Problem ‘more entrenched than we hoped,’ says B.C. AG

Continued from FP1

Horgan said a public inquiry will give an understanding of how the problem reached this point and how to eradicate the crime.

Attorney General David Eby said B.C. Supreme Court Justice Austin Cullen has agreed to lead the inquiry and he’ll have the power to compel testimony, seize records and obtain search warrants.

“Even with many red flags, the problem of money laundering is bigger than we thought and more entrenched than we hoped,” Eby told a news conference.

He said money laundering is a “crisis” in the province’s economy.

The reports also shed more light on the possibility that money laundering is a larger problem in other provinces.

It said B.C. ranked fourth for the crime among a division of six regions in Canada, behind Alberta, Ontario and the Prairies — collectively Saskatchewan and Manitoba — for the years 2011 to 2015. It also said B.C. only accounted for 15 per cent of the $47 billion laundered across Canada last year.

After learning of the reports’ conclusions, Prime Minister Justin Trudeau said the information was “extremely alarming,” adding that money laundering is hurting people by disrupting the housing market.

Cullen’s inquiry is expected to deliver an interim report within 18 months and a final report is due by May 2021.

Last week, a panel of three academics established by British Columbia’s Minister of Finance released a report exploring the role that money laundering played the province’s real estate market.

The report found that money laundering had likely inflated B.C. housing prices by five per cent.

The 184-page report details the methods and assumptions used to estimate the amount of money laundered in Canada and then further determines the amount laundered through real estate in B.C. In so doing, the report relies heavily on previous research on money laundering from other jurisdictions.

The report does not identify a single laundered dollar or an account with laundered money or even a single purchase of property purchased using ill-gotten wealth. So how did the report come up with $7.4 billion in laundered money in BC of which it estimated $5.3 billion made it into real estate?

The report primarily relied on previous international estimates that stated that roughly two to five per cent of global GDP comprised laundered money. It assumed that the flow of ill-gotten wealth to Canada from other countries depends upon the attractiveness of the host country and the cultural affinity it may have with a source country.

Furthermore, the report relies on a global database of crimes per country and estimates of the “amount of money that needs to be laundered per crime” generated by an Australian expert in 1995 to come up with the $7.4 billion figure for laundered money in B.C. in 2018.

The report identified some unusual suspects for inflows of laundered money to Canada. The bulk of the estimated inflows to Canada originated in the U.S. followed by Northern Europe and Western Europe respectively. Estimates of inflows from Eastern Asia, including China, totalled only $0.8 billion in 2015.

Essentially, the amount of laundered money from foreign and