A lot of gems in last week’s BC money laundering report, but the biggest one wasn’t about the province. The report’s numbers suggest one of Canada’s fastest growing industries is washing money. In an advanced economy with low but stable gross domestic product (GDP) growth, this is a big issue. The numbers show laundering cash is now the difference between growth and recession in Canada.
The Amount of Money Laundered Is An Underestimate
The amount of money laundered in the report underestimates the total. The gravity model used is only as accurate at fund sources, which are hard to measure. Obvious understatements would be included in corruption, bribery, and tax avoidance. Further, funds washed and entering Canada for layering or integration wouldn’t be counted. When the report mentions the number is most likely an understatement, it most likely is.
Over $200 Billion Money Laundered Across Canada Over 5 Years
The amount of cash laundered over a five year period tops a couple hundred billion. In 2015, the model estimates over $41.2 billion cash was laundered, up 9% from 5 years ago. This represents 2.13% of GDP, a fairly consistent number seen over the five year period. From 2011 to 2015, the total estimated amount of money laundered is $200.5 billion. This excludes reinvestment, typical in the layering and integration process of money laundering.
Canadian Estimated Money Laundering By Province
The estimated annual amount of money laundered in Canada, by region.
Source: Government of British Columbia, Combatting Money Laundering in BC Real Estate, Better Dwelling.
The most interesting bit in this report is money laundering is growing faster than GDP. The paper estimates $46.7 billion in laundered cash for 2018, which represents around 2.1% of GDP. GDP only grew 1.57% over that same period, just under 75% of the size of cash laundered. Excluding additional spin-off activity from laundering activities (such a great GDP booster, right?), if ¾ of it disappears – we have negative growth. Once again, this is just the obvious and easiest to measure laundering.
More Laundering In Alberta Than BC?
Another takeaway that was glossed over by media is BC is the third largest province by dollar volume. Alberta is the winner, with an estimate of $10.2 billion in 2015 – 3.03% of the province’s GDP that year. Ontario follows with $8.2 billion, the size of 1.13% of the province’s GDP that year. British Columbia is in a distant third with $6.3 billion, 2.63% of the province’s GDP in 2015.
Canadian Money Laundering As A Percent of GDP
The estimated annual amount of money laundered in Canada, expressed as a percent of GDP.
Source: Government of British Columbia, Combatting Money Laundering in BC Real Estate, Stat Can, Better Dwelling.
One reason Alberta’s estimate is so high is due to how the numbers were distributed provincially. Crime statistics play a role in the attractiveness factor, which helps with distribution. Since Alberta has a relatively high crime rate, the province may be overrepresented. That would mean Alberta’s true number would be lower, but still very high. The paper notes if this scenario is true, Ontario and BC would be underrepresented. Yes, BC and Ontario estimates can actually be much higher – even by a conservative measure.
Money laundering plays a surprisingly important role for the Canadian economy. Even using conservative estimates, the amount is larger than GDP. Once spin-off activity, and capital velocity is factored – it’s one of Canada’s largest industries. The government, federal and provincial, is either clueless or unwilling to crackdown due to the benefit. The former would imply wide scale incompetence, and the latter recklessness.
Like this post? Like us on Facebook for the next one in your feed.
They aren’t even counting the money that came over laundered by banks. How many students entered BC with millions of dollars and a tiny stake in a house?
This is probably the bulk of it too. If banks allow people to circumvent capital controls in their home country, they’re leaving a glaring hole in who’s money is actually being sent abroad.
What’s layering?
Transactions used to hide the trail of money. They explained it in the article they linked to. Probably one of the best reads on BD.
https://betterdwelling.com/how-a-little-money-laundering-can-have-a-big-impact-on-real-estate-prices/
Just a way for a person to make it tougher/take longer/extra effort to uncover a truth.
Think Hans Gruber when he asked Theo to break into the vault in Die Hard. Theo had to get through 6 or 7 security measures before he got into the vault. One security measure would have kept out most people. 6-7 security measures makes it all the tougher.
The more layers added, likely, the more valuable what you’ll find once you get through the layers.
All things need to be explained from a Hans Gruber perspective. lol
Or John Wick…People keep asking if I’m back and I haven’t really had an answer, but yeah, I’m thinking I’m back.
May 17th premiere. Can’t wait!
Makes me wonder just how deeply rooted money laundering truly is (beyond conservative estimates). There is a saying in China among the elite “going to Canada” meaning to launder money. If a serious crackdown on federal level was to finally materialize, the construction industry would collapse, RE would go with them. Our GDP would be negative and Canada would enter a recession (we already are it’s just hidden). This will lead to calls on HELOC’s and all those 2nd, 3rd FOMO investor condos will go with them. Not a sunny situation by any means. This is why no government will ever attempt something like this unless we the voters put up some serious pressure on the reps in our riding.
Provinces like Ontario and Alberta will almost never be subject to a real crackdown, without a federal mandate. Showing growth is how they attract more foreign investment. Cracking down raises crime rates reported, and that scares money away.
Although tbh, the growing reputation Canada is developing will scare away investors by viewing the government as a country with poor enforcement.
People really want a recession it seems ? So consider this too.
What about all the foreign students flooding our universities. Driving up prices – Chinese students often buy new condos (vs renting or using dorms).
Entirely different issue. A foreign student attending school here and buying a condo isn’t the same as someone money laundering and creating transactions to pad GDP.
Also, it’s not that people WANT a recession. It’s because non-productive economic expansion is only growth on paper. In actuality, it devalues the assets you have.
Most price growth in Canada over the past 4 years has been mostly uncaptured inflation. Look at the loonie. 5 years ago, if you sold a detached, you could buy a detached in a similar region in the US. 5 years later, prices are up 50% in Canada. If you sold your house in Canada, you can buy… the same house in the US, that has barely increased in price at all.
Non-productive expansion of the capital pool does absolutely nothing except please the middle class, that likely has a poor understanding of how money works.
Here is someone who gets it. Deleveraging and purging bad consumer decisions and bad businesses is part of the business cycle and stabilizes an economy putting it back on good footing. A never ending credit expansion makes us all poorer in the end.
Agree on hidden inflation that is skewed towards housing, however this is all based upon the cultural pressure to own your home. Canadians approach this from an emotional rather than rational perspective, a house is the largest purchase in most of our lifetimes. Why MUST we purchase in a bubble and insist on living in Vancouver or Toronto? Do those cities give my lifestyle such enrichment and wealth that I voluntary sign away my entire lifetime’s earning potential into a 30 year mortgage to live in a 800sq ft decrepit shack?
To say that expansion of credit has done nothing for us is wrong. It completely ignores the effect of velocity of money and all that spending going back into our GDP. What is stupid is to villanize the Chinese without understanding the benefits to us of money laundering, once you get over the dirtiness of the word.
Today’s BD pic is quite interesting. The gloomy light, the pretty mountains in the background. The construction crane deep in the frame. A lot going on in there….
Waiting for the inevitable response from governments: “other places have it worse.”
Waiting for the next prime minister to change the country’s motto to “Canada, it’s better than most places.”
Agreed. I’m so happy legally paying my (massive) income taxes while non-Canadians launder billions with no penalty. 🙁 Good work Ottawa
what gives you the impression that laundering billions of dollars does not require massive taxation? they are paying more tax than you.
‘More Laundering In Alberta Than BC?’ How about Quebec, and Ottawa…you wanna see money laundering, corruption, fraud…and i’m talking about government, from Ottawa to Quebec…the 100’s of billions stolen out of Ottawa since Trudeau #1 got into power would shock most Canadians…decades of it, all disguised as grants, subsides, equalization…all now ‘legal’ theft…change the laws, make it legal…ya sure…follow the money…
The topic might be too high level for someone that doesn’t understand the difference between a province and a city.
The rest of us are looking at it as a non-partisan issue, otherwise you have to ask what’s Kenney’s plan for cracking down on the highest money laundering per capita in the country? Ah right, he has none, because voters in Alberta were convinced that a pipeline that needs 600 jobs will reverse the fortunes of the country’s most corrupt province.
Tell us how you really feel about Quebec, don’t hold back.
😂 Toronto has at least as much corruption as Montreal, it’s just easier for Canadians to hate on the part of the country that seems most foreign.
Really hard read. I know this is selfish, but does that mean buying now is best since the government is unlikely to do anything? Or does it mean you shouldn’t buy now?
It means buying now is a good idea as it has always been.
Just remember that 95% of the audience wants a recession and house prices to fall apart very badly and will try to coherse others to jump on the train.
They manipulate stats and make great claims but really they are losing money.
I also think these numbers are stretched. They probably call money laundering any money that cant be 100% traced.
Do Canadians really believe that real estate is an asset class that will only go up? If so, it’s the only asset class that does that, and there’s no point in investing in anything else. Live off the land, because it will produce more than income possibly can.
Only working class people that become middle class believe this, because they don’t understand opportunity lost by concentration of wealth. They ride the wave up, run their mouth about making money, then never talk about the long trough of no-returns.
Buying real estate you live in has no yield, and therefore is non-productive. No one went broke by diversifying their portfolio, but many go broke by putting all eggs in one basket.
Asian squiggly- buying your own property has no yeild? Is that why I made 340k in 7 years after 60k in upgrades and closing costs when selling my home? Is that 340k not worth anything? Let me assure you it is. And that’s off one house. Before you blurt out uneducated info and try to coherse others to make mistakes keep these REAL numbers in mind
Vaguely racist comment aside, you clearly don’t understand the difference between the terms yield and profit are.
That means you can’t even be a Realtor, since that’s a large focus of real estate investment.
If the government’s not taxing you on it is probably because they’re getting their money somewhere else and maybe the total cost of ownership is actually costing you.
Most mortgages (20-25 year amortizations) are setup that by the time the property is completely paid off, the amount of Interest you’ve paid is equal to the original principle of the home, purchasing a principle residence is a great business model for the banks (and safe, if the mortgagee is required to obtain insurance).
Asian squggly- of course you find it racist lol. I dont have those letters so I cant use them.
I’m not a real estate agent. I just buy houses, flip, rent them and spend my money all day while sitting at home reading BD and others. This year I think I’m going to buy a boat to fill in some time.
What are you trying to do? If you want to buy a home for your family to live in for the next 20 years, now is as good a time as any. You’re buying a place to live. You live in it. Even if everything goes to Hell and you’re upside down on it for a while, you still have a place to live and it’ll right itself eventually.
If you’re looking at real estate as an investment, you’re better off staying on the sidelines.
Fun Fact : Langara College brings in about 40,000 students from India only!
Why we changed all of our college names to university ? to get more international students at 100K per year !
Btw, where is the policing authorities on this ? I guess they are having their avocado toasts ?
HEY FINTRAC ? what you up to tonight ?
Hey Port authorities ? oh I forgot, we dont have much of that. Phenyl coming by containers killing Canadians . No problem. Money is in the system .
All we care about is people talking on the phone while driving when there are billions of crime money coming to town. go to east Van, so many underground brothels are popping up .
Sugar Daddies and money buying up all the people here in Canada
a lot of mechanics shops are now dealing luxury cars. they sell the used luxury cars to crime syndicates washing their cash in Canada 🙂
I like to be positive, but Canada is going on a stroll to downward spiral 🙂
Solutions : for David Eby and real responsible dude:
1- Close the ports, and put so much policing there . inspect containers
2- drain the swamp, if you know what i mean 😉
3- get BC Lottery to cough up names
4- trace the international criminal peeps and take drastic actions in courts. Whatever happened to Wong Mengzhu ?
4- A real close inspect all the past transactions about 3 – 4mill in Vancouver in Housing, Commercial real estate, farm lands etc.
5- Stop glorifying this weed galore
without these steps, BC will be in 10-15 years of a mess ! real financial mess
It’s not just BC, it’s the whole country. We’re obsessed with non-sensical data points, like the job numbers print last week. If projected to the US, it would have been the equivalent of 1.5 million jobs, which shows it’s a cohort skew – not a real number. Who cares though, business journalists and politicians are going to party. No one’s is actually interested in the difference between a real job and a printed job.
Congratulations. This is the first news article I’ve seen, that says what our Canadian Gov’t and MSM won’t say, and that is….the link
between “money laundering” and Canada’s GDP growth.
( And of course, there is a link between money laundering and the GDP’s of the other English Speaking Countries where this is also happening, ie. Australia, NewZealand, UK, USA.)
I’ve thought about this many times. Millions of Canadians (Seniors, Boomers, Investors) have “won a lottery” selling their places in the past decade, due to the abnormal run-up caused by the “laundered money”. Canadians wouldn’t have increased their net worth by simply working, because in Canada, the wages have not increased much since 1995. (does $15 – $20/hr sound familiar?)
Now the Millennials and GenZ and others, have to suffer with unavailable affordable housing. The only way to “fix this” is for a “reset button” but is Gov’t Intervention going to be effective as a “reset button”?
Maybe Gov’t needs to get “alternative inputs” on housing issues like from private sector housing advisors like Ross Kay, instead of just gov’t bureaucrats making endless reports upon reports.
Just my 2 cents, as a citizen.
Same old story. There was a “laundering” problem in the early 90s too. People downplay that in order for a place to become a laundry, they need to provide favorable conditions. That is, locals will readily absorb the laundered properties, without asking too many questions as to why the sellers didn’t move in, make any improvements, and are selling not that long after.
” Millions of Canadians (Seniors, Boomers, Investors) have “won a lottery” selling their places in the past decade, due to the abnormal run-up caused by the “laundered money”.
You will find the commentary from a lot of jealous Canadians unable to afford housing while blaming rich foreign Chinese for driving up prices conveniently ignores this truth. That each transaction had a buyer and a seller.
As a millennial the answer for me is simple. Ignore the societal pressure to own a house. As long as prices are irrational I will refuse to buy, for as long as it takes, as much as decades. I don’t think many Canadians are capable of doing the math as to how badly you are setback if you insist on mortgaging a million dollar home for 30 years. Those who need a reality check once in awhile at how overinflated our housing is, should look at comparable homes in the USA. And ask yourself how badly do you really want to live in Vancouver?
As I said the other day, the politicians, bankers, lawyers, realtors, etc have known about this four 30 years and have done nothing to stop it, because they have all profited.
So now we have reached the point where we cannot turn off the tap. If we did, who would get hurt? The launderers, politicians, bankers, etc? Nope. They would do just fine. The average sucker in the street, the folks who played by the rules, would lose money, their jobs and their homes.
So what do we do? Keep shoving fake quarters in the laundromat and hope for the best.
Oh, Canada, land of the greedy and corrupt.
If anyone is interested in reading the report, which is part 2 of a report released last year called “Dirty Money” you can find it here:
https://news.gov.bc.ca/files/Dirty_Money_Report_Part_2.pdf
Dirt Money Report Part 2 provides many more examples of dirty cash moving into the mainstream financial system, but also consider the second (layering) and third (integration) stages of money laundering.
It’s a very interesting read if you can spare the time.
I read up to page 94. Thanks for this.
There are about 364 pages, extremely detailed, and itemized into many categories / sub-categories / sub-sub categories of crime laundering. Data compiled by a huge list of Professionals.
So, what was the Aggregate number of ALL the individual transactions from ALL the various methods of crime laundering, from casino transactions, R/E, Ports, Drugs, Bikers, currency and gold purchases, etc. Mind staggering. Over time, it must have been in the millions of individual transactions?
So….is money laundering Canada’s biggest industry? Canada’s biggest wealth creator? So Canada has had a growth GDP based on a “shadow economy”for decades?
Same old story blah blah blah….Money will keep coming. I have been telling this for last two year and then some bears here will start saying china stop it…blah blah..Canada tighten the rules…etc etc…. Country with 400k immigrants moving in year after year sooner or later those people will sell the asset back home and bring it here… and then excluding immigrants even 1 percent of rich from all over developing countries invest in Canada that translate to billions. Just look at GDP growth…any western country has 7 plus growth? no…Its all Asian countries…this century belongs to them….wealth is generating all over developing countries like never before and part of it will reinvest in the form of legal or illegal means back to West. Deal with it. Its good for Canada and government know it hence no changes specially conservative now coming to power on federal as well.
You’re a fool, that would give a greater contribution by not speaking.
How long can legitimate income keep up with illicit funds? 1.75 CAGR real growth of laundered funds using the gravity model (which is a low estimate), is faster than GDP and income growth. The laundering cannot scale faster than incomes, this is basic math. Education cuts in Canada are starting to appear 20 years later.
Like I have been saying on this website for the past year.
M O N E Y L A U N D E R I N G
Our №1 way of faking our country’s prosperity.
Canada isn’t very prosperous. Our government runs on an unsustainable model of socialism & high taxes. The only way our politicians have been able to sustain our model is through massive donations from developers. Whatever happens to this investigation?
https://nationalpost.com/news/politics/liberal-party-investigating-ties-to-vancouver-businessman-wanted-in-china-on-corruption-charges
Our politicians NEED money laundering to keep the gears turning for them, and Canadians are too limp dicked to demand transparency.
Hi friend, I’m like the elephant liam neeson…I can assure you with a name like ‘Skylar Zerr’, you would not be missed by me. I mean, is skylar a real name? I mean really? if I call myself ‘cokadopolous’ is that a name? I digress…. You are a liar and have not been posting on this board often, if at all, over the last year. maybe the last…oh hell, I’ve got you dead to rights. Don’t come on the block and lie. If I’m watching I generally don’t miss it. Tock. BD4L.
Skylar Zerr, Bang on. Go look a debt chart from the 60’s to today, straight up…Poor Canada, what a mess…Big, big pop coming, recession, depression, who knows…Red, Blue, Liberal, Conservative, almost one and the same…come on, what a joke, all mainstream parties…all have added to our debt, and all have grown the size of government… greedy, greedy, public sector parasites, baby boomers destroying our country…Over 5 decades of greed, corruption, massive government growth and debt, all started under daddy, Trudeau Sr and his quebec cronies and all who have followed…100s of billions stolen out of Ottawa and funneled into quebec and other franco towns, and companies, all across the country…all disguised as grants, subsides, equalization, bilingualism – only outside quebec (code for french) while quebec bans our language, a la bills 22, 178, 101… nice eh ? – all really legal theft, change the laws, steal more money…most people have no idea what happened to this country when Quebec, Trudeau, Lalonde… took over Ottawa = corruption, fraud, money laundering, every day, every way = government…follow the money folks, follow the money…french power $$$, follow the money…in all provinces.