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editorial

After all the jarring facts that emerged from British Columbia’s investigations into money laundering, one observation sums it up: As B.C. Attorney-General David Eby put it, “This is a national issue."

The response, then, has to be national. Nobody knows exactly how much dirty money is being bleached through the Canadian economy, but the amounts are believed to be significant.

For example, the B.C. reports estimated that $5-billion was washed through the province’s real-estate market in 2018, inflating prices by 5 per cent.

There is good reason to believe that the same is happening in other Canadian cities. A report in March from Transparency International tallied almost $30-billion of “unknown funds” – from entities whose true ownership is cloaked – that have been pumped into the Greater Toronto Area housing market since 2008. Of that figure, $9.8-billion worth of deals were done in cash, avoiding the few checks on money laundering that exist in real estate.

B.C.’s money-laundering reports – on casinos, luxury cars and real estate – are the beginning of the story, not the end. The province last week announced a public inquiry, which should be a prelude to action.

However, there has not been the same urgency in the rest of the country. Other governments are taking tentative steps, or none at all.

Underlining the need for action in B.C. are two recent reports on real estate – one detailing the problem and one looking at solutions.

In his investigation into what’s happening, former RCMP deputy commissioner Peter German found $28-billion of residential real estate owned by mystery entities. In most cases, there is “no information” on who really owns the assets. Such opaque vehicles were often used in higher-value deals that distort the market. Mr. German said B.C. law enforcement is “woefully unprepared," and lawyers are especially vulnerable “to be used as conduits for dirty money.”

Maureen Maloney, a Simon Fraser University public policy professor, led the report on fighting the problem. She concluded that “urgent action” is required, and Ottawa and the provinces must work together.

The necessary responses are widely agreed on by experts, from Ms. Maloney to Transparency International to the House of Commons finance committee that studied the issue last year.

An essential first step is a public registry of who owns what real estate. B.C. has taken the lead with first-in-Canada legislation introduced this spring that will reveal beneficial owners – the names of actual people – behind structures such as numbered companies.

As Transparency International argues, disclosure of beneficial ownership “should be a prerequisite for any property transfer.”

The rest of the country, unlike B.C., is still pondering the problem, or ignoring it.

The Commons finance committee last November recommended a federal private registry, available to relevant authorities. But the federal government has made no further progress beyond confirming that “the possible use of a registry” is being assessed.

In Ontario, former Progressive Conservative leader Tim Hudak, now head of the Ontario Real Estate Association, said last week that a registry of beneficial ownership is a “no-brainer.” The Ontario government has yet to create one.

Another needed change is to amend Canada’s anti-money-laundering legislation to include all players in real estate. One group highlighted is unregulated mortgage lenders; in B.C., they hold 9 per cent of residential mortgages.

Ottawa and the provinces must consider the role of lawyers in real estate, so that solicitor-client privilege isn’t used to hide illicit actions.

Policing also needs to be beefed up. Mr. German cited a potential model: the success of Quebec’s Unité permanente anticorruption, a coalition of multiple provincial agencies.

After B.C.'s reports came out, Prime Minister Justin Trudeau said the details were “extremely alarming.” He called money laundering a “real and pressing problem for Canadians” and said Ottawa would act.

It should, and so should the provinces. The next steps have been clearly outlined.

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