B.C. vows crackdown after investigation reveals money-laundering scheme
theglobeandmail.com
theglobeandmail.com
1. Bad person sells drugs for cash.
2. Bad person has cash.
3. Bad person lends borrower cash to buy real estate.
Step 3 is the mystery.
— Bad person could give a bag of cash to the borrower. Now the borrower has a banking problem. How does that cash get into a bank account so the real estate purchase can happen?
— Bad person masquerading as a legit lender could give a bag of cash to the seller at closing. Now the seller has a banking problem.
— Bad person masquerading as a lender can give a bag of cash to the closing agent who is facilitating the real estate transaction. Now the closing agent has a banking problem.
There will be a huge pile of cash that must somehow enter the banking system. Someone must do this. How does it happen?
And no it doesn’t not suffice to tell the seller or the closing agent “I brought a giant bag of Canadian currency with me when I flew in from China to buy this property.” Banks didn’t fall off the back of the turnip truck yesterday.
As the article notes, this is a money laundering problem. But the article postulates a moment of magic — the moment where a bag of tainted cash becomes a recorded mortgage lien on real estate.
I’m saying this as an international tax lawyer who has structured hundreds of millions of dollars of US real estate purchase by foreigners. Maybe I just deal with legit people. We always get wire transfers from real banks, whether the investment is debt or equity.
They are very wealthy people and have that kind of lifestyle, but their problem is that they can't get their money out of China. They borrow against the property by accepting this Canadian cash, and then repay the loan in China via the banking system there.
Both parties need to launder money, one in one direction and one in the other, that's the obvious beauty of the scheme.
1. Own property.
2. Borrow big bag of cash from Bad Guy.
3. Gamble or spend the cash.
4. Pay back the loan from clean sources.
I understand it, but I guess I have never dealt with the KYC people at a casino. I still see obvious choke points (for the conversion of drug-laden currency into gambling chips, for instance) at which Explanations Must Be Made, but perhaps there are channels that I do not know about.
Let’s just say my experiences with the KYC systems have been rigorous.
EDIT: Is the downvoter aware of some criminal charges being laid sometime within the many years this has been known to be going on? If not, what might be the nature of your disagreement?
Except that the source is not in fact clean. China forbids the transfer of such wealth out of the country. But this system accomplishes exactly that. (Settlement of debt is a form of wealth transfer.) It isn't clean. only apparently clean. So the loan on the house has been paid off using dirty money, a proceed of a Chinese crime, and therefore could theoretically be seized through civil forfeiture.
Revenue Canada asks where the money came from? "I 'won' it at the casino". Rinse and Repeat.
Not necessarily. If the price in cash makes up for the inflation losses you can easily pay for most things in cash. Or buy a money order when you can't. You can launder maybe as much as 60% of your income. Cash is spent and your legit salary goes to the bank.
Eating out? Cash
Vacation? Cash
Babysitter? Cash
Buy a used car? Cash (maybe even a new car...go to a like minded dealer)
Furniture? Cash
Home improvements? Cash
Clothes, jewelry? Cash
Obviously gotta do it in stages or else you stand out.
A family that received a million dollars in cash for a house, but then financed their new home as if they were first-time home buyers, would probably take 10-15 years to spend a million dollars in cash.
It just doesn't make sense, and the details are probably deliberately left out of the article. My (probably wrong) guess is that someone is selling cryptocurrency for paper cash, and that someone else is buying cryptocurrency with funds that are inside the banking system.
I dunno if there is some alternative verification that happens as part of the process, but he didn't make it sound like it.
In theory all transactions above $10k in cash must be declared, but penalties are only if you get caught and bonus time /end of qtr is 18 days away.
Probably the most cash I've ever seen at once was when we bought a chunk of property in cash-we took a paper grocery sack full of cash to the real estate agency. You could tell they'd never seen that much cash in person.
For instance, I can offer cash to folks so their bosses don't snatch their tips.
Simple
The expectations for action on housing in the first budget of the new NDP government tomorrow are sky-high.
Now however the province has elected a labour government which has mentioned numerous times to expect action on the demand side and expectations are sky high that they'll be a bit different.
Here's an article about people are expecting today. A tax on foreign capital is expected. http://www.cbc.ca/news/canada/british-columbia/bc-ndp-govern...
"This story confirms our government's commitment to taking action to crack down on money laundering and criminal activity in B.C.," David Eby said.
I'm not even sure how to parse it. In my mind this story does anything but "confirm" the government's commitment to stopping this; in my mind it confirms that someone was asleep at the wheel. Perhaps he meant to say "this story has inspired us to crack down..." but the cynical part of me thinks that a politician would never admit there was a problem that they did not already know about.
In any case, I will pay more attention to what David Eby does than what he says.
The government should not be allowed to just declare the money was obtained illegally and seize it without due process, never to be returned. That's the Canadian equivalent of civil asset forfeiture. I don't know Canadian law, but it seems they are falling into the same morality pit that the US has been engaging in. Yes, I realize that these people are guilty. But this kind of thing is what leads to this: https://listverse.com/2015/06/29/10-egregious-abuses-of-civi...
I don't agree with the civil forfeiture policies but I can certainly see how & why they are developing here. It's an attempt to remove the profit motive of crime without adding to the already clogged and expensive legal system. Again, I'm not judging the "rightness", just understanding the logic behind it.
Are you saying that the opioid crisis can be fully blamed on Chinese foreigners? Is that really what this article is saying? Or is that your intuition.
If you'd like to pretend that is controversial, you're welcome to it, it is an utter waste of time to try to convince people, but there are still some people in the world who like to know what's actually going on instead of believing what they're told to believe.
I'm confused, is that the people who listen to what is routinely reported in the newspaper, or other people?
OK, this I don't get. Why would you charge someone to launder your money? Typically you pay them.
EDIT: Never mind. It's in the article. This seems less like a money-laundering scheme and more like loan sharking. Getting clean money in the end is just icing on the cake.
Governments know that the massive outflow of cash from China into global real estate markets is bound to be corrupt and in many cases the proceeds of crime but they really have no interest or incentive in any way in preventing that.
Governments will express ourage and a rock solid determination to ensure all Chinese money is clean but will in fact do nothing because at so many levels that cash is wanted. Consider for example that most politicians will own multiple houses. They don't want the real estate prices to drop, they want them sky high. Chinese cash, corrupt or not, still results in the best possible real estate dollar so the politicians will speak loud and act quiet on this.
The irony is that investment in share markets requires some level of proof that the money being invested is clean but there is no such regulation on real estate cash.
Rather, Chinese drugs get smuggled into Canada, the Canadian proceeds from selling those drugs then get loaned to homeowners who don't have Canadian money themselves, and then when the home sells, the Canadian money goes back to the lender. If the lenders can be paid back, they don't get paid back with Canadian cash or Chinese cash in Canada. They get paid back with Chinese cash in China.
Of course, the question might arise how did the homeowners get enough money to buy the property in the first place. Well, that's probably Chinese money. Getting enough money out of China for a down payment should only take a few years with a $50,000 per year limit.
OK, so maybe Chinese money is paying a lot of down payments, and maybe drug money is being loaned out to homeowners. But where does the money to buy the home when it's later sold or foreclosed come from? Drug money, Chinese money, or other? That's the real question for figuring out what's causing real estate prices to soar.
Try this one on for size:
http://www.timescolonist.com/news/b-c/explosive-b-c-court-ca...
And the only reason it came to light was because it is a civil suit between individuals, the Canadian legal system most definitely isn't trying to catch anyone breaking laws as described in this story. Despite confessions on record in Canadian court, there will not even be an investigation of these people, as there won't be for those laundering hundreds of thousands of dollars in casinos in broad daylight, or paying people (and getting reported to the media with extensive reporting in the newspaper) for phony job offers for immigration scams.
All of this very clearly has the blessing of all levels of government in Canada. Whether it is merely for the much needed economic boost or if there's something more sinister in play, we'll never know.