Lack of Transparency Hits Close to Home for Canadian Journalists
While they are quick to condemn opaque jurisdictions overseas, Canadians are failing to address the lack of accountability at home. A version of this piece was also published in Business in Vancouver.
Written by: Jared Ferrie and Katarina Sabados
As journalists with the Organized Crime and Corruption Reporting Project, we spend a lot of time investigating offshore tax havens where oligarchs and criminals secretly stash their wealth.
We expect to have a hard time getting data from some parts of the world, like secrecy havens in the Caribbean or dictatorships in Eastern Europe.
But one of the toughest fights for transparency we’ve had turned out to be in our native Canada.
Two years ago, we set out to obtain ownership records of properties in the province of British Columbia. We figured that if we entered this real estate data into our system and cross-referenced it with other datasets, we might find some interesting connections that we could investigate.
We thought the authorities in possession of the dataset — the Ministry of the Attorney General, the Land Title Survey Authority (LTSA), and BC Assessment (BCA) — would be happy to help us try to expose criminals who have contributed to the current housing crisis by dumping dirty money into Canadian real estate.
We were wrong.
We first asked the ministry for a dataset containing ownership records of B.C. properties that had been compiled for “Dirty Money Part 2,” an explosive 2019 report on how money is laundered through real estate in the province. While officials seemed eager to share it, they had signed a contract saying they couldn’t. So we filed a Freedom of Information (FOI) request. The ministry said we needed to instead ask the LTSA and BCA to release the dataset, as they had compiled it. Those organizations rejected our requests, although BCA offered to sell it to us for $93,000 plus tax.
We appealed for a review of both rejections, and the Office of the Freedom of Information and Privacy Commissioner sided with BCA, which is a government-owned corporation. It said the data should not fall under FOI legislation, and that there was no point in reviewing the LTSA refusal for the same reason. The Commissioner’s office found that it was “plain and obvious” that the data was available for purchase.
They argued that a member of the public could buy each of the individual records. We contended that the dataset should be considered a separate entity from the records inside it, and that it was not available for purchase in that form.
In its letter to us, the commissioner’s office pointed out that BCA can provide information free of charge when the “provision of the data for no or reduced fee is in the public interest.”
BCA declined to respond to our argument that the information was clearly in the public interest, and declined to comment on whether $93,000 (plus tax) was a reasonable amount to charge a non-profit journalistic organization.
Why wouldn’t BCA want to share data that could potentially help expose money launderers? We don’t know, although BCA pointed out that selling records represents a small part of its revenue.
BCA also refused to answer repeated questions on what it is doing to implement anti-money laundering measures, as recommended by two reports commissioned by the provincial government.
As we pointed out in letters to BCA and the Commissioner’s office, the public interest behind our request was underscored by the fact that the provincial government commissioned reports to look into money laundering. Two years ago the government also launched the Cullen Commission, a public inquiry to look into money laundering in British Columbia.
The Cullen Commission’s final report will likely outline myriad ways that our laws and institutions facilitate money laundering — but it probably won’t deeply investigate specific cases or present incriminating evidence about them to the public, which is what we had been hoping to do as journalists.
The Commission may point out, for example, that B.C. law does not require the disclosure of company shareholders, nor does it prohibit the use of nominee directors who know little to nothing about the company’s affairs. There isn’t even a legal requirement that at least one director of the company be a B.C. resident.
So, the company can have just one director, and that director can be a lawyer, an accountant or an employee of a corporate service firm in some offshore tax haven who simply takes instruction from an undisclosed shareholder. While B.C. law requires the company to have a registered address in the province, that can be provided by a law firm, accounting firm or corporate service provider.
In other words, B.C. law effectively enables tax cheats and money launderers to use companies to hide their criminal activities in complete secrecy.
This is part of a general trend of secrecy in Canada. While we point our fingers at offshore tax havens where oligarchs and criminals secretly stash their wealth, many Canadians don’t realize that provinces like B.C. are the same in many respects. You can own property anonymously through a company that even law enforcement will struggle to investigate.
It’s a perfect place for organized crime groups to hide their cash. And they do.
The terms “snow washing” and the “Vancouver Model” — in which drug money is funneled through underground banks, law firms and casinos in B.C. and used to purchase property — are now commonly used by international experts to describe Canada’s money laundering problem.
“I can say, with some exceptions, that Canada’s legislation actually encourages money laundering,” Antonio Nicaso, a lecturer at Queen’s University and mafia expert, told us.
“Private corporations and trusts are not required to disclose the beneficial owner or the person who owns, controls or exercises ultimate effective control of the legal entity, arrangement or property.”
Nicaso says this, along with Canada being a transit country for cocaine, a source country for synthetic drugs, and a hub for cybersecurity technology makes it a target destination for organized crime groups.
“If organized crime were to create a country, it would look a lot like Canada.”
A B.C. government panel estimated that $5.3 billion was laundered in 2018 alone in B.C. real estate. The Dirty Money 2 report examined how cash was laundered, but that was based on indicators — cash buys, or people buying multiple properties in a short period of time, for example — and did not identify specific cases of individuals or companies laundering illicit funds.
There have been some recent moves towards company transparency.
The B.C. government recently passed legislation requiring companies to keep a record of beneficial owners. But it remains to be seen if criminal-connected companies will do so, and whether the new law will be adequately enforced. In the meantime, criminals can continue to benefit from B.C.’s system of institutionalised opacity, not only through companies, but also trusts, which are subject to even less oversight.
The government has also created a Land Owner Transparency Registry, with a deadline of Nov. 30 for people to declare their interest, including those who own properties through trusts and corporations. Unfortunately, weaknesses in reporting requirements mean it will “likely do little to stop money laundering in BC real estate,” according to a report by the C.D. Howe Institute.
Among other flaws laid out in the report, the registry does not verify information, and land owners are not even required to submit government-issued photo identification.
“They can just make up a name, because they don’t even need to file any of that identification documentation,” said Kevin Comeau, a corporate attorney who authored the report.
“Make no mistake about it, organised crime is going to lie,” he said. “And it’s not just organised crime, it’s kleptocrats around the world. The amount coming in from corrupt politicians is at astronomical levels, we assume.”
If by chance money launderers do get caught, they won’t go to jail, but will only be required to pay a fine, according to the regulations.
“Money launderers have lots of money, it’s just dirty,” said Comeau. “So it’s no big deal for them to come up with money for the fine.”
At this point, we have multiple reports and another one coming from the Cullen Commission that point to rampant money laundering in B.C. Yet, there seems to be little coordinated effort to investigate the perpetrators of crimes that spurred the government to launch these initiatives.
And when we wanted to access the data to do just that, we were denied.
