British Columbia will hold a public inquiry into money laundering, sparked by a set of explosive reports showing widespread laundering in the province's real estate, gambling and luxury car sectors.

B.C. Premier John Horgan announced the decision, flanked by Attorney General David Eby and Finance Minister Carole James after a cabinet meeting Wednesday morning.

"It became abundantly clear to us that the depth and the magnitude of money laundering in British Columbia was far worse than we imagined when we were first sworn in, and that's why we established the public inquiry today," Horgan said.

B.C. Supreme Court Justice Austin F. Cullen has been appointed to head the inquiry, which will look into real estate, gaming, financial institutions and the corporate and professional sectors.

Calls for a public inquiry have grown after two reports released by the provincial government last week revealed more than $7 billion was laundered in B.C. in 2018, including an estimated $5.3 billion through the real estate market.

The reports were written by Peter German, a former RCMP deputy commissioner, and law professor Maureen Maloney, the chair of B.C.'s expert panel on money laundering in real estate.

Earlier this month, German released findings on money laundering in the luxury vehicle sector. Last year, he had released another report which detailed extensive links between money laundering and B.C. casinos.

David Eby said B.C. Supreme Court Justice Austin F. Cullen, the head the inquiry, has been granted "significant" powers. (Mike McArthur/CBC)

Eby said the German reports formed the basis of the decision to call the inquiry, and alluded to the fact some individuals had refused to participate in the reviews voluntarily.

"We are done with asking nicely," he said. "Today, our government has given Justice Cullen the authority to do more than ask for voluntary participation."

Eby said Cullen has been granted "significant" powers under the Public Inquiry Act to compel witness testimony, gather evidence and search and seize records with a warrant.

Eby added he had reached out to his federal counterpart, Organized Crime Reduction Minister Bill Blair, and was assured the federal government will co-operate with the inquiry.

A statement from his office reiterated the need for everyone to work together.

"This is a complex issue that does not have one simple solution," Blair wrote. "That is why all orders of government must work together, along with law enforcement and our international partners to ensure the measures we are taking are effective."

When asked whether any B.C. Liberals will be compelled to testify on political decisions made around money laundering, Horgan said it will be completely up to Cullen.

"If there is testimony that the commissioner needs to get to the bottom of this, he will compel that testimony," the premier said.

"We're not constraining the commissioner in any way."

Michael Lee, the opposition Liberals' critic for the attorney general, said his party would cooperate "fully" but expressed some reservations.

"I don't think that this should be an exercise where it's been, arguably, overly politicized in terms of finger pointing ... it should be done in an appropriate manner, and that's what's contemplated here," Lee told On The Coast guest host Matthew Lazin-Ryder.

Eby has previously accused the Liberals, who ran the province from 2001-2017, of "significant wilful blindness" when it came to clamping down on money laundering.

Lee said his party wants to see money laundering looked at fully: the role of the province plus federal agencies like the RCMP and money-laundering watchdog FINTRAC.

He said his party has been tough on money laundering, including tightening up rules under the Gaming Control Act.

The final report by the inquiry will be delivered by May 2021, and an interim report within the next 18 months.