'Do not be duped': BMW targets 'straw buyers' in race to stop luxury SUV exports

In one case, a bailiff followed the GPS on a black sapphire BMW X5 to a string of car repair garages in Richmond.

The $81,000 luxury SUV sat in the end unit — presumably ready for export to China.

In a pattern that's becoming almost routine in B.C. courts, lawyers for BMW Financial Services Canada went to B.C. Supreme Court to try to stop the car from leaving the country.

"High-end vehicles are purchased here and then shipped to Asia. Apparently, there is good money in it," lawyer Kim Labelle told a judge as he applied for an order to seize the vehicle in January.

"And this has — this has become such a problem in this province, not just for BMW. I have been told by the bailiff that the two vehicles parked beside this one in the shop are two brand-new Mercedes."

'Name is not decipherable from the signature'

The lawsuit is one of a series recently to highlight the problem of so-called "straw buyers" accused of fuelling the luxury vehicle "grey" export market as a major concern for money laundering.

In the past month alone, BMW Financial Services Canada has filed at least four new lawsuits against people from Burnaby, Richmond and Surrey — all alleged to have acted as fronts for exporters.

The details of the claims are almost identical.

They all stem from alleged breaches of contract in which a defendant is accused of transferring the vehicle to a third party without BMW's consent, refusing to divulge the car's location.

In each case, an individual places a down payment and signs a contract to lease or buy a BMW X5. A short while after, they call to inquire about closing out the deal.

A cheque for the outstanding amount arrives but from a third party.

In two of the cases, BMW claims the final payment came in the same Canada Express envelope, from the same Toronto Dominion bank account, "signed by the same individual, whose name is not decipherable from the signature."

According to the civil claims, BMW claims it wants to protect its interest in the vehicle, ensure that vehicles are not unlawfully exported and "ensure that its vehicles are not purchased by individuals, entities, organized crime groups or money launderers."

'Almost always either black or white'

In his report, German noted that the tax structure and soaring demand for high-end cars in China mean that Chinese dealerships charge much higher prices than their North American counterparts.

"This has created an arbitrage opportunity in the form of a grey market for people willing to purchase these vehicles in North American locations and ship them to China for a significant profit," German wrote.

"These straw buyers or agents will sign the paperwork at dealerships, buy cars and then drop them off to be exported. In return, they receive a small commission on the vehicle, typically ranging up to a few thousand dollars and corresponding to less than five per cent of the vehicle's value."

The four lawsuits filed at the beginning of May involve BMW X5s bought in 2017 and 2018.

"They are almost always X5s," Labelle told the judge at the hearing in January.

"And in fact they are almost always either black or white."

A judge granted Labelle's application for an order to seize the car. The case is set for a hearing next week on an application to add an auto trade company as a defendant alongside a Surrey man accused of buying the BMW for someone else.

'Do not be duped'

The problem with the grey export of X5 vehicles is so bad that BMW attaches a "non-export agreement" as part of its contract with buyers. One of the court files includes a signed copy of a consumer fraud notice.

"BMW Canada and the Canadian authorities are aware that certain individuals, entities, organized-crime groups and criminal money-launderers will purchase BMW vehicles in Canada for export," the notice reads.

"Do not be duped. If you purchase a vehicles as part of one of these schemes in violation of our agreements, anti-money-laundering laws, or other criminal laws, BMW will pursue all of its remedies against you."

The non-export agreement allows BMW Canada "to periodically determine the location of the vehicle" for 12 months.

BMW also has the right to access the vehicle's GPS "to confirm that the vehicle is located in Canada, as well as automatic alerts that the vehicle has entered high risk zones associated with export activities, such as borders or ports."

According to one of the claims filed last month, one vehicle's GPS unit was "non-responsive" — "further indication that the vehicle had been transferred or exported."

The bailiff who used GPS to track the black sapphire BMW X5 to Richmond in January said he found the car in the back of the auto shop.

"I entered the shop and checked the serial number and verified that it was the BMW X5 I was instructed to seize," the bailiff swore in an affidavit.

"The subject BMW was unplated and blocked in by several other unplated late model luxury cars."