There’s an old expression that crime doesn’t pay. Unfortunately, the truth is rather more nuanced.
Some criminal activity pays very well, generating hundreds of millions of dollars as a result, most notably the deadly drug trade. The problem for criminals is that they can’t simply take a bag of fentanyl-laced currency to the bank, nor can it generally be used to purchase big ticket items such as luxury cars.
That’s where money laundering comes in, and in British Columbia and potentially Greater Victoria, that activity may be moving into the real estate market.
Allegations of money laundering in our province concern Attorney General David Eby, who calls the situation “serious and deeply troubling.”
“The nature of these allegations, that this money-laundering activity is actively influencing our real estate market and is connected to the sale of life-destroying fentanyl, underline the critical importance of addressing money laundering urgently and not ignoring it,” said Eby in a news release Friday.
Eby was responding to reports of money laundering recently published in the Globe and Mail newspaper, but the practice has been alleged in B.C. by real estate professionals and others for well over a year.
While the practice is suspected most in Vancouver, where the super-heated real estate market provides a perfect cover, some Victoria real estate agents say it may already be happening here.
While she hasn’t personally witnessed this type of illicit activity, Realtor Tara Hearn has heard of some transactions that should raise some eyebrows. “Any time you have a home sold, not through a real estate professional, but rather to an ‘independent broker,’ people should be concerned,” she said. “Real estate professionals are really the only people who should be trusted to broker these transactions, to ensure that there are no problems with either the buyer or the source of their funds.”
The system for money laundering can involve people identifying as wholesalers. They approach homeowners with cash offers for their homes, sometimes well in excess of the market value. Once the title is transferred to the wholesaler, the property is often transferred to a third party and can then be put up for sale, laundering the proceeds and making it available to the criminals who funded the process.
Wholesaling is not regulated and there is no statutory requirement for the purchaser to reveal the source of the money, according to a spokesperson for Eby’s office.
A Vancouver real estate professional, who spoke on the condition of anonymity, said properties may be reassigned or “flipped” several times before the final sale provides the money to the original “investor.” “You can guess that it’s dirty money, but proving it would be difficult, if not impossible,” he said.
Another method of money laundering involves the establishment of criminals as private lenders. Home buyers, often immigrants from China, are loaned money from lenders who are unregulated, unlicensed and have no requirement to reveal the source of the money being loaned. The loan is registered against the land title, and if the home is sold, or if payments are missed and a foreclosure is initiated, the lender is payed out in “clean” money.
Shortly after assuming responsibilities for his portfolio, Eby hired Peter German to conduct an independent review of B.C.’s anti money laundering policies in relation to policies and practices for B.C. casinos. As part of his review, German is to explore what connection, if any, the issue has with other sectors of B.C.’s economy. This may include areas such as real estate or tax policy.
“Our government will work to determine the scope of this issue, and what must be done to appropriately address it. We will ensure our investigation into money laundering in B.C. casinos is informed by these disturbing revelations,” said Eby.