Untraceable: Did the City of Vancouver Launder Money?
The City of Vancouver accepted millions of dollars in cash for property taxes over the last decade, despite public concerns about illicit funds entering the local economy. There was no requirement to show ID for these cash transactions, so the source of the money is completely untraceable.
Between January 1, 2012 and January 25, 2021, the municipality accepted 1,905 cash payments over $5,000 in value for property taxes, totalling more than $13M. Of these transactions, 129 consisted of payments of $10,000 or more, amounting to $1,757,416. On two separate occasions, the City received more than $40,000 in cash.
While the City of Vancouver stopped accepting cash payments over $10,000 in January 2019, it has never revealed details of what it collected prior to this. The City charged Coastal Front $930 to access more than 700 pages of redacted tax records and internal communications. It took multiple Freedom of Information (FOI) requests over the course of a year to gather the information in this report.
Background
Vancouver has become a haven for money launderers , as highlighted in Peter German’s Dirty Money report and Sam Cooper’s Best Seller, Willful Blindness. A separate public inquiry into money laundering, the Cullen Commission, recently wrapped up and is due to be submitted to the provincial government by December 15.
Given the sheer spread and penetration of money laundering in the Province, the sectors it infiltrated are still being identified. Questions remain about whether it reached local government and if the lack of identification requirements was exploited.
Municipal government would not be the first public sector impacted by money laundering. In 2019, authorities suspected that money was being laundered through BC’s public colleges and universities in the form of college tuition payments made in cash.
Stories about people carrying bags full of cash into City Hall became a common joke. NPA Councilor Melissa De Genova, who introduced the motion to stop cash payments over $10,000, said she had personally seen an individual enter City Hall with a plastic bag full of cash, asking where to pay the empty homes tax.
FINTRAC
To help identify and prevent money laundering, organizations such as banks, insurance companies, money services businesses, real estate brokers, car dealerships, and casinos are regulated by the Financial Transactions Analysis Centre of Canada (FINTRAC). They must submit an official report whenever they process a cash transaction of $10,000 or more, or two or more cash transactions totalling $10,000 or more within 24 hours by the same person. They also have to report any transactions they deem to be suspicious.
Shockingly, governments, on the other hand, do not have to report to FINTRAC.
Prior to January 2019, the City of Vancouver had no limit on the amount of cash it would accept. Additionally, the City’s Manager of Customer Services and Collections confirmed that the municipality did not ask for proof of ID when processing in-person property tax payments.
The FOI results show that there was a lot of confusion among the Lower Mainland’s municipalities about their role in preventing money laundering. City staff emailed their counterparts in neighbouring authorities multiple times to inquire about their anti-money laundering policies.
Some municipalities keep their own records in the event they might need them in the future. Others said they proactively submitted records to FINTRAC only to never receive a response. One authority said it was advised by the RCMP to report suspicious transactions to the police rather than the “black hole that is FINTRAC”.
large cash payments
Coastal Front wanted to know the extent to which the reports of people paying the City of Vancouver with bags full of cash were true. We submitted an FOI request to the City of Vancouver for records of all property tax payments over $5,000 in cash it took from January 1, 2012 to January 25, 2021.
The FOI results reveal that the amount of money received from cash payments over $5,000 increased 162% between 2012 and 2019. This steady growth in cash payments over $5,000 reached a peak in 2019 when there were 303 transactions amounting to $2,091,559.
Cash transactions over $5,000 increased steadily between 2012 and 2019.
Of the 129 transactions over $10,000, 94% were for private properties. Cash transactions over $10,000 peaked in 2017 when there were 27 payments, amounting to $389,055.
Several payments involved jaw-dropping amounts of money. In 2014, someone paid their property tax bill with $47,700 in cash. In 2017, there was an instance of another property tax bill being paid with $44,464 in cash.
For reference, this is what $40,000 in $20 bills looks like.
Other large property tax cash payments included one for $36,744 in 2016, and another for $31,000 in 2018.
Legitimately taking $40k worth of cash out of a bank would require days of pre-planning and multiple trips to an ATM. So, what kind of person has bags full of cash sitting around to pay their property taxes?
Empty Homes Tax
Another thing we wanted to know was how many people paid for the Empty Homes Tax (EHT) in cash. EHT, also known as the Vacancy Tax, was introduced in 2017. Its purpose was to discourage homeowners from leaving their properties unoccupied in order to ease pressure on Vancouver’s rental market.
We know that multi-million dollar properties in Vancouver have been purchased by people who claim to the Canada Revenue Agency to be “low-income earners”. In August, reporter Ian Young, of the South China Morning Post, broke a story about 90% of luxury homes in two Metro Vancouver municipalities being purchased by migrants declaring “refugee-level” incomes.
After taking 5 YEARS (!!) to answer my freedom-of-info request, @CanRevAgency has released a secret study confirming millionaire migrants made 90% of lux home purchases in two Metro Vancouver municipalities while declaring refugee-level incomes 2/ https://t.co/METXkzee57
— Ian Young (@ianjamesyoung70) August 30, 2021
Buying luxury homes is an established way of moving money out of other countries. Some foreign buyers avoid tax by not reporting their true income. A homeowner paying thousands of dollars for EHT while claiming to have a miniscule income should be a huge red flag. However, paying for EHT in cash, with no requirement to show ID, would prevent authorities from linking a payment to a specific homeowner.
There were eight EHT cash payments over $5,000 made to the City of Vancouver between 2018 and 2019, totalling $59,932. The values of the payments were:
2018: $6,342, $7,560, $6,090, $7,800
2019: $5,240, $10,000, $9,000, $7,900
EHT began with a 1% tax on vacant properties from 2017 to 2019. The rate increased to 1.25% in 2020 and 3% in 2021.
If we assume the 1% tax rate applied at the time, a $10,000 payment would mean the property was worth at least $1 million.
anti-money laundering policies
In the last decade, money laundering in B.C. became a major focus of politicians and the local media. To its credit, the City Council passed Councillor Melissa De Genova’s motion to stop accepting cash payments over $10,000. The motion passed unanimously on January 31, 2019, effective immediately. This amount was selected to align with FINTRAC’s reporting requirements.
The City also stopped accepting cash for billings over $10,000. This was to prevent people from circumventing the restrictions by making multiple visits. For instance, paying for a $12,000 bill with two separate instalments of $6,000 in cash is not permitted under the policy.
While cash payments for property taxes declined after the policy change, was it too late to prevent dirty money from entering the local economy?
Money Laundering timeline
Three Questions Raised by the FOI results
While the results of the FOI provide plenty of food for thought, we are left with more questions than answers. While we may never know the answers, we hope that some lessons can be learned.
Here are some of the biggest questions that arose after analyzing all of the data and communications.
Who were these people?
Who were the people making these huge payments? Were they gangsters? Were they money launderers? Were they criminals?
We have been trying to determine who these people are and we have no way of knowing. Shouldn’t someone know? Doesn’t it matter? Are we just going to let this fly?
Who is responsible?
Who was responsible for this massive oversight? This happened under the watch of Mayor Gregor Robertson and his successor Kennedy Stewart. Could they have done more or is the City’s Finance Director to blame?
We want to know who is accountable and who is going to answer for this. What kind of preventative measures are being put into place?
If the City wasn’t able to manage its own money properly, what else is being missed? Why did it take a City Councillor, Melissa De Genova, taking a detour to walk her baby in a stroller to stumble across this? Is that how our City is being run?
How do we know something like this won’t happen again?
How do we assure the people of Vancouver that our current government won’t make the same mistakes? How do we know that we are not going to have the same problems?
Has the culture even changed? Just last year, the City landed in hot water over a shipment of Herman Miller chairs, which sell for more than $1,000. Mayor Kennedy Stewart said he had no idea about it. So who did? Does this really point to a culture of accountability?
Let us know what you think. Tweet us @coastalfrontbc or leave a comment on our Facebook and LinkedIn pages.
More information
Click to download:
Note: This report has been featured in the media since it was published
South China Morning Post on November 5, 2021. Read the online article here.