Peter German’s 250-page report “Dirty Money“, delivered to Attorney General David Eby on March 31 and to the people of British Columbia almost three months later, contained more than just a set of 48 recommendations for the response and reforms to the gaming industry.
It also delivered a scathing review of casino operations, oversight and regulation in British Columbia, a sector wallowing in poorly-written legislation, acrimony and denial between various concerned entities, such that “certain Lower Mainland casinos unwittingly served as laundromats for the proceeds of organized crime.”
German describes it as a “collective system failure” of the province’s casinos, where an estimated $100 million of illicitly gained currency transferred from anonymous hand to anonymous hand.
That the money laundering uncovered so far in casinos is but a “drop in the bucket”, according to Mr. German’s interviews, is disturbing enough. But it delivered a third eye-opener — that there are likely other sectors in the provincial economy are being used, mis-used and abused in the same way.
As he notes in his report, luxury and counterfeit goods, cars, boats, precious metal — anything that can be bought without too many questions being asked — formed the chain of transactions (the “spin cycle”) meant to disguise and render untraceable the origin of dirty money. (See Chs. 4 and 34 of the German Report for a sense of the scope and sophistication of such efforts).
Now look at our real estate industry. It accepts cash deals, is self-policing, and has a history of collectively pushing back against rules which would prohibit such conflicts of interest as dual agency. According to said Christine Duhaime, a lawyer who specializes in counter-terrorist financing and anti-money laundering law, these could be just the warning signs of larger issues, also of the systemic variety:
Real estate is a really important one … It’s one of the sectors that have been overlooked from the federal oversight perspective, from the provincial oversight perspective.
One of the tell-tale signs that something may be amiss is when you examine a sector at the ground level to see what’s actually happening. And that’s where some of the hard work has already been done; in 2016, Transparency International Canada found that 45 per cent of Metro Vancouver’s most valuable properties were held by numbered companies. This infographic illustrates where some of these properties are, and some of the background behind their purchase.
And so it’s no surprise the real estate market, its participants and the entire regulatory environment are the focus of Peter German’s next investigation, commissioned by the provincial government.
It seems, at this point, the real estate industry has a choice.
There’s a widespread belief that it facilitated the movement of money — ‘dirty’ or not — into an overheated market to make it burn even hotter. And it’s likely the German report will determine how much of it was arson.
More kindly, many of its actions (and inaction) might be called collusion – not breaking the law egregiously, but playing a very profitable game not at all in the public’s interest. Realtors, government, and of course the sellers and buyers themselves, were all making (or hiding) tons of money, and no one wanted to end the party or call the drunken participants to account. And it’s just not their problem if not everyone got the invitation.
The least harmful accusation to be levelled by the next German Report may well be obliviousness, a kinder word than incompetence. Either way, it’s the result of failures in legislation, governance, practice or enforcement. Perhaps all of the above — something was happening, but there was no data. How would we know? And we had our best people on it.
But thanks to the cracks created by Dirty Money, such excuses will no longer pass the smell test.
So the choice for the real estate sector is this: be proactive and take responsibility now. You were trusted to self-regulate; now there’s a chance to self-correct, and in a major way. (Think, what’s the opposite of “collective system failure?”)
Or simply acknowledge that the real estate profession isn’t worthy of even such a designation. And that it is unworthy of the privilege of self-regulation.