the circumstances surrounding Arone’s death.
That inquiry, however, covered events far different from money laundering in B.C.
There are enough similarities between B.C.’s money laundering issue and corruption in Quebec construction to suggest that a public inquiry could yield similar results, said Saravan Veylan, a property lawyer with the Vancouver office of MLT Aikins.
“If the inquiry is going to be designed around fault-finding, then it is entirely possible that a very broad mandate will make a fault-finding exercise unworkable, in that too broad means that there’s too much to deal with,” Veylan said.
“But if it’s about fact-finding and coming up with recommendations around putting general money laundering, corruption to rest going forward, then it would make sense to have a broader scope.”
Gordon, too, saw similarities with the issues that Charbonneau investigated, though the focus in Quebec, he said, was “pretty parochial” next to money laundering.
“It was contained pretty much within a handful of industries in a single province in Canada,” he said.
Meanwhile, the problems exposed in B.C. are international in scope, involving other countries and economic systems.
“The money laundering in B.C. and the fallout from it has connections to Chinese cultural mores around conducting business,” he said. “The issue of passing money around to facilitate activities is something that’s institutionalized in the Chinese system.”
WATCH: David Eby shows video of money laundering in action
For now, Eby is focused on implementing recommendations from German’s first report and looking toward his next one.
Should a money laundering inquiry proceed in B.C., with a slate of recommendations, Eby expects that they would be taken “very seriously.”
“It would be my expectation that we would be looking at implementing all of them if we went in that direction.”
—With files from Sam Cooper, John Hua and Monique Scotti
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