Every year, dirty money worth anywhere between $5 billion and as much as $100 billion is being illicitly infiltrated into BC’s housing market. Therefore, on September 27, the Government of British Columbia announced an initiative to fight against money laundering in the real estate sector. The plan involves a twofold investigation of the province’s property market, with the aim of identifying systemic risks and shutting down venues involved in criminal activities.
A Twofold Approach to Ceasing Money Laundering
BC’s Ministry of Finance will lead the first part of the initiative. Finance Minister Carole James has appointed an expert panel to review illegal activity in the housing sector and offer recommendations on how to counteract it. The panel will be chaired by Maureen Maloney, criminal law expert and professor at Simon Fraser University, and will look into compliance with existing real estate rules and regulations. It will also probe jurisdictional gaps between British Columbia, other provinces, and the national government.
“Our goal is simple — get dirty money out of the housing market. The people of B.C. shouldn’t be competing for homes with those using the profits of crime.“ said James, as cited on CBC.
The second part of the investigation will be managed by Attorney General David Eby, who designated Dr. Peter German to conduct an additional audit. German is a former Deputy Commissioner of the Royal Canadian Mounted Police (RCMP) and the Correctional Service Canada (CSC) and he has recently authored a report regarding money laundering in lower mainland casinos. The study shows how organized crime groups, mainly from Asia, are using casinos as laundromats for the proceeds of crime and provides evidence that this criminal activity has also expanded into other business areas across BC.
The new analysis commissioned by the Attorney General is meant as a follow-up in which German will be focusing exclusively on British Columbia real estate, as well as on the horse racing and luxury car sectors. It will present specific case examples of how dirty money is being inserted into these markets and will offer valuable insights into the way money launderers operate.
“I have great confidence that findings from the probe we are launching today will give a great picture on how criminals are profiting from our system and how we can do our best to eradicate money laundering,” Attorney General David Eby said.
Both this report and the one put forward by the Ministry of Finance are scheduled for March 2019.
Illicit Activity Driving Up Housing Unaffordability
One of the reasons for carrying out such a thorough investigation is the growing indignation regarding the province’s extremely expensive housing sector. Home prices in British Columbia have more than doubled in the past 10 years, while Vancouver has recently become North America’s most unaffordable real estate market, exceeding even the notoriously inaccessible Manhattan. Properties here have long been priced above the $1M mark, making it very difficult for homebuyers to reach the goal of owning a place of their own. One of the reasons for this excessive increase in prices is believed to be the illegal injection of foreign capital into real estate.
The government is also invested in bringing more transparency to the housing market. This came as a response to a study released by Transparency International at the end of 2016, stating that nearly half of Vancouver’s most expensive homes have hidden ownership, making them susceptible to the proceeds of crime.
This month, the province made changes to its tax forms in a pursuit to collect more information on property ownership. According to Bloomberg, all the gathered data will be published in a registry that will be shared with law enforcement agencies, as well as with tax authorities.