Minnows and whales

At the end of June 2018, the Attorney General of British Columbia held a press conference to launch a report into his province’s gambling industry and its possible facilitation of money laundering.  Any uncertainty on the matter was removed pretty sharpish when it was revealed that the report, written by Peter German QC, is called “Dirty Money: An Independent Review of Money Laundering in Lower Mainland Casinos”.  It’s a chunky beast of a document, running to 250 pages, and in it Mr German – a former Mountie – pulls no punches: “On July 22, 2015, a Royal Canadian Mounted Police officer advised a British Columbia Lottery Commission investigator that police officers had been looking for a ‘minnow’ and had found a ‘whale’…. Large-scale, transnational money laundering has been occurring in our casinos.”

Among the topics discussed in the report is the so-called “Vancouver Model”.  This is (sorry, ladies) nothing to do with Ryan Reynolds in his undies, but rather a term coined by Professor John Langdale of Macquarie University in Australia to describe a situation in which organised crime gangs “clip the ticket both ways” – or double their share of the profits by providing services at both ends of the transaction and achieving two objectives.  As explained in the report: “In the Vancouver Model, Chinese citizens wish to relocate some of their wealth from China to Canada.  To do so they agree to accept cash in Canada from a lender.  At that point a settling of accounts occurs app to app between the person making the loan and an underground banker in China.  The catch is that the provenance of the cash loaned in Canada is unclear.  It generally come in the form of stacks of C$20 bills wrapped in a fashion that more closely resembles drug proceeds that it does cash originating at a financial institution.  The Chinese individual will then buy-in at a casino with the cash, gamble, and either receive higher denomination notes or a cheque upon leaving the casino.  The lender is servicing both a drug trafficking organisation by laundering its money, and the Chinese gambler by providing him or her with Canadian cash.”

And Mr German highlights once again that enormous, gaping, ridiculous hole in Canada’s AML regime – the fact that lawyers are not part of the AML family: “Without question, the absence of reporting by lawyers to FinTRAC [the Canadian FIU] is a gap in Canada’s AML regime and is a significant impediment to police investigations involving the movement of money through real estate and other financial sectors.  Canada is an outlier, as other common law jurisdictions, including the United Kingdom, have robust provisions in place which require financial reporting by lawyers….  The irony is that in British Columbia, most residential real estate transactions are handled by notaries, who do report to FinTRAC.  It is hard to rationalise why their handling of real estate funds should be treated differently than that of lawyers.”  Indeed.

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