British Columbia is a magnet for money laundering, and Canada’s lax regulations are allowing billions of dollars to illegally flow into the province, according to the findings of a three-year public inquiry.
The inquiry found that such concentration of activity has had an extraordinary impact on the BC economy – but that its influence on the housing market – the original motive for the investigation – has been overstated.
In a new report released Wednesday, the public inquiry’s lead commissioner, BC supreme court Justice Austin Cullen, said decisively that investors from Asia using the real estate market to launder money is not the cause of a housing crisis that has seen average house prices triple over the past two decades.
That finding is in stark opposition to a line that has been touted by politicians for years: that the rising cost of housing in the province is owed almost exclusively to Chinese investors snapping up properties as fronts for money laundering.
“Money laundering is not the cause of housing unaffordability,” wrote Cullen in his report. “Money laundering should be addressed, to be sure, but steps taken to counteract money laundering should not be viewed as a panacea for housing unaffordability.”
The Cullen report – which spans more than 1,800 pages and includes 101 recommendations on revamping vast swaths of the BC economy and regulatory environment – is the result of three years of investigation into the relationship between foreign investing and the housing crisis.
Over 2020 and 2021, the public inquiry heard from nearly 200 witnesses, including a notable contingent of experts on global money laundering schemes.
Cullen said failures of law enforcement and government policy have led to the “staggering” proliferation of money laundering in the province. In particular, the “Vancouver model” for laundering was under close examination during the proceedings.
The internationally infamous money laundering framework is used by organized crime groups to deposit their ill-gotten cash through an underground informal value transfer system operating in southern BC’s Lower Mainland region. After depositing the cash, the criminals receive a token of equivalent value – often casino chips, property or luxury goods – which is run through the global laundering network with the end goal of enabling wealthy Chinese nationals to move their wealth to BC while skirting Chinese currency restrictions.
The Cullen report notes that not all Chinese participants in laundering schemes acquired their wealth illegally. “The problem, however, is that most, if not all, of the actual cash provided to those individuals in British Columbia is derived from profit-oriented criminal activity and is being paid out by the operator of the informal value transfer system in furtherance of a money laundering scheme,” he wrote.
The longstanding belief that this activity was significant enough to greatly upset the BC housing market fueled escalating anti-Asian hate in the province.
Vancouver police have said anti-Asian hate crimes rose 717% during the first year of the Covid-19 pandemic, attributing some of that uptick to allegations of foreign interference in the real estate market.
Nearly half of Vancouver’s population identifies as Chinese, Filipino, Korean, Japanese or another Asian ethnicity.
In the report, Cullen implored legislators to veer away from racist stereotyping, urging them to “take care not to stray into treating any ethnic community as presumptively dishonest or unlawful”.
