There’s an old saw that crime doesn’t pay. Unfortunately, the truth is rather more nuanced.
While criminals are most often brought to justice, their activities tend to pay very well, generating hundreds of millions of dollars as a result of criminal activity, 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, that activity has allegedly moved into the real estate market.
Reports of money laundering in British Columbia’s real estate market has the Attorney General, David Eby, expressing concern, saying that reports regarding these allegations are both 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.
Reports of money laundering were recently reported in the Globe and Mail, but have for well over a year been alleged in B.C. by real estate professionals and others.
And although the practice is most prevalent in Vancouver, where the super-heated real estate market provides a perfect cover for the activity, some real estate agents in Victoria have said that the practice may already be happening in Greater Victoria.
Real estate professional, Tara Hearn, explained that, while she hasn’t personally seen the practice in action, she 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,” Hearn 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 often involves people who call themselves 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.
Sometimes, according to one Vancouver realtor who spoke on the condition of anonymity, the property 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.
According to investigations published by the Globe and Mail, home buyers, often immigrants from China, are loaned money from private lenders who are both unregulated and unlicensed, and who have no requirement to reveal the source of the money they are lending.
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 said he hired Peter German to conduct an independent review of B.C.’s anti- money laundering policies in relation to policies and practices in 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.