A citizen of the People’s Republic of China reported average annual earnings of $40,615 to Canadian border agents yet went on to buy $32 million worth of Â鶹´«Ã½Ó³»real estate after moving $114 million from Hong Kong-based depositors with connections to organized crime and the Chinese Communist Party, a case study by counsel for the Commission of Inquiry into Money Laundering in B.C. shows.
The study is one of over 1,000 commission exhibits, and it hits on a number of vital aspects of money laundering heard during the course of the 18-month inquiry, such as nominee purchases, obscure corporate structures, fraud, layering and placement of assets (particularly real estate) and links to organized crime and corruption.
Commissioner Austin Cullen heard closing submissions this month and is expected to submit a final report in December, with findings and recommendations that could include real estate regulations and anti-corruption measures.
The anonymized study describes a family affair of suspected money laundering. The ‘Man’ utilized his ‘Wife,’ ‘Child’ and ‘Mother’ to move funds from Hong Kong-based depositors, or so-called “money changers,” and into luxury homes in Â鶹´«Ã½Ó³»as well as at least one Bahamas-based shell company.
The Man came to Canada in 2006 with total declared family assets of $1.25 million but became subject of a deportation hearing under the Immigration and Refugee Protection Act in 2016. A number of reports to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), the national financial intelligence agency of Canada, seemed at odds with his declarations. Documents in also show the Man was listed by Interpol as being wanted for bribery. The immigration proceedings are now sealed, according to commission counsel.
Between April 2006 and November 2014, the Man and his family members received about $114 million from Hong Kong. Much of the money moved through so-called ‘Company A’ – an investment holding company listed in the Bahamas and beneficially owned by the Mother. The company held $34.6 million in three accounts. Documents also show the Wife (listed as “homemaker, unemployed and CEO”) ordered transfers from institutions listed in Switzerland, China, Singapore and Canada.
FINTRAC reports showed the money moved in 60 separate electronic fund transfer reports, seven large cash transaction reports and just two suspicious transaction reports.
The Man and the Wife bought their first home in Â鶹´«Ã½Ó³»for between $2.0 million and $3.0 million, according to the study (exact details are redacted). The Child, listed as a student, then bought a $14 million home in 2012. The Man bought a second home, for at least $15 million in 2016 – the same year the Child bought a second property in the $1 million to $2 million range. The properties were tied to one another via mortgages and names on land titles.
It’s unclear where the other money went.
It was in December 2011 when the Man and four Hong Kong-based depositors were subject to two suspicious transaction reports to FINTRAC by UBS Bank (Canada), after about $7.5 million was moved to family members in 10 separate transactions. The Mother had explained to the bank the transfers were the result of the partial sale of her property in China. However, the Man, who held power of attorney for the Mother, wasn’t able to produce the land title records and UBS asked them to take the money out of their accounts.
Counsel examined the FINTRAC reports and issued summons to 11 Canadian banks or financial institutions for details on four specific depositors.
The summons show the four depositors moved $166.9 million total into B.C. accounts registered to five major Canadian banks between 2009 and 2020. The study further examined those four specific depositors in further detail using open source material.
Overall, the commission found limited open source information about these depositors, despite the large amounts of cash flowing into B.C. One operated in an obscure building belonging to an auto repair shop.
“Almost no information is available about these companies online,” the study states in reference to two of the depositors.
However some arms-length information on the others was gleaned from public records.
Depositor Hing Wah China + HK Renminbi Exchange Co., which made the most deposits to B.C. accounts, was found to have shareholders named Fang Jinghua and Hing Wah. Those two were accused of operating an underground bank in a Chinese court dispute but were determined innocent of the allegation. Fang, who owns a number of Hong Kong businesses with his family, has also faced charges of assault and criminal damage.
A business associate of theirs is Fong Siu Lok, who is a co-shareholder of jewellery shops with the “Fang Family.”
“Lok has a somewhat higher public profile than other Fang Family members. He became head of the Hong Kong Lion’s Club in 2017, and in 2011 and 2012 was one of Hong Kong’s delegates to the Chinese People’s Political Consultative Congress (“CPPCC”) of Fengkai, a region of Guangdong just north of Hong Kong,” the study states.
The CPPCC is a branch of China’s foreign influence program, the United Front Work Department, according to the U.S.-China Economic and Security Review Commission.
The commission goes on to detail some of the connections Lok has, including to a woman named Szeto Yuk Lin – a “gaming tycoon widely reported to have close connections to organized crime, particularly Wan Kwok-koi, a.k.a. Broken Tooth Koi, a leader of the 14K triad,” the study found.
“In 1997, Wan ordered a hit in Â鶹´«Ã½Ó³»against Lai Tong Sang, an alleged leader of the rival Shui Fong triad. Wan was sentenced to prison in 1999, and after being released in 2012 is alleged by the United States Treasury and others to have continued to conduct criminal activities,” states the study.
Likewise, the commission has heard about alleged Chinese transnational organized criminals operating in concert with local gangs and using B.C. casinos as a means to launder drug proceeds by loaning cash to gamblers.
Cullen may also weigh in on his views of foreign capital impacting the Â鶹´«Ã½Ó³»real estate market and to what extent Canadian laws mitigate any risks of that money being from criminal activity.
Cullen heard broadly from experts that it is difficult to pinpoint the exact quantity of money laundering in real estate.
Conservative estimates from from professors Maureen Maloney, Tsur Somerville and Brigette Unger, titled Combatting Money Laundering in BC Real Estate, indicate there was $5.3 billion laundered into B.C. real estate in 2018 alone, thus leading to an increase in real estate prices.
In closing submission, the B.C. Real Estate Association, which represents the interests of real estate agents, downplayed the report as “speculative” and that “there has been a conflation in the public discourse surrounding money laundering and foreign investment in real estate.”
Last November, the B.C. government launched a beneficial-ownership registry for residential property. As opposed to simply naming a person on a land title record, companies, business entities or individuals with an interest in residential land will need to file a transparency report by November 30, 2021. The government claims it has enforcement officers and says providing false information carries a maximum penalty of 5% of the property’s value.
The province states it is consulting with stakeholders on establishing a beneficial ownership registry for B.C.-registered corporations. The Canadian government has committed to doing so as well, but on the federal level.
