There are now calls for a public inquiry and increased transparency after a drug and money laundering investigation called “Operation Mad Money” shows links to the Greater Toronto Area (GTA).
Investigation reveals links between illegal marijuana sales and Toronto’s searing real estate market, such as CTV News Toronto reports.
Led by the Calgary Police Department, “Operation Mad Money” has spread from British Columbia (BC) and Toronto to China. The investigation is part of an initiative to seize millions of suspected drug-related profits that have resulted in money service businesses in the GTA. Those dollars were then transferred from those businesses to people trying to buy homes in the area.
For potential first-time homebuyers whose prices are rising in the GTA, this news – and the reality that laundered money could be responsible for raising already sky-high home prices – is striking. particularly strong.
The extent of the impact of dirty money on the GTA market still unknown
As reported by CTV, Garry Clement, a retired Royal Canadian Mounted Police officer and money laundering expert, said Ontario should take a page from British Columbia’s book and demand a public inquiry to reveal the extent of the impact of laundered money on the province’s increasingly inaccessible housing market. In British Columbia, a public inquiry called the Cullen Commission on Money Laundering found a 5% (!) Increase in house prices following a scheme whereby drug money was laundered by through government-licensed casinos.
But Peter German, acting director of the Vancouver Anti-Corruption Institute, says an investigation isn’t necessarily the end and the end – far from it. German is a lawyer and former RCMP Deputy Commissioner and is well known for his reports for the Province of British Columbia, “Dirty Money” and “Dirty Money – Part 2”, which are part of the mandate of the Cullen Commission. .
“Public inquiries are designed to shed light on a problem and propose solutions; they’re not a panacea, ”says German. “The downside is that they can be time consuming and expensive, and their recommendations may not be timely. The Charbonneau Commission in Quebec was a notable exception. If the government already knows what the problem is, it may be better to develop a framework to deal with it. This would include prevention and law enforcement.
Real estate connection found when buying an infiltration pot
Well it is safe to say that the “Mad Money Operation” definitely found a problem.
According to an Ontario Supreme Court petition, “Operation Mad Money” began when a Calgary police officer purchased marijuana from the illegal BudExpressNow and Cheapweed websites.
Court documents reveal unlicensed sites have made over $ 3 million in revenue through feed accounts. Electronic bank transfers came with explanatory notes such as “weed guy” and “ed and bills”. Law enforcement officials saw the funds deposited into bank accounts in Edmonton, then tracked some of that money to three properties outside of Vancouver where it was used to pay $ 1.38 million in bills. electricity.
Of course, these weren’t regular electricity bills we’re talking about. While these cannabis-filled properties did indeed have licenses from Health Canada to cultivate around 5,000 marijuana plants, a police raid in 2020 revealed almost four times as many. The British Columbia Office of Civil Forfeiture is currently applying to seize these properties.
According to CTV, in documents filed in Superior Court, authorities say the profits from the operation ended up in the hands of money-services companies in the GTA who sent money to interested Chinese nationals in enter Toronto’s lucrative real estate market. The documents allege that Chinese nationals refunded money to China, bypassing Chinese currency controls that prevent easy withdrawal of money in another country.
Now the Attorney General of Ontario is asking for the seizure of approximately $ 3.7 million in bank accounts that allegedly contain money generated from illegal sales of marijuana. The accounts reveal suspicious activity, according to the court’s request, with a tendency for large deposits made in round numbers.
The allegations are currently before a civil court.
In a recent court hearing, a lawyer for one of the money recipients said they were “innocent bystanders” and believed everything to be legal. They had no idea the money deposited into their accounts was from illegal weed, the lawyer said, according to CTV.
Whether they know it or not, the reality remains that the dirty money trail leads directly to the booming real estate market in the GTA. And, in a market characterized by declining supply and record prices, that does a disservice to today’s young buyers.
Unfortunately, there is more money laundered in the Canadian real estate market than Canadians realize, warns German.
Discovering the “Toronto model”
“We highlighted the Vancouver model in ‘Dirty Money’. “Mad Money” may mirror the Toronto model, ”German explains. “What we are seeing now in Ontario seems to be very similar to what we have seen in Vancouver, except that casinos may not be part of the equation. In “Dirty Money,” we warned that money service businesses, cryptocurrency, cannabis, and most cash-based businesses can be vulnerable and can be used in conjunction with underground bankers. “
The solution to preventing dirty money from entering the real estate market centers on transparency, German says.
“It is essential to know who is the beneficial owner of an asset; British Columbia just created Canada’s first beneficial ownership registry, ”said German. “To be effective, the information entered in a land (or corporate) register must be verified or verifiable, otherwise the nickname of” waste in – waste out “may apply. Records should also be public, subject to narrowly defined restrictions, to allow scrutiny by the media and interested parties. “
In addition, German says it is essential that all components of the real estate market be subject to regulatory oversight by FinTRAC, Canada’s financial intelligence unit, and provincial regulators. “Finally, law enforcement must have the resources and training to tackle real estate money laundering cases,” he said.
From the rumors, the time to talk seriously about it was probably yesterday. In the meantime, GTA can use whatever help they can get to cool their out of control market. The crackdown on dirty real estate money is just one piece of the puzzle.