Issue Update: Money laundering and new beneficial ownership registry March 2018

Some of you may have heard news that a significant money laundering issue at lower mainland casinos was waiting for me on appointment to Minister responsible for gambling in the province. You might find this speech I delivered to Transparency International Canada and two law reform groups from UBC law school interesting – it contains details about some of the issues our government has identified, and addressed, to get this issue under control since being elected.: Transparency International Speech

This is a video from question period where I explained how we got to where we are in BC with money laundering in our casinos, our own internationally recognized model of money laundering called the “Vancouver Model”:

A  major initiative that has gotten little attention, but may ultimately be more significant than the speculator’s surtax will be the new “beneficial ownership” registry of property ownership in the province. This registry will require the disclosure of the actual owner of properties in British Columbia. In other words, the public will be able to determine, through the land registry, the real person or people who benefit from owning any particular property.

The reasons to conceal an actual human owner are many, and some apparent attempts to “conceal” an actual owner may actually be a side effect of a business or personal purpose that is entirely legitimate. However, concealing a true owner, and a system like British Columbia’s current system that permits the true owner to remain hidden, prevents regulatory authorities from cracking down on any number of harms, including tax evasion or money laundering.

Disturbingly, this problem is not a speculative issue in our community. According to a recent study by Transparency International Canada, almost 50% of Vancouver’s most expensive properties have ownership structures that conceal the true owner of the property.

Transparency International Canada’s research, which I supported by providing land title documents to them to facilitate their review, revealed opaque residential property ownership structures like offshore trusts, numbered companies with lawyers as sole directors of the company, and “students” and “housewives” as purchasers of properties valued in the tens of millions of dollars.

The research showed that more recent real estate transactions were far more likely to use opaque structures than older transactions. In other words, they observed that the problem was getting significantly worse, not better.

Recent articles by Sam Cooper in the Vancouver Sun and Kathy Tomlinson in the Globe and Mail, have outlined damning allegations connecting the laundering of hundreds of millions of dollars in proceeds of crime and our local real estate market.

My own briefings as a Cabinet Minister responsible for gambling in the province caused me to hire Dr. Peter German, an international expert in money laundering, to advise me on reforms to deal with what appeared to me to be out-of-control money laundering in Lower Mainland casinos. I also asked him to tell me what connections to other areas of our economy – like real estate – he identified. He will be reporting back to me by March 30th of this year.

Our beneficial ownership land registry in BC will be a leader in Canada, and will follow the successes (and build on the challenges) experienced by other jurisdictions like the UK which have also adopted similar mechanisms. By knowing the true beneficial owner, Revenue Canada, the RCMP, and other enforcement agencies can ensure our property market is not used for money laundering or tax evasion.

In addition to these changes, major reforms to the pre-sale condo housing market that will require accurate and complete information about those buying pre-sale condos, including Social Insurance Number, will enable our government to take action on speculators in this area as well. Hard working British Columbians looking for a family home should not be disadvantaged by speculators buying pre-sale condos and flipping them for profit – these legal reforms will assist government in cracking down on this kind of activity.