B.C.'s attorney general says the province's system to catch money laundering in its early stages is "woefully deficient" because officials turned a "blind eye" to suspicious activity for too long.

David Eby said that means schemes aren't flagged until it's too late.

His comments come after The Globe and Mail published an investigation alleging that drug traffickers are using B.C. real estate to clean their dirty drug money.

The report alleged that dealers loan their cash at illegally high interest rates to wealthy Chinese newcomers, who put up Canadian property as collateral. When the borrowers repay the loan, or when the property is sold, the alleged drug dealers are repaid in clean money — dirty cash in, clean cash out.

The Globe also noted that the problem is likely widespread, as alleged laundering schemes only leave an accessible paper trail when they go wrong and end up in court.

Money laundering in B.C. is likely a widespread problem, according to the investigation. (Rafferty Baker/CBC)

Eby said B.C. doesn't have adequate infrastructure to catch the schemes before that point.

"The infrastructure for detecting, preventing and prosecuting money laundering is woefully deficient," he said.

"Where I lack confidence is our ability to detect this activity sufficiently early and to bring it forward until it's far too late, when people have made hundreds of millions of dollars and there's been lives destroyed — and obviously the link to fentanyl here is incredibly troubling."

Using money laundering in B.C.'s casinos as an example, the attorney general said the detection problem stems from officials turning their backs for too long.

"The province has been banking on garbage transactions in our casinos [to catch this] — and, frankly, in my opinion, turned turning a blind eye as to where that money is coming from," he said.

"When they turned a blind eye to it, that meant they didn't respond to it, they didn't develop the infrastructure we needed to detect, prevent and prosecute money laundering within the province."

The investigation noted that alleged money laundering is yet another problem driving up housing prices in B.C. (Rafferty Baker/CBC)

The province launched an investigation into the prevalence of money laundering in casinos last year. On Friday, after the Globe report was published, Eby announced that the probe would also start looking into schemes in the real estate sector.

"We do need to know what steps we need to take in order to ensure we're not just detecting the obvious [schemes] at the top, but actually doing whatever we can to close these loopholes and make it as bulletproof as possible."

Former RCMP deputy commissioner Peter German was hired to lead the investigation. Eby said asked German to announce "connections to any other area to our economy, which included real estate," from the outset.

Last month, German's recommendations on casinos prompted the government to announce new rules for high rollers, including asking anyone who spends $10,000 or more within a 24-hour period to prove where the money originally came from.

In 2016, a federal agency found that Greater Vancouver's housing market was vulnerable to money laundering because scores of real estate firms were failing to obey regulations in place to prevent the schemes.

'It will be a process'

Eby said B.C. has a long way to go to stem its "apparent" money laundering problem and rid its reputation as a place where dirty money can be cleaned.

"How do we make sure that our province gets its reputation back internationally as being the leading jurisdiction in combating this activity rather than, unfortunately, as the case is now, as having our own unique model of money laundering?" he said.

"I really want us to get back our international reputation as a place of integrity and I think we can get there — but it will be a process to get there."

With files from CBC's The Early Edition