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BC Liberal Government Roasted in Money Laundering Report

Failure to act on years of warnings allowed billions to be laundered in the province.

Andrew MacLeod 15 Jun 2022TheTyee.ca

Andrew MacLeod is The Tyee's Legislative Bureau Chief in Victoria and the author of All Together Healthy (Douglas & McIntyre, 2018). Find him on Twitter or reach him at .

The final report from an inquiry into money laundering in British Columbia has concluded BC Liberal cabinet ministers and former premier Christy Clark knew about the problem but failed to do enough to address it.

“Elected officials were aware of suspicious funds entering the provincial revenue stream through the gaming industry, but there is no evidence of corruption,” said the 1,831-page report that also strongly criticizes police, federal agencies, the province’s Gambling Policy and Enforcement Branch and the BC Lottery Corp.

In 2019 cabinet appointed Austin F. Cullen, a B.C. Supreme Court justice, to head the inquiry and gave him the power to seize records, obtain warrants and order testimony under oath. The commission heard from some 200 witnesses and received 1,063 exhibits during 130 days of hearings.

The report was originally to be completed by May 2021, but was delayed for various reasons, including the 2020 election and the COVID-19 pandemic.

Cullen told reporters today he hopes the commission’s report will be a turning point towards better addressing public concerns about money laundering.

“Those suspicions were correct and it was right to be alarmed by this activity and the lack of effective response to it,” he said

Received by the government earlier this month and released to the public today, the report makes 101 recommendations aimed at reducing the “pernicious problem” of money laundering, which it estimates is worth billions of dollars a year in the province.

“Sophisticated professional money launderers operating in British Columbia are laundering staggering amounts of illicit funds,” Cullen’s report said, noting that one money services business laundered upwards of $220 million per year.

As early as 2010 former cabinet minister Rich Coleman heard concerns from the Gambling Policy and Enforcement Branch but received reassurances from BC Lottery that the Crown corporation had a strong and effective anti-money laundering regime.

“Coleman responded to these mixed messages by arranging for an independent review of anti-money laundering measures in the gaming industry, but he did not take action to stem the flow of the suspicious cash transactions that he had been warned about,” the report found.

Subsequent ministers responsible, Michael de Jong and Shirley Bond, as well as Coleman in a return to the position, took some steps, it said.

“None of these actions, however, was sufficient to resolve the extensive money laundering present in the industry through much of the 2010s.”

The report found that as premier Christy Clark appropriately delegated responsibility to ministers, but should have done more when the problem came to her attention.

“In 2015... the premier learned that casinos conducted and managed by a Crown corporation and regulated by government were reporting transactions involving enormous quantities of cash as suspicious,” it said.

“Despite receiving this information, Ms. Clark failed to determine whether these funds were being accepted by the casinos (and in turn contributing to the revenue of the Province) and failed to ensure such funds were not accepted.”

The commission did not, however, find that any of the politicians had gained personally. “There is no basis to conclude that any engaged in any form of corruption related to the gaming industry or the commission’s mandate more generally. While some could have done more, there is no evidence that any of the failures was motivated by corruption.”

Overall the commission found that money laundering is a significant problem, and needs serious attention from the government, law enforcement and regulators.

“An enormous volume of illicit funds is laundered through the British Columbia economy every year, and that activity has a significant impact on the citizens of this province,” it said. “Money laundering has, as its origin, crime that destroys communities — such as drug trafficking, human trafficking and fraud. The crimes victimize the most vulnerable members of society.”

It is also an affront to citizens who follow the law and pay their fair share of taxes, it said. “There can be few things more destructive to a community’s sense of well-being than a governing regime that fails to resist those whose opportunities are unfairly gained at the expense of others.”

In an emailed statement, BC Green Party Leader and Cowichan Valley MLA Sonia Furstenau said “This report demonstrates that sophisticated criminal organizations ran circles around the provincial government in broad daylight.” It is “deeply concerning” that money laundering operations were able to embed themselves throughout the provincial economy, she said. Furstenau said she was disappointed that Cullen made no recommendation about replacing the illicit drug supply with one that was regulated, a move that would also save lives.

“The link between unsafe, toxic drugs and organized crime must not be overlooked,” she said, adding that the government needs to announce clear timelines to act on the findings.

BC Liberal MLA de Jong, who represents Abbotsford West, said he was gratified that Cullen refused to accept the narrative that the former government was corrupt and that it did nothing about money laundering. “There was at no time corrupt practices, collusion, any deliberate attempt to facilitate money laundering in this province by anyone within the previous government,” de Jong said.

The government he was in did a great deal to combat money laundering and those steps had an impact, he added. He did, however, acknowledge that the government could have done more sooner. “Sure, upon reflection I think there are things you’d like to go back and revisit,” he said. “At the same time I have to make this point, that all of the things that were done were done with the best of intentions intending to address the issue.”

Attorney General David Eby said that he acted to address money laundering in casinos and other sectors after coming into his role and learning about the extent of the problem. Politicians should strive to do more than not be corrupt, he said.

“In my opinion the government of British Columbia should not knowingly be accepting the proceeds of crime as revenue in a way that supports that criminal activity,” Eby said. “That is something that happened for a decade, that was insufficiently addressed, and those who are responsible for the decisions that led us to that point should definitely in my opinion explain how we got there.”

He said he is “very enthusiastic about all of the commissioner’s recommendations” and that work has been underway for some time in areas that overlap with those recommendations. Like the commissioner, he said, he believes the province needs to take on responsibilities such as regulating money service businesses that have been the federal government’s domain.

Singling out the Financial Transactions and Reports Analysis Centre of Canada, the report found “The federal anti-money laundering regime is not effective.”

“Law enforcement bodies in British Columbia cannot rely on FINTRAC to produce timely, useful intelligence about money laundering activity that they can put into action.... If the Province is to achieve success in the fight against money laundering, it must develop its own intelligence capacity in order to better identify money laundering threats.”

There was also blame for the RCMP, which had paid little attention to money laundering and dedicated few resources to fighting it.

“Prior to 2012, the RCMP maintained some capacity and expertise to pursue money laundering and proceeds of crime investigations,” it said. “A shift in focus in 2012 largely eliminated that capacity and expertise, leaving, for the next decade, a glaring enforcement gap. This gap left money laundering to proliferate in this province, largely unchecked.”

BC Lottery knew about the problem with money getting laundered in casinos it regulates, but argued it couldn’t take action without law enforcement.

“BCLC’s approach reflected a completely unacceptable and unreasonable risk tolerance,” the report said. “GPEB and law enforcement likewise took minimal action to respond to the growth in large and suspicious cash transactions prior to 2015.”

One of Cullen’s key recommendations is to create an anti-money laundering commissioner position as an independent officer of the legislature so that there’s somebody focused on the issue. Until now it hasn’t been the dedicated responsibility of any one minister or official and hasn’t received sufficient priority from the government, the report said.

It also recommended creation of “a dedicated provincial money laundering intelligence and investigation unit with a robust intelligence division” and more aggressively pursuing the forfeiture of assets bought with money from illegal sources.

“The number and value of unlawfully obtained assets seized through the asset forfeiture system in British Columbia is shockingly low,” it said. “The B.C. Civil Forfeiture Office recovered approximately $13.4 million in 2019 and $10.7 million in 2018.”

The forfeiture of criminal assets is similarly low, it said. “These recoveries are not commensurate with the huge volume of illicit funds being laundered through the province each year.”

It suggested following the lead of other jurisdictions that issue “unexplained wealth orders” where a person can be asked to demonstrate where they got the funds they’ve used to buy an asset such as a house.

“If the recipient of the order fails to produce the required information, a presumption will arise that the property was purchased with illicit funds. If the presumption is not rebutted, the property will be forfeited to the state.”

Cullen’s report said that the current provincial government has taken steps to address money laundering in casinos. “B.C.’s gaming industry is greatly changed from that which permitted extensive money laundering in British Columbia casinos between 2008 and 2018,” it said.

It also said that while the real estate sector is “highly vulnerable to money laundering” and that realtors have a poor record of complying with anti-money laundering requirements, it is not the cause of housing unaffordability.  [Tyee]

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