Canadian Banks Moved $167 Million From Dodgy Sources, And Even Issued Mortgages

Only make $40,000 per year in income, but want to buy some pricey Vancouver real estate? Maybe these folks can tell you how they did it. The situation came up in passing with our interview with investigative journalist Sam Cooper, author of Wilful Blindness, which landed us in the middle of a censorship controversy last week. The source is an exhibit presented at the Cullen Commission, BC’s Money Laundering Inquiry.

The exhibit is a study looking at a family with a modest income, moving extraordinary amounts of cash. Despite making just $40,000 in their peak earnings, they bought at least $32 million worth of Vancouver homes. Further analysis from FINTRAC shows they moved over $100 million through Canadian banks. With limited tools for recourse, even when it came to the attention of a bank, they were unable to do much.

Further analysis from Counsel reveals even more cash was moved than FINTRAC found. In total, about $167 million flowed into Canada. When they dug into the source of payments, they found a network of companies linked to foreign officials, and organized crime in China. I really don’t see what was censor-worthy there, but let’s dive into the details.

FINTRAC Warned A Low Income Family’s Fat Bank Accounts, Didn’t Make Sense

FINTRAC, who monitors suspect transactions, already found the family’s situation to be odd. When arriving in 2005, the family had declared $1.25 million in assets. Not an extraordinary amount, but more than their earnings would support. From 1998 forward, they had only declared peak annual earnings of $40,615. You would need a heck of a hot hand at a casino to have 30x peak earnings in assets.

That could have been a warning flag for many, but it wasn’t for some reason. It wasn’t until over $100 million flowed through banks, that regulators thought, “hey, this is weird.”

“Unless they made considerably more before the majority of funds began to come to Canada in 2010, [Person A] and his family did not have sufficient resources to account for the funds they transferred,” wrote FINTRAC. 

“The discrepancy between the funds they had available and the volume of the subsequent transfers to Canada is a significant indicator for money laundering activity,” reads FINTRACs notes.

Source: Cullen Commission.

Family Bought $32 Million In Vancouver Real Estate 

The person went on a bit of a shopping spree for Vancouver real estate. Counsel found the person, along with their “wife,” “son,” and “mother” bought about $32 million worth of homes. Transactions in the study ranged from 2007 to 2021. The most recent transaction was a home sale, which sold for double the price they paid. Nice!

Properties bought with cash were then mortgaged as down payments for other properties. It’s such a Canadian move, I’m surprised they weren’t given full citizenship on the spot. Banks issued around $17 million in mortgages to the family. It’s unclear if they declared income to support such large mortgages. The FINTRAC reports list a range of occupations, including unemployed, student, and CEO.

The cash pumped into real estate might seem small, but there are a lot of questions about how it moved. If the goal is to move cash, regardless of whether it’s legitimate, this can push home prices higher. Someone overpaying at one home becomes the comp for the next home. It’s near impossible to know if it’s an exuberant buyer funded by the bank of mom and dad, or someone who needs to move cash.

Since the marginal buyer sets the pace of the game, this becomes every buyer’s problem. As we’ve discussed before, a small amount of money laundering can boost prices by a lot. You think you’re buying a home. They might be buying a safety deposit box. The person with the most money sets the rules, and they might not even be playing the same game as you.

The Money Transfers Should Have Set Off At Least 7 Types of Warnings

If you’re beginning to think this sounds a little suspect, you’re not one. Authorities found over seven warning flags that it might be money laundering. “At least seven types of indicators for money laundering were observed, particularly at the layering and integration stages when funds were moved from other countries and converted for Person A and his family’s benefit,” reads the FINTRAC report notes. 

Not familiar with the jargon? Money laundering is done in three steps — placement, layering, and integration. Placement is the introduction of illicit cash back into the system. Layering is when you conduct transactions to hide the original source. Integration is working the money back into the legitimate system. If successful, it should be impossible to tell if it was a legit business or laundering.

In this case, FINTRAC is saying the last two stages were suspect. In other words, it was sloppy transacting. Once again, every payment (60 in total) should have set off alarm bells. For the most part, the entire system failed to question this money. When they did, the consequences of holding suspect money weren’t what you would think.

It First Came To The Attention of UBS (Canada)

The family, and its mountains of unexplained cash, first landed on the radar of UBS Canada. In 2011, the bank filed two suspicious transaction reports. The family received $7.5 million across ten transactions, which seemed odd to the bank. UBS asked the family to explain where the cash had come from.

The family claimed it was from the partial sale of property in China. A developer purchased part of the property from the family, and these were the proceeds. Why it came in ten transactions still wasn’t addressed, but whatever. The bank asked them to produce evidence of the sale or title of the remaining property they owned.

After failing to provide enough proof to satisfy the bank, the money was seized. Just kidding, UBS asked them to take their money elsewhere. Any assets that weren’t liquid, could be held at the bank until they were liquidated. At which point they would have to transfer the proceeds out.

In other words, you don’t have to stop having suspicious money, you just can’t have it here. It might seem odd, but Canadian banks have few tools to tackle these issues. In fact, not even FINTRAC, who is responsible for investigating these transactions, has tools. The bank (and authorities) have little to no recourse in these situations. That’s part of the reason Canada has become a hotbed of murky cash.

In contrast, countries like the UK recently introduced unexplained wealth orders (UWO). If you’re hit with a UWO, you have to explain where you got the money from. If you can’t, the state can seize the property for the public. It’s not a high bar to show where the money came from, but people fail to clear even a low hurdle.

The Family Moved $167 Million Through Canadian Banks

After examining FINTRAC records, Counsel issued summons to 11 banks. They found the family moved $166.9 million from 2009 to 2020 through five major Canadian banks. It’s unclear where the rest of the cash went outside of the real estate purchases. Looking at the property records, only ~$32 million appears to have been used as payment. It’s a lot of mystery money kicking around, and where it came from caught the attention of the study’s authors.

How Questionable Money Moved Into Canada

A chart produced by FINTRAC to explain how the money flowed from abroad through various intermediaries, eventually landing with a “low income” family.

Source: Cullen Commission.

Deposits Made By Parties Linked To Organized Crime, And Foreign Officials

FINTRAC mentions the names of the depositors but makes no further comment. Counsel found limited information on the companies. Some didn’t have any official registration in the country they operated in either. A little digging, and they found an association with less than savory sources. 

One depositor who had sent the family $1.6 million was accused of running an underground bank. The allegation was from a Mainland Chinese person, during an unrelated contract dispute. He accused the operator of using employees to circumvent capital controls. A Chinese court ruled the transfers were legal.

Council also alleges a depositor is a business associate of a high-profile Communist Party member. He served as a delegate of the Chinese People’s Political Consultative Congress (CPPCC). The CPPCC is considered a branch of the United Front Work Department (UFWD). An Australian think tank (run in part by its military), accused the UFWD of being a foreign influence tool.

In June 2020, Canada issued a public safety notice mentioning the UFWD. The release was crafted to acknowledge nothing, but said Canada is working on it. A public safety notice for what exactly, is still unclear. But Canada is on it, apparently.

Council also indirectly links another high-profile executive from Macau. They describe her as, “a gaming tycoon widely reported to have close connections to organized crime, particularly Wan Kwok-koi, a.k.a. Broken Tooth Koi, a leader of the 14K triad.” 

Fun Vancouver Fact: Wan Kwok-koi once ordered a hit on Lai Tong Sang, the head of another Triad gang. Lai had moved to Vancouver in 1996, and his home was sprayed with bullets attempting to kill him. Canadian immigration said they mistakenly granted him permanent residency, because they didn’t do a background check. Whoops!   

As for Wan? He became involved in real estate development and was recently sanctioned by the US. He’s alleged to be a close associate of “Asia’s El Chapo,” who also happens to be Canadian. World. Class.   

There Is Now Way To Tell How Money Laundered Cash Was Made

Was the money transferred linked to organized crime? No one knows, but when this scale of money moves it’s near impossible to tell its source. Is it legitimate money the family earned, just flowing through dodgy banks? Or is it someone else’s cash, earned in a much more nefarious way? Few questions were asked, as it was just largely seen as cash to buy homes. A lot of them. 

When a bank finally did ask questions, the Canadian system left them with few methods of recourse. All they could really do was ask the family to take their money elsewhere. This isn’t an accident, but a part of a carefully constructed system. Not to allow the illicit flow of money, but to minimize the reporting of crimes. Officially, this is just $167 million worth of improperly filed paperwork. As for the family, the household head is being deported. No idea how that’s going, since a Canadian Court just ordered the proceedings sealed.

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  • david 3 years ago

    There is something in the banking industry call “Know Your Customer” to fight money laundering.

    These Canadian banks have a lot of explanations to provide

  • Brian 3 years ago

    Vancouver has a similar median income compared to Toronto, but is also the luxury car capital of North America. You do the math.

  • Ethan Wu 3 years ago

    Nice call back, I wonder how many people caught. It starts with a story about censorship, and then shows how Canada is scrambling to suppress information about their proceedings.

  • Andy 3 years ago

    Same situation with Canada and political corruption. No public availability of holdings politicians have, or even disclosing when they work as a Realtor while serving in office.

  • RM 3 years ago

    This is so infuriating.

  • SH 3 years ago

    The Liberal Party puts the interests of Canadian citizens dead last. Always has, always will.

    • KA 3 years ago

      Someone had to bring politics into it. I assume all these happened under both liberal and conservative leadership. Focus on the issues and leave politics out of it

    • Mike 3 years ago

      The Conservative party was no better when they were in power. Both parties have had years of this happening under their watch. The problem has gone on for decades, and is a joke.

      Every offshore dollar that comes into Canadian real estate, previously untaxed here, competes with the locally taxed money earned by everyday Joe Sixpack hardworking Canadians.

      So, every offshore dollar that comes into Canadian real estate is STEALING future income dollars from hardworking Canadians. That is because Canadians have to earn even more money to compete with the foreign untaxed dollars that flew in and bid up the price of homes here.

      For every million offshore dollars that comes and buys a home in Canada, Canadians are forced to mortgage even higher amounts to compete — stealing from their future income.

      Justice in Canada: If you are poor and steal $500 of product from somebody, you go to jail. BUT if you are a rich non-taxpayer with offshore money who costs Canadians (in the aggregate) millions of dollars by bidding up the price of real estate, Canada’s government just shrugs.

      And to add insult to injury, the hardworking Joe Sixpack Canadian taxpayers are forced to pay for the majority of public/socialized benefits of the richest people bringing in their untaxed offshore money. We know this because we have already seen studies showing the richest new immigrants declare almost no income in Canada, even after many years living here.

      What a disgrace.

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