B.C.’s inquiry into money laundering amid allegations of rampant drug crimes and crime proceeds injected into real estate—fuelling a housing affordability crisis—heard its closing submissions this week, ahead of its final report expected in December.
Various stakeholders used their submissions to summarize their positions on the evidence heard, make general recommendations to the inquiry, assign or deflect blame, and attempt to influence how the Cullen Commission should move forward in producing its report.
“The Commission heard evidence from various industry actors which suggests that some B.C. casinos may have been used to directly launder, or facilitate the laundering of, funds with illicit origins,” wrote the lawyers for the province in their final submission.
While the province argued that this occurred “despite the best efforts of the public service” to address the issue, whistleblowers reported an unwillingness among the authorities to get to the heart of the issue, at times turning a blind eye.
The Commission was established by the B.C. government in May 2019, led by B.C. Supreme Court Justice Austin Cullen, with the mandate to investigate “the extent, growth, evolution and methods of money laundering in British Columbia.” Several reports had shown that hundreds of millions in illegal cash linked to organized crime flowed through B.C. casinos, fuelling the fentanyl crisis and negatively impacting the real estate and gaming sectors.
On the last day of hearings, Oct. 19, lawyer Toby Rauch-Davis made recommendations on behalf of the anti-corruption organization Transparency International Canada. He warned against viewing money laundering strictly through the lens of gang and illicit drug trade activity.
Equal attention should be “paid to money laundering as it relates to predicate offences, falling under a white-collar crime umbrella” such as corruption and tax evasion, Rauch-Davis said.
Lawyer Paul Jaffe spoke about the fallout on his client and key whistleblower Ross Alderson, who in 2017 leaked information to the media about his time as director of anti-money laundering investigations at the B.C. Lottery Corporation (BCLC). He resigned as director in October 2017.
Jaffe said on Oct. 15 that Alderson was subjected to “ridicule and contempt, scrutiny of his mental health, and threats to his family” for coming forward to testify about “what he had observed in his years in the casinos.”
In September, Alderson, a former police officer in Australia, testified that he had seen numerous large cash transactions taking place at the River Rock Casino Resort when he was first stationed there in 2011, but encountered “indifference” from senior levels at the BCLC when he tried to get something done about it.
“I can’t help but think that, you know, the elephant in the room is known to the public,” Jaffe said.
“They have seen the videotapes of hockey bags full of cash being brought into these casinos at the same time that you have witnesses before you testifying as to the robust anti-money laundering programs supposedly in effect at that time. Now the public aren’t stupid, your Honour, they know that’s [the claim of robust anti-money laundering programs is] untrue.”
B.C. government lawyer Jacqueline Hughes said that “while the Commission’s mandate does include the potential to make findings of misconduct, the province submits that that should not be the principal focus of the inquiry,” adding that the recommendations made by the Commission will be its key contribution.
Lottery Corporation in Hot Seat
Lawyers representing the BCLC and its leadership, under fire for overseeing the casinos allegedly used to launder large amounts of dirty money, made a case for their clients’ integrity.
“At no time did the BCLC allow revenue concerns to trump AML [anti-money laundering] concerns, and revenue concerns never drove AML efforts,” said Bill Smart, a lawyer representing BCLC. “In assessing BCLC’s AML efforts at any given time, caution should be exercised to avoid hindsight bias.”
While defending the Lottery Corporations’ actions, Smart also directed sharp criticism at the Gaming Policy Enforcement Branch (GPEB), suggesting lingering tensions between the corporation and the regulator.
“So GPEB appears to have done very little in our submission to address the risk of money laundering prior to 2015. And with all due respect to the province, their efforts to put all the responsibility on the BCLC suggests an effort to deflect their own failures by blaming the Lottery Corporation,” he said.
Robin McFee, the lawyer representing BCLC president and CEO Jim Lightbody, who is currently on medical leave, said that “under Mr. Lightbody’s leadership, BCLC, contrary to assertions and statements that were made occasionally by politicians, did not turn a blind eye to the risks of illicit proceeds entering BC casinos. Rather, Mr. Lightbody was diligent in responding to money laundering risks as they were identified.”
The statements from the provincial and BCLC lawyers that those in authority were doing their best to counter money laundering have been contradicted by B.C. Attorney General David Eby.
Eby was paraphrased by The Canadian Press in February 2020 as saying that “the previous government, at best, turned a blind eye, and at worst, recognized dirty money was generating revenue, dismantled a police unit responsible for the problem, and increased betting limits.”
Those allegations were examined by Smart, the lawyer representing BCLC, during Eby’s testimony before the Commission in April.
Smart asked Eby if he wanted to “maintain the political narrative the previous government is at fault and your government and you in particular are the solution?” Eby replied he would have indeed handled things differently from the way they were handled by the previous Liberal government.
“My intention was to communicate that they turned a blind eye to money laundering; they were insufficiently engaged,” Eby said.
Other testimonies have also provided some insight into the money laundering issue at the ground level.
Joe Schalk, former senior director of investigations at the GPEB and ex-RCMP officer, told Global News in 2019, “It is my belief and my knowledge that this was allowed to happen,” referring to money laundering in B.C. casinos.
In his testimony before the Commission in January, Schalk said he believed he was fired from GPEB in 2014 for insisting on highlighting the issue of suspicious currency entering casinos.
In letters to the BCLC retained by the Commission, Schalk had warned in 2011 that “if the flow of large quantities of small denomination cash is not stopped at the casino cash cage with those monies being refused, the integrity of gaming will continue to be jeopardized.”
Schalk wrote that the small denominations are likely linked to the direct laundering of proceeds of crime and are associated with loan sharks.
“The continued significant increase of suspicious currency being brought into and accepted at several casinos in the Lower Mainland is a cause of great concern,” he wrote to the BCLC in 2012. “We believe this is significantly impacting the overall integrity of gaming in British Columbia.”
Impact on Real Estate
While casinos overseen by the province have been allegedly used to launder important sums of cash, the amounts are small compared to what has occurred in the real estate sector, where the impact has been directly felt by the population.
The government report “Combatting Money Laundering in B.C. Real Estate,” released in 2019, assessed that “Money laundering investment in B.C. real estate is sufficient to have raised housing prices and contributed to B.C.’s housing affordability issue.”
The report called the province’s Land Ownership Transparency Act of 2019 a “major step forward,” adding that “Disclosure of beneficial ownership is the single most important measure that can be taken to combat money laundering but is regrettably under-used both internationally and in Canada.”
In 2016, a study by Transparency International Canada found “that nearly half of the 100 most valuable residential properties in Greater Vancouver” were “held through structures that hide their beneficial owners.” But some of the richest, and allegedly shadiest, homeowners in B.C. had still been identified by police, according to Global News in 2018.
A confidential police report obtained by the network reportedly stated that the study of over 1,200 luxury real estate purchases in B.C.’s Lower Mainland in 2016 found that more than 10 percent were tied to buyers with criminal records, and 95 percent of those transactions were believed by police intelligence to be linked to Chinese crime networks. One $17 million mansion was said to be owned by a suspected fentanyl importer. Another $22 million manor was linked to a high-stakes gambler and property developer with suspected ties to the Chinese police services.
These links between fentanyl, gamblers, and Chinese organized crime and Chinese Communist Party (CCP) officials have been investigated extensively by Global News reporter Sam Cooper and have been captured in his book “Willful Blindness: How a Network of Narcos, Tycoons and CCP Agents Infiltrated the West,” released in May.
The book explores the CCP’s link to criminal activity that has fuelled the opioid crisis as well as driven home prices so high as to be unaffordable for many, due to illegal cash proceeds being used to make major real estate investments especially in Vancouver and Toronto.
