02 Dec 2019
It started with a huge hash bust.
Following up on a tip, the RCMP set up a stakeout and pounced when a freight truck left a warehouse on Mitchell Island in Richmond.
The haul: six tonnes of hashish (a drug made from the resin of cannabis), wrapped in cellophane and carefully packed in wooden boxes.
More concerning — the traffickers’ books showed it was the tail end of a 40-tonne shipment with a wholesale value of more than $140 million.
The RCMP did not know it at the time — and would not find out until a couple of years later, when the U.S. Drug Enforcement Administration corralled a major drug-trafficking kingpin — that the hash shipment was part of a global cartel that had profits of $165 million a year.
Even after being arrested in the warehouse bust, the B.C. ringleader, George (Lorry) Burden, sold off 20 tonnes of the shipment already stashed in B.C.
The cash proceeds from the drugs were laundered in part in real estate in the Lower Mainland: at least seven houses worth more than $7 million.
The year was 1993.
Land and money
As British Columbians attempt to confront, understand and quantify the effects of money laundering in real estate, there remains skepticism over whether, and to what extent, illicit money can be laundered in real estate.
A B.C. government-commissioned report released this spring estimated that as much as $5 billion was laundered in real estate in 2018. But it was based on an economic model and not actual data of money laundering. In response to the report, Vancouver lawyer Garth Evans wrote to Postmedia: “Lawyers and banks aren’t allowed to accept large amounts of cash, so what is alleged to have gone on? The buyers were paying with bags of cash? I don’t think so. It behooves the authorities to provide evidence of real-estate money laundering rather than making allegations.”
It is a valid point.
How money is laundered in real estate is also an important question for an inquiry launched by Premier John Horgan’s B.C. NDP government that will begin hearing evidence next year.
The fact is that laundering money in real estate is not a new phenomenon.
A Postmedia compilation and analysis of 12 cases over the past three decades, including the hash bust in Richmond, shows there are a number of ways to get money into the financial system, ultimately resulting in property purchases that are made with money in electronic or digital form and not, generally, with bags of cash.
Postmedia’s conclusions are the result of an examination of thousands of pages of U.S., Canadian federal and B.C. court records; B.C. property and corporate records; archived Postmedia News reports; and interviews with those familiar with the cases.
The cases — big and small, domestic and international — paint a much wider picture of money-laundering in real estate than has been reported in the past three years in B.C., where the focus has been on B.C.’s biggest money-laundering case, involving the underground bank Silver International in Richmond, where allegedly as much as $220 million a year of largely drug-trafficking cash was cleaned.
Postmedia’s analysis shows laundering methods have included placing cash in multiple banks in exchange for bank drafts, a lottery scheme that produced winning tickets, and stuffing money into suitcases and flying it abroad to jurisdictions where financial institutions ask fewer questions about cash. Other methods include the use of currency exchanges and underground banking schemes.
The analysis also shows that money was often laundered with the use of shell companies and nominee directors, where the true owner or owners were hidden.
The illicit money was generated from an array of offences and alleged offences: stock fraud, bank and company embezzlement, phishing email fraud and drug trafficking. In another case, millions were raised in an alleged cryptocurrency fraud.
The proven and alleged illicit activities generated as much as $1.7 billion, a huge sum that points to the amount of domestic and global money available to be laundered.
Postmedia tracked nearly $100 million that was plowed into real estate.
“It is pervasive,” says Denis Meunier, a former deputy director of Canada’s financial intelligence gathering agency, in response to Postmedia’s compilation and analysis of the 12 cases.
“It doesn’t matter whether it is drugs, or whether it is fraud or pump-and-dump schemes; as long as it’s dirty, the source is illegal, people will want to hide it,” said Meunier, also a former director general responsible for criminal investigations at the Canada Revenue Agency.
Added Meunier: “Real estate is being used, has been used and will continue to be used.”
Buying real estate
While most of the money invested in real estate was sunk into Metro Vancouver properties, the analysis shows money also ended up in other places, including Whistler and Kelowna.
The analysis also underscores the global nature of illicit activities and laundering operations.
The cases involved more than 20 countries and territories: the U.S., Canada, Australia, Pakistan, India, Japan, New Zealand, Taiwan, Mexico, China, Hong Kong, the Bahamas, Singapore, Bahrain, Panama, Belize, the United Kingdom, Mauritius, Malta, the United Arab Emirates, Switzerland and Germany.
Major banks are almost always the conduit to move money, through legally established accounts and often in the names of companies also legally established. In the 12 cases, money moved through more than 30 banks, including all the major banks in Canada: CIBC, Royal Bank, Bank of Montreal, Toronto Dominion and Bank of Nova Scotia.
The money also moved through other major banks: HSBC, the Bank of China, the Industrial and Commercial Bank of China, Credit Suisse, Credit Lyonnais, Citibank, Wells Fargo, DBS Bank, Barclays Bank, and Deutsche Postbank.
In the global trafficking scheme that Burden was involved in, huge amounts of cash were laundered both inside and outside of Canada.
French-American Claude Duboc led the global cartel, which shipped the hash from Pakistan to Canada, and also to the U.S. and Australia.
Duboc had couriers move cash from Canada to banks in Europe and Singapore, where fewer questions were asked about the origin of the currency. The cash was stuffed into suitcases for flights out of Vancouver or Montreal. One courier moved $80 million out of Canada using this method on 39 separate trips.
Duboc also used a money trader in Hong Kong to launder money into banks in Bahrain.
Some of the money Duboc moved globally was sent back to B.C. to help fund further operations — $5 million from a bogus company in Bahrain called Arab Lumber Products to Burden’s business, Coastal Forest Products, to outfit ships and barges to transport drugs.
The money was sent to a Richmond branch of CIBC.
Money from Duboc’s profits was also used to purchase drug stash houses on Vancouver Island and the Sunshine Coast.
The profit from Burden’s share of the hashish, also cash, was placed in banks in amounts that would not trigger suspicion. Cash was also cleaned using a lottery ticket scheme that guaranteed payouts.
Russ Lefler, a now-retired RCMP officer who headed the Burden money-laundering investigation back in the ’90s, said he remembers when he mapped the various cash bank deposits, it showed a criss-crossing pattern along Kingsway as multiple transactions took place. It’s a classic money-laundering scheme called smurfing.
At the end, “they come out with a bank draft,” said Lefler.
A problem with the lottery scheme was for the gangsters to find enough different people to cash in the winning tickets, said Lefler. When police raided Burden’s house — purchased by his lawyer though a shell company set up in the Bahamas called Taipei Trading Corp. — they found stacks of winning tickets, worth about $500,000.
“They get it down to an art, to dilute the money, so you don’t get the big picture. It’s designed to confuse investigators,” said Lefler.
By Gordon Hoekstra, Vancouver Sun, 29 November 2019
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