Cullen Commission Report on Money Laundering in British Columbia Recommends Major Regulatory and Enforcement Improvements to Combat Money Laundering | Knowledge

Introduction

On June 15, 2022, the British Columbia Commission of Inquiry into Money Laundering (the Cullen Commission) released its highly anticipated final report. The Commission’s findings suggest that significant changes by government, law enforcement and regulators are poised to stem the flow of what the Commission found to be billions of dollars in laundered money entering the British Columbia economy each year.

The Commission’s work and the Government of British Columbia’s response indicate that British Columbia is poised to play a global leadership role in making anti-money laundering a priority and developing more detailed policy responses.

Below, we highlight some of the Commission’s key recommendations and offer some thoughts on what we hope to see next.

The Commission’s analysis and conclusions

The Commission’s in-depth examination of money laundering is unprecedented. The report is over 1800 pages and contains 101 recommendations. The Commission heard from more than 200 witnesses, including the former premier of British Columbia and several former cabinet ministers, as well as a contingent of experts on global money laundering schemes. The report is the most comprehensive examination of money laundering in Canada. It analyzes money laundering in the context of the real estate, gaming, financial institutions, luxury goods, virtual assets, and corporate, legal, and accounting sectors.

The Commission concluded that although it is not possible to determine a precise figure, the amount of money laundered in British Columbia is “enormous”. Money laundering erodes trust in governance systems and distorts markets. Allowing money laundering allows “those who prey on the most vulnerable in society to continue and even expand their operations and reap the rewards of their unlawful conduct.”

The Commission has found that all relevant actors, including government, regulators and industry, have not given sufficient attention to money laundering. This is consistent with Canada’s ranking in the Basel Anti-Money Laundering Index, which looks at countries’ risk levels, and confirms Canada’s intermediate status and lack of progress in its anti-money laundering efforts. silver. In order to combat the “uncontrolled growth” of money laundering, the Commission found that substantial policy reform, sustained effort and a significant increase in resources were needed.

The governments of British Columbia and Canada each responded to the report with statements outlining their continued commitment to addressing the issues identified by the Commission. The federal government has underlined its intention to establish a new Canadian Financial Crimes Agency, while British Columbia has expressed hope that the federal government will join British Columbia in addressing the problem. This is noteworthy, as the Commission recommended that given the regulatory and enforcement gaps to date and the magnitude of the money laundering problem in British Columbia, the provincial government not wait for the federal reform to act. Therefore, the regulatory reforms introduced by British Columbia for provincially regulated institutions can be expected to pave the way for future federal and provincial regulatory responses.

The main recommendations of the Commission

We highlight the following recommendations, which illustrate important reforms that should be implemented provincially:

  • The creation of an independent Anti-Money Laundering Commissioner to provide ongoing and strategic oversight of money laundering;
  • The creation of a specialized money laundering law enforcement unit to improve intelligence and investigate money laundering;
  • Require police to consider money laundering and proceeds of crime when investigating for-profit criminal activity, and collect evidence in support of criminal and civil asset forfeiture;
  • The introduction of unexplained wealth orders in civil forfeiture proceedings. Unexplained Wealth Orders are used to obtain asset information when the beneficial owner has an alleged connection to organized crime. Such orders have not yet been introduced anywhere in Canada; and
  • Acceleration of the federal government’s planned implementation of the Pan-Canadian Beneficial Ownership Registry by the end of 2023.

The Commission has also called for increased regulation and oversight of the sectors most at risk from money laundering: home and mortgage lending, money services businesses, cryptocurrency, chartered professional accountants and legal services.

Future bulletins will discuss some of the sectoral implications of the report in more detail.

The likely effects of the Commission’s recommendations

The Commission’s findings and recommendations will likely lead to significant changes in how British Columbia and other Canadian jurisdictions combat money laundering. Based on the Commission’s findings, we expect that:

  • The provincial and federal governments will engage in a sustained period of policy development;
  • Sectors most likely to be affected by policy changes include financial services, real estate and certain professional services;
  • Both levels of government will devote increased resources to regulatory and enforcement measures to combat money laundering;
  • Law enforcement and prosecution will focus more on proceeds of crime, money laundering, and criminal and civil asset forfeiture;
  • In line with the Commission’s call for more effective regulation, we foresee an increase in corporate transparency and reporting requirements across a range of sectors, in particular for professionals, financial institutions and others who are important watchdogs in the prevention of money laundering; and
  • Other jurisdictions will likely look to British Columbia’s experience in implementing policy development and reform.

Conclusion

As governments respond to the Commission’s call for effective anti-money laundering regulation and measures, players in vulnerable access control sectors have the opportunity to proactively implement best practices and to review and improve their compliance programs, customer identification and verification, record keeping and reporting systems.

The report is an important step in the fight against the risk of money laundering. It remains to be seen how governments react and the degree of attention they give to these issues as they seek to implement the Commission’s recommendations.

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