Front Burner - B.C.'s serious money laundering problem

Episode Date: January 24, 2019

The toll of British Columbia's money laundering problem is climbing, with recent reports suggesting that about a billion dollars a year have been laundered through the province's casinos.This week, the federal government promised it will do more to help B.C. finally clamp down. Today on Front Burner, CBC Investigative journalist Eric Rankin explains the long-term problem and breaks down how the money is tangled up in organized crime, illegal drugs, and even real estate.

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about hidden disabilities. Short Sighted, from CBC's Personally, available now. This is a CBC Podcast. Hello, I'm Jamie Poisson. British Columbia has a serious problem with money laundering. Recent reports show it could be in the billions of dollars. The money is tangled up in organized crime, illegal drugs, real estate. It's even tied to BC's housing crisis.

And this isn't a new problem. People investigating these crimes say it's been going on for years. And that successive governments have really failed to stop it. International intelligence members were taught about something called the Vancouver model of money laundering. We are famous, or more accurately, we've become infamous. Well, earlier this week, the federal government said they're going to do more. Both orders of government, I think we have a shared responsibility here to work together to make a difference, and we're quite prepared to come to the table. I'm going to talk to Eric Rankin about all of this.

He's an investigative reporter at CBC Vancouver, and Eric has been on the beat for a long time. I think there was an individual who brought in like, you know, $250,000 in 20s. If you stack that up, I think at the time I calculated it was going to be something like 40 feet tall. That's today on FrontBurner. Hi, Eric. Hi. Thanks so much for joining us today. You're welcome, Jamie. I know there have been all kinds of reports and investigations into this, particularly lately. And I want to go back to some of those key findings in a minute.

But first of all, can we start? Can you give me a sense of just how big the money laundering problem is in B.C. right now? Well, that's the $1 billion question. Literally the $1 billion question. It just keeps on getting bigger and bigger and bigger almost from week to week in terms of what the estimates are. Six or seven months ago, the government commissioned a report. Unfortunately, for many years, lower mainland casinos unwittingly served as laundromats for the proceeds of organized crime. And the author of that report, former Deputy RCMP Commissioner Peter German, said that he estimated that the problem exceeded about $100 million in terms of dirty money flowing into casinos.

We can only guess at the true amount. Our best indicator is the thousands of suspicious currency transaction reports filed by casino operators through the years. Why did this occur? Because it could. He didn't specify the period, but it appeared to be about 2010 to 2017 that he'd been looking into. And then a short time later, we obtained some internal gaming enforcement documents through a freedom of information request.

Secret reports obtained by CBC News show a staggering amount of dirty money was laundered... And we found that the figure was actually more like $100 million at least a year on average. Wow, so almost sevenfold what he originally... Almost sevenfold, that's right. And then we tracked down the author of that gaming report, who actually had been fired after making recommendations that there'd be a crackdown.

And he said, you know what, it was more than $700 million over that, say, seven or ten year period. It was more like a billion dollars. The numbers would have exceeded $1 billion for sure in suspicious currency transactions. It was a staggering amount of money. So then we were doing a story about, look at this, oh my God, it was a billion dollars. Ten times what the report had said before. billion dollars, 10 times what the report had said before. And then I did a follow-up story just a short while ago with the BC's Attorney General, who said to me, actually, it was as much at its peak, a billion dollars a year going through legal and illegal casinos in BC. Obviously,

these are staggering numbers, incredibly troubling. And it shows very clearly this is a very serious issue, and I believe an issue of national concern. And plus, oh, by the way, there was, we're looking at the possibility that there was another billion that was laundered through real estate in British Columbia at that same period. So now we're suddenly gone from 100 million just six months ago as a very conservative estimate over several years to then being $100 million more than that in one year. And now we're looking at potentially $2 billion when this peaked a couple of years ago. I do want to get to why it feels, to me at least, why it feels like the government hasn't really spent a lot of time and effort trying to understand this problem in the last several years. But before we get there, I want to get a clearer picture

of how this all happens. So let's pretend for a second that I'm a drug dealer. I have all of these $20 bills that I made illegally, and I don't want them to be tracked back to me. So why would I bring them to a casino? The source of that money is a problem. You can't take that to a bank. You've just got this cash. If you take it to a bank, a bank is going to say, you have to tell us where this came from. You need to tell us what the source of it is. And oh, by the way, we think it's suspicious and we're calling in the police. Right. Because $10 million in $20 bills is suspicious. Yes.

So the issue has always been for organized crime and gangsters what to do with that kind of money. Explain to me how that works. If I'm trying to launder money, I have all of this money that I've gotten from illegal means. And so where do I put it in places that won't raise suspicion? Right. So that's where casinos come in. That's where real estate comes in. That's where incredibly expensive luxury cars come in. Casinos are supposed to adhere to the same kind of suspicious money tracking that banks do. And if large amounts of money come in, it's supposed to be reported to Fintrack, which is the federal watchdog on money laundering and terrorism and funds coming in.

Now, the problem, though, was that there was a bit of a weakness in this, and that is that casinos in B.C BC were required by law to report suspicious cash transactions coming in. If people came in with more than $10,000 in cash, there had to be some accountability. Where does this money come from? Because the fear was that it would be organized crime bringing in dirty money that had to be laundered. And so casinos were dutifully, over the years, filling out these suspicious cash transactions, but they were still accepting the money. They weren't calling the police. And so these reports were then finally being seen by authorities later. And it was noted that this suspicious cash had come in, but the trail was long cold at that point.

So this was all kind of useless. but the trail was long cold at that point. So this was all kind of useless. Yes. All that was happening was we got wind of the fact, going back to about 2008 or so, that this was starting to happen. And so we were, the CBC was putting out freedom of information requests to get a hold of documents. And there was a bit of a battle,

but we finally were getting these accounts over the years. And each year we were seeing these insanely high suspicious cash transactions, amounts of suspected dirty money going into casinos, where it was just truly staggering at times what was coming in. How much money? Well, I can remember a couple of cases reporting back around, I think, 2008, where people were bringing in suitcases full of 20s or big plastic shopping bags and garbage bags and hockey bags full of wads and wads and wads of 20s. The individual showing up with two large bags filled with cash, cash cage, attendant goes through the cash and unloads the bag of $20 bills. These are probably $20,000 bundles. And in one case, I think there was an individual who brought in like, you know, $250,000 in 20s. And begins the process of counting the money, which comes in a red shopping bag.

This transaction in excess of $250,000. If you stack that up, it would be, I don't know, I think at the time I calculated it was going to be something like 40 feet tall. But they were bringing this in, and there were very few questions being asked. The staff were filling out the report, noting, wow, that was a lot of money that came in, but then nothing was being done. And you'll see the cash cage teller running cash through the counting machine. The video runs for about 13 minutes of counting.

And I understand at some point you laundered money through a casino? Well, we wanted to check and see, you know, really? You know, can we do this? Yes. Is this easy? And so the CBC actually authorized us to get $20,000 in cash in 20s. And we assembled a team and we divvied up the cash. And members of our team went into various casinos.

We hit the slot machines with wads of cash, load them to the max. Within an hour, we have credits for the thousands of dollars not played and proceed to the cashier. And we found that there was maybe one or two exceptions, but it was very easy to go in. But we were, it was very easy to go in. And what we did at the time was take the cash and feed it into slot machines, play that money, maybe lose a little bit, like load up that machine with tons and tons of money, like maybe $1,000 would give you extended play. And then play a little bit, lose a little bit, and then cash out. Cash out, all part of doing business. Right, so when you cash out from the machine, you get a little piece of paper,

you take it to the cashier cage, and they, at the time, would just issue you a casino check. The whole amount? Yeah. Okay. Yeah, no problem. In just half an hour after showing simple ID were handed casino checks. $15,000 now laundered clean. So how did you guys do? They said congratulations and I was on my way.

They said congratulations? Yeah. And you could take that to a bank and it appeared that the source of that money was from the casino. It could be casino winnings for all the bank new. So there'd be no alarm bills going off. And so the money was effectively laundered that way. Interesting. So if I want to launder money, you mentioned before, through luxury cars or real estate, how would I do that?

Well, you know, this is actually now the subject of the next investigation, the next report that's being done into money laundering in B.C. So we're waiting for the other shoe to drop. Peter German is now doing a report on dirty money flowing into real estate, horse racing and luxury cars in the province. There's a complication with real estate because, as you know, Vancouver has a superheated real estate market. There's a very easy way, if you've got lots of cash, to start buying expensive homes and sinking your money out, once again making that money legitimate, because you can sell that house later and it will all appear as everything was clean. Now, the problem is that you have to go through lawyers to do real estate

transactions. And lawyers have client-lawyer confidentiality agreements. And so there has been this issue, like how much money was flowing through? Has it been adequately reported? Because of that confidentiality, were these suspicious transactions not reported. So is it possible that people were buying homes or people have been buying homes in Vancouver with $20 bills that they got from the illegal proceeds of crime? It's very possible. I mean, and, you know, the B.C.'s Attorney General David Eby just told me a few days ago that, you know, he's receiving reports now that it was a billion dollars at its peak

in terms of money going through real estate in British Columbia. We learn about things like the RCMP internal intelligence report that a billion dollars in luxury real estate in Vancouver was tainted with the proceeds of crime transactions. real estate in Vancouver was tainted with the proceeds of crime transactions. Again, dirty money being used to buy homes, to buy luxury condos and townhouses. And that, you know, at least in part, helped fuel the crazy real estate market and the crazy prices that we've got here. Because if people, if it was, you know, money's no object, then people would just throw money

at things to buy property. We've been hearing for years about the housing crisis in Vancouver, and you hear a lot about foreign buyers, people who are coming to Vancouver and buying homes. But is it possible that this aspect of it, the idea that people are using illegal proceeds from crime, laundered money to buy these homes, is playing a much larger role in the housing crisis than we thought. Well, you know, obviously there's a lot of legitimate purchases and a lot of legitimate people. But even if a lot of it went into luxury real estate, as David Eby has said, it still starts to set the bar and it starts to, you know, everything starts to rise up to meet the expectation of what property is going for. So the impact of dirty money on BCs, and especially the greater Vancouver area's real estate prices, I think is very real. I think that if even just a billion dollars, even, but a billion dollars has been identified

as the peak in one year, it could have been much higher than that. We've talked about this report by Peter German that was released in June. He called it a collective system failure, that no one had addressed this sooner, that this problem went back as far as 2011. This represented a collective system failure which brought the gaming industry into disrepute in the eyes of many British Columbians. So one thing I'm struggling with a bit is why didn't anyone do anything about this sooner? Well, you know, the issue here was that casinos, once they were legalized in B.C., turned out to be a cash cow for the provincial government. There was so much money flowing in and the B.C. government got a take of that.

And the regulator, the overseer, was the B.C. Lottery Corporation, which everyone basically admits now was in a conflict of interest in terms of its role. It had two roles. One was to promote the amount of money going to the province to try to maximize profits going from gaming to the province. And the other was to regulate the casinos. And you can see where there's a problem there. If you're supposedly cracking down, how do you also maximize profits? So the issue was arising that there wasn't much being done. There weren't many crackdowns. The money was sort of being noted that it was flowing in, but measures were taken, but they were a little weak. They were not accomplishing anything. And as a result, we just saw the amount of money flowing in going higher and higher and higher. Since this big report came out, has the government done anything? Are there any initiatives that have been announced to try and combat this issue? Well, Peter German brought down 48 recommendations. Among the changes are a move to a standards-based industry, moving responsibility

for reporting suspicious transactions and anti-money laundering compliance to the casino operators. A lot of them have been implemented and they seem to be having near immediate results because the first six months of 2018 following the implementation of these recommendations The first six months of 2018, following the implementation of these recommendations, we've seen the amount of suspicious cash flowing into BC casinos drop to $2.1 million. Still sounds like a lot of money, but compared to what was going through the casinos before, it's a drop in the bucket. And there are ongoing investigations into this issue. I want to ask you about one of them in particular, which was a bit confusing to me. It was back in November and it fell apart.

It was an RCMP investigation into a Richmond company that's alleged to have laundered $1 billion a year. But then all of a sudden, the case was just gone. And all the charges against the people charged were stayed. What happened there? Well, it's still not really clear. A colleague of mine, Jason Proctor, in the investigative unit here in Vancouver, has been looking into that. And from what we can determine, there was this investigation called E-Pirate.

They always have these kind of cool names for investigations. And it was looking, as you said, into a Richmond-based business. The allegation was that they were acting as sort of a go-between in terms of money coming from organized crime to loan sharks who then gave that money to gamblers, professional gamblers going into casinos, and that that money in a complicated way was then being paid back through underground banking to China. So there was this sort of weird circuit of how the money was being handled, very complicated, but very interesting. And sort of looking into how this was happening. The problem was, it appears to have happened, is that when the Crown presented its evidence to the other side, the defense lawyers, some information was included that shouldn't have been. And so the charges had to be stayed. When these kind of

things happen, it's often because they have done something like accidentally revealed the name of a confidential source, putting somebody's life at risk. And that's what the speculation is in this case, that the information was accidentally provided to the other side that should have remained confidential. And it has really fouled up that case. Is this something that's being considered like a screw-up, essentially, on the part of law enforcement? Yeah, I think so. I mean, there's massive questions being asked as to why this happened. There's been talk of a public inquiry to look into this. The Attorney General, David Eby, is angry that this has happened, that the ball's being dropped in this case.

I have asked my staff to have a look at this and to see whether there is anything at the provincial level we should be looking at in terms of provincial laws or regulations that have been violated in terms of the conduct that took place here, whether there's a provincial role to play here to try to pick up some of the pieces. It's all very murky, what happened there,

but major embarrassment for the province that really wanted, I think, this to go to trial and for justice to be done in this case, you know, a bit of a showcase for crackdown, you know, depending on the outcome of the trial. You mentioned Attorney General David Eby, who's angry about this case. He also, from where I'm sitting, seems to be angry about a whole lot of things around this issue of money laundering in B.C. He has described it as a crisis. These are massive numbers and incredibly troubling to the point that I really think that we need the federal government to step up here with resources for enforcement, prosecution, and

ultimately conviction, something that we've really failed at. And why is this something he thinks that the rest of the country should care about? Because, you know, what's happening here is probably happening to a greater or lesser extent across the country, that this is a problem that is contagious. that this is a problem that is contagious. It's a problem that involves injustice. It involves organized crime. So I think he feels that this is very important for the rest of the country.

And that's why he's enlisted the help of the federal minister in charge of organized crime reduction, Bill Blair. He thinks that this is something that there has to be a concerted campaign. There has to be cooperation and collaboration of federal and provincial resources to try to snuff out something that is such a massive problem. Eric, thank you so much for coming on and helping us understand this really complicated issue. You're welcome, Jamie. As Eric and I discussed, Federal Minister of Border Security and Organized Crime Reduction, Bill Blair, met with B.C. Attorney General David Eby. That happened Tuesday. And while Blair said the feds would help tackle this issue, BC's Attorney General was clear. The province would do whatever it needed to do to deal with this issue. In the event that we are not able to address these

issues, that we can't get the information out to British Columbians that they deserve to know, the province has kept open the option of public inquiry. We've communicated that federally. That's it for today. I'm Jamie Poisson. Thanks for listening to FrontBurner. Go to cbc.ca slash podcasts. It's 2011 and the Arab Spring is raging. A lesbian activist in Syria starts a blog. She names it Gay Girl in Damascus. Am I crazy? Maybe. As her profile grows, so does the danger. The object of the email was, please read this while sitting down.

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