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SFU
Pubdate: Wed, 28 Feb 2018
Source: Globe and Mail (Canada)
Copyright: 2018 The Globe and Mail Company
Contact: http://www.theglobeandmail.com/
Details: http://www.mapinc.org/media/168
Authors: Andrea Woo and Kathy Tomlinson
Page: A11
LAUNDERING LINKED TO DRUG TRADE A 'STRUCTURAL' ISSUE: SFU CRIMINOLOGIST
Structural changes are required to clamp down on the unregulated
private lending networks that drug traffickers are using to launder
their illicit gains, a Simon Fraser University criminologist says.
A recent Globe and Mail investigation identified people connected to
the local fentanyl trade who are also private lenders, using
Vancouver-area real estate to clean their cash.
Neil Boyd, a criminology professor at SFU, said the complexity of
these private lending networks and similar white-collar crimes make
them notoriously hard to prosecute.
"Sometimes you can uncover it, but to prosecute it, to get the
evidence, to go to court and convince a judge is incredibly
difficult," Prof. Boyd said.
"The resources required to prosecute in this area are really
considerable, in contrast to a lot of the street-level crime that
shows up in our courts. I think the solutions there are at the level
of structure, putting in place systems that make this movement of
money much more accountable."
The Globe investigation identified, for example, Ying Zhang, Zhi Guang
Zhang and Wei Zhang, a trio of private lenders that has issued
millions of dollars in registered mortgages and short-term loans. In
all, The Globe identified 12 private lenders associated with the
illicit drug trade and other crimes.
Just as a bank does, they grant a loan, then register a land title
charge against the borrower's real estate equal to the value of the
debt, plus interest. The charge, which gives them a stake in the real
estate, remains in place until the debt is cleared. If the property is
sold, the loan is paid out from the sale proceeds, in clean money, all
seemingly legal.
Except these financiers are unregulated and unlicensed, and the loans
they grant are in cash likely derived from drug deals or other crimes.
The Zhangs charge interest rates of up to 39.6 per cent, with some
private lenders demanding up to 120 per cent. In the spring of 2016,
police seized from the Zhangs a total of $660,970 in small bills -
with traces of fentanyl and other street drugs - after watching them
conduct business in and around Vancouver.
They were not charged with any crimes, but the money was seized as
proceeds of crime under B.C.'s Civil Forfeiture Act. The Globe has
contacted the Zhangs for comment, but has received no response.
"I don't think there's any doubt that people in law enforcement would
like to act against this kind of predatory conduct, but I think the
problem is structural," Prof. Boyd said. "It's almost like a shadow
economic system that operates: It's not legitimate, but how you
control that system is going to require international co-operation
and, in all likelihood, pretty significant restrictions against
private lending."
Staff-Sergeant Darin Sheppard of the RCMP's Federal Serious and
Organized Crime Synthetic Drug Operations, said while the scale of the
issue is not yet known, it's common for traffickers to look for new
ways to launder cash. A popular newer method is through
cryptocurrencies such as bitcoin.
"Drug trafficking and money laundering go hand in hand, and any method
that organized crime can find to legitimize their money, they'll
likely take," Staff-Sgt. Sheppard said. "[Private lending] is just
another example."
While people such as the Zhangs may be on police radar for an apparent
connection to the local fentanyl trade, Staff-Sgt. Sheppard said the
difficulty lies in drawing a direct line that would result in a conviction.
"Some of the anonymity factors that go along with all the ways that
money is laundered pose challenges, as is trying to draw that line
from Point A to Point B when money is being filtered, or layered,
through the community," he said.
Staff-Sgt. Sheppard said regulatory changes, such as stronger
reporting requirements from all financial institutions, including
private lenders, would help in investigating and prosecuting these
crimes.
Attorney-General David Eby called the findings of The Globe's
investigation "very serious and deeply troubling," and said Mr.
German's review - expected to be complete by the end of March - will
be informed by its revelations.
When asked why the lenders identified by The Globe have not been
charged, Mr. Eby said police are "very engaged" in an "active
investigation."
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