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Coping with rising cost of insurance for strata Properties


Premiums and deductibles have increased substantially

Tony Gioventu
The Province

Over the past few months across B.C. there has been an industry struggle to renew strata corporation insurance polices. With renewals, the cost of the insurance has increased anywhere from 50 to 300 per cent and the deductibles to cover claims have also increased substantially, from rates of $25,000 per claim to as high as $250,000 and $500,000.

While not all regions of the province have been affected in the same manner, there have been targeted building types or large strata communities across B.C. that have seen the dramatic increase.

British Columbia has over 30,000 strata corporations, which vary from a duplex to over 1,000 units in a single strata community. Many conventional strata corporations are low-rise wood-frame apartment buildings, townhouses or highrise buildings.

When a water failure or fire occurs in multi-unit buildings, multiple units are often affected. The result is an increased risk of cost for damages and losses by the insurance industry.

Under the Strata Property Act, a strata corporation must insure for full replacement value of all common property, common assets and fixtures. This basically means in a duplex, townhouse, low rise or highrise community, the original construction, including finishing attached to the building, is covered under the strata corporation insurance policy.

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What is the cause of the dramatic increases?

In addition to worldwide catastrophes, we live in a high-risk earthquake zone, and with several major building claims in the province, there are a reduced number of insurance companies that are covering strata insurance in B.C. The hardest-hit regions are the high-density metro areas, but resort properties and communities with large developments of more than 250 units are also feeling the crunch as they have the highest compound risks when there is a claim.

In addition, with a limited number of insurers, increase in claims, higher property and construction values and a high demand for insurance, a supply/demand imbalance has been created where the insurers have imposed much higher costs and deductibles to manage risks.

How does this impact owners of strata units in B.C.?

If your strata is faced with a substantial increase in insurance rates, the cost will be reflected in your annual budget, which determines your annual strata fees. If the deductible is dramatically increased to $100,000, for example, it means any claims under $100,000 are not covered by insurance and subject to your bylaws, each owner is likely responsible for damages to their strata lot and the corporation is responsible for the cost to repair common property. The result is many of the past insurance costs will now be downloaded onto the affected owners in the event of a claim.

If an owner is responsible for a claim — for example, their washing machine hose fails, flooding out the building — the owner could be responsible for the $100,000 deductible.

This time, more than ever, homeowners need to consider condo home owner insurance to cover their liability in the event of a claim for damages to their unit, the cost of a deductible or the risk of being sued by other owners if they cause a claim. If there is a claim from a failed pipe and the amount of the claim is over $100,000, resulting in an insurance claim, the $100,000 deductible becomes a common expense of the strata and the council may pay it from the contingency fund or directly levy owners without the need for a three-quarters vote at a general meeting.

What can our strata do to limit the risk?

Work closely with your broker. If the strata corporation is faced with a change in insurance or the possibility of no coverage, immediately give notice to owners. If you fail to obtain insurance, contact your lawyer to determine the liabilities for owners and council members and what next steps you should consider.

Maintain your buildings. Work with your owners to manage risks. Verifying that all units with washing machines have upgraded their hoses to braided steel. Failed rubber hoses in cramped closets and spaces are a chronic cause of water damages.

Address risks that may result in a claim. Smoking, barbecues on balconies, balcony gas heaters and in-suite hot water tanks all present a higher risk. Repair access or building issues that may risk an injury.

Update your bylaws. Bylaws that present a risk of human rights complaints or court actions also increase your risk.

What should buyers consider 

Before you purchase, obtain a copy of the strata insurance and confirm the insurance cost, deductibles for water escape, and the renewal dates. Over the coming year, the increases will likely continue.

© 2019 Postmedia Network Inc.



Latimer Village at Latimer Heights 8242 200 Street Langley the first two buildings with 100 homes by Vesta Properties


Latimer Village condos the hub of Langley community

Simon Briault
The Province

In 2013, Vesta Properties approached homeowners in the Carvolth neighbourhood of Langley with an offer to purchase and then develop their lots. Fast forward six years and a landmark master-planned community is beginning to take shape. Set on 74 acres and comprising 31 lots in total, Latimer Heights will provide the area with just under 2,000 new homes.

Latimer Village is the newest section of Latimer Heights to go on sale and represents the urban hub of the entire community with 487 condos. Set for completion in the late summer of 2021, it will include restaurants, retail outlets, amenities and an urban village space.

Community building on this scale offers potential homebuyers all kinds of options. For Fisher Lietz, it’s the opportunity to own a home for the first time.

“It was very affordable,” Lietz said. “I’m a pretty young guy and don’t have a crazy amount of money to work with so it was really nice to be able to get into a new development like this.”

Tara Desmond, sales manager at Vesta Properties, said Latimer Heights will allow different generations to live in the same location based on their different needs.

 “We have young families who have bought one of the townhomes and their parents are going to be moving into one of the condos,” said Desmond. “It’s a very walkable community that’s completely sustainable on its own – people can very much age in place if they want to and have the amenities and the facilities they need right on their doorstep.”

Homes at Latimer Village will have nine-foot-high ceilings, oversized windows and laminate hardwood-style floors. There are three colour schemes to choose from – grey, caramel and dark – and the kitchens come with Samsung appliance packages, gas ranges and french door fridge freezers with ice and water dispensers.

Bathrooms have dual sinks, frameless glass shower doors, large-format tiles on shower surrounds and floors, and quartz countertops.

“There’s a ton of variation here,” Desmond said. “A lot of the time with condo buildings you’ll see the same plans repeated on every floor. That’s definitely not the case with the architecture and the design at Latimer Village. There are at least 40 different floor plans – it’s really unique.”

At Latimer Village, Desmond said there has been lots of interest from residents of Burnaby and Coquitlam who are attracted by the value on offer, as well as people who already live in the area. Lietz is one of them and he jumped at the chance to own a condo in what is set to become a highly desirable new area of the Lower Mainland.

“I live in Brookswood, south of downtown Langley,” he said. “I like it where I am but I’m really looking forward to going to the new place

Latimer Village at Latimer Heights

Where: 8242 200 Street, Langley

What: The first two buildings of Latimer Village, comprising approximately 100 homes, are on sale now, with new phases to be released shortly

Where: 8242 200 Street, Langley

Residence size and prices: Homes range from 507 to 1,331 square feet. Available homes have one to three bedrooms and are priced from the upper $300,000 range

Developer: Vesta Properties

Sales centre: 8242 200 Street, Langley Township

Hours: noon to 5 p.m., Sat — Thurs

Telephone: 604-371-1669

© 2019 Postmedia Network Inc.

 



Metro homeowners hit by weak market


Five more Metro Vancouver homeowners hosed in a falling market

David Carrigg
The Province

A recent report from Central 1 Credit Union suggests a rebound in Metro Vancouver’s housing market is coming. However, at the moment there are property owners losing hundreds-of-thousands of dollars on their investments.

Released last month, Central 1 foretold of a turnaround in B.C.’s housing market — with both sales and prices jumping by 2021 — as long as interest rates stay low.

However, for Twitter real estate watcher Mortimer, his online hobby of tracking losers in the local market has never been more active.

Here’s a list of the five latest property owners to lose big in the local real estate market:

1: 4891 McKee Pl., Burnaby

This solid, 1953 home on a very large 60-by-150 lot in Burnaby would have seemed like a good pick in May 2016 when the owners forked out $1.9 million for their stake in Metro. Then the former B.C. Liberal government introduced its foreign owner’s tax and things started going downhill from there, leading to late November 2019 when that same home was sold for $1.495 million. A loss of $405,000, plus realtor and legal costs. It’s now assessed at $1.5 million. 2018 Assessed: $1,504,500 – 2017 Assessed: $1,659,400

2: 3018 Burfield Pl., West Vancouver

This beautiful, 3,100-square-foot, custom built home was bought new for $3.347 million on April 19, 2016 — again, right at the wrong time. It just sold for $3.1 million, marking a $250,000 loss, plus expenses. 2018 Assessed: $3,114,000 – 2017 Assessed: $3,358,000

3: 6210 Buckingham Dr., Burnaby

Assessed on July 1, 2019, at $2.371 million, this older (1967) home sits on a 10,881-sq.-ft. lot and was bought on April 26, 2016, for $3.11 million. There’s a real theme here of people who bought in early 2016 and are now losing a lot of money. In this case, the loss is a whopping $1 million, as it sold recently for $2.1 million. 2018 Assessed: $2,371,000 – 2017 Assessed: $2,665,000

4: 2929 West 29th Ave., Vancouver

Bought in (you guessed it) February 2016, this 2,200-sq.-ft. Dunbar oldie cost its owner $2.7 million. Assessed now at $2.4 million, the property sold last month for $2 million — a $700,000 loss. 2018 Assessed: $2,406,300 – 2017 Assessed: $2,670,600

5: 667 Baycrest Dr., North Vancouver

This property was bought in March 2017 when the market had already started to drop, so the bath isn’t as hefty as what might have been. The owner paid $2.36 million for a 2,800-sq.-ft. home on a massive 15,000-sq.-ft. lot wedged between Dollarton Highway and Baycrest Drive, three blocks from the water. Listed for $2.36 million (hoping to break even on paper), the house sold for $2.05 million last month — a loss of $310,000. 2018 Assessed: $2,172,000 – 2017 Assessed: $2,260,000

© 2019 Postmedia Network Inc.



Signs of real estate innovation after Supreme Court decision opens housing data


Regional startups like Fisherly are emerging as other boards change rules

Mortgage Broker News

When Chris Pollard wanted to list his Toronto condo, he decided to try a private sale in his neighbourhood first.

And thanks to a Supreme Court decision last year against the Toronto Real Estate Board (TREB), he and his wife were able to look up how much similar units had sold for in the area to better price the home themselves.

Private listings and other alternative sales models are still outliers in Canada’s real estate market, despite an opening up of data on sale prices and listing history.

Still, last year’s ruling has ushered more information for consumers into the market and spurred innovation opportunities, said Anthony Durocher, deputy commissioner for the Competition Promotion Branch of the bureau.

“For the average consumer, they’re able to benefit from greater choice of online tools to enable them to make an informed decision,” he said of the change, which came after seven years of “hard-fought” litigation.

“That’s really a great outcome for competition and innovation.”

The additions to the online real estate landscape have taken a variety of forms, including international companies like Redfin that promise low commissions.

Meanwhile, Canadian players like Zoocasa and HouseSigma are expanding their data-driven models, regional startups like Fisherly are emerging as other boards change rules and realtors are setting up their own data sites.

Stephen Glaysher, who’s worked as a downtown Toronto realtor for 18 years, set up a site called MLS Sold Data as a resource for current and potential clients to boost transparency and trust.

He said he’s long been an advocate of more disclosure on sale prices, in part to keep his own industry in check.

“I see a lot of unethical business practices with real estate agents,” said Glaysher.

He said it’s been too easy in the past for realtors to fudge numbers when determining bid and sale prices, where they could manipulate comparables up or down by as much as $200,000 to make sure they win a bidding war.

“You can doctor it to make it look how you want it to look.”

He said clients can double-check data themselves now that sale prices can be made available online, though he worries some people could make wrong decisions by not analyzing the data properly.

TREB, which fought the release of data largely over privacy concerns, said the ruling has started to dilute the MLS system, because some consumers aren’t providing information or not even listing on the system over privacy concerns.

John DiMichele, president of TREB, said in a statement that he’s concerned how people both in and outside of the industry are using the data. He said the board, which has restrictions including no scraping, mining, or monetizing of the data, is looking to protect its intellectual property and defend personal information.

“We are currently in the process of auditing and protecting confidential information in TREB’s database, which is what our members and consumers expect and what the law demands.”

Aware of privacy concerns, real estate site Zoocasa has taken down some price history information on request, generally a couple a month, said CEO Lauren Haw.

Overall though, the data has allowed the company to provide more information and will play into a range of better tools and valuation features it plans to unveil in the coming months to help people better predict price changes.

“This does allow us to better innovate, in terms of the data interpretation that we’re providing,” she said.

And despite privacy concerns, the Supreme Court ruling has prompted real estate boards in other major cities including Vancouver, Calgary and Ottawa to open up their data online, while Quebec’s amalgamated board is considering the issue.

The competition bureau said it has been generally pleased with how other boards have reacted, and that “most” have implemented new rules, but did not provide specific numbers.

But even as the openness of information increases and new companies enter the market, the overall market does not look to have changed all that much, said Queen’s University real estate professor John Andrew.

“Most people aren’t accessing the data that is available, so I don’t see really that it’s had a very profound impact on the market,” he said.

“I kind of made the prediction that this might be kind of the next step of several in the general trend towards the liberalization of data, and that really hasn’t happened, to my surprise.”

He had expected more Canadians would follow the growth in the U.S. of flat-rate listings and other ways to reduce commissions, where the cost savings are “simply staggering,” but the vast majority are sticking with the standard model.

“I think it’s just about the consumers’ confidence level. They’re dealing with their home, and by far their largest investment.”

Pollard, who had listed his condo privately, decided after a quick test of the option to go with a realtor. He said one of the big trade-offs in paying a commission was the greater potential for multiple bidders.

“There’s definitely benefits of having a realtor, and I’m seeing that right now actually, the fact they know how to price it, they have the network. It’s a marketing campaign.”

Copyright © 2019 Key Media



Creekside 24076 112 Avenue Maple Ridge 130 three bedroom homes by StreetSide Developments


Creekside has family-friendly allure

Kathleen Freimond
The Vancouver Sun

Back in 1874, about 50 families decided at a group meeting to incorporate and established one of British Columbia’s earliest municipalities, Maple Ridge. They were optimistic that the community would be a great place to raise their children. That attitude hasn’t changed and over the years as new residential developments have continued to attract young families to the area.

Creekside, a project by StreetSide Developments, is a good example.

Located on a six-and-a-half-acre site on 240 Street and 112 Avenue, Creekside will have proximity to Siegel Creek and the green space in the southwest corner of the site.

The finishing touches are being made to the first few homes in the 130-unit project, says Jonathan Meads, vice-president at StreetSide Developments, adding that the development will be completed in planned phases starting in the northeast corner and progressing southwards.

While Creekside is attracting interest from across Metro Vancouver, most potential buyers are from the Maple Ridge area, Meads says.

“Typically, it’s families moving up from smaller townhouses who are looking for some extra space, or downsizers who no longer want to maintain a large single-family house, but still want to live in a roomy home,” he says.

Buyers can choose from five floor plans ranging in size from 1,424 to 1,714 square feet. While the A and A1 plans offer three bedrooms and three-and-a-half bathrooms with a downstairs (at grade) rec room that can be a comfortable guest suite or fourth bedroom, the two B plan choices comprise three bedrooms and two-and-and-half bathrooms. The smallest option, the 1,424 square feet C plan has three bedrooms and two-and-a-half bathrooms. Garages, tandem or side byside depending on the floor plan, have extra space to accommodate a workshop or for additional storage, says Meads, adding all homes have outdoor space.

For the interior design, Jamie Judd at Portico Design Group, took her inspiration from the setting.

“Creekside is uniquely nested within nature, yet close to schools and shopping. I kept the look clean and contemporary while utilizing natural-looking materials,” she says, adding her goal was to create a design to appeal a wide range of buyers.

“The architect [Bingham Hill Architects] did a great job of incorporating large windows – it helps to bring in a great amount of natural light as well as showcase the beautiful nature that surrounds the buildings,” Judd says.

Complementing the natural sunlight, all lighting fixtures are LED and energy efficient.

The two showhomes at 24076 112 Avenue each display one of the colour palettes: warm and cool. In both schemes, the backsplash is a standout: two-inch-by-nine-inch ceramic tiles laid in a chevron pattern.

“I wanted this to be a feature in the kitchen, something a bit traditional done in a contemporary way,” notes Judd.

The clean lines of the slab cabinet doors and drawer fronts in the kitchens and bathrooms enhance that up-to-date ambience.

The major appliances are by Whirlpool, including the gas range, counter-depth refrigerator, chimney-style hood fan and dishwasher, as well as the front-loading washer and dryer.

In the A-plan display home, the interiors show the warm scheme with white quartz kitchen countertops and taupe-tone cabinets. In this layout, the double-bowl stainless-steel sink is below a window, leaving the island to serve as extra workspace and a convenient place for the kids to enjoy a snack.

The interior design in the B-Plan townhouse features the cool palette. For this scheme, Judd specified white cabinets in the kitchen to contrast with the dark wood accent cabinets around the refrigerator and the spacious full-height pantry cupboard.

The double undermount sink in the island, with its elegant Grohe faucet, creates one point in the work triangle in kitchen, while the refrigerator and the slide-in gas range with cast-iron grates mark the other two positions.

The contemporary design extends to the bathrooms where the glass shower enclosure in the ensuite bathroom gives the space an airy feel, while the double sinks and storage in the vanity ensure its functionality. The main bathrooms feature soaker tubs.

Creekside will also include a clubhouse, scheduled to be constructed during the second phase. The internal space will be vaulted, says Meads.

“It will offer a kitchen, dining and living area designed for families to gather for parties, groups to get together for meetings, or a Grey Cup party,” he says.

Double doors will open on to a patio that looks across the outdoor space.

“In summer, the patio will have tables and chairs and a barbecue and will be a natural extension of the indoor space. Beyond the patio will be a lawn for games and a children’s play area,” he adds.

Meads says his favourite aspect of the whole project is the design of the interior space, as well as the placement of the homes on the site.

“The space – inside with the high ceilings and oversized windows that let in lots of natural light – and the layout of the site itself with less density than many developments, makes it a hidden little gem,” he says.

All the homes have separate driveways and entrances and are close to a green space or path that connects them to the natural surroundings.

Creekside

Project address: 24076 112 Avenue, Maple Ridge

Developer: StreetSide Developments

Architect: Bingham Hill Architects

Interior designer: Portico Design Group

Project size: 130 three-bedroom homes

Unit size: 1,424 — 1,714 square feet

Price: Starting from low $500,000s

Sales centre: 24076 112 Avenue, Maple Ridge

Sales centre hours: noon — 5 p.m., Sat — Thurs

Phone: 778-572-8218

Website: livecreekside.ca

© 2019 Postmedia Network Inc.



Anatomy of money laundering in B.C. real estate: 12 cases, $1.7 billion, 20 countries and 30 banks


As British Columbians confront, understand and quantify the effects of money laundering in real estate, there remains skepticism over whether, and to what extent, illicit money can be laundered in real estate

Gordon Hoekstra
The Vancouver Sun

It started with a huge hash bust.

Following up on a tip, the RCMP set up a stakeout and pounced when a freight truck left a warehouse on Mitchell Island in Richmond.

The haul: six tonnes of hashish (a drug made from the resin of cannabis), wrapped in cellophane and carefully packed in wooden boxes.

More concerning — the traffickers’ books showed it was the tail end of a 40-tonne shipment with a wholesale value of more than $140 million.

The RCMP did not know it at the time — and would not find out until a couple of years later, when the U.S. Drug Enforcement Administration corralled a major drug-trafficking kingpin — that the hash shipment was part of a global cartel that had profits of $165 million a year.

Even after being arrested in the warehouse bust, the B.C. ringleader, George (Lorry) Burden, sold off 20 tonnes of the shipment already stashed in B.C.

The cash proceeds from the drugs were laundered in part in real estate in the Lower Mainland: at least seven houses worth more than $7 million.

The year was 1993.

Land and money

As British Columbians attempt to confront, understand and quantify the effects of money laundering in real estate, there remains skepticism over whether, and to what extent, illicit money can be laundered in real estate.

A B.C. government-commissioned report released this spring estimated that as much as $5 billion was laundered in real estate in 2018. But it was based on an economic model and not actual data of money laundering. In response to the report, Vancouver lawyer Garth Evans wrote to Postmedia: “Lawyers and banks aren’t allowed to accept large amounts of cash, so what is alleged to have gone on? The buyers were paying with bags of cash? I don’t think so. It behooves the authorities to provide evidence of real-estate money laundering rather than making allegations.”

It is a valid point.

How money is laundered in real estate is also an important question for an inquiry launched by Premier John Horgan’s B.C. NDP government that will begin hearing evidence next year.

The fact is that laundering money in real estate is not a new phenomenon.

A Postmedia compilation and analysis of 12 cases over the past three decades, including the hash bust in Richmond, shows there are a number of ways to get money into the financial system, ultimately resulting in property purchases that are made with money in electronic or digital form and not, generally, with bags of cash.

Postmedia’s conclusions are the result of an examination of thousands of pages of U.S., Canadian federal and B.C. court records; B.C. property and corporate records; archived Postmedia News reports; and interviews with those familiar with the cases.

The cases — big and small, domestic and international — paint a much wider picture of money-laundering in real estate than has been reported in the past three years in B.C., where the focus has been on B.C.’s biggest money-laundering case, involving the underground bank Silver International in Richmond, where allegedly as much as $220 million a year of largely drug-trafficking cash was cleaned.

Postmedia’s analysis shows laundering methods have included placing cash in multiple banks in exchange for bank drafts, a lottery scheme that produced winning tickets, and stuffing money into suitcases and flying it abroad to jurisdictions where financial institutions ask fewer questions about cash. Other methods include the use of currency exchanges and underground banking schemes.

The analysis also shows that money was often laundered with the use of shell companies and nominee directors, where the true owner or owners were hidden.

The illicit money was generated from an array of offences and alleged offences: stock fraud, bank and company embezzlement, phishing email fraud and drug trafficking. In another case, millions were raised in an alleged cryptocurrency fraud.

The proven and alleged illicit activities generated as much as $1.7 billion, a huge sum that points to the amount of domestic and global money available to be laundered.

Postmedia tracked nearly $100 million that was plowed into real estate.

“It is pervasive,” says Denis Meunier, a former deputy director of Canada’s financial intelligence gathering agency, in response to Postmedia’s compilation and analysis of the 12 cases.

“It doesn’t matter whether it is drugs, or whether it is fraud or pump-and-dump schemes; as long as it’s dirty, the source is illegal, people will want to hide it,” said Meunier, also a former director general responsible for criminal investigations at the Canada Revenue Agency.

Added Meunier: “Real estate is being used, has been used and will continue to be used.”

Buying real estate

While most of the money invested in real estate was sunk into Metro Vancouver properties, the analysis shows money also ended up in other places, including Whistler and Kelowna.

The analysis also underscores the global nature of illicit activities and laundering operations.

The cases involved more than 20 countries and territories: the U.S., Canada, Australia, Pakistan, India, Japan, New Zealand, Taiwan, Mexico, China, Hong Kong, the Bahamas, Singapore, Bahrain, Panama, Belize, the United Kingdom, Mauritius, Malta, the United Arab Emirates, Switzerland and Germany.

Major banks are almost always the conduit to move money, through legally established accounts and often in the names of companies also legally established. In the 12 cases, money moved through more than 30 banks, including all the major banks in Canada: CIBC, Royal Bank, Bank of Montreal, Toronto Dominion and Bank of Nova Scotia.

The money also moved through other major banks: HSBC, the Bank of China, the Industrial and Commercial Bank of China, Credit Suisse, Credit Lyonnais, Citibank, Wells Fargo, DBS Bank, Barclays Bank, and Deutsche Postbank.

In the global trafficking scheme that Burden was involved in, huge amounts of cash were laundered both inside and outside of Canada.

French-American Claude Duboc led the global cartel, which shipped the hash from Pakistan to Canada, and also to the U.S. and Australia.

Duboc had couriers move cash from Canada to banks in Europe and Singapore, where fewer questions were asked about the origin of the currency. The cash was stuffed into suitcases for flights out of Vancouver or Montreal. One courier moved $80 million out of Canada using this method on 39 separate trips.

Duboc also used a money trader in Hong Kong to launder money into banks in Bahrain.

Some of the money Duboc moved globally was sent back to B.C. to help fund further operations — $5 million from a bogus company in Bahrain called Arab Lumber Products to Burden’s business, Coastal Forest Products, to outfit ships and barges to transport drugs.

The money was sent to a Richmond branch of CIBC.

Money from Duboc’s profits was also used to purchase drug stash houses on Vancouver Island and the Sunshine Coast.

The profit from Burden’s share of the hashish, also cash, was placed in banks in amounts that would not trigger suspicion. Cash was also cleaned using a lottery ticket scheme that guaranteed payouts.

Russ Lefler, a now-retired RCMP officer who headed the Burden money-laundering investigation back in the ’90s, said he remembers when he mapped the various cash bank deposits, it showed a criss-crossing pattern along Kingsway as multiple transactions took place. It’s a classic money-laundering scheme called smurfing.

At the end, “they come out with a bank draft,” said Lefler.

A problem with the lottery scheme was for the gangsters to find enough different people to cash in the winning tickets, said Lefler. When police raided Burden’s house — purchased by his lawyer though a shell company set up in the Bahamas called Taipei Trading Corp. — they found stacks of winning tickets, worth about $500,000.

“They get it down to an art, to dilute the money, so you don’t get the big picture. It’s designed to confuse investigators,” said Lefler.

Burden, who has since died, was handed a five-year sentence in 1997. The properties used to launder money were forfeited. Duboc is serving a life sentence in the U.S. and also forfeited his wealth.

Using the banks

Even today, cash is placed in banks by those accused of money laundering.

In another case examined by Postmedia, the B.C. Civil Forfeiture Office is suing to seize a Burnaby home owned by Matthew Thomas Borden and wife Chia Yin (Vicky) Wang, alleging drug trafficking money was laundered through the property, which B.C. property records value at $677,000. 

Borden and his stepfather, John Michael Canning, were arrested on Aug. 29, 2019, for alleged drug trafficking, according to a police affidavit filed in B.C. Supreme Court in support of the civil forfeiture suit. Neither Borden nor Canning has been charged and the police investigation is continuing, according to the affidavit from the B.C. Combined Forces Special Enforcement Unit.

During police raids of the Burnaby home, Canning’s home in Surrey and several vehicles, more than $30,000 in cash was seized, along with a money-counting machine, scales, nearly two kilograms of cocaine, almost three-quarters of a kilogram of heroin and 260 grams of marijuana.

The police investigation alleged Borden was observed depositing two large cash deposits at a Scotiabank branch in Burnaby, both in August of this year. One was a three-quarter-inch-thick sheaf of cash (the top note was a $50 bill) and the other was a half-inch-thick stack with a $5 bill on top, according to court filings.

In the second deposit, police allege in the affidavit that Borden was overheard saying to the teller to deposit $6,500 into a bank account. That is less than the $10,000 amount that triggers an automatic large transaction report to Canada’s financial intelligence-gathering agency, the Financial Transactions & Reports Analysis Centre or Fintrac.

But a Fintrac disclosure report filed in B.C. Supreme Court in support of the civil forfeiture suit alleges the Toronto Dominion bank already had concerns about the activity in Borden’s accounts in 2016 and 2017. The bank filed a suspicious transaction report to Fintrac flagging potential money-laundering activity. The report alleged that $110,000 was deposited during a six-month period, some of which came from cash deposited at bank branches in Saskatchewan and Newfoundland as well as email transfers ranging from $175 to $3,000. “The origin of the cash, connection to the third parties and final distribution of the funds are unknown,” said the report to Fintrac.

The Vancouver model

If laundering cash has always been a problem for criminal organizations, as police investigators have observed, it’s why the so-called Vancouver model was so ingenious. It was the name given by an Australian academic to the scheme allegedly run by the underground Richmond bank, Silver International.

Under the scheme, drug-trafficking money — and proceeds from other crimes such as illegal gambling and extortion — was lent to high-roller gamblers from China to be used in Metro Vancouver casinos, according to B.C. court documents. The money provided was largely in bundles of $20 bills wrapped in rubber bands, a key marker of money collected in the illicit drug trade.

In exchange for the cash, the high rollers would wire money into foreign bank accounts, for example in China, to cover the debt. The drug-trafficking money, now in electronic form, could then be moved as profit back to those involved in drug trafficking and money laundering to finance their operations, or to buy assets such as houses, allegedly laundering the drug-trafficking proceeds.

Postmedia tracked more than $47 million in Lower Mainland properties linked to the underground bank scheme and related police probes into allegations of drug trafficking, illegal gambling and money laundering.

Peter German, a former RCMP deputy commissioner and a lawyer with a doctorate in law, said once the cash is in the financial system, depending on the complexity of the scheme and the amount of money involved, it can “whiz” around the world.

“If you are talking about real estate, in most cases you are talking about money that is already in the system. People aren’t walking into lawyers’ offices or realtors with tons of cash,” said German, who is the lead author of two B.C. government — commissioned reports on money laundering.

Cashless money-laundering

There are criminal schemes where it is not necessary to place cash in the financial system because the money is already in electronic or digital form.

Of the cases that Postmedia analyzed, this is true of the bank and China state-owned company embezzlement, stock fraud, alleged cryptocurrency fraud and email phishing fraud.

It removes a step from the classic money-laundering process. No placement of cash into the system is needed, just layering and integration.

One of the cases examined by Postmedia was a massive embezzlement at the Bank of China between 1992 and 2001. A trio of senior executives — Xu Chaofan, Xu Guojun and Yu Zhen Dong — stole $670 million at the branch of the Bank of China in Kaiping in Guangdong province where they worked. Chaofan and Guojun and their spouses were convicted by a federal jury in Las Vegas in 2008 of racketeering, money laundering, international transportation of stolen property, as well as passport and visa fraud. All four have since been deported to China.

While the fraud itself was not simple — requiring the perpetrators to mobilize staff to create a new and separate set of books before a major bank audit — moving the hundreds of millions was in some ways a straightforward matter of transferring the money from bank account to bank account.

The trio of bank executives used their positions to cover up false loans and illegal transfers, according to the U.S. court proceedings.

The money moved into Bank of China accounts of Chinese shell companies, including Kaiping Polyester Factory and Zhong Hui Filament Co., under the guise of the purchase of equipment or supplies. From there, the money was funnelled to bank accounts of shell companies in Hong Kong controlled by the trio of executives, including Everjoint Ltd. and Everjoint Properties Ltd. The money was then moved from Everjoint to bank accounts in Hong Kong in the names of the executives, their spouses and relatives, including through a Hong Kong account at Credit Lyonnais. Getting the money to Hong Kong was important because it has fewer constraints on transferring money out of country than China.

From Hong Kong, at least $8.5 million was transferred into accounts at the Royal Bank, HSBC and CIBC in B.C., according to a successful claim to recover money filed in B.C. Supreme Court by the Bank of China.

Some of the money was used to buy three Richmond houses: two on Udy Road and one on Mang Road. The houses were purchased in the early 2000s in the names of the Bank of China executives’ spouses, B.C. court and property records show. One house still remains in the name of one of the spouses, B.C. property records show.

Pump-and-dump

In another case examined by Postmedia, there was also no need to place actual cash in the financial system because the more than $300 million in illicit proceeds from a stock fraud were also already in electronic funds.

There was no cash — no $20 bills — involved.

U.S. court proceedings — including a civil suit brought by the U.S. Securities and Exchange Commission and a criminal case led by the U.S. Attorney’s office — showed that mastermind Gregg Mulholland had dozens of shell companies created in the U.S. and Canada to move millions of dollars from pump-and-dump schemes. In a pump-and-dump scheme, the stock fraudsters falsely promote a penny-stock and then sell off their chunk of the shares when the price rises. The stock then often plummets, leaving other shareholders with a loss. A Calgary businessman helped set up more than a dozen of the shell companies in Canada, according to B.C. court records.

Mulholland used two of the shell companies — Vision Crest Consulting Group Ltd. and 2943 High Point Drive Whistler Holdings Ltd., neither of which showed him as the true owner — to purchase a $4.85-million West Vancouver house in 2014 and a $2.5-million parcel of land in Whistler in 2013, according to the U.S. Securities and Exchange suit filed in B.C. Supreme Court to recover money.

Both properties had been paid for in full with no mortgages.

To purchase the houses, $5 million was wired from the U.S. to a Vancouver law firm, and another $2.94 million was wired to a CIBC account in the name of Vision Crest, according to the B.C. court proceedings.

In 2016, Mulholland pleaded guilty in a criminal action brought by the U.S. Attorney’s Office in the Eastern District of New York and agreed to forfeit his illicit gains, including the two B.C. properties.

In 2017, he was sentenced to 12 years in a U.S. jail.

In another case examined by Postmedia, money was moved from Canada to Hong Kong and back.

In 2017, fraudsters used an email phishing scheme to trick Grant McEwan University into sending $11.88 million in builder contract payments to a bank account in Montreal in the name of a company called Mono Shoes, whose sole director was Jehad Al Batniji. From there, some of the money was transferred to a bank account in Hong Kong in the name of company Kinglong Commerce Development Ltd., according to B.C. court documents.

In a separate transaction, a B.C. property developer, Hoi Fu Enterprises, arranged to borrow $1 million from a Chinese company, Yangjiang City Jixie Zhulu Engineering Ltd. to help with the $30 million purchase of land in Richmond.

Because it was difficult to get the $1 million out of China, the engineering firm used an underground banking channel to do so, shows information filed by Hoi Fui in its defence of a B.C. Supreme Court claim by Grant McEwan University to recover money. 

Under that scheme, the engineering firm deposited about $1 million in Chinese currency in China to the accounts of two men. In return, the two men made arrangement to have $1 million sent from Hong Kong to the property developer in Richmond, to accounts at CIBC and Toronto Dominion. It turned out the $1 million from Hong Kong was sent from the account in the name of Kinglong Commerce Development, according to the B.C. court proceedings.

The Richmond property developer, Hoi Fu, said it had no knowledge that the Hong Kong money was obtained from Grant McEwan University. The parties reached at an out-of-court settlement.

In another B.C. Civil Forfeiture Office case examined by Postmedia, a portion of $30 million raised in an alleged cryptocurrency fraud was allegedly laundered in real estate in Vancouver and Toronto.

Money in the form of bitcoin was converted to U.S. dollars through an American crypto-asset trading company, Cumberland DW LLC, according to an RCMP affidavit filed in B.C. Supreme Court in support of the civil forfeiture suit.

The U.S. currency was then transferred to owners of the Vancouver-based cryptocurrency company and used to buy a $4.1 million Coal Harbour condo and a $3.74 million condo in Toronto, according to the police affidavit.

The owners, including Kevin Patrick Hobbs, deny any wrongdoing and say they run a legitimate business.

A growing problem

Louise Shelley, a professor at George Mason University and the lead at the university’s Terrorism, Transnational Crime and Corruption Center, has a sobering conclusion.

The use of real estate to launder money is a growing problem, she says.

Criminals have ever-larger amounts of money to be disposed of — and skyrocketing prices of real estate in a growing number of places in the world, including in Vancouver and Toronto — makes it a “really choice” way to store and grow their illicit money, said Shelley.

Of the illicit money flowing into real estate, she says: “Nobody seems to have cared … It was good for business.”

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