Bags of cash, luxury car export scheme described in B.C. money laundering

VICTORIA _ An independent report suggests organized criminals are laundering money through British Columbia’s luxury car sector and some are even receiving tax rebates from the province for the transactions.

The B.C. government tasked former RCMP deputy commissioner Peter German in September to identify potential links between criminal enterprises and real estate, horse racing and luxury vehicle industries.

Attorney General David Eby called the findings released Tuesday “disturbing confirmation” that money laundering is a problem in B.C. that goes beyond the previously identified channel of casinos.

“In the luxury car market, there is no financial reporting of large cash purchases, no oversight of international bank wire transfers and no apparent investigation or enforcement,” he said.

“It’s a recipe for exactly what’s happened here: Vancouver becoming North America’s luxury car capital generally, and perhaps since 2013, claiming North America’s luxury car export capital title as well.”

In addition to gathering accounts of luxury car sales of up to $240,000 paid for with bags of cash, German uncovered a “huge” and complicated luxury-vehicle export scheme involving hundreds of so-called “straw buyers” in the grey market.

Many of the straw buyers appear to be foreign students hired to purchase a car in Canada that will almost immediately be exported and re-sold in China, where dealerships charge more due to the tax structure and soaring demand. The role of a straw buyer is to insulate the true purchasers from contact with the seller, the report says.

The purchasers pay provincial sales tax when they buy the car but apply for a refund when it’s exported and the practice has grown exponentially, costing the province almost $85 million since 2013, Eby said.

Before 2014, fewer than 100 vehicles a year received the refund. In 2016, the provincial sales tax was rebated on 3,674 vehicles and the surge in applications required the Finance Ministry to hire more staff, the report says.

The source and destination of the tax refunds and any income tax reporting from these individuals or entities is unknown, but the conditions are ideal for money laundering, the report says.

It’s an unregulated grey market, with little know about the people or companies involved and where the money comes from, the report says.

“It provides a wonderful opportunity for large-scale money laundering, with very little chance of detection.”

It’s impossible to put a dollar figure on the amount being laundered through the luxury car sector, German said.

Eby said he was shocked to hear about the refunds and the government is moving quickly to address the issue.

“We have not waited to take action on this report.”

The Finance Ministry is reviewing the tax rebate program and details of allegations made in the report have been forwarded to police, the Insurance Corporation of B.C., and the Vehicle Sales Authority. The province is also preparing plans for regulation of the luxury car sector.

The apparent growth in luxury car money laundering has coincided with other potential criminal activity and problems in the market, Eby said.

“I note the remarkable correlation between the timing of the exponential expansion of this grey market export scheme, the exponential growth of suspicious cash transactions at B.C. casinos and the exponential real estate price ramp up on the Lower Mainland,” he said.

The report also found vulnerabilities in the horse racing sector with a lack of financial reporting requirements but no excessive issues related to money laundering.

The report is one of two commissioned by the province in September amid what the government said was “widespread concern about B.C.’s reputation as a haven for money laundering.”

German was asked to look further into the problem after he concluded a review last June on money laundering in Lower Mainland casinos.

Another report by an expert panel on money laundering recommends rule changes that would close loopholes in the real estate market and increase transparency around who owns property in B.C.

Eby said that report, along with German’s findings about the real estate sector, should be released in the coming days.

In an entirely separate report also released Tuesday, the C.D. Howe Institute estimates Canada fails to catch money launderers 99.9 per cent of the time.

The institute says in a news release that the protections against money laundering in Canada are among the weakest of Western liberal democracies.

“While it is impossible to estimate the exact amount of money laundering, a realistic estimate of the magnitude of dirty money laundered in Canada each year likely lies in range of $100 – $130 billion,” report author Kevin Comeau says in the statement.

Nearly 1 in 3 surveyed Canadians report having been victimized by financial fraudsters

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Benefits fraud is a real crime with real consequences

As part of Fraud Prevention Month this March, the life and health insurance industry is supporting Canadians in the fight against workplace benefits fraud. The Canadian Life and Health Insurance Association (CLHIA) is raising consumer education and awareness around health and dental benefits fraud through the Fraud=Fraud campaign.

Each year, insurance companies lose hundreds of millions of dollars to fraudulent health and dental claims. This fraud costs all Canadians through higher premiums, but can also result in serious criminal consequences. The CLHIA’s goal during Fraud Prevention Month is to help Canadians recognize fraud, understand how to avoid becoming involved in fraudulent activities, and increase awareness that fraud is a crime with real consequences. Resources to identify and report benefits fraud are available at the Fraud=Fraud website at fraudisfraud.ca

“Benefits fraud is becoming more widespread, in part because, as we’ve found in our research, many don’t understand that it is a crime,” notes Stephen Frank, President and CEO of the CLHIA. “Most people think, if you are caught, you would just repay the money. In fact, the consequences are bigger than that and can include the loss of your job and in some cases, ending up with a criminal record and jail time.”

Benefits fraud occurs when an individual intentionally submits false or misleading information about the health or dental benefits they received under their employer’s benefit plan. According to a survey conducted by Environics Research for the CLHIA, 75 per cent of Canadians incorrectly believe that the only punishment for benefits fraud is having to pay higher premiums, or be forced to reimburse claim payments.

Although there have been some cases where individuals did not understand that they were engaging in fraud, the industry is increasingly seeing evidence of organized crime, or unscrupulous service providers getting involved and reassuring their victims that what they are doing is normal or that they are entitled to the money.

“We are seeing more of these sophisticated schemes. In cases where we identify these larger frauds, companies may have to lay off large numbers of staff in response. This can have a huge negative impact on employers. That is one reason why we believe this Fraud=Fraud campaign is both timely and necessary,” added Mr. Frank.

About the CLHIA

The CLHIA is a voluntary association whose member companies account for 99 per cent of Canada’s life and health insurance business. The industry provides a wide range of financial security products such as life insurance, annuities (including RRSPs, RRIFs and pensions) and supplementary health insurance to more than 29 million Canadians. It also holds over $860 billion in assets in Canada and employs more than 155,000 Canadians.

SOURCE Canadian Life and Health Insurance Association Inc.

Police in Lethbridge, Alta., say senior lost $250K in sweepstakes scam

LETHBRIDGE, Alta. _ Authorities in southern Alberta are warning people to be aware after an 81-year-old senior was defrauded of $250,000 in a sweepstakes scam.

Police in Lethbridge say they were contacted last week by the woman’s son, who said his mother had been persuaded by scammers to send large sums of money _ mainly in the form of bank drafts _ almost weekly since last March.

She had been told she needed to send the money to cover taxes and insurance so she could claim a cash prize she had won.

Investigators have determined the senior initially received a letter purporting to be from the Bank of America and indicating that she had won a U.S. sweepstakes.

She believed the letter was authentic and over the next 10 months dealt with numerous scammers on the phone.

They continued to press her for payments and to provide her personal and banking information.

Police say the woman received hundreds of phone calls from the scammers, who in mid-January began to indicate they were from the Canada Revenue Agency and said that she now owed Canadian taxes.

“These types of scams are unfortunately very common and the criminals behind them can be very convincing,” Sgt. Paolo Magliocco of the economic crimes unit said in a release Monday.

The Better Business Bureau says that almost 500,000 people in Canada and the United States have reported being the victims of sweepstakes, lottery or prize scams in the last three years.

“It’s critical for people of all ages to be vigilant and understand that if something sounds too good to be true, it is,” Magliocco said.

BCSC alleges $47 million investment fraud by insurance group’s top officers

The British Columbia Securities Commission (BCSC) has issued a notice of hearing alleging that three leaders of a once fast-growing insurance group committed fraud by getting hundreds of people to purchase unsecured loan agreements.

The BCSC alleges that Aik Guan “Frankie” Lim and Scott Thomas Low, the directors and founders of FS Financial Strategies Inc. and related companies in the FS insurance group, dishonestly raised over $47 million between 2012 and 2017 by failing to disclose to investors that the company wasn’t profitable, its financial situation was deteriorating, and it survived by raising money from investors to cover its expenses.

The notice says that Darrell Wayne Wiebe, the company’s general manager, was aware of the FS insurance group’s true financial condition and contributed to the fraud by routinely advising Lim and Low how much the company needed to raise from investors to stay afloat.

The BCSC says investors were promised interest payments of 10 per cent to 12 per cent, payable monthly. Lim and Low “created an illusion of profitability” by opening new offices in rapid succession; donating money to charities; telling customers that they planned to take the insurance group public; and hosting parties for clients and staff at expensive hotels.

The notice of hearing names six additional people – Chun Ying “Jim” PanChung-Sheng “Johnson” KaoGeorge LayGagan Deep BachraChi Kay “Dixon” Wong and Meng Cher “Philip” Tsai who were appointed by Lim and Low as directors of related companies in the FS insurance group that also sold the unsecured loans. The related companies are alleged to have sold securities without a prospectus and without being registered to do so.

The BCSC alleges that Lim and Low, in addition to committing fraud, selling securities without a prospectus and selling securities without being registered, also violated the B.C. Securities Act by continuing to trade and sell securities after making a legal promise to the BCSC’s executive director, in 2014, that they would stop.

A hearing on the matter will be held Dec. 4, 2018 at 9:00 a.m., which all of the individuals named in the notice, or their counsel, have been invited to attend.

The notice of hearing can be viewed on the BCSC’s website, www.bcsc.bc.ca, by typing the names of any of the respondents or 2018 BCSECCOM 330 in the search box. Information about disciplinary proceedings can be found in the Enforcement section of the BCSC website.

Please visit the Canadian Securities Administrators’ (CSA) Disciplined List for information relating to persons and companies disciplined by provincial securities regulators, the Investment Industry Regulatory Organization of Canada(IIROC) and the Mutual Fund Dealers Association of Canada (MFDA).

About the British Columbia Securities Commission (www.bcsc.bc.ca)

The British Columbia Securities Commission is the independent provincial government agency responsible for regulating capital markets in British Columbia through the administration of the Securities Act. Our mission is to protect and promote the public interest by fostering:

  • A securities market that is fair and warrants public confidence
  • A dynamic and competitive securities industry that provides investment opportunities and access to capital

Learn how to protect yourself and become a more informed investor at www.investright.org

SOURCE British Columbia Securities Commission

CONSUMER WARNING – Allegations of Forgery, Odometer Tampering, Fraudulent Vehicle Transfers & Illegal Sales

Allegations of forgery, odometer tampering, fraudulent vehicle transfers and illegal sales has resulted in the IMMEDIATE SUSPENSION of KK Motors Canada Inc., 6295 Mississauga Rd, Unit 215A, Mississauga, and of Kajendran Kasippillai, KK’s sole officer and director, by Ontario’s regulator of vehicle sales, OMVIC. As a result, KK Motors Canada Inc. and Kasippillai may not legally sell, lease, buy or consign vehicles.

OMVIC found the dealer purchased insurance write-offs from salvage auctions. These vehicles were repaired and sold to consumers, often not by KK Motors directly, but rather by unregistered businesses or individuals working for, or with, the dealer. “OMVIC believes that in order to distance themselves from these vehicles, KK Motors Canada Inc. forged documents and fraudulently transferred these vehicles into the names of past customers, prior to making the vehicles available for sale by the unregistered businesses and individuals, ” states John Carmichael, OMVIC CEO and Interim Registrar. “Most purchasers didn’t know about KK Motors; they thought they were buying the vehicles privately.”

Of 13 vehicles OMVIC investigated, six appeared to have rolled-back odometers. One, a 2007 Honda Odyssey was sold in June by one of KK Motors’ associated sellers with an odometer reading of 141,411 kms; four months earlier the mileage for the Odyssey was reported as 335,230 kms. “OMVIC is alleging the fraudulent manipulation of odometers was done by, or on behalf of, KK Motors Inc.,” explained Carmichael.

An investigation of the unregistered businesses and individuals who actually sold the vehicles is ongoing.

Dealer’s Past-History

KK Motors Canada Inc. and Kajendran Kasippillai have a past history of non-compliance: in 2012 the dealer was found in breach of the Motor Vehicle Dealers Act and fined $1,500 for advertising a vehicle without disclosing in the ad that it had been placed by a registered dealer.  Additionally, the dealer was found to be in breach of OMVIC’s Code of Ethics and fined $5,000 in 2014 for failing to properly disclose material facts related to the past use, history and condition of vehicles it sold, including significant accident repair histories.

Immediate Suspensions

OMVIC only issues an immediate suspension order when the regulator believes a dealer’s conduct may place the car-buying public at risk. Note: a dealer may appeal an Immediate Suspension Order and a hearing will be held within 15 days before the Licence Appeal Tribunal (LAT). The Tribunal will determine if the order should be extended until a final determination is made regarding the associated Proposal to Revoke Registration.

Advice to Past Customers of KK Motors Canada Inc.

OMVIC encourages consumers who have previously purchased from KK Motors Canada Inc. or Kajendran Kasippillai to have their vehicle inspected by an independent mechanic for problems not disclosed by the dealer/salesperson. Consumers should also consider purchasing a Used Vehicle Information Package (UVIP) available from ServiceOntario, or a CARPROOF/CARFAX Canada Vehicle History Report to check odometer histories.

OMVIC also encourages previous KK Motors Canada Inc.’s customers to run a credit check to ensure that their name/identity was not used fraudulently, and to visit any ServiceOntario location to purchase a ‘personal history’ report of all vehicles that have been registered to them. This is sometimes referred to as a personal RIN search. The cost is $12.

CONSUMERS ARE WARNED not to buy or lease vehicles from, or sell or consign vehicles to, KK Motors Canada Inc. or Kajendran Kasippillai while the dealer’s registration is suspended. Consumers who trade with an unregistered business or individual are not protected by the Motor Vehicle Dealers Compensation Fund.

Consumers with questions or concerns should contact OMVIC’s Complaints and Inquiries Team at: 1-800-943-6002×3942.

About OMVIC Registration
Ontario’s Motor Vehicle Dealers Act (MVDA) requires all dealers and salespeople be registered with OMVIC. Unregistered selling (curbsiding) is a serious offence: individuals convicted of curbsiding can be fined $50,000 and/or be jailed for up to two years less a day.

About OMVIC
OMVIC (Ontario Motor Vehicle Industry Council) administers and enforces the Motor Vehicle Dealers Act (MVDA) on behalf of the Ministry of Government and Consumer Services. OMVIC maintains a fair and informed vehicle sales marketplace by regulating dealers and salespersons, regularly inspecting Ontario’s 8,000 dealerships and 27,900 salespeople, maintaining a complaint line for consumers and conducting investigations and prosecutions (or discipline proceedings) of industry misconduct and illegal sales (curbsiding). OMVIC also administers the Motor Vehicle Dealers Compensation Fund on behalf of its Board of Trustees.

About the Motor Vehicle Dealers Compensation Fund

The Motor Vehicle Dealers Compensation Fund is funded by Ontario’s registered motor vehicle dealers and provides compensation to consumers who have a valid claim against an Ontario-registered dealer. Qualifying consumers may be eligible to receive up to $45,000 for each valid claim to the Compensation Fund. Since its inception on July 1, 1986, the Compensation Fund has paid out more than $5 million to consumers.

SOURCE Ontario Motor Vehicle Industry Council (OMVIC)

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