Features | From Pivot Magazine

Putting an end to B.C.’s money laundering problems

B.C. auditor general Carol Bellringer on fighting corruption and dirty money in her home province

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Carol Bellringer standing in alley way with arms crossedCarol Bellringer (Troy Moth)

At a conference in 2017, an Australian criminologist coined the term “Vancouver Model” to refer to an illicit flow of money across the Pacific Ocean. It goes like this: criminals profit from the sale of opioids, like fentanyl, that are produced in China and sold in North America. They then, with the help of Asian tourists and immigrants, circumvent Chinese capital controls and launder the proceeds by making large bets in B.C. casinos, or by buying real estate and luxury goods. Peter German, a former deputy commissioner of the RCMP, wrote a damning report on the problem—focused on casinos—early last year. He is working on a second report examining real estate, luxury cars and horse racing. One highly interested observer is the province’s auditor general, Carol Bellringer, who served on an international task force on combatting corruption. Here, she shares her take on this, and other issues, with Pivot’s Michael McCullough.

In addition to your duties as auditor general of B.C., you’ve been on the board of the International Federation of Accountants (IFAC) and other bodies focused on fighting international corruption. Can you tell me about that?
Carol Bellringer: I was nominated by CPA Canada and sat on the IFAC board for the last six years. I just ended my term with them. IFAC serves the public interest internationally, strengthening the accounting profession, and it also has a mission to contribute to the development of strong international economies—so something quite consistent with my day job.

For many years we’ve been communicating to the G20 about matters that are of particular interest to IFAC, everything from introducing international standards for audit assurance and accounting, to public sector management. As part of that, IFAC participated on a “B20” committee—the B stands for business—that was an advisory committee to the G20. I helped IFAC with one of the task forces of the B20, working on anti-corruption. We also moved, as IFAC, from being at the task force meeting, to being what’s called a network partner.

Is this an area that you had built up expertise in over the years?
CB: To a degree, yes. As auditor general, we do two types of work in Canada: we do financial statement audit work, which is the same type of work as a private sector firm would do, and we also do performance audits. Performance audits can be operational, to look at how well an organization is performing, but they can also touch on things that can become fraud-related. When I was auditor general in Manitoba, before I was here in B.C., we did quite a lot of forensic accounting-type fraud investigations, as well as performance audits.

What’s your perspective on the headlines we’ve seen in B.C. around money laundering and the so-called Vancouver Model?
CB: When I started hearing about it, I wondered what work our office had done. In 2005, the office issued a report: “Keeping the Decks Clean: Managing Gaming Integrity Risks in Casinos.” It was quite a comprehensive review of what was going on in the casinos and brought a number of risks to the attention of the legislature. Our reports go directly through the Speaker to the members of the legislature and the public. The organization we audit is then required to answer to the Public Accounts Committee of the legislature,and provide information as to how they’ve addressed any of the concerns that we’ve raised.

So that was an issue that we brought forward in 2005, and [B.C. Lottery Corp.] would have made a presentation to the Public Accounts Committee since then. While there were reports to the legislature that the risks had been addressed, it’s rather clear that that’s not been the case—certainly not fully.

Some think the Vancouver Model actually appeals to various political constituencies in that it explains several of the province’s ills at once: the opioid crisis, the astronomical cost of housing, gang violence. Is it almost too perfect a conspiracy theory?
CB: Yes, it is too perfect a conspiracy theory. Every single one of those issues has multiple dimensions. I mean, the opioid crisis, for example—it’s a complex issue. It involves mental health services. It involves vulnerable populations. A few years ago, there was a commission of inquiry into missing and murdered women in British Columbia. We took a look and wrote a report in 2016 on the progress the province had made on some of the key recommendations. So every single issue’s got multiple dimensions.

Looking at some steps that have been taken so far—for example, there are now requirements for high-stakes casino gamblers to disclose their source of funds—will they go a ways to addressing the issue?
CB: I’m a big believer in transparency, so I would say more reporting will definitely contribute to part of the solution. When I was involved with the IFAC task force, I became more aware of some of the work of Transparency International, which does regular reporting on global corruption. One of the recommendations of the task force was to require, internationally, a beneficial ownership system, where you could find out who are the actual owners of various assets, like real estate, or who’s transacting and spending money in large amounts. It is part of the battle against corruption, to have that kind of transparency.

Has that been implemented effectively in other jurisdictions?
CB: It’s been implemented in other jurisdictions. I’d say there are some limitations to its effectiveness, in particular that there’s no global communication of some of those systems—you can obtain [the information] in one jurisdiction but it is not necessarily available somewhere else. In a Transparency International report, Canada unfortunately ranked quite low on the adoption scale and therefore we rate quite low on how well we’re battling corruption. However, the steps that B.C. has taken and recent action by the federal government are definitely moving things in the right direction.

The money-laundering problem obviously goes far beyond B.C. and even Canada. How much can one province do to stop it?
CB: Let me come at it from another direction. I’d say that there’s a certain complacency in Canada: the idea that we’re a developed nation, we’re in the G7, we don’t have a problem. I don’t think that’s the case. We can’t control everything that everybody else is doing but we can control what we’re doing here. That can only be a positive. I feel the same way about [corruption] as I do about climate change: “Well, what’s the point of putting a drink bottle into the recycling bin if I’m not going to make a difference?” But if we all thought that way, nothing would ever improve. There is definitely something that can be done locally that will have a global impact.

An IFAC study, “The Accountancy Profession—­Playing a Positive Role in Tackling Corruption,” reinforces the role professional accountants play worldwide in fighting corruption. How specifically do they help?
CB: It’s a good study, and filled with examples of the crucial role that professional accountants play. First, they are a key part of the governance architecture that serves to tackle corruption; their contribution is amplified where the rest of the architecture is strong. Second, there is a strong link, from research, between the percentage of professional accountants in the workforce and more favourable scores on main global measures of corruption. And third, there are core qualities that make accountancy a global profession: a robust international ethics code, comprehensive educational requirements, and ongoing monitoring and oversight mechanisms are what enable us to help.

Battling corruption must require a lot of collaboration, though. Who else has a significant role to play?
CB: The complex and interconnected world means that we must work collaboratively with the other players. Regulators, members of governing bodies, government and elected officials, as well as other professions, all play a part in what IFAC identifies as the governance architecture. IFAC signed a joint statement with the legal profession in 2016 ahead of the Anti-Corruption Summit in London deploring corruption. And when our members identify fraud and corruption, they need to speak out within an ethical governance framework. We need confidence that when we speak out, those responsible for fixing the problem will take appropriate action. And anyone in the organization who suspects or identifies wrongdoing needs clarity about what steps they should take, and know they are protected as whistle-blowers.

How does your experience with IFAC help you with your role here in Canada?
CB: I have to admit that I didn’t know as much about the global profession before I joined the IFAC board as I do now. I have a greater appreciation for diversity, especially in terms of how people with different views of the world can come together and agree on basic principles. My work with IFAC for the B20 has reminded me that even though we live in a developed country that is well respected globally, we cannot be complacent. The world is changing rapidly around us, we have to stay ahead of those changes—and there is more that Canada can do to fight corruption.

What’s the federal government doing?

Anti-money laundering efforts have taken on new urgency in the federal government as well. Over the spring and summer of 2018, the House of Commons Standing Committee on Finance held hearings and fact-finding tours as part of its statutory review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. In November the Finance Committee released a report containing 32 recommendations to government.

First and foremost, it recommends working with provinces and territories to create a nationwide beneficial ownership registry for all individuals and entities who control 25 per cent or more of a corporation or entity. The registry should be accessible only to law enforcement agencies, FINTRAC (the Financial Transactions and Reports Analysis Centre of Canada), the Canada Revenue Agency and other authorities, though the NDP members of the committee, in a dissenting opinion, recommended it be made public.

The committee also advised that reporting requirements under the Act be expanded at casinos, in the real estate sector and in the luxury goods sector.

The Finance Department has also been consulting and considering updates to the Act. In October, the government also introduced a bill that would update the Canada Business Corporations Act with respect to beneficial ownership disclosure.