British Columbia’s luxury car sector is being used to launder the proceeds of crime, according to an independent review on money laundering through luxury cars and horse racing.
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The report, done by former senior RCMP officer Peter German, and released on Tuesday, May 7, is the first detailed examination of money laundering in luxury car sales in Canada.
“Vancouver has an international reputation for being a desirable location for the activities of organized crime,” German said. “Our review of these sectors has shone a spotlight on how significant money laundering is in BC, including in the luxury car sector.”
The review found car dealers in BC reporting that individuals were “bringing bags of money” or orchestrating multiple small international wire transfers to different accounts to buy cars.
“Individuals with high-level criminal records are alleged to be principals in some used luxury car dealerships in the province,” the report said.
It also uncovered a complicated luxury-vehicle export scheme involving hundreds of “straw buyers.” German noted this is a grey market that is “ideal” to facilitate trade-based money laundering.
BC’s Attorney General David Eby said the report is “disturbing confirmation that money laundering in BC is a problem that goes beyond our casinos.”
In the luxury car market, “there is no financial reporting of large cash purchases, no oversight of international bank wire transfers and no apparent investigation or enforcement,” he added.
The combined result is “a recipe for exactly what happened here – Vancouver becoming North America’s luxury car capital, generally, and perhaps North America’s used luxury car export capital too,” said Eby.
The new report describes individuals (straw buyers) who help facilitate the transaction of vehicles between sellers and exporters, as well as describing the dramatic increase in the use of the provincial sales tax (PST) refund, which applies to vehicles purchased in BC to be sold abroad.
According to the report, fewer than 100 vehicles a year received the refund prior to 2014. In 2016, the PST was rebated on 3,674 vehicles.
Since 2013, almost $85 million in PST refunds have been paid by the government for the export of vehicles. The source and destination of funds for the buyers and sellers, and any income tax reporting by any of these individuals or entities, is unknown.
Government “has not waited to take action”
In response to the report, Eby said the government “has not waited” to take action.
“The Ministry of Finance is reviewing Dr. German’s findings, as well as vehicle exporters’ use of the PST refund program,” he explained. “Details of allegations made in the report have been forwarded to police, ICBC and the Vehicle Sales Authority.”
In addition, Eby said the province is preparing plans for regulation of the luxury car sector. “Our government is committed to stamping out money laundering and the damage caused by organized crime – and building an economy that works for people in BC,” he added.
The impact of money laundering on the luxury car market is only part of German’s full report that will also include his findings on BC’s real estate sector. The full report will be released soon, and German said he hopes it “provides a window into money laundering in our province because it is a problem that can no longer remain unchecked.”