Real Estate

Money laundered before it enters B.C. housing market: Reilly

By AdvocateDaily.com Staff

Although the government of British Columbia continues to focus on the issue of money laundering in the province’s real estate sector, the problem is that it is occurring before it even hits the housing market, Vancouver corporate lawyer Jonathan Reilly tells The Lawyer’s Daily.

As the article notes, following a report earlier this year that showed some B.C. casinos had been used as a hub for cleaning the dirty cash, the province’s expert panel on money laundering is holding a public consultation on how to protect the real estate sector from being infiltrated by criminal elements.

The panel will investigate gaps in existing laws, consumer protections, financial services regulations, regulations of real estate professionals and jurisdictional gaps between B.C. and the federal government, says The Lawyer’s Daily, and its final report and recommendations are due to the government in March.

The government has also set up an anonymous tip portal to allow citizens to report potential money laundering.

However, Reilly, founder of English Bay Law Corporation, tells AdvocateDaily.com it’s not that laundered money isn’t an issue in the B.C. housing sector, it’s that it occurs before the money enters the real estate market. In this case, he says, the government's taxes are only taking a percentage, but are not contributing to stopping the laundering.

"It comes into the housing market with the patina of legitimacy. The actual laundering takes place in businesses that process a lot of cash without much tracking. The government study identifies that this has been happening in casinos and explains how," Reilly tells AdvocateDaily.com.

"Businesses that have a lot of cash payments and little or no electronic tracking and no cost of goods are primed to be laundries. They allow cash to be recorded as ‘sales’ and deposited to a bank. If the business is primarily labour and does not require inventory, it is difficult or impossible to prove the laundering is taking place unless there are comparable metrics from a legitimate business and even then it is difficult."

Essentially, Reilly tells The Lawyer’s Daily, you can’t buy a property in Canada with a suitcase full of cash.

“You need to work through the banking system. I’m not saying there aren’t nefarious individuals who own property here, but the act of buying and selling isn’t the problem — the problem is how did they get their money into the system in the first place.

“If you owned a house and I went to you with a suitcase full of cash, I suppose you could sell it to me, but one of us would still have a problem depositing that money in the bank. And until you get that cash in the bank it’s really not a lot of good to you,” he adds.

Ultimately, Reilly says he believes the government’s move to investigate possible money laundering is aimed at creating a level of acceptance in the province for taxes it has levied on the housing market, such as a foreign speculation tax.

“The government is in the process of collapsing the market,” he says.

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