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Prime Minister Justin Trudeau has called the findings in an explosive report identifying at least $5 billion in real estate money laundering in British Columbia in one year “extremely alarming and unacceptable.”

Twin reports by Maureen Maloney and Peter German, released Thursday, revealed that in 2018, $7.4 billion in dirty money was laundered through British Columbia — and $5 billion of that money was funnelled through B.C.’s real estate market, driving already sky-high home prices up by at least five per cent.

At a press conference in Edmonton on Friday, Trudeau acknowledged that the report findings point to the devastating impact of money laundering on B.C.’s housing affordability.

He said his government continues to look at B.C.’s money-laundering crisis and has already proposed new funding for a task force to increase money laundering and tax evasion investigations and audits.

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But whether the federal government will act on one of the strongest and most contentious recommendations in former Mountie German’s findings — to bring Canadian lawyers under the control of Canada’s money-laundering scrutiny laws — remains unclear.

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German pointed to a 2015 Supreme Court of Canada ruling that exempts lawyers from reporting suspicious transactions to Fintrac, Canada’s anti-money-laundering intelligence agency.

Canadian law societies successfully argued that the Charter of Rights would be violated if they could not uphold solicitor-client privilege and be protected from unreasonable law enforcement searches in their financial accounts. They claimed that law societies could monitor their own members to protect against money laundering.

But according to a number of studies and international anti-money-laundering authorities, the Fintrac reporting loophole has allowed lawyers to hide real estate money-laundering transactions. And German devoted a significant portion of his report to the problems caused by lawyers who turn a blind eye to dirty money.

“Lawyers are the ‘black hole’ of real estate and of money movement generally,” the report said. “With no visibility by law enforcement on what enters and leaves a lawyer’s trust account, many investigations are stymied.”

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German’s report notes that Canada’s Finance Ministry has acknowledged that the 2015 ruling opened a serious gap in Canada’s anti-money-laundering system, and the flaw is damaging to Canada’s global reputation.

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German noted that in hearings last year in Ottawa, a committee heard that in 51 financial crime cases from 2013 to 2017, an RCMP audit had found “over 75 per cent (of the cases) involved lawyers as either a direct suspect or someone identified during the investigation.”

But the committee also heard testimony from a justice official, German reported, who testified it would be “difficult” to bring Canadian lawyers under Fintrac’s reporting regime.

In a response to German’s report, a spokesman for the anti-money-laundering agency said: “Fintrac believes that the exclusion of lawyers from the anti-money-laundering and anti-terrorist financing regime is an important gap that can and is being exploited by bad actors.”

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Pierre-Olivier Herbert, a spokesman for Finance Minister Bill Morneau, did not directly answer whether the ministry will move forward on German’s recommendation to bring lawyers in line with other Canadian financial professionals.

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“The Department of Finance is working with Justice Canada on the impact of the 2015 decision toward next steps in due course and engaging with law societies and bar associations so they may become a meaningful part of Canada’s (Fintrac reporting) regime,” a statement said.

“Our government recognizes the high-risk of money laundering that exists in the real estate sector, and we have recently proposed measures in budget 2019 to help strengthen Canada’s regime,” the statement said.

In a statement, David Jordan, a spokesman for the B.C. Law Society, said: “Our rules require that a lawyer who knows or ought to know that a transaction is suspicious not provide or discontinue providing services, which is more stringent than what is required by the Fintrac regime.”

samcooper@globalnews.ca