Interim Report from the Commission of Inquiry Into Money Laundering in British Columbia

Commission of Inquiry into Money Laundering in British Columbia Interim Report November 2020 The Honourable Austin F. Cullen Commissioner Commission of Inquiry into Money Laundering in British Columbia Interim Report November 2020 The Honourable Austin F. Cullen Commissioner © Copyright Province of British Columbia 2020 ISBN 978-1-7774125-0-0 (PDF) ISBN 978-1-7774125-1-7 (Print) Available on the Commission’s website, www.cullencommission.ca, along with transcripts, exhibits, and reports prepared by or for the Commission. Details of how members of the public may contact the Commission are posted on the website. Library and Archives Canada Cataloguing in Publication Commission of Inquiry into Money Laundering in British Columbia, [electronic resource] : interim report / Austin F. Cullen, Commissioner. ISBN 978-1-7774125-0-0 (PDF) ISBN 978-1-7774125-1-7 (Print) Electronic monograph in PDF format. 1. Commission of Inquiry into Money Laundering in British Columbia – Interim Report. 2. Casinos. 3. Money Laundering. 4. Dirty Money. 5. Gambling. 6. Anti Money Laundering. 7. Austin F. Cullen Contents Acknowledgements ix Executive Summary 1 Part One Mandate, Organization, and Work of the Commission 3 Terms of Reference 3 Guiding Principles 4 Commission Staff 5 Constitutional Limitations 6 Participants 8 Province of British Columbia 8 Ministry of Finance 8 Gaming Policy and Enforcement Branch 8 Government of Canada 9 Law Society of British Columbia 10 Society of Notaries Public of British Columbia 11 British Columbia Lottery Corporation 11 Great Canadian Gaming Corporation 12 Gateway Casinos and Entertainment Inc. 13 Canadian Gaming Association 14 British Columbia Government and Service Employees’ Union 14 Robert Kroeker 14 BMW Canada Inc. and BMW Financial Services 15 British Columbia Civil Liberties Association 15 British Columbia Real Estate Association 16 James Lightbody 16 Canadian Bar Association and the Criminal Defence Advocacy Society 17 Transparency International Canada, Canadians for Tax Fairness, and Publish What You Pay Canada 17 Additional Participants 17 Public Meetings 18 Vancouver 18 Kelowna 18 Victoria 19 Richmond 19 Prince George 20 Written Submissions 20 Work of the Commission 20 Terms of Reference Reports 20 Witness Interviews and Document Production 20 Experts 21 Overview Reports 22 Investigations 24 Overview Hearings 24 COVID-19 25 v Part Two Terms of Reference Reports 27 Dirty Money 1 27 Clarification of Roles and Responsibilities 28 Creation of a New Regulator 29 Standards-Based Regulatory Model 31 Federal Reporting 33 Transaction Analysis Team 35 iTrak 35 Designated Policing Unit 36 Joint Illegal Gaming Investigation Team 37 Operational Recommendations 38 Source-of-Funds Declarations 39 Cash Buy-ins 39 Cash and Cash Alternatives 40 Very Important Patrons 41 Other Vulnerable Sectors 42 Dirty Money 2 43 Real Estate 43 Lack of Reporting by Real Estate Agents and Mortgage Brokers 43 Lack of Beneficial Ownership Transparency 45 Unregulated Mortgage Lenders 46 Role of Lawyers in Real Estate Transactions 48 Luxury Vehicles 50 Horse Racing 51 Other Forms of Money Laundering 51 Law Enforcement Response 52 The Maloney Report 52 Political, Social, and Economic Harms of Money Laundering 52 Recommendations 53 Beneficial Ownership Transparency 53 Corporate Transparency 53 Regulatory Compliance 54 Real Estate Services Act Exemptions 54 Mortgage Brokers and Mortgage Lenders 55 Money Services Businesses 55 Unexplained Wealth Orders 56 Oversight of Provincial Regulators 57 Legal Professionals 57 Beneficial Ownership Information 57 Information Sharing with Provincial Regulators 58 Data-Sharing Framework 58 Investigation and Enforcement 59 The Perrin Report 59 vi Part Three Issues to Be Addressed 61 Is Money Laundering a Problem Worth Addressing? 61 Canada’s Participation in the Evolution of Anti–Money Laundering Policies and Procedures 62 The BC Experience 63 Raising the Issue: Is a Robust Provincial Anti–Money Laundering Regime Justifiable? 64 Professor Stephen Schneider 65 Professor Michael Levi and Professor Peter Reuter 66 The Commission’s Approach 67 Quantification 68 The IMF Consensus Range 68 Extrapolation from Capital Mobility Data and Discrepancies 69 Extrapolation from Estimates of the Shadow or Underground Economy 69 Extrapolation from Suspicious Transaction Reports and Other Indicators of Money Laundering 70 Extrapolation from Proceeds-of-Crime Data 70 Original Research 71 Money Laundering Methods and Techniques 71 Government Response to Money Laundering 72 Sector-Specific Issues 72 Gaming and Horse Racing 72 Real Estate 73 Financial Institutions 75 The Corporate Sector 75 Professional Services 76 Luxury Goods 76 Luxury Vehicles 76 Jewellery and Precious Metals 77 Luxury Yachts 77 Fine Art 77 Issues to Be Addressed 77 Other Jurisdictions 77 Barriers to Effective Law Enforcement 78 Evolution of Canada’s Anti–Money Laundering Regime 78 Emerging Patterns 78 Essential Elements of Canada’s Anti–Money Laundering Regime 79 Legal and Regulatory Scheme 79 Intelligence Capacity 79 Investigative / Law Enforcement Capacity 80 Prosecutorial Expertise 81 Asset Recovery Capacity 81 Federal / Provincial Integration 82 The Situation in British Columbia 82 Asset Forfeiture 83 Other Money Laundering Vulnerabilities 84 Conclusion 84 vii Appendices A Order in Council – Terms of Reference 86 B Media Reports 89 C Topic Areas and Responsible Lawyers 99 D Participants and Counsel 101 Commissioner, Counsel, and Commission Staff 103 viii ACKNOWLEDGEMENTS Acknowledgements The mandate for this Commission of Inquiry is Attorney General who, while recognizing the in- a broad one covering a wide range of sectors of dependence of the Commission, provided much British Columbia’s social and economic life. The needed practical and logistical support in its cre- breadth of the Commission’s Terms of Reference ation. Early on I was able to retain two senior law- coupled with the elusive nature of the subject mat- yers, Brock Martland, QC, and Patrick McGowan, ter – money laundering – made the creation of an to assume the roles of joint senior Commission effective Inquiry team a challenge. I am grateful counsel. The commitment of both Mr. Martland to the many people who have helped bring this and Mr. McGowan to building the Commission Commission – its organization and focus – into ex- team, focusing its approach, and preparing for the istence. Shortly after I was appointed Commission- hearings has been exemplary. Both of them bring er, I was able to draw on the experience and wis- great experience, judgment, and energy to their dom of the Hon. Bruce Cohen and the Hon. Dennis roles in the Commission. O’Connor, both distinguished former judges who On the administrative side, Dr. Leo Perra, the presided over significant commissions of inquiry executive director of the Commission, has been in their respective provinces. I was equally fortu- and continues to be a tower of strength in liaising nate to have the chance to consult Madam Justice with the government, building and administering France Charbonneau of the Quebec Superior Court the budget, looking after a myriad of issues that who presided over the inquiry into corruption in arise in an endeavour such as this one, and keeping the management of public construction contracts everyone on track and on task. Dr. Perra has been in Quebec. I received excellent advice and guid- very competently assisted by the Commission’s ance from those three distinguished judges. manager of administrative and financial services, I also received early and significant contribu- Cathy Stooshnov. Both Dr. Perra and Ms. Stooshnov tions from various officials in the Ministry of the have had extensive experience with commissions ix Commission of Inquiry into Money Laundering in British Columbia – Interim Report of inquiry and bring considerable skill and ability in the challenging task of reviewing the vast num- to the challenges of this Commission. The efforts bers of documents that have lately been produced of the staff have been heroic. The tasks of build- to Commission counsel. ing and operating a commission are challenging When the Commission was originally formed, enough in ordinary times, but the onset of the Christine Judd assumed the role of policy counsel pandemic called for a level of commitment and and brought her considerable skills to bear on cre- adaptability that has been and continues to be ex- ating the applicable rules of practice and procedure traordinary. I cannot properly detail all of the con- governing the Commission and its participants. tributions that members of the staff have made, but Ms. Judd, unfortunately, for family reasons, had to I offer my thanks to Scott Kingdon, Sarah LeSage, withdraw from the Commission, but happily, we Phoenix Leung, Shay Matters, my executive assis- were able to engage Tam Boyar, who has done an tant Linda Peter, Natasha Tam, and Mary Williams. excellent job of preparing the groundwork for the We have recently been joined by John Lunn in a Commission to consider, analyze, and make recom- backup role and I have no doubt he will contribute mendations on vital issues of policy and practice. similarly to the Commission. The Commission was fortunate to have the The Commission has been well served benefit of advice from Professor Gerry Ferguson, by the investigative and analytical efforts of who shared his expertise and insights gained from Doug Kiloh, Don Panchuk, and Adam Ross, who many years of writing about corruption and mon- have unearthed, assessed, and followed up on

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