An estimated $5.3 billion worth of real estate transactions in B.C. last year were the result of money laundering, helping to fuel the province's skyrocketing housing prices, according to a new report.
An expert panel on dirty money in the overall real-estate market estimates that five per cent of the value of 2018 purchases were for laundering purposes, contributing to about a five per cent rise in housing prices.
The effect could be more significant in certain markets, including Metro Vancouver, according to the panel, which was commissioned by the provincial government.
Altogether, dirty money in the real estate market accounted for an estimated 72 per cent of the $7.4 billion that the experts believe was laundered in total in B.C. last year.
"Our economy should work for regular people, not criminals," said B.C. Finance Minister Carole James. "Housing should provide shelter, not a vehicle for proceeds of crime."
James said the province will be looking closely at all 29 recommendations put forward by the report, called Combating Money Laundering in B.C. Real Estate.
"For me, the most important piece of action is transparency — shining that light, taking away that opportunity to hide," she said.
The panel was chaired by criminal law expert Maureen Maloney.
Its report was one of two released Thursday that examine the influence of money laundering in B.C.'s real estate market. Both paint an alarming picture of how criminals are using homes to clean their cash.
Former RCMP deputy commissioner Peter German produced the second report, named Dirty Money Part 2, which outlines some of the red flags that signal when illegal money is behind a real-estate purchase — including unfinanced purchases, private lending, unusual interest rates and purchases by homemakers and students, for example.
Both documents identify numerous gaps in provincial and federal systems for keeping track of purchases and reporting suspicious transactions.
The reports are just the latest entries in B.C.'s ongoing investigation into how proceeds of crime are being cleaned in this province.
Earlier this week, German released findings on money laundering in the luxury vehicle sector, information that Attorney General David Eby called "incredibly disturbing."
A year ago, German issued his first report, Dirty Money, detailing extensive links between money laundering and B.C. casinos.
Both reports identify numerous gaps in regulatory systems at both the federal and provincial levels that have allowed money laundering to flourish in real -estate transactions. Here are just a few:
Mortgage brokers, lawyers and homebuilders aren't required to report suspicious transactions to the Financial Transactions and Reports Analysis Centre (FINTRAC).
There's little flow of information between FINTRAC and law enforcement agencies.
B.C.'s Land Title and Survey Authority collects data in a haphazard way that makes it difficult to analyze trends. The database includes multiple spellings for every bank, along with homeowners who describe their occupations as things like "super dad" or "domestic diva."
Police agencies in B.C. have come to depend heavily on the civil forfeiture system to deal with money laundering and proceeds of crime cases, rather than using criminal laws that were designed to dismantle criminal organizations.
The recommended solutions
The expert panel applauded some of the actions already underway in B.C., including a beneficial ownership registry that will make information about property owners publicly available. But it also suggested ways to close those gaps, including:
Regulating real estate developers through a licensing system.
Replacing the Mortgage Broker Act.
Improving data sharing between agencies that deal with money laundering.
Creating a new financial investigations unit at the B.C. Ministry of Finance.
Making more professionals accountable to FINTRAC.
The panel also suggests a drastic new measure that would build upon B.C.'s criminal and civil forfeiture system, known as unexplained wealth orders. This would allow the government to confiscate property when there is no evident legitimate source for the funds to purchase it — even if there is no evidence of criminal activity.