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Billions in dirty cash helped fuel Vancouver's housing boom
VANCOUVER penthouses, ski chalets at Whistler, and holiday retreats in the Gulf Islands are among the thousands of properties identified in a dirty money probe which estimated that more than C$7 billion (S$7.1 billion) was laundered through the western Canadian province of British Columbia last year.
The startling findings from two reports released by the provincial government illustrate how a torrent of suspicious cash has fuelled casinos, luxury car sales and real estate in the Pacific Coast region.
"The amount of money being laundered in British Colombia is more than anyone predicted," Finance Minister Carole James told reporters.
In real estate alone, an estimated C$5 billion may have been laundered last year in the province - equivalent to 4.6 per cent of all transactions by value in that period, according to one of the reports.
In the Vancouver region, where housing prices rose more than 70 per cent in five years, "I certainly believe that money laundering played a part," Ms James said.
Such a share of transactions is "sufficiently large to have an observable impact on real estate prices", the report said. It estimated that dirty money pushed British Colombia home prices some 3.7 per cent to 7.5 per cent higher than they would be in the absence of laundering.
A string of investigations commissioned by Premier John Horgan's government have slowly been revealing in recent months how Vancouver and the surrounding area has become a hub for dirty money, tax evasion and a place to park foreign cash of unknown origin - no questions asked.
Previous reports had revealed how casinos for years were accepting millions in cash often stuffed into hockey bags and suitcases, how gangsters paid car leases with proceeds of crime, and most recently, how a thriving grey market in Vancouver-to-China luxury car exports sent millions of dollars in sales tax refunds to overseas buyers.
But those paled in scale and scope to the latest findings in real estate, a sector that by some estimates accounts for a third of British Columbia's gross domestic product and is likened to "the oil" of its economy.
Among the numbers revealed in the second report released last Thursday, led by independent investigator Peter German who had earlier probed the casinos, were: one out of five British Colombia properties are bought in cash; over the past two decades, C$212 billion in property were paid for in cash.
The true owners cannot be identified for the vast majority of C$28 billion in the province's residential property held by legal entities.
More than 25 properties worth C$34 million have owners listing addresses in countries subject to trade sanctions.
The anecdotal examples are just as staggering. There is a C$3.5 million Gulf Island estate acquired with funds allegedly embezzled from a US$90 million loan fraud in India, and a luxury car reseller "known to police" who owns three Vancouver homes worth C$8.6 million with multiple layers of mortgages with inexplicably declining interest rates.
Hundreds of properties where mortgages were registered and repaid in rapid succession - in one case a single property had 29 mortgages - which the report called a "red flag for money laundering".
Incredulously, those findings were made by Mr German and a small team of 10 consultants using only publicly available data in less than a year.
While the numbers were "obviously shocking", equally disturbing is the ease with which they identified thousands of properties at high risk for money laundering or tax evasion without access to confidential law enforcement records and databases, British Colombia attorney-general David Eby said.
"His findings are stark evidence of the consequences of an absence of oversight, the weakness of data collection and the total indifference of governments until now to this malignant cancer on our economy and our society," Mr Eby said.
The western province has been leading the dirty money crackdown in Canada, which has long had a reputation among international law enforcement circles for "snow washing". or dirty money circulating through its seemingly upright economy to emerge pristine.
While public scrutiny until now has focused on the role of Chinese money - both legal and illicit - particularly in the Vancouver area, the latest investigation shows the region has been open to all.
"Greater Vancouver has acted as a laundromat for foreign organised crime, including a Mexican cartel, Iranian and mainland Chinese organised crime," the German report said.
"The region has acquired an unenviable reputation for serving as a site for money laundering, drug trafficking, and capital flight."
The provincial government is planning to establish a public registry of beneficial property owners by next year that it says will peel back the anonymity that enables such activity.
It is also continuing to plead with the federal government for more resources and new regulations to better monitor cash transactions and suspicious activity.
"The party is over," Mr Eby said. "It may be spring, but winter is finally coming for those who rely on bulk cash transactions in their business model." BLOOMBERG