Money laundering In Canada

Money laundering in Canada is a problem described by professionals in 2019 as a "national crisis," and which has attracted international attention.[1] Money laundering has become such a significant part of Canada's domestic economy that anti-money laundering experts have associated two distinct types of laundering (snow washing and the Vancouver Model) with the country. As of July 2022, a public inquiry is currently being held to gauge the extent of the problem.[2]

Economic impact

Canada generates a significant share of its gross domestic product (GDP) from money laundering. Canadian intelligence estimates $113 billion of funds are laundered annually, which works out to over 5% of GDP.[3] This generates significant demand for goods that may otherwise be considered essential, such as housing.[4]

Housing

Canadian housing is a frequently used tool for money laundering that often involves organized crime, according to Criminal Intelligence Service Canada, one of the country's intelligence agencies.[5] The problem has become a global phenomenon in countries with high home prices and low levels of scrutiny for home purchases.[6] However, Canada is uniquely targeted due to a lack of beneficial ownership, meaning the true owner of property is never collected by authorities.[7]

Luxury vehicles

Canada's lack of vehicle purchasing regulations have made luxury passenger vehicles a common tool for money laundering. Luxury vehicles are purchased with illicit cash since payments are only regulated in some provinces, and then sold. The depreciation is a relatively small price to obtain clean money that can be deposited into a bank account with a clear source of funds.[8]

Snow washing
Further information: Snow washing

Snow washing is the process of routing illegal activity through Canada to capitalize on its reputation as a “boring” and safe place.[9]

The Vancouver Model

The Vancouver Model is the name anti-money laundering experts gave to a unique model observed in Vancouver, Canada.[10] It involves taking illicit cash earned through crime to a casino (often a VIP room), and gambling some of the proceeds.The chips are then cashed out of the casino as clean cash. To further obfuscate the funds in a money laundering process known as layering, the funds are then used to buy assets such as real estate.[11]

Once the real estate is sold at a profit, sometimes to a related party, the funds are considered legitimate (and often tax free) profit. A combination of Canada’s opaque ownership laws and low scrutiny on foreign investment makes it an ideal target.[12]

References
  1. "Money laundering is a national crisis. What now?". www.cpacanada.ca. Retrieved 2022-05-09.
  2. Kane, Laura (2020-02-24). "Money laundering in B.C.: Public inquiry begins in Vancouver". British Columbia. Retrieved 2022-04-16.
  3. "As Canada's home prices soared during COVID-19, real-estate money laundering audits fell 64% | Globalnews.ca". Global News. Retrieved 2022-04-22.
  4. Francis, Diane (2022-01-13). "Diane Francis: Shining a light on money laundering in Canadian real estate". Financial Post. Retrieved 2022-05-09.
  5. "Canadian Real Estate Has A Money Laundering and Fraud Problem: Intelligence Report". Better Dwelling. 2022-05-06. Retrieved 2022-05-09.
  6. "Widespread money laundering in property locking out Australians from owning homes, Senate told". the Guardian. 2021-11-09. Retrieved 2022-05-09.
  7. "Report: Opacity - Why Criminals Love Canadian Real Estate (And How to Fix It)". Canadians for Tax Fairness. 2019-01-10. Retrieved 2022-05-09.
  8. "Why do we allow money laundering in the auto industry?". driving. Retrieved 2022-05-09.
  9. "Canada is the world's newest tax haven | Toronto Star". thestar.com. Retrieved 2022-05-05.
  10. "How Chinese gangs are laundering drug money through Vancouver real estate | Globalnews.ca". Global News. Retrieved 2022-04-16.
  11. "How criminals used Canada's casinos to launder millions". the Guardian. 2018-10-15. Retrieved 2022-04-16.
  12. "Opacity: Why Criminals Love Canadian Real Estate" (PDF). Transparency International Canada.
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