I'm finding it hard to make time to write, it's frustrating but the reality is I'm just busy as hell. I am still finding time to read, which is important, and came across two very different but interesting articles this week - they inspired this quick post. Obviously they relate to financial crime and they are in fact opinion pieces on the money laundering situation in, my favourite place, that’s right, Vancouver, Canada. If you don’t know why it's my fave place you can read all about it in my previous posts. The two articles differ widely, in short, one is focusing on the negative Chinese nexus to the money laundering scandals and going on the defensive offensive (1). The other is short but going on the offensive, aiming at the Canadian regulators lack of teeth (2), it's in line with what I’ve been saying about the situation - basically, that there is a lot to fix. Snippets of both below.
Article 1.
“Money laundering has become a conflated term. People frequently move money around from overseas to local accounts. That is not necessarily money laundering. And it is not when the foreigner sells the property. No, the funds were already legitimate when they were received. Legal services and real estate cannot be paid for in hard cash.”
“The investigation fails to grasp a basic understanding of global capital flow, financial regulations, current practices of “know your client”, and anti-money-laundering policies.“
Article 2
“The question we have to ask ourselves is what is the real motive to comply with anti-money laundering legislation in Canada if there is no real punishment for it?”
"Crime is low here — while gun crimes exist, they aren’t prevalent on our streets. We don’t see the results of the crimes that are committed elsewhere where the dirty money is generated — that blood is spilled on foreign streets. When it is that far away, it doesn’t affect votes in Canada.
Guess which one is which?
Read the SCMP article (#1), by one former international banker, with an open mind and you see a side of the argument that makes sense from some acute angles, though it’s missing any reference to the research that might justify it. It’s an emotional response, not what I would call informed, and it’s jumped to a few conclusions. I would say it might reflect an angle that I hadn’t considered but I did consider it and have written about it - the Chinese connection. The author cites jealousy as motivation for the investigations into Chinese buying of luxury real estate - I’m sure that there is jealousy but it’s not the cause of the current movement. As the mention of Chinese offenders and money has been of interest in the case of British Columbias money laundering scandals, this was by no means the only demographic or nation that was caught in the cross-hairs of Peter German and his crack team of investigators in the money laundering reports(3).
It’s the headlines that have bothered the author, and those headlines are obviously sensationalist and have an audience and a goal in mind. To stir the pot, create discussion and argument - they are provocative but the headline might not be reflective of the entire story. So the Chinese connection to crime is often in the headlines in Metro Vancouver, but that’s the way it goes, the locals want someone to blame and the news sites wants click. The important thing is that the the conversation has gone beyond that and changes are being made - there is always a patsy, sometimes the right one and sometimes not. I get that some of the hate and envy is unjustified, but until the Canadian financial system is cleaned up we won’t see that good, honest, old fashioned jealousy that is part of this unjust world we live in. The state of the system allows articles like this to gain traction, and give these often uninformed opinions, some legitimacy.
FINTRAC needs teeth, big, sharp ones!
The other article (#2) from the Vancouver Sun is written by the COO of an AML software provider, he states as I have been, that the problem requires a top down solution, i.e. the regulator/watchdog needs ‘some teeth’ to get it going. There is no mention of the Chinese or China, as that isn’t the primary problem - the problem is that the loud and threatening bark that are the money laundering regulations have no bite! This is the reason that financial crime has become such a prolific issue, the criminals who have taken advantage of it therefore aren’t entirely to blame (you know what I mean).
Well part of the reason I like this short and sharp article is because I share the opinion, fair enough, I’m entitled to that - but what about the right and wrong of it? From the authors personal perspective as a Canadian, he states if it weren’t for the outrage over house prices and the attention brought by it, that nothing would have been done. It took a common denominator that effected real life, that got people involved, to make an impact on the fight against financial crime, one that would resonate across the country and the globe forcing discussion and action.
Always a step behind.
The reality is that there is a lot Chinese money in Canada, and some of it is dirty, just as there is dirty money from all over the world in British Columbia, and Canada, and the reason is that regulation has not been enforced. It’s not all dirty and it’s not all Chinese. Look to London, a lot of adverse media has blamed dirty Russian and just a vast amount Chinese, Indian, Middle Eastern money for the rise in house prices, but it’s not all them, there are other forces in play. In Metro Vancouver there is a large Chinese diaspora and that isn’t because they moved there to launder money. However, once there and settled there may have been those who noticed, and leveraged the strong community connections and exploited the situation enabled by the lack of the required friction from the financial authorities - why wouldn’t they? Criminals are strategists and opportunists, they’d be stupid not too to take advantage of such a lax system. It's been a very one-sided game of chess, and so far the criminals have been playing with all their pawns turned to queens and the authorities/police have been only pawns, underpowered and a good few steps behind.
The numbers show a huge Chinese population in Metro Vancouver(4), so there will be a proportionate connection to crime, while there may be some jealousy involved on the ground level it’s not what has driven this movement against financial crime. If those criminals are allowed to buy Lambos in cash, operate in realms without due diligence and flaunt their ill gotten gains - then that's exactly what the newspapers are going to report on. The former banker, his assumptions and arguments are vague and too generalised, but his opinion will be shared by many I’m sure - and those are people who may not have done their research, responding to choice headlines lead by confirmation bias. These are the kind of people who would find a nonsense way to refute any facts brought forward that oppose their thoughts or beliefs - solid evidence and investigation might never be enough. But saying that, it doesn't mean they are entirely wrong and they are entitled to their opinions.
like the Canadian Watchdog, the [SCMP] article has bark but no bite.
Now what?
As you can tell I’m not particularly impressed with the SCMP opinion piece, I did want this post to be neutral but I didn’t quite manage it - like the Canadian Watchdog, the [SCMP] article has bark but no bite. I think my main issue with that article was that it struck a chord in relation to what I have seen over the years working in compliance roles - that some people in senior management are or have been there to make as much money as possible, and are not really that bothered about where that money is from, or how the illicit funds are generated and the victims left in the wake of heartless crimes for that all powerful buck. It’s mentioned, but glossed over. They may become bothered but the motivation is often to protect their necks from the higher-ups, auditors and regulators.
The reputations of those who have a duty to uphold the law and protect the financial system should be a matter of moral value, but it sometimes becomes a case of - do the minimal required to meet regulatory requirements and/or interpret rules to meet the lowest possible standard, a tick box exercise. There often seems to be an inherent lack of understanding or a lack of desire to want to understand financial crime - when money is involved, ethics devolve. I understand that adhering to financial crime compliance can cause some challenges, and often any efforts that don’t make money are seen as a waste of time (not by all obviously). The rules are sometimes seen as a blocker to making money, not a path towards doing the right thing, and I while I feel this is changing, the culture within certain established businesses, financial institutions and banks has been the way it is for a long time - the change will take and is taking a long time.
We need a new angle of attack, first give the watchdogs teeth, then give the bots the intelligence we need them to have. Those are potential answers to this fight, I believe the real solution lies in zeros and ones, in the realms of the machines. I’m looking into the potential of, and what I want from, the future of artificial intelligence in the fight against financial crime. In the mean time I could do with a neural net cloud interface to help me with my research, like just plug me into the matrix already!
Al.
#moneylaundering #aml #antimoneylaundering #kyc #realestate #financialcrime #luxurycars #crime #narcos #organisedcrime #dirtymoney #thedirtstring #China #Chinese #FINTRAC #regulator #watchdog
Reference, Links and Related Articles.
4. 2019 Vancouver Population stats - http://www.demographia.com/dhi.pdf
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