Hong Kong, Macau pivotal players in massive criminal racket using Canadian casinos, ‘dirty money’ report claims

Hong Kong and Macau have been identified as “pivotal” players in an international criminal racket which has seen massive amounts of drug money and other illicit funds laundered through casinos in Canada, exacerbating the country’s opioid overdose crisis and stoking an overheating property market.

A long-awaited independent report entitled “Dirty Money” – commissioned by the attorney general of British Columbia (BC), Canada’s third-largest province – paints a stark picture of the role China’s two special administrative regions and the wider Guangdong province play in international organised crime.

Compiled by a former deputy commissioner of the Royal Canadian Mounted Police, Peter German QC, the 250-page report was published early Thursday morning and prompted British Columbia’s attorney general David Eby to declare an effective war on dirty money.

“The German report paints a troubling picture of government that didn’t respond effectively to pervasive money laundering in BC casinos. The era of inaction and denial is over. We are moving immediately to get dirty money out of BC casinos,” Eby said.

He said the multimillion-dollar racket should serve as a warning and pledged immediate action, starting with the complete adoption of the report’s 48 recommendations which will bring sweeping changes to the way casinos are regulated and the law is enforced in British Columbia, home to more than 400,000 people of Chinese descent.

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“Money laundering isn’t a victimless crime. It’s linked to the opioid crisis, and deaths on our streets. It’s linked to skyrocketing housing costs that are pushing people out of our communities,” he said.

“It will take time to undo the damage done to BC’s international reputation, but we aren’t waiting to get started.”

The first draft of the report was completed three months ago and delivered to the government of British Columbia – which has Vancouver as its largest city. It underwent a three-month review before German produced a revised version in which he denotes Guangdong, Hong Kong and Macau as being of “greatest interest”.

“The threat posed by organised crime in Guangdong province is facilitated through the banking and economic hub of Hong Kong and the casino and money transfer facilities in Macau,’’ the report said.

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“Hong Kong is one of the most secretive offshore jurisdictions and is a global hub for shell companies used by Asian and other crime gangs. The anonymity provided by these services makes them ideal for transnational organised crime.

“Both Hong Kong and Macau are offshore banking and finance centres. Bankers, lawyers, accountants, money service bureaus and other businesses in Hong Kong and, to a lesser extent, Macau facilitate much of the transfer of goods in Asia.

“It is also the intersection of international organised crime groups from Latin America, Europe, North America and elsewhere.”

Eby said: “It has to stop. We can’t let organised crime get ahead of us.”

The report said British Columbia’s gaming industry and its anti-money-laundering system were not prepared for the onslaught of illegal cash flowing through the casinos and they failed collectively.

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It estimated that more than C$100 million (US$75 million) was funnelled through casinos as part of a scheme dubbed the “Vancouver Model” which specifically refers to Chinese crime organisations which loan money made from criminal activity – commonly drug trafficking – to borrowers who help “clean” it by gambling at casinos. The Chinese gambler would then receive Canadian dollars, while repaying the criminal groups in China.

“The ‘genius’ of the scheme is the ability to achieve two objectives and be paid for, both in the same transaction,” the report said. “The lender is both servicing a drug trafficking organisation by laundering its money, and the Chinese gambler by providing him or her with Canadian cash.”

Much of the laundered money ended up being invested in Vancouver-area real estate, the report said.

Close to 4,000 Canadians died as a result of opioids in 2017, a 34 per cent year-on-year jump, according to official data, with British Columbia one of the hardest-hit provinces.

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In response to the report, the Hong Kong government said the city was committed to combating money laundering and terrorist financing together with the international community.

“Over the years we have put in place a robust anti-money laundering and counter-financing of terrorism [AML/CFT] regime having regard to international standards set by the Financial Action Task Force,” the Financial Services and the Treasury Bureau said.

“To stay ahead of the curve, we put the AML/CFT regime under continuous review to ensure that it can live up to challenges posed by the fast-changing financial market and security landscapes.”