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Money laundering report a wake-up call for Canada, but some provinces skeptical

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VANCOUVER — The authors of a report that found $47 billion was laundered across Canada last year debated whether to include a graph that indicated Alberta, Ontario and the Prairies were hotspots for dirty money, says the lead writer.

Maureen Maloney said her expert panel used the best mathematical model available to reach the estimates, but it’s more reliable at a national level than a provincial one, so they questioned whether to publish the figures.

“But we thought, ‘No, we need to do this, because people need to know it’s not just a B.C. problem,’ ” said Maloney, the province’s former deputy attorney general and a public policy professor at Simon Fraser University.

“It’s a big B.C. problem, but it’s everybody’s problem. And to the extent that B.C. starts fixing our problem or at least makes our province less enticing to money launderers, they’re going to go elsewhere. They’re not going to disappear.”

The report, one of two recently released by the B.C. government, aimed to sound a nationwide alarm about money laundering. But some provinces have reacted with skepticism, as Alberta questioned the numbers and Ontario said it will monitor the issue.

Maloney said there is no reliable data on money laundering in Canada, so the panel used what’s known as the gravity model, which estimates the flow of dirty money between countries based on characteristics including GDP per capita and crime rates. The panel divided Canada into six regions and treated each region as a country.

The panel estimated that Alberta led the country for money laundering in 2015 with $10.2 billion, followed by Ontario with $8.2 billion and the Prairies — Saskatchewan and Manitoba combined — with $6.5 billion.

To the surprise of many, B.C. came in fourth with $6.2 billion, scuttling its reputation as the money laundering capital of Canada.

The authors noted that the relatively high estimates in Alberta and the Prairies might arise from the importance the model places on crime rates and GDP levels, which were high prior to the oil downturn.

“If money laundering in Alberta and the Prairies have been overestimated … that implies that money laundering in B.C., Ontario and Quebec have likely been underestimated,” the report said.

Still, the panel concluded that money laundering is corroding “the very fabric of society” across Canada, and laid out a vision for it to become a national priority. Multiple recommendations call for the B.C. government to persuade its provincial and federal partners to take action.

Other provinces have yet to confront the issue with the zeal of B.C., which announced this week it will hold a public inquiry.

Alberta Justice Minister Doug Schweitzer said the province takes criminal activity seriously, but the figure presented in the report is the product of modelling that may not be completely reliable.

“We use intelligence from front-line law enforcement agencies, not data we can’t verify. We will continue to work with our law enforcement partners to protect law-abiding Albertans,” he said in a statement.

Money laundering is nearly impossible to quantify because, by nature, it’s hidden, but the report’s estimate for Alberta seems high, said Greg Draper, a national lead of valuations, forensics and litigation support with law firm MNP LLP and a former RCMP investigator based in Calgary.

“I would expect that Vancouver has a bigger issue than Alberta, which is not to say that Alberta does not face its own money laundering risks,” he said, adding illicit money is being washed through the province’s casinos, housing and cash businesses.

Ontario’s real estate association was so alarmed by Maloney’s report that it contacted its provincial government to call for a beneficial ownership registry. B.C. has already announced plans for such a registry, which collects the names of people buying property using corporations, trusts and numbered companies.

“Today, drug lords, gun runners and other criminals can hide behind the veil of Canada’s privacy laws,” said Tim Hudak, chief executive officer of the Ontario Real Estate Association and a former provincial Progressive Conservative leader.

Ontario Finance Minister Vic Fedeli wasn’t available for an interview and in a statement his department didn’t indicate it was planning to take any urgent action.

“What I can tell you is that we are discussing this issue with our federal and provincial partners — most recently at the last meeting of Canada’s finance ministers. This is something we will continue to monitor,” said spokesman Peter Spadoni.

Both Saskatchewan and Manitoba said they are taking measures to combat money laundering and pointed to their civil-forfeiture programs, which enable provinces to seize assets believed to be the proceeds of crime without laying criminal charges.

Saskatchewan added that it will pursue legislative amendments to ensure that corporations hold accurate and up to date information on beneficial owners. But it noted it was difficult to draw conclusions about the province from the Maloney report.

“The report itself states there are limitations on the methodology, so it isn’t clear what proportion of the Prairie figure in the report applies to Saskatchewan,” it said.

Jason Childs, an economics professor at the University of Regina, said he would expect money laundering to be worse in B.C. due to its sky-high real estate market, but Saskatchewan’s gaming industry is extremely vulnerable.

“We have a lot of comparatively small casinos that are going to be operating with different levels of oversight,” he said. “And then you’ve got, also, a lot of cash business going on in Saskatchewan still.”

As for the federal government, Prime Minister Justin Trudeau described the reports as “alarming” and said his government has strengthened audits on real-estate transactions and is working with provinces to do more.

Maloney said better data is needed, but if anything, the panel’s estimates might actually be lower than the reality.

“Our numbers are not definitive. Nobody’s numbers can be definitive. But we think at the moment, given the data that is available to us, this is probably the best guesstimate there is,” she said.

“But I would say if we were erring on any side, it would be on a cautious, conservative side.”

— Follow @ellekane on Twitter.

Laura Kane, The Canadian Press


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International

No national security issue in Chinese takeover of Canadian lithium company: Liberals

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OTTAWA — The pending takeover of a Canadian lithium mining company by a Chinese state-owned company raises no national security concerns, federal Liberals argued Thursday.

Liberal MP Andy Fillmore, parliamentary secretary to Industry Minister François-Philippe Champagne, told a House of Commons committee that the Industry Department reviewed last fall the proposed takeover of Neo Lithium Corp. by China’s Zijin Mining Group Ltd.

That review concluded that Neo Lithium is “really not a Canadian company,” he told the industry committee, describing it as an Argentine company with directors in the United Kingdom and only three Canadian employees “on paper.”

He said the only reason Neo Lithium “had any Canadian toehold whatsoever,” was to get on the Toronto Stock Exchange in a bid to raise money for what Fillmore called an “increasingly dubious appearing” mine development project in Argentina.

Moreover, he said that project involves lithium carbonate, not the lithium hydroxide used to manufacture batteries that are critical for electric vehicles.

For those reasons, Fillmore said a formal national security review of the takeover was deemed unnecessary.

“These are the things they found, right? That in fact it’s not a relevant lithium to Canada’s national security interests and it’s not really a Canadian company.”

However, Conservative MP Ed Fast, who had called for the emergency committee meeting to find out why no formal security review was done, said it’s “just false” to say Neo Lithium is not a Canadian company.

And he noted that the company’s own website touts the mine as “the pre-eminent lithium brine asset in the world” to meet surging global demand for electric vehicle batteries.

“It goes without saying but bears restating that critical minerals such as lithium are a strategic asset, not only for Canada but for the world, and will play a critical role in driving our future prosperity and in meeting our environmental objectives,” Fast said.

While the mine in question is in Argentina, Fast argued that it is incumbent on Canada and other “free-trading, rules-following allies” to ensure the global critical minerals industry is not monopolized by one country, especially one whose interests “are sometimes hostile toward ours.”

China currently dominates the world’s supply of lithium and batteries.

Conservative MP Tracy Gray further argued that lithium carbonate can be converted into lithium hydroxide for use in batteries.

But Fillmore countered that the conversion process involves additional costs and “significant environmental implications,” which is why lithium hydroxide is preferred.

“I could probably make a passable hat using my socks but I’d much rather wear a hat,” he said.

Thursday’s meeting was called to consider a motion by Fast, calling for the committee to hold six meetings to explore the Neo Lithium takeover and whether a formal national security review should have been conducted.

In the end, committee members unanimously agreed to a Bloc Quebecois compromise to hold two meetings on the subject next week. The steering subcommittee, which is also to meet next week to set the committee’s agenda for the coming months, could decide to schedule more meetings on Neo Lithium.

This report by The Canadian Press was first published Jan. 20, 2022.

Joan Bryden, The Canadian Press

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Justice

CP NewsAlert: Man charged after four bodies found in Manitoba near border

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WINNIPEG — A Florida man has been charged with human smuggling after the bodies of four people, including a baby and a teen, were found in Manitoba near the United States border.

The United States Attorney’s Office for the District of Minnesota says Steve Shand, who is 47, appeared in court earlier today.

The bodies were found yesterday in Manitoba near the border community of Emerson.

Mounties say it’s believed they died from exposure while trying to cross the border into the U.S. from Canada.

The U.S. Attorney’s Office says the dead were a family of four Indian nationals who were separated from others in a group crossing the border.

More coming …

The Canadian Press


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