Following widespread concern about British Columbia’s reputation as a haven for money laundering, the Province is launching a two-pronged review aimed at shutting down avenues for money laundering in real estate and other sectors.
The first component, led by the Ministry of Finance, will identify systemic risks that leave the real estate and financial services sectors open to money laundering. The other, led by the Attorney General, will investigate specific case examples of problematic activity in real estate and other vulnerable sectors to uncover the ways that money launderers have operated in the province.
“The last government allowed the real estate market to turn into the Wild West with rampant speculation and out-of-control prices,” said Carole James, Minister of Finance. “Our overheated housing market can attract criminals and people wanting to abuse the system. When these people exploit loopholes, they drive up housing prices and help organized crime and drug dealers. That kind of activity has no place in our province, and we are taking action.”
The probe announced today responds to concerns raised in previous reviews conducted separately for the Ministry of Finance and the Attorney General’s office. Analysis by independent consultant Dan Perrin on B.C.’s real estate regulatory structure found the current system put in place by the former government in 2016 is dysfunctional, inefficient and vulnerable to market manipulation and abuse, such as money laundering. Peter German’s report into money laundering in Lower Mainland casinos also raised concerns that dirty money was infiltrating the real estate sector.
“Our examination of money laundering in casinos uncovered troubling evidence suggesting strongly that dirty money is circulating in other places in our communities,” said David Eby, Attorney General. “The multi-faceted approach announced today is an attempt to move quickly to anticipate and shut down new avenues for money laundering, and to follow up on specific cases that Dr. German and the media have drawn to the public and government’s attention.”
The Ministry of Finance has appointed Maureen Maloney to chair the Expert Panel on Money Laundering in Real Estate. The panel will look at gaps in compliance and enforcement of existing laws, consumer protection, financial services regulations, regulation of real estate professionals, and jurisdictional gaps between B.C. and the federal government. It will provide recommendations to prevent market manipulation and abuse, create world-class regulatory standards and drive illegal activity out of the province. A final report is due to the government by March 2019.
The Attorney General is asking German to conduct a second review following up on his initial finding that the real estate sector is vulnerable to abuse by organized crime. It will focus on identifying the scale and scope of verifiable illicit activity in the real estate market. It will also examine whether money laundering is linked to horse racing and luxury cars. A final report with German’s findings is due to the government by March 2019.
Taking action to combat money laundering, tax evasion and tax avoidance is part of the government’s 30-point Plan for Housing Affordability. The government has already taken several actions to address tax fraud and close loopholes in the real estate market, including:
- Introducing a new law to track pre-sale condominium contract assignments and prevent tax evasion.
- Consulting on legislation to establish a new, publicly accessible registry of beneficial owners of real estate in B.C.
- Updating the property transfer tax return to uncover beneficial owners behind corporations and trusts.
- Enacting legislation to allow information sharing on the homeowner grant with federal tax officials to improve tax enforcement.
- Strengthening property transfer tax auditors’ ability to take action on tax evasion.
- Establishing a federal-provincial working group on tax fraud and money laundering.
German report, part one: https://news.gov.bc.ca/files/Gaming_Final_Report.pdf
Real Estate Regulatory Structure Review: https://news.gov.bc.ca/files/Real_Estate_Regulatory_Structure_Review_Report_2018.pdf