
B.C. vows crackdown after investigation reveals money-laundering scheme - ilamont
https://www.theglobeandmail.com/news/investigations/real-estate-money-laundering-and-drugs/article38004840/
======
philiphodgen
There is a missing step in the transaction that the article does not explain.

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.

~~~
Cw67NTN8F
_> >— 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._

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.

~~~
kafkaesque
Ban cash. Most people use cards in the UK. We should push for that in North
America.

~~~
nyolfen
a guy i knew used to say something like “the british are a slave people
without the torch of liberty in their hearts.” i used to think it was funny
and weird but it just seems more true as time goes on.

~~~
acct1771
Say it into the CCTV camera.

------
Jesus_Jones
One other thing, notice at the start of the article they say "the cash was
contaminated with fentanyl and other street drugs". Back in the 80s and 90s,
this was used as an excuse for why the cops would seize people's money in the
us - often it was a poor person without ability to challenge it. One of many
problems with this was that all cash was "contaminated", having some trace of
drugs. Canada should strive not to fall into the civil forfeiture hole we have
in the us, where the govt seizes people's property separately from charging
them with crimes, because it dirty drug money or something. of course they
should stop money laundering, but the govt should strive to use factual
reasons for taking someone's money.

~~~
dblohm7
Civil forfeiture is already a huge controversy in BC. There's a big court case
brewing on this topic.

------
Tiktaalik
After so many years of government indifference the housing situation in
Vancouver is so incredibly screwed up. Hard to say whether it'll be possible
at all to undo the damage.

The expectations for action on housing in the first budget of the new NDP
government tomorrow are sky-high.

~~~
chillydawg
Hello from a fellow white hot property market (London). The probability of
anything worthwhile being done in BC is approximately zero. The govt will do
stupid shit like issue cheap loans to young people to "get them on the housing
ladder" which just inflates prices more. If you're rrally unlucky, your lot
might even invent new and more stupid ways to heat up a too hot market.

~~~
Tiktaalik
Yep! Issuing cheap loans to young people is literally what the previous neo
liberal government did. Of course local economists which warned against the
plan found after that it increased prices.

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...](http://www.cbc.ca/news/canada/british-columbia/bc-ndp-government-
housing-affordability-1.4542462)

~~~
ttul
Additionally, the new Solicitor General is a tough as nails guy who previously
sued the conservative federal government into allowing supervised injection
sites for addicts, and then beat the former premier in her own riding, forcing
her to move 350km.

~~~
kayone
If I had to pick one politician out of the whole country that I trust the most
it would without a doubt be David Eby.

~~~
mediocrejoker
I can't say this quote (from the article) inspires a lot of faith.

"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.

~~~
Tiktaalik
The context is that this is a new government. The old BC Liberal government
didn't care about any of these problems at all and allowed them to fester for
years. The new NDP government suspected there were severe problems and were
starting to act on them. The article "confirms" that indeed the problems _are_
severe, and the new government is correct in their belief that it's an
important issue for their government to address.

------
turc1656
_" They weren't charged with any crimes"_ and yet... _" The Zhangs did lose
their cash, though, for good: A judge ordered it forfeited to the provincial
government as "proceeds of crime."_

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...](https://listverse.com/2015/06/29/10-egregious-abuses-of-
civil-asset-forfeiture/)

~~~
privacypoller
There is one big difference - Canada does not have the same heavy-handed legal
punishment system that the US does. Possession for distribution doesn't run
the same risks for (essentially permanent) jail time like it does in the US,
but costs as much or more to the legal system.

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.

~~~
turc1656
Yeah, I understand the logic as well. In the US it was designed to put a major
dent into organized crime by seizing what amounts to their working capital.
The problem, though, is that it's the easy way out and due process was
specifically designed to keep government from overreaching in exactly the
manner which they are doing. They are simply circumventing due process by
separating property from its owner. The huge amount of law has to do
specifically with property rights and torts against it. People (in the US)
supposedly have a 4th amendment right to help protect their property. I'm sure
Canada has a similar law. But now, they are separating property from the
person who owns, removing the 4th amendment protections. How the SCOTUS hasn't
struck this down with extreme prejudice boggles my mind.

------
msie
The reporters have found a connection between real estate and the fentanyl
crisis but I fear they’re going to jump to the conclusion of banning all
foreign ownership. Which is not going to stop the drug trade. It is such a
sexy narrative that the real estate crisis and opioid crisis can be blamed on
Chinese foreigners which leads the reader to conclude that banning them is the
solution. The piece is pushing all sorts of buttons.

~~~
mistermann
Sexy yes, but also true. Or do you think the Fentanyl and other criminality is
spread evenly through all demographics? I'm curious where you might you have
picked up this idea, because it certainly didn't come from the newspaper -
perhaps intuition?

~~~
EnFinlay
The article makes no assertion about the demographics of Fentanyl dealing or
trafficking, just that these Chinese lenders are involved with these
activities.

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.

~~~
mistermann
It's been routinely reported on in the newspaper, I can't be bothered to post
any proof as no enforcement = anecdotal evidence only = checkmate, racist.

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.

~~~
EnFinlay
> 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?

------
refurb
_The Zhangs charge interest rates of up to 39.6 per cent, with some private
lenders demanding up to 120 per cent. Court records show that one of the
Zhangs ' associates is among those allegedly charging that extortionate level
of interest, which is double the maximum legal rate._

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.

~~~
EnFinlay
The article makes it sound like an amazing cycle of selling drugs, money
laundering, loan sharking, and profiting from the real estate rise.

~~~
msie
I believe the connection to real estate is incidental. Drug dealing,
laundering occurs everywhere, including places without a hot RE market. Take
the Hells Angels for instance. They seem to survive without a connection to
the RE market. Criminals will find a way to launder money. The money from
selling drugs is too irresistible to pass up for them.

~~~
EnFinlay
True, it sounds like profiting from rising house prices is icing on the cake.

------
txsh
Fix: Government refuses to enforce a foreclosure until the lender proves the
money loaned came from a legitimate source.

------
hoodoof
Government: "We will crack down VERY VERY HARD (to the extent that it doesn't
stop the flow of cash pouring into our real estate market)!" Visualize a very
very serious and determined politician at a press conference.

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.

~~~
PakG1
When I read the article, it doesn't seem to say that Chinese cash is propping
up real estate prices.

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.

~~~
mistermann
> When I read the article, it doesn't seem to say that Chinese cash is
> propping up real estate prices.

Try this one on for size:

[http://www.timescolonist.com/news/b-c/explosive-b-c-court-
ca...](http://www.timescolonist.com/news/b-c/explosive-b-c-court-case-details-
seven-migration-scams-1.23144703)

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.

~~~
PakG1
I believe Chinese cash is contributing to soaring real estate prices in
specific cities worldwide, though I do not believe it's the sole root cause.
That being said, I was attempting to clarify what the article was discussing,
not my personal perspective on what causes real estate prices to soar in
Canada.

------
JorgeGT
Took me a while to find out that B.C. = British Columbia.

~~~
mediocrejoker
Speaking as someone who lives in the Vancouver area, I don't know why this
story was posted on this site. I generally come here to avoid reading about
politics and the toxic discussions that inevitably follow.

~~~
msie
Sigh, I agree. Ironically this article came from the Globe and Mail which has
turned off all commenting for now. Which I like.

