Canadian banks offer 'one-stop shopping' for money launderers, B.C. inquiry hears

Simple bank deposits are the predominant way to clean dirty cash in Canada, a public inquiry on money laundering in B.C. heard Monday.

Stephen Schneider, a criminology professor at St. Mary's University in Halifax, told the Cullen Commission of Inquiry into Money Laundering that the big six banks are just as popular with criminals as they are with the general public.

"They provide a vast array of financial services that are highly conducive to money laundering," Schneider said.

He said the banks offer products like investments and mortgages that can make illicit cash look legitimate, plus numerous services that can be done online or via ATM, without raising the suspicion of human tellers.

"Really, they're one-stop shopping for money laundering," Schneider said.

The commission, led by B.C. Supreme Court Justice Austin Cullen, was announced last year in response to a series of reports that attempted to capture the alarming extent of B.C.'s problem, including estimates that more than $7 billion was laundered in the province in 2018.

Monday's hearing was the first to be held during the COVID-19 pandemic, and the challenges of video-conferencing between the homes and offices of the many different parties involved meant Schneider's testimony began in fits and starts, with some unplanned breaks to deal with technical issues.

But in the broadest strokes, his testimony served as something of a Money Laundering 101 class to kick off a segment of hearings in the inquiry that is meant to give a broad overview of the issue of money laundering in B.C.

Emergence of money laundering specialists

Schneider presented the commission with a review of the academic literature on money laundering but acknowledged there hasn't been a lot of scholarly research on the situation in B.C., so he had to rely heavily on news reports.

Schneider began at the most basic level, explaining what money laundering is and why it exists.

"The whole point of money laundering … is to convert cash to a less suspicious form so the criminal offender is able to enjoy it," he said.

Schneider said the dirty money that's present in B.C. comes from a variety of different sources, including the drug trade, human trafficking, illegal international transfers from places like China and financial crimes like fraud.

Converting that money into something that looks like it was legitimately obtained can be tricky and expensive.

"We're seeing the emergence of groups in recent years whose sole purpose is to launder the proceeds of crime," Schneider said. "The whole Vancouver model revolves around professional money launderers."

The so-called Vancouver model involves wealthy visitors from China who make arrangements with criminals to launder money through B.C. casinos.

Smuggling cash out of Canada

Real estate and luxury cars or front businesses where legitimately earned cash can commingle with the proceeds of crime are all attractive money laundering tools, but Schneider told the commission the process is often a lot more straightforward than that.

"One of the best ways to launder money is just to pack up cash and smuggle it out of the country," he said.

Schneider's testimony continues on Tuesday. He is the first in a series of expert witnesses who will speak to the commission over the next 3½ weeks to give an overview of the subject of money laundering and various regulatory models. 

The role of the commission is to determine where and how money laundering is taking place, why it's been allowed to happen and whether it can be prevented. The commission doesn't have the power to convict or find liability but is expected to issue recommendations in its final report in May 2021.