Fast cars and bags of cash: Gangsters using B.C. luxury car market to launder dirty money
B.C. money laundering investigator and former Mountie Peter German says thousands of luxury cars worth millions of dollars are being purchased every year in B.C. by criminals as a way to launder proceeds of crime.
Many of the vehicles are then resold to exporters who ship them off shore. In a particularly galling twist, German says the criminals then turn around and apply for a rebate of the provincial sales tax.
The former RCMP deputy commissioner was speaking at a news conference in Victoria where the latest segment of his investigation into money laundering in B.C. was released to the public.
The report looked specifically into the luxury vehicle and horse racing industries in B.C. German said he found no "excessive issues" of money laundering at the two active horse racing tracks in the province — Hastings Park and Fraser Downs.
However, the report does describe the number of ways dirty money is being cleaned both domestically and internationally through the buying, selling, leasing and stealing of luxury vehicles.
'Criminals don't drive smart cars'
German said the "luxury" aspect of the schemes appeal to gangsters.
"Criminals don't drive smart cars," he said. "It goes with the lifestyle — they're interested in luxury goods."
In one scheme, a criminal will hire a straw buyer to purchase an expensive vehicle, supplying the buyer with a non identifying bank draft or, even sometimes, bags of cash. Cash purchases are not illegal and luxury car dealers are not required to report large transactions to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
The straw buyer makes the purchase and turns the car over to the true owner who then sells it to an exporter to ship off shore, most often to China. Once the car is sent overseas, the purchaser can apply for a rebate of the provincial sales tax.
German's report says prior to 2014, the number of PST refund applications for exported vehicles was fewer than 100 per year. In 2014 and 2015 the number jumped to over 700, before jumping exponentially in 2016 to 3,674, and rising even further to 4,452 in 2018.
German said the province has been forced to hire additional staff to deal with the increased demand for PST refunds, noting that "as part of their legitimate duties, provincial civil servants are assisting straw buyers and exporters to maximize their profits ..."
According to the report, Ministry of Finance staff identified one straw buyer who made in excess of 25 suspicious purchases in 2016/17, and another 48 who made in excess of 11 transactions each.
The province has paid out $85 million in export vehicle PST refunds since 2013.
Attorney General David Eby says the government is looking at ways of cracking down on the scheme.
"The piece about the PST refunds was totally shocking to me ... and incredibly disturbing," said Eby. "We are moving very quickly to address this."
Stolen luxury vehicle scheme
The report also highlights the need to crack down on the export of stolen luxury vehicles, noting that a full quarter of luxury cars that were stolen last year in B.C. were never recovered.
German said hundreds of such vehicles are likely shipped out of Metro Vancouver ports every year, adding that a lack of police presence in B.C. ports since the demise of the Ports Canada Police in 1997 has left a serious gap in the law enforcement umbrella.
Today's 300-page release is the second section of German's larger report into money laundering in B.C.
Last June, he released "Dirty Money," a report into the links between money laundering and B.C. casinos. It found that casinos had "unwittingly served as laundromats for proceeds of crime."
New Car Dealers Association of B.C. responds
Blair Qualey, the president and CEO of the New Car Dealers Association of B.C. (NCDA), said in a statement that the organization applauds German's latest report.
The NCDA, which represents 390 new car and truck dealers in the province, say dealers follow the requirements established by the Vehicle Sales Authority. Qualey says NCDA members fully report qualifying transactions to FINTRAC.
"We agree that this review is important for British Columbians, and should there be regulatory changes to any reporting requirements with respect to new car sales, we certainly will comply as our members always do," read the statement.