‎101 recommendations: Release of the Cullen Report on anti-money laundering in British Columbia

In May of 2019, the Government of British Columbia appointed B.C. Supreme Court Justice Austin Cullen to lead a Commission of Inquiry into money laundering in the province. On June 3, 2022, Justice Cullen provided the Commission’s final report to the Government of British Columbia, which was published on June 15, 2022 (the “Cullen Report”).

The Cullen Report broadly concludes that neither B.C.’s provincial or federal anti-money laundering regimes are effective in their current state to address the estimated billions of dollars in illicit funds that flow through B.C. annually.

The Report is critical of a number of actors, agencies, institutions and regulatory bodies, both provincially and federally, that have either contributed to, or failed to adequately address, money-laundering in the province including:

• Financial Transactions and Reports Analysis Centre of Canada’s (“FINTRAC”) low instance of reporting useful intelligence to law enforcement agencies and FINTRAC’s encouragement of ‘defensive reporting’ leading to a significant volume of ‘high-volume, low-value’ reporting backlogging the system;
• The lack of dedicated oversight of anti-money laundering by the Provincial government and the failure of the government to effectively prioritize and address money laundering activities as a result;
• The Royal Canadian Mounted Police’s lack of sustained investigation into money laundering activities since the Federal government’s disbandment of provincial Integrated Proceeds of Crime (“IPOC”) units in 2012;
• Insufficient resources in the province to effectively investigate and prosecute money laundering offences;
• The failure of provincial policing to make money laundering and proceeds of crime charges a consideration in all profit-oriented criminal activity;
• Poor utilization of asset forfeiture powers and low recovery by the B.C. Civil Forfeiture Office commensurate to the volume of money laundered in the province;
• The failure of the British Columbia Gaming Policy and Enforcement Branch (“GPEB”), the British Columbia Lottery Corporation (“BCLC”) and law enforcement to take meaningful action when the risk of significant money laundering activity was reported by investigators at the GPEB and BCLC;
• The failure of the various government ministers responsible for gaming within the province to respond to the risk of money laundering in the gaming industry, despite having knowledge of illicit funds moving through the industry‎¹‎;
• The susceptibility of the real estate sector to money laundering activities as a result of mortgage and loan practices, inadequate understanding of money laundering in the real estate industry, and low FINTRAC reporting by real estate licensees;
• Deficient regulation of the mortgage and lending industry, including a lack of reporting obligations for mortgage brokers, the risk of complacency by lending institutions, including banks and credit unions, and deficiencies in the federal regulation and monitoring of money service businesses (“MSBs”);
• A lack of beneficial ownership transparency in the corporate sector, making it exceedingly difficult for law enforcement to determine a beneficial owner when investigating corporate criminal activity;
• A lack of reporting regime for luxury goods;
• The prevalence of unchecked trade-based money laundering between jurisdictions;
• A lack of information respecting criminal involvement in informal value transfer networks;
• The prevalence of bulk-cash smuggling across international borders; and
• A lack of expertise to investigate cryptocurrency crime and lack of provincial regulation of virtual asset service providers.

As a result, the Cullen Report makes 101 recommendations for implementation by the Government of B.C. These address the overarching need for a robust provincial response to the issue of money laundering in the province, separate but complementary to the federal regime, which notably include a call for a dedicated provincial money laundering intelligence and investigation unit and a new, independent Anti-Money Laundering Commissioner to oversee and monitor the provincial response to money laundering.

The Report is also quick to point out the successes British Columbia has achieved to date in curbing money laundering in the province and highlights the positive impact of a number of measures, including:

• The implementation of the beneficial ownership registry;
• The requirement that B.C. casino patrons present proof of legitimacy for cash transactions of $10,000 or more; and
• Coordinated and collaborative efforts between the GPEB, BCLC and the Joint illegal Gaming Investigation Team.

It remains to be seen to what extent the Government of British Columbia implements the Cullen Report recommendations and what effect they would have on money laundering activities. In addition, the impact of the Cullen Report will no doubt be felt across Canada, both provincially and federally, in the fight against money laundering.