The B.C. government stunned many today with the announcement of a 15% surtax on property purchases by foreign buyers in Metro Vancouver.
But one Canadian lawyer with an anti money laundering law practice says that the problem is bigger than most people realize, and that pulling 15% of it into government coffers isn’t going to solve the problem.
LISTEN: Certified financial crime and anti-money laundering specialist Christine Duhaime on foreign cash
Christine Duhaime with Duhaime Law has made her career out of tracking money illegally entering the country, and says there’s no doubt the inflow to Canada is substantial.
She says China and its banks currently have a big problem with its citizens borrowing money, then fleeing the country and defaulting on the loans.
She says her firm has tracked the issue long enough to recognize a pattern, with Canada being the preferred destination when it comes to real estate.
“It seems to be the typology where a person will obtain some financing, apply for permanent residency status, once they get it, move to Canada with the money and then the bank unfortunately can’t locate them.”
Duhaime says her investigations have led her to believe the volume of money is in the billions per year, often a product of bank fraud in China, with Canadian banks, possibly unwittingly, assisting on the receiving end.
If I had liberty of telling you how much money has been scammed from Chinese banks & parked in Canadian real estate, Canadians would riot.— Christine Duhaime (@cduhaime) July 24, 2016
Duhaime rejects the assertion focusing attention on the issue is racism in disguise.
“So it’s not really just China, it’s just that the most amount of money – in terms of money moving into mansions – is from China. And then it appears to be Iran the second amount, so it’s not just one country, it’s just the largest. And I don’t think that’s racist, it’s just factual.”
Duhaime says it’s not quite correct to throw around the term “laundered” in the sense of straightforward criminality.
But she says the money movers are definitely dodging rules – capital controls in the case of China, and sanctions in the case of Iran.
She says in China its a product of the government clamping down on bribery and graft, as it struggles to keep government coffers full, while people who have gotten rich off the old “business as usual” pay to play Chinese economy try to hold onto their wealth.
Duhaime says that fleeing wealth often ends up here because Vancouver is, as is is so often said, a beautiful and safe place to live.
But it’s also easy to get into, through programs like Quebec’s Immigrant Investor program.
“We really are known as a jurisdiction where it’s easy to become a permanent resident if you have a certain amount of money, and it’s easy then to integrate into Canada if you have a lot of money and you follow certain immigration patterns such as you go to Quebec, you apply for permanent residency and then you get on the plane and you move out here to Vancouver.”
As to recent data that seems to suggest the effects of foreign cash on the Vancouver market are less pronounced than feared, she says it’s a question of the fine print.
“I think a lot of what’s happening is we’re defining a foreign national versus a permanent resident when it suits us, to manipulate the statistics.So for example a person who’s a permanent resident we may consider to be Canadian and therefore not from Mainland China, but the reality is they got permanent residency and then moved to Canada with a pile of money, but they’re still a foreign national under the immigration act, but they’re also a permanent resident.”
The new 15% surtax will take effect August 2nd.