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B.C. auto dealers are reporting being “in the middle of money laundering” activities in the province, according to newly released information from former senior RCMP officer Peter German.
And the problem appears to be growing exponentially, according to provincial sales tax rebate data on car exports.
“There has been an explosion in the number of grey market vehicles exported to China since 2013, growing from less than 100 vehicles in 2013 to over 4,400 vehicles in 2018,” the report states.
The report paints a picture of bags of cash being walked into luxury car dealerships for the purchase of vehicles bound for this grey market.
In one instance, $240,000 in cash (or about 11 kilograms of 20 dollar bills) was brought to a dealer. The dealer staff took the cash to a bank where only a large cash transaction report would need to be filed.
A key takeaway from German’s findings is that luxury car dealers are not required to file suspicious transactions of over $10,000 cash with FINTRAC – the Financial Transactions and Reports Analysis Centre of Canada.
“There’s no visibility at the point of sale,” said German. “It’s a wonderful opportunity to launder money.
However, cash payments are quickly turning into foreign electronic bank transfers via the likes of WeChat and UnionPay, which allow Chinese nationals, for instance, to load up accounts with cash in China only to be used overseas.
“B.C.’s luxury car sector is being used to launder proceeds of crime,” Attorney General David Eby said plainly, at a press conference in Victoria May 7.
Eby noted this is the first “detailed” government report in Canada addressing connections between money laundering and luxury cars.
German said the report addresses speculation that Â鶹´«Ă˝Ół»is the luxury car capital of North America.
Organized crime is said to be behind a roster of “straw buyers” in B.C., who, for a fee, purchase luxury cars as nominees and ship them offshore, where “international price differentials ensure huge profits” for the beneficial owners.
The report found 1,000 “straw buyers” connected to a single exporter.
The report claims international students, or those “appearing” to be students, make up a large portion of straw buyers (and “super rich Asian students” are also a big segment of purchasers in the luxury car resale market, according to some police investigators).
“It’s thanks to the provincial sales tax we know a lot about the grey market,” explained German, who poured over PST rebates.
According to the report, if the cars purchased by straw buyers are resold to the exporters within seven days of purchase, then the provincial government refunds the PST.
“Before 2014, fewer than 100 vehicles a year received the refund. In 2016, the PST was rebated on 3,674 vehicles. Since 2013, almost $85 million in PST refunds have been paid by government for the export of vehicles. The source and destination of funds for the buyers and sellers, and any income tax reporting by any of these individuals or entities, is unknown,” noted Eby’s office via a news release.
In the end, layers of transactions obscure source of funds and those who benefit from them.
Luxury car resellers are also identified as a money laundering vulnerability due to the lack of transaction oversight.
Noted one police investigator quoted in the report: The well-known gangster “wouldn’t be able to get a liquor or casino licence, but he can own a car dealership.”
Eby said the Ministry of Finance is reviewing the tax refund program and preparing more regulations of the luxury car sector.
German said his report does not quantify the extent of money laundering in the luxury car sector, adding it may be impossible to do so.
German said he did not see “excessive” issues in horse racing but he did see “vulnerabilities.”
The information comes from parts of a report from German on money laundering activities in the real estate, luxury car and horse racing industries in B.C. The full report is presently in the hands of government cabinet, according Eby.
German provided Eby with the report on April 1, alongside another report from the Expert Panel on Money Laundering, which was created by the Ministry of Finance to recommend rule changes to close loopholes in the real estate market and increase transparency in property ownership.
German’s report, assisted by former transit police chief Doug Lepard, is an assessment findings of money laundering in the real estate, luxury car and horse racing industries. It is not a tell-all document, noted German.
Information on real estate has yet to be released, as the NDP cabinet mulls a public inquiry into money laundering in B.C. following extensive media reports on organized criminal activity at provincially regulated casinos.
International anti-money laundering circles have described money laundering through real estate and casinos as the “Â鶹´«Ă˝Ół»Model,” whereby drug money is funnelled into assets using casinos and underground banks.
This is the second press conference Eby has held with German in the past month. The first was to show the public that the federal government has no dedicated police officers actively investigating money laundering in B.C.
“The absence of dedicated federal resources undertaking criminal money laundering and proceeds of crime cases is of great concern,” noted German in a news release.
Eby said at a news conference April 8 this discovery explains why so few money laundering cases have been investigated or prosecuted in the province despite an international reputation for such activities and a high level of media and public interest.
There are some RCMP officers handling money laundering cases connected to illegal gaming, by way of the Joint Illegal Gaming Investigation Team (JIGIT). But that team is funded mostly by the B.C. Lottery Corp. and handles all aspects of illegal gaming and criminal activity around gaming. It also falls under a provincial funding agreement with the national police force.
JIGIT, which has 16 officers, has operated out of the RCMP’s Combined Forces Special Enforcement Unit – largely dedicated to tackling gang activity – since April 2016.
As for money laundering investigations in other sectors, there appears to be no strictly federal presence at all, said Eby.
