Vancouver model for money laundering unprecedented in Canada, B.C. inquiry hears

The so-called Vancouver model is an outlier in the history of Canadian crime, a criminologist told B.C.'s public inquiry on money laundering Tuesday.

Stephen Schneider told the Cullen Commission of Inquiry into Money Laundering that this system for laundering illegal funds from China and revenue from drug trafficking is exceptional.

"I've never seen such a big operation … that is so geographically confined," said Schneider, a criminology professor at St. Mary's University in Halifax.

"We've never seen anything like this in Canada, and you probably won't see anything like this any time soon."

As Schneider explained it, the Vancouver model involves large amounts of money taken out of China through informal value transfer systems to avoid China's limits on money leaving the country. Once in Canada, those funds are mixed with cash from the drug trade, and then the cash is cleaned through B.C. casinos and private mortgages.

"The Vancouver model was quite unique," Schneider said. "So many different techniques were being amalgamated."

The Cullen 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.

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 a final report.

During his second day of testimony on Tuesday, Schneider spoke at length about the Vancouver model, saying it depended on the facilitation of professional money launderers.

Those professional groups allegedly included Silver International Ltd., the Richmond company at the centre of a high-profile money laundering probe that collapsed in 2018. The company and two directors were criminally charged, but the charges were later stayed in court.

"You wouldn't have the Vancouver model without Silver International and their directors," Schneider said.

Pushback from casino company

During his testimony, Schneider described casinos as central to the Vancouver model of money laundering, outlining how, in many cases, illicit cash is turned into casino chips and then exchanged for a cheque.

But his testimony on the prevalence of money laundering in B.C. casinos came under fire during cross-examination by Mark Skwarok, a lawyer for the Great Canadian Gaming Corporation, which operates many major casinos including the River Rock in Richmond.

Skwarok pointed out that Schneider has relied heavily on the news media for his research into money laundering in B.C.

As Schneider has acknowledged, there is a lack of academic research into the issue in this province, and so his review of the literature has included a great deal of investigative reporting from outlets including Postmedia, the Globe and Mail and CBC News.

Skwarok suggested that news reporting is prone to certain "frailties," including the fact that journalists aren't typically scholars and news articles aren't peer-reviewed.

"I would suggest that newspaper articles aren't evidence of anything except the reporter's opinion. Would you agree with that?" he asked.

Schneider laughed in reply and said he would not agree. He said that while it's true news reports can sometimes be wrong, so can academic papers.

"I don't think we need to engage in bashing the news media," Schneider told Skwarok at one point.

Skwarok also suggested that Great Canadian has specific policies meant to prevent some of the activities that have been reported in its casinos.

Schneider said he has no firsthand knowledge of the casino company's enforcement of its policies, but "just because you have a policy doesn't mean that's going to eradicate a particular money laundering activity."

Schneider continues under cross-examination on Wednesday. He is the first in a series of expert witnesses who will speak to the commission over the next three weeks to give an overview of the subject of money laundering and various regulatory models.