In our last post, we discussed how the gap between average wages and average home prices in Metro Vancouver is more extreme than in any other city in the world apart from Hong Kong. This is largely due to the purchasing power of foreign buyers, many of whom are planting the proceeds of criminal activities in our tony residential real estate market.
So many people are getting rich off these illicit arrangements that it’s hard to see the practice being meaningfully curbed anytime soon. All that money makes its way into the pockets of policy makers one way or the other. For a province that prides itself on occupying the moral high ground, on staying in the lines and playing by the rules (those withering looks of shame at those who dare to jaywalk is exhibit A here), we’re shockingly capable of ignoring the menace at the heart of our economy. We’ve succumbed to a gold rush mentality – if my neighbour’s getting rich, well I should be too. I’ve been here since ’86. And so on.
But the money laundering numbers are coming in, and they can’t be ignored. Those politicians that help smooth the path of the crooked and criminal are being called out. The political will is growing stronger for pushing back against one of the major drivers of our economic engine.
So what would this look like?
It’s hard to argue that it wouldn’t look a lot like an economic crash. Luxury retailers would be the first victims, and it could happen pretty easily by requiring them to file forms indicating the source of any cash transaction over $10,000.
But the ripple effects of this kind of law would be widespread. Do we have the stomach to watch multiple high-end businesses start to fail? For commercial property values to tumble? Where do we step in to cushion the blow for legitimate businesses? Do we just chalk it up to bad karma?
The next victims would be the attorneys, bankers and accountants who make all this possible… the ones who clean all this money. A lot of lawyers wind up acting as de-facto realtors because solicitor-client privilege exempts them from reporting requirements. While many of these professionals are unwitting participants in criminal schemes, they’re lumped in with the willful actors who keep the transactions flowing and the prices rising.
There are such huge incentives to keep these transactions hidden away in the dark that it will take a major fight to shine a light on them. Right now, there are no federally funded RCMP officers assigned exclusively to investigate money laundering in B.C. That could be a good place to start.
Other recommendations made by those who study these things include creating a new financial investigations unit at the B.C. Ministry of Finance. A more extreme measure that’s been put forth would involve an extension of our criminal and civil forfeiture system, giving our province the power to confiscate property when there is no evident legitimate source for the funds to purchase it – even without evidence of criminal activity.
While I can’t endorse that level of government power over private property, I do think we can stand for stronger actions against obvious criminal purchases. We owe it to each other to at least look a little deeper at transactions that are flagged as suspicious - and to punish those professionals who fight to keep them hidden.
We’re becoming notorious not for our walkable neighbourhoods and beautiful beaches, but for our unprecedented red-carpet rollouts for foreign criminals. Legitimate foreign buyers, those who we do track and measure, account for a small percentage of real estate purchases and do not create the kind of distortion that leads to the largest housing crisis anywhere (again, aside from Hong Kong, where criminals also run free). As a developer who believes we can build our way out of the affordability crisis, I urge our criminal and intelligence agencies to do their part by keeping the cash-flush crooks off our shores.
