Explained: Scheer promises to launch national inquiry into money laundering

Federal Conservative Leader Andrew Scheer makes a campaign stop in Vaughan, Ont., on Monday, Sept. 23, 2019. THE CANADIAN PRESS/Nathan Denette

Andrew Scheer has promised that a Conservative government would launch an inquiry into money laundering in the real-estate sector “to root out corrupt practices that inflate housing prices.”

Scheer made the campaign announcement Monday morning as part of his four-point plan to improve housing affordability.

“Shady dealings have inflated prices in the Greater Toronto Area and Vancouver, and they must come to an end,” Scheer said.

A party official told Global News that Scheer’s plan is for a “broad public inquiry into the full scope of money laundering in Canada that will cost $20 million over two years.”

READ MORE: B.C. money laundering seizure fails, while poll says dirty cash is a national problem

Why does it matter?

According to a recent Angus Reid poll, money laundering is a national problem that is important to a majority of voters, with most saying the problem is getting worse in their own province and especially in British Columbia, the province that has been beset by problems connected to the largest failed money-laundering prosecution in Canadian history.

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Angus Reid says 81 per cent of Canadians believe the federal government must do more to tackle money laundering, and most Canadians believe the problem is getting worse.

In British Columbia, which has already launched a public inquiry into money laundering due to start sometime in 2020, 90 per cent said it is a problem.

Across Canada, 70 per cent believe their own province should hold an inquiry into money laundering. In Ontario, the number was 78 per cent, followed by Quebec at 74 per cent and Alberta at 67 per cent.

The pollster noted that a recent expert panel in British Columbia found $50 billion could be laundered across Canada per year and that a report from the C.D. Howe Institute estimated the total could be more than $100 billion.

READ MORE: Secret police study finds crime networks could have laundered over $1B through Vancouver homes in 2016

Global News investigation

In November 2018, Global News revealed that while the RCMP had completed confidential studies on real-estate money laundering in Vancouver and found serious problems, officers said the force did not have the resources to investigate and prosecute known criminal activity. The study found that more than $1 billion worth of Vancouver-area property transactions in 2016 were believed to be linked to organized crime.

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A number of the properties targeted in the study were connected to illegal casinos, fentanyl importation and trafficking and prostitution, according to the findings.

There were also links to primary suspects targeted in the RCMP’s ill-fated E-Pirate probe of an alleged underground bank in Richmond, B.C., that police said was connected to B.C. Lottery Corp. money laundering, international drug trafficking and about 600 bank accounts in mainland China.

READ MORE: Crown mistakenly exposed police informant, killing massive B.C. money laundering probe (Jan. 9, 2019)

E-Pirate failed due to the exposure of a confidential informant in an error pinned on under-resourced RCMP and federal prosecution teams, Global News reported. The suspects charged in E-Pirate were accused of drug importation, drug trafficking, money laundering and tax evasion. Continuing B.C. civil forfeiture claims have targeted a number of Metro Vancouver luxury properties owned by the suspects, alleging the homes were used to launder dirty money.

But in one case, $2 million in cash seized from the alleged underground bank in Richmond has been returned to the defendants, who cited charter rights violations in police searches and seizures. In another case, the defendants attempted to sell off a $2-million home through a shell company while the government was attempting to seize the property.

According to a 2018 report from the Financial Action Task Force, an intergovernmental anti-money-laundering agency, the alleged Richmond underground bank was laundering over $1 billion per year for mainland China drug cartels, the Sinaloa cartel, Metro Vancouver drug dealers and Middle Eastern organized crime.

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Accusations against the alleged underground bankers have not been proven in court. And details of the case — including testimony from police officers and B.C. Lottery casino investigators involved in the file — are expected to be central to B.C.’s provincial money laundering inquiry in 2020.

WATCH (Sept. 13, 2019): Liberal party Leader Justin Trudeau says his party is working with B.C. to address money laundering

Click to play video: '2019 Federal Election: Trudeau addresses money laundering and organized crime in Canada' 2019 Federal Election: Trudeau addresses money laundering and organized crime in Canada
2019 Federal Election: Trudeau addresses money laundering and organized crime in Canada – Sep 13, 2019

B.C. AG questions federal assistance

In an op-ed last week, B.C. Attorney General David Eby noted that a real estate money-laundering review commissioned by his office had found “there was not a single dedicated RCMP officer working on the issue in B.C.”

“We have no choice but to act quickly: B.C. has a body count and numbers of mourning family members growing every day as a result of the highly profitable criminal-led fentanyl overdose epidemic, and billions in annual real-estate transactions linked by police and government studies to criminal activity.”

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Eby noted that the federal government has increased funding for investigators dedicated to money laundering and changed laws making it easier for police to recommend money-laundering charges.

But B.C. is still “waiting to hear what share of that money will come to B.C. in the form of new officers,” Eby wrote.

“There are things only Ottawa and federal police officers can do,” Eby wrote. “The federal government is responsible for banks, for the anti-money-laundering agency FINTRAC, for the RCMP, for international work with governments and police agencies around the world.”

Liberal Leader Justin Trudeau says his government has worked with B.C. on the money-laundering issue and that his party is serious about tackling the problem.

Anti-money-laundering budget measures put forward this year by Trudeau’s government included investments of about $200 million in five years and additional ongoing funding as 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.

NDP Leader Jagmeet Singh has said his party will crack down on money laundering, and he slammed the Liberal government in Parliament this year, citing an investigation from Global News.

“Money laundering in [British Columbia] and across Canada is one of the reasons housing has become so unaffordable, and it has also fuelled organized crime,” Singh said.
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Green party Leader Elizabeth May has also said the federal government must do more to fight money laundering, especially in B.C.

READ MORE: Toronto’s real-estate market risky for money laundering, with $28B in opaque investments. report says (March 21, 2019)

GTA real estate risky with $28B in opaque investments

While Vancouver appears to have, proportionately, the most serious real estate money-laundering problems in Canada, Transparency International published a report in March showing Toronto’s much larger market faces massive floods of opaque cash, with $28.4 billion invested in Greater Toronto Area housing since 2008 through corporations.

The report found that many of the 1.4 million corporate transactions studied were open to abuse because “the vast majority” of companies involved are privately owned, offering no information about the true buyers behind corporate shells, the report says.

Author Adam Ross had already completed a study of Vancouver’s high-risk luxury market in December 2016 and found about half of the city’s most expensive homes were owned through non-transparent means. Some of these included buyers represented on land title documents, such as students, who could not possibly have the income needed to buy luxury property.

A similar problem was found in audits of B.C. casinos, where high rollers making millions in bets listed their occupations as students or housewives. According to anti-money-laundering experts, these kinds of transactions can hide the true buyers, who could be laundering proceeds of crime.

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WATCH (May 16, 2019): NDP MP Peter Julian criticizes the ‘epidemic’ of money laundering in Canada under the Liberal government

Click to play video: 'Canada is ‘snow washing’ capital of the world under the Liberals: NDP' Canada is ‘snow washing’ capital of the world under the Liberals: NDP
Canada is ‘snow washing’ capital of the world under the Liberals: NDP – May 16, 2019

What can an inquiry do?

A Conservative party official who was not authorized to be named told Global News that Scheer’s plan for a national inquiry will be “largely based on the B.C. inquiry.”

The official pointed to a report on the plan that says: “Across the country, our society is being affected and infected by money laundering, and every province has the opportunity and the obligation to make a significant contribution. In fact, without broad federal and provincial regulatory involvement, Canada cannot be successful in combatting money laundering.”

“We expect this inquiry to produce actionable recommendations for legislative and regulatory changes, as well as extra enforcement resources to crack down on money laundering,” the official said. “It will be conducted under the Inquiries Act so will have the ability to compel witnesses and order disclosure.”

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Advocates who pushed for B.C.’s inquiry into money laundering pointed to the example of Quebec’s Charbonneau Commission, which probed corruption.

In an inquiry that took four years, cost $45 million and issued 60 recommendations, the Charbonneau Commission found “widespread and deeply rooted” corruption and collusion in the awarding of public construction contracts.

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