Canada-China Relations Committee on June 7th, 2021

[Dr. Peter M. German, Q.C.]

On one level, decriminalizing is a good thing, because if you don't decriminalize, it just continues anyway, but in the grey market. By decriminalizing it, by placing regulations around it, at least government gets control of this beast that's out there, and that people want, so to speak. It would also presumably provide revenue for government. It stands to reason that you have to have an appropriate regulatory structure, or in this case, that the provinces have to have an appropriate regulatory structure to deal with it.

I have not read the bill, so I don't know the details of what's being proposed, but in general terms, I favour sports betting becoming legal, so to speak, getting out of the grey market, and having proper regulatory control around it.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Canada has been listed in the State Department's reports, as well as in other reports, as being a laggard on money laundering, and has also been criticized for its opacity around beneficial ownership.

What measures should be put in place by the Government of Canada and the provinces to move us from being laggards in this area to being world leaders?

[Dr. Peter M. German, Q.C.]

I'll deal with the second part of it first.

In terms of beneficial ownership, we always have to keep in mind that there are two aspects to it. There's beneficial ownership of corporations and there's beneficial ownership of land. Land being a provincial responsibility, it falls to the provinces to deal with that. British Columbia now is the first province to create a beneficial ownership registry for land. We will hopefully find the ultimate beneficial owner of all the land in our province.

Unfortunately, or fortunately, if we are looking at beneficial ownership of corporations, that has to come from the federal government. We know the federal government has made an announcement that it's looking at a federal beneficial ownership registry for corporations, I believe, in 2025, simply because you can incorporate both provincially and nationally.

Somehow you have to bring this together. I certainly favour beneficial ownership registries for both land and corporations. The important thing, however, is.... There are a number of factors, but without belabouring it, there are two important factors that I see. The first is “garbage in, garbage out”. You have to make sure there is some verification of what is going in or else it's worthless. There has to be a bit of a checking process—

[The Chair, Liberal, Geoff Regan]

Thank you, Mr. German. I'm sorry, but I have to interrupt, because Mr. Chong's time is up.

We'll go on now to Mr. Fragiskatos, please, for six minutes.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you, Chair.

Thank you, Mr. German, for your work, sir.

Is there a figure that exists for the amount of money that is laundered in Canada on an annual basis? I know that you're on record as saying that it's not possible to determine a figure, so I guess I have an answer in one sense, but can you perhaps tell us why it's difficult to arrive at an estimate?

[Dr. Peter M. German, Q.C.]

Right.

The Cullen commission currently under way in British Columbia is attempting to do that, I think, so it will be interesting to see what their report says. Many people have tried. I'm not an economist and I'm not accountant, so I don't try. For one thing, there are so many different factors involved. It's not as if all of this data is transparent. Drug-trafficking organizations don't tell you. They don't supply financial statements.

We generally rely on the IMF and the World Bank, which estimates the percentage of GNP that is related to illegality, to criminal activity. I believe the figure is somewhere in the area of 3% to 5%. You also have to consider that we have not the grey market, and it quickly gets meshed in with criminal money, so it's an underground economy.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you, sir.

Mr. Chair, I think I have two minutes left, if that's correct.

[The Chair, Liberal, Geoff Regan]

You have a total of six, unless you're sharing your time.

[Peter Fragiskatos, Liberal, London North Centre, ON]

I was going to share my time. I thought you were aware. My apologies. I'll be sharing my time with Ms. Yip. In any case, I think I have about a minute and a half left, so I'll ask quickly.

Mr. German, you're also on record saying this. I'll read the quote: “Thousands of families have lost sons or daughters due to opioids, fentanyl, heroin, cocaine. That's why this is important.”

Can you shed some light on the personal issues at stake for families in this issue of money laundering?

[Dr. Peter M. German, Q.C.]

Yes. Thank you, sir. I appreciate that.

I think people looked at money laundering as an abstract concept for quite some time. I'll speak about British Columbia. I think the “Dirty Money” report, the work the attorney general did here, and now the Cullen commission have made people realize that money laundering is the back office of organized crime. Organized crime exists to make money, and money laundering is the process by which they cleanse their money and get to use it.

If money laundering is the back office of organized crime, what does organized crime do? What commodities do they deal in? Illegal drugs.... If you look at downtown Vancouver, you see fentanyl. We are losing more people as a result of fentanyl deaths than we are from COVID—five a day here in Vancouver—and I know that we are losing people elsewhere in the country as well. That's the connection there. This is about organized crime. This is about making money from illegality of one sort or another, including drug trafficking, and people die as a result.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you.

I'll turn it over to Ms. Yip.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

Thank you.

Last year, you were quoted in Pivot magazine as saying, “All the things that make Canada a wonderful place to live also make it desirable for organized crime.”

There are some items on the list, but I want to focus on the large ethnic diasporas. Can you elaborate on this point and how it helps to facilitate organized crime and how we can best insulate our ethnic communities from criminal activity?

[Dr. Peter M. German, Q.C.]

Right. Every community.... I'll refer to “Caucasian” as an ethnic diaspora, because I am Caucasian. Every diaspora tends to have its own organized crime. It's a percentage. No country is without crime. Let's put it that way.

I look at the Caucasian community, and I look at outlaw motorcycle gangs, which are predominantly Caucasian. Who do they prey on? They tend to prey on people within their own community. If you were to translate that to the Vietnamese community, Vietnamese organized crime will primarily target residents of the Vietnamese community. Why? It's language, culture and those sorts of things—it's easier.

What we find with organized crime these days is that alliances are taking place all the time. As I mentioned in my opening statement, we now find that you will have gangs from different backgrounds that work together. The outlaw motorcycle gangs will work with Iranian organized crime and with Asian organized crime and so forth. This is not about one ethnicity. I think it's very important to point that out. That's why I always talk about outlaw motorcycle gangs as the example I prefer.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

Are there any agencies that could help specific communities? You mentioned the [Technical difficulty—Editor] you know that there are resources out there, or at least somebody that has some cultural competencies, for example. Maybe you could [Technical difficulty—Editor]

[Dr. Peter M. German, Q.C.]

Right now in greater Vancouver, we're seeing a lot of murders. In the South Asian community, it's gang murders. There's a real issue there. Ninety-nine per cent of the people in the South Asian community are wonderful individuals. You have that 1% who have gotten themselves involved in gang activity. They happen to be very young people, too. One would hope that the South Asian community could work within itself to help, but that's also the role of law enforcement and community policing. That's what it's all about. It's about having police officers who reflect the communities and who are able to work in the communities on a preventive level so that it's not just about enforcement.

I think there are a lot of different potential tools there that the community can use.

[The Chair, Liberal, Geoff Regan]

Thank you very much, Ms. Yip.

We now go to Mr. Bergeron for six minutes.

[Stéphane Bergeron, Bloc, Montarville, QC]

Mr. German, thank you for being with us so late in the evening. You mentioned that we were working late, but so are you, and I thank you.

You said in your opening statement that the People's Republic of China does not go easy on domestic organized crime. In the first “Dirty Money” report, you talk mainly about Mexican organized crime groups and little about Chinese organized crime groups such as the Big Circle Boys, 14K and Sun Yee On.

Given the extensive control wielded by the Government of the People's Republic of China in just about every sphere of Chinese life, how is it possible that these organized crime groups operating abroad, for instance, in Canada, are beyond the reach of the Chinese government?

In other words, do you think it's possible that the People's Republic of China is using these groups to destabilize western democracies?

[Dr. Peter M. German, Q.C.]

Thank you for the questions, sir.

I suppose anything is possible. We're really talking about their state-sponsored or state-supported organized crime. I don't have evidence of that, so I can't say if that occurs or doesn't occur.

I should also point out that my reports were not fault-finding exercises. They weren't intended to point the finger at a particular individual. That is more the role of the Cullen commission, which is under way right now. I was asked to find out what is going in our casinos.

Clearly, the Big Circle Boys have played a role for some time, as have the triads. Yes, there's a long history in China of triads and there's the issue of the extent to which they have been allowed to exist. What their role is internationally and what relationship they may have with the Chinese government, I cannot say. It would be total conjecture on my part.

[Stéphane Bergeron, Bloc, Montarville, QC]

What would you say about the role they play in organized crime in Canada?

You said your report dealt with what was happening in casinos.

Do those groups play a role in casinos, from what you observed?

[Dr. Peter M. German, Q.C.]

I'm sorry, sir. Is there a role for whom to play in the casinos?

[Stéphane Bergeron, Bloc, Montarville, QC]

I am talking about Chinese organized crime groups.

[Dr. Peter M. German, Q.C.]

Yes, I see.

There's no question that organized crime has been in the casinos in British Columbia. Primarily, the persons involved were of Asian ethnicity. I can't answer whether they are Canadian citizens, permanent residents or visitors.

In terms of a lot of the “whale gamblers”—a term used to refer to those with a lot of money—there's no reason to believe that those who did come over were themselves actually involved in criminality. They just wanted to get money out of China.

We do know that we've had loansharking going on in, I'll say, the Asian community in Richmond and near the casinos for many years. Loan sharks have been murdered. It's an example of that issue I spoke about earlier. We do know that certain things were happening in various diasporas.

Organized crime has definitely been at work in the casinos.

[Stéphane Bergeron, Bloc, Montarville, QC]

What more can you tell us about the process you referred to, in your opening statement, as the Vancouver model?

[Dr. Peter M. German, Q.C.]

“The Vancouver model” is actually a term that a professor in Australia, John Langdale, an Asian crime expert, coined. He was in Australia looking at what was taking place between Vancouver and China, and he could actually see this relationship I described of money leaving China and people arriving here, of money avoiding currency controls in China and somehow getting out of China. In fact, what was happening through the underground bankers was that people were depositing money with an underground banker in China; then they would fly to Canada and be given a bag of cash. The bag of cash tended to be dirty money, money that was evading taxes or underground economy money.

He saw that from a distance and coined it “the Vancouver model”. His view was that the underground bankers at both ends were getting a cut, because anyone doing money laundering will take a percentage. This one organization is actually getting a percentage of the money leaving China and a percentage of the money being laundered here in Vancouver, so it's clipping the ticket at both ends.

That is what is referred to as the Vancouver model. I came upon that through open source material, and it ended up in my report.

[Stéphane Bergeron, Bloc, Montarville, QC]

How did Canadian authorities respond to the practice?