VANCOUVER—In the luxury car capital of North America, criminals are using those flashy Ferraris, Lamborghinis and McLarens to mask their misdeeds, according to part of a report examining money laundering in British Columbia.

“In the luxury car market, there is no financial reporting of large cash purchases, no oversight of international bank wire transfers and no apparent investigation and enforcement,” David Eby, British Columbia’s attorney general, told reporters at a May 7 press conference.

“It’s all a recipe for what’s happened here: Vancouver becoming North America’s luxury car capital generally, and perhaps since 2013, claiming North America’s luxury car exporting capital as well.”

The report from retired RCMP commissioner Peter German also suggests that some money launderers took advantage of a provincial tax rebate for exporters of vehicles that are intended to be sold in other countries.

Before 2014, fewer than 100 vehicles got the refund. But by 2016, PST was rebated on 3,674 cars; by 2018, the number had risen to 4,452. Since 2013, almost $85 million in tax has been refunded, and the sharp increase required the Ministry of Finance to devote more staff to work on the rebates, according to German.

Eby said the government will review the program in light of the report.

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The B.C. government tasked German with writing the report, which also examines real estate and horse racing. It acts as a followup to a June 2018 report that detailed rampant money laundering in B.C. casinos.

He found that buyers of luxury cars have been paying with “bags of cash” and organizing multiple small international wire transfers to different accounts. Since car dealers are not required by Fintrac — Canada’s financial intelligence agency — to report large cash transactions, the activity has been going on completely under the radar.

German and Doug LePard, a retired police chief who assisted German with the report, described interviews with several luxury car dealers who were open about the activity and expressed suspicions they were “in the middle of money laundering.”

“A particular individual brought in $240,000 of cash to purchase a high-end vehicle,” German said, recalling one of the interviews.

“And the dealer accepted the money, sold the car and then made sure he was accompanied by two or three employees as they marched the money down to the bank. The teller asked, ‘What’s this from?’ ‘It’s from a car sale,’ ‘OK, thank you’ – and then (the teller) would presumably fill out a large cash transaction report, but there’s nothing suspicious because there’s no reporting involved and there’s no visibility on that sale (from Fintrac).”

LePard said it is difficult to quantify the amount of money laundering in the luxury car sector, but based on interviews with luxury car dealers, he said cash sales are common.

“One dealer I spoke to said he was seeing cash sales about once a month, and people literally bringing in cash in grocery shopping bags,” LePard said. “Sometimes well over $100,000, sometimes over $200,000.”

Another method German and LePard said they discovered was people leasing very expensive cars and making the lease payments in cash. That would be a safer method for people involved in organized crime because “they would take less of a hit if (the car) were seized by police,” LePard said.

Yet another trend was using foreign credit cards that “are not transparent in any way” because the money is coming from another country, and therefore Canadian police can’t obtain any records through a search warrant, LePard said.

German’s report also uncovered the use of “straw buyers”: people who facilitate transactions between sellers and exporters of vehicles. The source and destination of money for the buyers and sellers, and whether income tax is being reported by the straw buyers, is unknown.

“It’s a grey market that investigators say has expanded dramatically since 2013 and is extremely likely to be facilitating trade-based money laundering,” Eby said.

Two chapters of German’s current report, on horse racing and the luxury car sector, were released Tuesday. German did not find any issues with horse racing in B.C. A month ago, the government chose to release a chapter that identified a severe lack of federal police resources devoted to money-laundering prosecutions.

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The government has yet to release German’s report in its entirety but plans to do so very soon, likely at the same time as another report on the vulnerability of real estate to money laundering that was commissioned by the Ministry of Finance.

Eby said he was struck by the fact that luxury car sales increased around the same time that duffel bags full of cash were being brought to B.C. casinos and housing prices were going through the roof in Metro Vancouver.

“This is a disturbing confirmation that money laundering in B.C. is a problem that certainly goes beyond our casinos,” Eby said.

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