Tuesday, February 25, 2020

BC, Vancouver, Canada... a huge Chinese criminal money laundering problem

BC, Vancouver, Canada... a huge Chinese criminal money laundering problem

How Chinese gangs are laundering drug money through Vancouver real estate

 WATCH: Explaining the 'Vancouver Model.' How criminal organizations move money and drugs around the world.
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Criminal syndicates that control chemical factories in China’s booming Guangdong province are shipping narcotics, including fentanyl, to Vancouver, washing the drug sales in British Columbia’s casinos and high-priced real estate, and transferring laundered funds back to Chinese factories to repeat this deadly trade cycle, a Global News investigation shows.
The flow of narcotics and chemical precursors — and a rising death count in western Canada caused by synthetic opioids — is driven by sophisticated organized crime groups known as Triads.
The Triads have infiltrated Canada’s economy so deeply that Australia’s intelligence community has coined a new term for innovative methods of drug trafficking and money laundering now occurring in B.C.
It is called the “Vancouver Model” of transnational crime.
LISTEN: Investigative reporter Sam Cooper explains the “Vancouver Model’ of transnational crime
Details of the Vancouver Model are outlined in a November 2017 report obtained by Global News from B.C.’s provincial government, in a freedom of information request. The report, by John Langdale of the department of security studies and criminology at Macquarie University, was presented to Australian intelligence officers and Austrac, the country’s anti-money laundering agency.
B.C. Attorney General David Eby has reviewed the report, and recently travelled to Ottawa to inform a federal committee of his concerns. His message was blunt. Eby testified that Canada’s anti-money laundering system has completely failed. He told the committee that gangsters have been openly carrying hockey bags stuffed with hundreds of thousands in drug cash into B.C. casinos, and there has not been a single prosecution.
In an interview with Global, Eby said the Australian report shows “that Vancouver is now recognized internationally as a hub of transnational money laundering.”
“I was stunned,” Eby said, “by the scope and the scale of the transnational crime that is alleged in this presentation. I know that B.C. is in the grips of an opioid crisis that is costing hundreds of millions of dollars. And it is costing hundreds of lives.”
Langdale’s report explains how Chinese criminals exploit “weak links” in global regulation. In one example, Triads deal with the state of North Korea, and Latin American drug cartels, to run a shadow economy based on the trading of narcotics, counterfeit goods, and illegal migrants.
Similarly, the regions of Vancouver, Hong Kong and Macau have formed a black market financed by intricate Chinese underground banking networks. According to the Vancouver Model report, the underground banks are at the heart of Chinese drug trafficking crime.
These secret banks have developed for centuries on China’s southern coast, police intelligence reports say. They consist of family members spread across Chinese communities worldwide. They can move money, drugs and commodities around the world, without having to send funds across national borders. The banks maintain reserves of various currencies at locations worldwide, taking deposits in one area, and paying out withdrawals in another.
In order to function, the underground banks need financial facilitators, and the Triads have used some lawyers, bankers, casino operators, and gambling junket operators in Hong Kong, Macau and Vancouver, Langdale’s report says.
LISTEN: B.C. Attorney General David Eby responds to money laundering concerns
The junket operators are organized crime lenders. Traditionally, the junkets have laundered Asian heroin money and facilitated capital flight from China, by extending loans to Chinese high-rollers to purchase chips in Macau casinos.
The VIPs can cash out chips to buy global real estate. They pay back gambling loans in China, with small interest fees, allowing them to illicitly send legitimate wealth abroad, or launder ill-gotten gains. The junket lenders have migrated from Macau to Vancouver casinos, B.C. government documents show, bringing many VIP gamblers with them.
Langdale says that Australia’s government is worried about Chinese capital flight, because Austrac can’t differentiate between legitimate and criminal money pouring into Australian assets. His report outlines a worst case for Australia: “Possible scenario. Sydney as a regional hub for Chinese transnational crime (the Vancouver Model.)”
The model’s criminal elements, according to the report, are:
“Traffic illegal drugs from Guangdong and Latin America”
  • “North American illegal drug dealing networks supplied by Chinese methamphetamines and precursor chemicals”
  • “Launder money into high-end real estate (funded by Chinese) capital flight, and launder money through the high-roller tables in casinos”
  • “High rollers used Canadian casinos, junket operations, and investment in Canadian real estate”
  • “Use banks, money transfer businesses to shift money to and from China and other countries (including) Mexico and Columbia.”
WATCH: B.C. Attorney General David Eby explains how transnational crime groups target Canada
Extended: How transnational crime groups target Canada
 Extended: How transnational crime groups target Canada

The world’s factory

Langdale’s research focuses on the global supply of illegal drugs and crime from Guangdong, a province that faces the South China Sea, and borders China’s special administrative regions, Hong Kong and Macau.
Guangdong is China’s most populous province, with 100 million citizens, including about 30 million migrant workers, and the most billionaires in China. The province’s economy is powered by the industrial Pearl River Delta region, which includes cities such as Zhuhai and Shenzhen. And with massive shipping infrastructure that connects with major international ports, Guangdong is known as the “world’s factory,” Langdale says.
It is also the world’s factory for chemical opioids.
Guangdong is known as the ‘world’s factory’
 Guangdong is known as the ‘world’s factory’ Source: Global News
“Guangdong is a good location for production and trafficking of illegal goods and services,” the report says, with its proximity to Hong Kong and Macau, and their “well-established networks of facilitators skilled at shifting money overseas via offshore banking and finance.”
“You have a confluence of a major financial market in Hong Kong beside this seething mass of capitalism,” Langdale said in an interview.
“Guangdong is a very tough world. The whole place is barely regulated. It’s a kaleidoscope of subcontractors that the Chinese government doesn’t have a handle on.”

Command and Control

According to U.S. and Canadian law enforcement, illegal shipments of fentanyl from Chinese factories and fentanyl overdose deaths in North America are multiplying at an exponential rate.
Last October, the U.S. Dept. of Justice announced a major drug-trafficking and money-laundering investigation against two Chinese men, who are alleged to have had “command and control” of numerous chemical factories and labs in southern China, used to ship “massive quantities of deadly fentanyl and other synthetic opioids to communities throughout the United States.”
It was the first time the U.S. labelled Chinese nationals as top priority international crime targets, on a level with Colombian drug cartel kingpins.
In a separate case last December, Chinese state news agency Xinhua reported that Chinese police arrested 19 suspects accused of manufacturing fentanyl from Guangdong factories and sending the drugs to North America.
And Canada Border Services Agency documents say seizure amounts of fentanyl from China have surged since three years ago, with 7.2 kilograms seized in 2014, that rising sharply to 58 kilograms in 2015, and 20.5 kilograms seized in the fiscal year of 2016-2017.
Meanwhile, the B.C. Coroners Service reported more than 1,400 people died of an illicit drug overdose in the province in 2017, with about 81 per cent of the deaths involving fentanyl, that was most often mixed with heroin, cocaine or methamphetamines. It was the most overdose deaths ever in B.C.
WATCH: A new report shows how Canada’s anti-money laundering system has failed
New details on ‘The Vancouver Method’ of gangland money laundering
 New details on ‘The Vancouver Method’ of gangland money laundering

Not all Triads are bad

In his 34-year policing career former RCMP superintendent Garry Clement served as director of the Proceeds of Crime program, an undercover investigator, and from 1991 to 1994, as liaison officer for Canada’s Hong Kong embassy.
He is a certified consultant on financial and organized crime, and has been an expert witness in numerous money-laundering trials.
In an interview, Clement said that the allegations laid out in Langdale’s report — specifically, that Triads are producing deadly chemical narcotics in Chinese factories, shipping the drugs to B.C., and laundering proceeds of crime in Vancouver before returning funds to Chinese factory production — are completely accurate.
In fact, Clement investigated and reported on this same criminal blueprint, in 1994. In Canada’s Consulate General in Hong Kong, Clement and an immigration control officer uncovered an alleged Triad immigration fraud that they say allowed the gangs to gain a foothold in B.C.
“Sadly, it’s the truth. The Triads were a multinational crime syndicate back in the ’90s, and we have allowed them to expand, using Canada as a base,” Clement said. “It is phenomenal what the Triads can do.”
To grasp the Vancouver Model of Triad crime, Clement says, some Chinese economic and historical understanding is needed.
In his 1994 report, Triads and other Asia-based Organized Crime, Clement writes that prior to China’s communist revolution, the Triads had deep connections to military and political leaders. A Chinese president himself, Chiang Kai-Shek, was a Triad associate who staffed his army with opium-trading gangsters, Clement’s 1994 report says.
When Chairman Mao and the communists seized control of Mainland China in 1949, many Triads fled to Hong Kong, Macau and Taiwan. Hong Kong was substantially built on British opium trading fortunes, Clement’s report says, and provided many business opportunities for the Triads.
Meanwhile, Mao and the communists claimed to have cleansed Mainland China of drug vice. But the Triads were allowed to return. In the 1980s, a new Chinese leader, Deng Xiaoping, ushered in economic liberalization, with a strong focus on factories and global exports in Guangdong.
Deng’s model of reform tolerated corruption between state officials and business tycoons for the sake of rapid job growth.
According to Clement, famous sayings credited to Deng — such as “it doesn’t matter whether a cat is black or white as long as it catches mice,” and “not all Triads are bad” — explain how crime syndicates gained control in Guangdong.
“When he said that, I knew that it meant that Triads would get to set up factories,” Clement said.

Vancouver Model real estate laundering

After establishing a strong base in Vancouver, Clement says, the Triads forged a criminal trade loop with Triad factories in Guangdong.
Clement’s 1994 report explains how the Triads have used “quasi-legitimate” real estate development, construction, and financial companies to launder drug cash in Vancouver real estate. In one method, Triad companies send drug funds to offshore bank accounts, and use these deposits to secure mortgages for purchasing and developing B.C. land.
Another method involves falsified contracts used to make drug cash appear to be legitimate real estate wealth. The buyers pay artificially high prices for property, recording transactions in B.C.’s land title system. But a much lower actual price is paid to a Triad-linked seller, in an offshore bank account transaction.
Clement says these offshore transactions have likely had the effect of artificially inflating prices across Metro Vancouver housing markets, and leaving swaths of empty homes.
“What we see in Vancouver real estate is heartbreaking,” Clement said. “I saw the same thing in Panama, with the empty homes.”

Guangdong-Hong Kong-Vancouver-Sydney

Langdale’s report says that transnational criminals in Mainland China and Hong Kong play different roles in the Vancouver Model. The Guangdong Triads specialize in large-scale production of chemical narcotics, as well as counterfeit products. They are also involved in wildlife smuggling and human trafficking.
The Hong Kong Triads specialize in financing drug shipments, as lenders and insurers. They are involved in loan sharking, stock market manipulation, and criminal money laundering services. These Triads show some of the same characteristics as suspects named in B.C. Lottery Corp. investigation documents.
The Hong Kong syndicates also re-route shipments of counterfeit products from North Korea, such as tobacco, Langdale’s report says. CBSA documents say that counterfeit tobacco from Chinese and Hong Kong ports often ends up in B.C.
A review of B.C. government documents obtained by Global News shows that a Chinese man linked to Vancouver casino junket lenders was cited in a major tobacco trafficking investigation.
The man, who is allegedly involved in criminal real estate lending networks in Vancouver, has defaulted on $196,000 in payment of “taxes, penalty or interest,” under the Tobacco Tax Act, a 2010 B.C. Supreme Court filing says.
Meanwhile, some of the Chinese VIP gamblers identified in B.C. Lottery Corp. documents obtained by Global News, are alleged to be involved in B.C. wildlife trafficking cases. B.C.’s Ministry of Environment would not disclose documents about these cases, citing potential harm to police investigations.
The Mainland China Triads also have the ability to trade illegal migrants around the world, Langdale says. CBSA documents obtained by Global point to a case of forged documents that likely is connected to Triad schemes, Clement said.
The documents say that in April 2016, border agents at a Montreal airport seized about 5,600 counterfeit foil holograms from China, designed to authenticate Quebec health insurance cards. This case concerns the CBSA, an intelligence brief says, because the forgeries could facilitate immigration frauds that threaten Canada’s national security.
In an interview, Langdale said that in the Vancouver Model, Triad crime money will ultimately flow back into Chinese factories that produce deadly narcotics, and the export cycle will continue. But the Triad money will also taint economies worldwide.
“The recycling (of dirty cash) may take place in Australia, Vancouver, Hong Kong’s offshore money market, or Shenzhen, depending on where they see the greatest opportunities for their money,” Langdale said. “It could also go into legal enterprises. Overall, the economy becomes totally corrupted by a web of licit and illicit activities.”

Fintrac loopholes

Kim Marsh, a former international organized crime unit commander for the RCMP, now consults with international governments in efforts to detect corrupt officials and criminals seeking money laundering havens.
Marsh says that he agrees with Attorney General Eby’s conclusion, that Canada’s anti-money laundering system has failed.
“Is this the message we want to send to the world?” Marsh said, “That Vancouver is the place to launder dirty money in real estate, and this is forcing our young people to move away.”
Fintrac, as Garry Clement puts it, is a “Rolls Royce, without an engine.” He means that Fintrac’s reporting requirements are stringent, but reports rarely lead to investigations and enforcement.
The system requires that Canada’s financial professionals, including bankers, casino operators, realtors and currency exchange owners, report suspicious or large cash transactions. Fintrac receives extensive reports from casino operators and banks, especially.
However, Eby says that in the casino industry, ample reporting only means that operators can claim they have fulfilled their regulatory obligations. And meanwhile, he said, VIPs have the green-light to wheel suitcases stuffed with $20 bills into high-limit betting rooms.
A major problem, Marsh says, is that Canadian privacy laws block police investigators from working with Fintrac agents, and accessing Fintrac’s valuable cache of evidence.
Another problem, is Canada’s gaping lawyer loophole.
2016 report from Transparency International said that almost 50 per cent of Vancouver’s most expensive properties are owned through legal mechanisms, such as trusts and shell companies, which are used to hide true ownership.
Canadian lawyers won an exemption from Fintrac reporting in a 2015 Supreme Court ruling.
In 2016 the Financial Action Task Force, a partnership among international governments, recommended that Canada amend Fintrac laws to bring lawyers into the system. The task force reported that money laundering in Vancouver real estate is linked to trust account services provided by some lawyers.
“It is unethical professionals that are benefiting, and global criminals,” Marsh said. “The legal loophole is big, and unique to Canada.”

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