B.C.’s long-awaited report into money laundering was released Wednesday (June 15), with 101 recommendations including the creation of a new law enforcement unit and permanent commissioner dedicated to addressing the estimated multi-billion dollar problem.
B.C. Supreme Court Justice Austin Cullen was commissioned to lead the inquiry in May 2019 after a series of reports to the government found “extraordinary” levels of money laundering in the real estate, casino, horse racing and luxury car sectors, fuelled in part by the illegal drug trade. In his final report, Cullen says human trafficking and fraud also feed into the problem.
Lack of action, prioritization allowed problem to thrive
The 1,800-page Cullen Final Report points to a lack of effective action from law enforcement, government and regulatory agencies as the reason for why money laundering has been allowed to grow for so long. It also aims blame at the federal agency responsible for receiving and analyzing information related to money laundering threats, FINTRAC, which the commissioner says has done a poor job of relaying information back to provinces.
In 2019/2020, for example, FINTRAC received over 31 million reports, but only disclosed 2,057 to law enforcement agencies across Canada, and just 355 to B.C., the report says. As a result, reporting entities have begun “defensive reporting,” where they send in information to FINTRAC even if they are unsure of its value. This causes high-volume, low-value reporting, Cullen found.
To solve this, Cullen says B.C. law enforcement needs its own dedicated money laundering intelligence and investigations unit. At the legislative level, Cullen also recommends the government establishes an office for a permanent and independent Anti-Money Laundering Commissioner, who will provide strategic oversight on B.C.’s response.
“Because the damage it (money laundering) causes is not as visible as that caused by other crimes (such as violent crime) it is often afforded less priority and attention,” Cullen states in his report.
Suspicious cash buy-ins common in casinos
He points to casinos as one major sector that needs to be targeted.
In Lower Mainland casinos alone, Cullen estimates hundreds of millions of dollars made off crime were laundered between 2008 and 2018. He says the method criminals use there is known as the “Vancouver model,” where wealthy casino patrons are given large sums of money to play with. When they cash out, they return the remaining funds in an e-transfer, or other non-cash payment.
In 2014, B.C. casinos accepted nearly $1.2 billion in cash transactions of $10,000 or more, including 1,881 individual buy-ins of $100,000 or more, Cullen found. Often times, that cash was in the form of $20 bills, rolled up with elastic bands and held in gym bags, shopping bags, cardboard boxes, or knapsacks.
The real estate sector is another vulnerable area, Cullen says. Purchasing high value properties gives criminals a safe place to store and launder their money, and realtors often don’t know it is going on, Cullen says. Here, he says, greater education on what money laundering looks like is required. For example, criminals sometimes take out a mortgage to purchase a property, and then make payments in cash (any payment under $10,000 doesn’t need to be flagged).
Corruption not suspected among elected officials
Cullen makes a couple important clarifications in his report as well. He says while government and B.C. Lottery Corp. officials were aware of suspicious funds entering provincial revenue streams through the gaming industry, there is no evidence of corruption by them. He also says it is unlikely money laundering is having a significant impact on housing affordability in B.C.
Speaking Wednesday, Attorney General David Eby said he isn’t personally satisfied with the finding of no corruption, though.
“I’ll say frankly, as a politician, I wouldn’t be satisfied with a sash from the commissioner that says ‘not corrupt.’ I hold myself to a higher standard,” he said, adding that it will be up to individuals whether they want to provide a public explanation for their actions, or lack thereof.
Cullens report also calls for better regulation of a number of industries, including accountants, lawyers, money services businesses, mortgage lenders, the luxury goods sector and cryptocurrency, noting that money launderers are opportunistic and always finding new areas to launder through.
“It pops up where you least expect it,” Cullen said Wednesday.
In his report, Cullen also emphasizes the importance of focusing on asset forfeiture. In 2019, he found the B.C. Civil Forfeiture Office only seized $13.4 million in illegal assets, despite estimates of billions of dollars of illegal money flowing through the province each year. During a similar time period in New Zealand – which has a similar population and GDP to B.C. – comparable organizations seized $358 million in assets, 56 per cent that were attributed to money laundering. Cullen says he hopes a greater focus on forfeiture will offset the price of the new policing unit.
Eby said he is enthused by all of Cullen’s recommendations and that he looks forward to working on implementing them. He said he can’t provide any kind of timeline yet, though.
Throughout the inquiry, Cullen heard testimony from 199 witnesses and an additional 23 witness via sworn affidavit, received 1,063 exhibits and held 5 community meetings.