Canada is a paradise for the mafia.
Posted at 9:00 a.m.
It is the retired Italian prosecutor Roberto Scarpinato, who was in Montreal last week, who says so.
For those who follow the activities of organized crime closely, the words of this expert are unfortunately not surprising. Canada is recognized as being a prey of choice for criminal groups, a benchmark for money laundering and tax evasion. The Panama Papers, in 2016, identified around 900 Canadians – individuals or companies – more than half of whom were subsequently investigated by the federal government.
It is well known that criminal organizations come to Canada to create front companies that launder the fruits of their illicit activities. Criminal groups invest in cryptocurrency, real estate, gambling, and luxury goods like cars, boats, and jewelry.
the Toronto Star even invented an expression to describe the Canadian reality: the snow washing.
The amount of money laundered in Canada ranges between C$45 billion and C$113 billion, according to a Criminal Intelligence Service Canada survey on money laundering and fraud, published in 2020.
The modus operandi is always the same: criminal groups, which have links with foreign countries, create here legal companies, trusts or empty shells in which they place their money under nominees. Our laws help protect the identity of the true owners. Sometimes money laundering is child’s play: dirty money is deposited in private ATMs. In the real estate sector, many practices have been reported, such as the overvaluation of property values or quick buy-sell transactions.
A series of intermediaries make the link between organized crime and the legal economy without our laws being able to prevent them from doing so. Nothing obliges mortgage brokers, private lenders, lawyers and notaries to report suspicious activity or large cash transactions.
At the start of the week, the Toronto Star revealed that for eight years, a Chinese-born real estate developer suspected of illegal activities, Runkai Chen, transferred tens of millions of dollars to Canadian banks without any of them – neither the Royal Bank nor CIBC, TD or Bank of Montreal – raises a red flag.
In another damning report, Transparency International Canada explains how consultants are selling Canada abroad as a welcoming country for those who want to launder money discreetly. A little more and we print tourist brochures!
In short, it’s clear that not everyone chooses to come and live with us solely for the beauty of our Rockies or the diversity of our restaurants. We have become a prime destination for money laundering, like the British Virgin Islands or the Bahamas for tax havens. And the opacity of information makes it impossible to follow the money, in addition to hindering investigations, whether police, regulatory or journalistic.
So far, our governments have been rather lukewarm, not to say indifferent, to this scourge that is tarnishing Canada’s reputation on the international scene. Inspired by British practices, the Federal Minister of Finance, Chrystia Freeland, nevertheless reacted in her last budget: she will set up a register of the effective ownership of real estate which should be in operation next year. It’s a beginning. Except that this register is easily circumvented since the provinces do not have the same legislative measures as Ottawa.
A group of experts, of which Transparency International Canada is a member, would like the federal government to go further by supporting provinces such as British Columbia and Ontario in setting up a public registry that would be equipped with a mechanism audit with penalties imposed on companies that do not comply.
In its 2019 report on money laundering, the firm Deloitte recommended for its part to substantially increase the budgets, resources and commitment of the teams working in the field of financial crimes and compliance.
One thing is clear: Canada must be much tougher.
In 2018, following an investigation by the Globe and Mail into the links between drug trafficking and the real estate industry, the NDP government of British Columbia has set up a commission of inquiry headed by former provincial Supreme Court justice Austin Cullen. The Cullen report was filed Friday and is expected to be released soon.
A similar exercise should be conducted across the country.
There are enough red flags to consider holding a federal commission of inquiry that would shed light on organized crime’s infiltration schemes in the legal economy and money laundering. A commission that would be given investigative powers similar to those of the Charbonneau commission, and which could propose possible solutions, legislative or otherwise, to prevent organized crime from doing business with complete impunity in Canada.
Yes, commissions of inquiry are expensive and take up a lot of time and energy.
Doing nothing costs us even more.