Has Canada Contributed To The Transnational Crime Wave By Allowing The Vancouver Model?

New money laundering schemes are constantly being uncovered, usually due to the brazen actions of money launderers. The Vancouver Model is the latest using real estate as a primary means of laundering money.

Money launderers seized onto China’s currency control & Canada’s lax money laundering regulatory approach that result in something called: The Vancouver Model of Money Laundering.

The Vancouver Model

A recent Inquiry by a Canadian Commission into money laundering in British Columbia (B.C.) revealed several details of a multi-billion dollar scheme, where so-called “students” bought multi-million-dollar mansions.

It was identified that for over ten years, money launderers operated a money laundering method called “The Vancouver Model.”

This model of money laundering, which was recently featured in an article by sanctions.io, a leading provider of sanctions & PEP screening for AML & Trade Compliance, detailed how it typically involved individuals or groups purchasing real estate in the B.C. region, used large amounts of cash, often sourced from illegal activities – including both BEC Scams and Chinese Pig Butchering Scams.

These properties were then sold or rented out, generating seemingly legitimate income, which was then used to further launder the illicit funds and either funnel them back to China or elsewhere as legitimate money or is used to fund further expansion of these transnational criminal enterprises.

The Vancouver Model is characterized by its use of “professional facilitators” such as real estate agents, lawyers, & accountants who may knowingly or unknowingly assist in the process. Given the fees they earn, we much question their total innocence.

Additionally, it is said to rely on the availability of Vancouver’s hot real estate market, which provides ample opportunities for investment and profit. Something similar may be happening in Miami, Houston, Silicon Valley, and Southern California too.

The Vancouver Model has been the subject of increased scrutiny and criticism in recent years, with many calling for tighter regulations & increased enforcement to combat ML in the region.

The article written by sanctions.io details that due to strict Chinese currency controls, Chinese gamblers enter into arrangements with criminal syndicates & loan sharks with links to B.C. The gamblers would transfer money to criminal-controlled bank accounts in China before traveling to Vancouver, where loan sharks and other criminal associates provide them with their money in local currency. This cash money provided was likely the profits of criminal activities, such as drug trafficking, scamming cartels, and even human trafficking.

With gambling, win or lose, the money is laundered as soon as it is converted to casino chips. This is believed to also have fueled some of Las Vegas’ growth in recent years (before the pandemic.)

As said, the proceeds from the Vancouver Model were reinvested back into criminal activities, notably fentanyl sales or scams targeting Chinese that relocated to the Americas, by criminal gangs or invested in real estate by Chinese citizens themselves in order to avoid paying taxes or drawing the attention of regulators.

What Is The Vancouver Model of Money Laundering?

According to sanctions.io

New money laundering schemes are constantly being uncovered, usually due to the brazen actions of money launderers. A recent report into money laundering in Canada’s western province of British Columbia revealed several details of a multi-billion dollar scheme, where so-called students bought multi-million-dollar mansions and a single working-class family brought more than 100 million Canadian dollars to the country. Money launderers entered casinos with garbage bags full of illicit money in an attempt to clean their illicit funds.

These events have opened up fresh inquiries into Canada’s lax regulatory approach to financial crime as provincial governments step up their efforts to identify and prevent the Vancouver Model of money laundering from thriving in their territories.

Witnesses cited in the report described rich gamblers flying from China with huge bags of cash used to play baccarat at private salons in Vancouver casinos. Once Canada increased betting limits to 100,000 Canadian dollars per hand, money laundering activities escalated even further.

While the Vancouver Model isn’t limited to the Canadian city, it was popularised there by Chinese citizens who took advantage of high gambling limits and criminal gangs who took advantage of lax regulatory controls to launder the illicit proceeds of their crimes.

How the Vancouver Model Works

Chinese currency controls prevent citizens from taking more than $50,000 out of the country at a time. To circumvent these rules, Chinese gamblers enter into arrangements with criminal syndicates and loan sharks with links in Canada and elsewhere. They transfer money to criminal-controlled bank accounts in China before traveling to Canada, where loan sharks and other criminal associates provide them with their money in Canadian dollars. (This money, it should be said, is likely the profits of their own criminal activities, such as drug trafficking, scams, human trafficking, and more.)

Once they receive their funds, the Chinese citizens visit various casinos and exchange their money for chips. They make a series of bets and then exchange their chips for Canadian dollars. Through gambling, the money has been “cleaned”, and its illegitimate origins are concealed from authorities.

Whether the gamblers win or lose is irrelevant since the money is laundered as soon as it is converted to casino chips. The financial proceeds from the Vancouver Model are usually reinvested back into criminal activities (notably fentanyl sales) by criminal gangs or invested into real estate by Chinese citizens themselves in order to avoid paying taxes or drawing the attention of regulators.

Money laundering is not a victimless crime!

Money laundering fuels these criminal organizations & according to the B.C. Coroner Service, over 2,200 people died from illicit overdose deaths in 2021, plus it fuels the multi-trillion dollar cybercrime industry. Ending most money laundering is now a top priority for most legitimate nations of the world.

Every jurisdiction and financial institution should take the opportunity to learn from the Vancouver Model and be able to identify warning signs that money laundering may be going on. The best way to combat money laundering is through automated AML solutions that can screen and monitor the thousands of transactions that occur through their institutions every single day. While the Vancouver Model was particularly difficult to detect, there were early warning signs that were ignored.

One of the side effects of the influx of this corrupt money into Canada, the United States, Australia, and elsewhere is the escalation of housing prices. This is driven normal family homes almost out of reach. Consequently, when governments finally do crack down on the properties bought under these schemes, it will collapse housing prices and negatively affect everyone’s home values.

Learn More

• Cullen Commission Issues Final Money Laundering Report in British Columbia https://guidehouse.com/insights/financial-crimes/2022/money-laundering-report-british-columbia
• The Vancouver Model: Canadian Casinos And Money Laundering https://financialcrimeacademy.org/the-vancouver-model-canadian-casinos-and-money-laundering/

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