Dirty water: Fisheries on West Coast may be vulnerable to money laundering

The lack of transparency about who owns or controls commercial fishing licences, quota and vessels in Canada makes them attractive targets for criminals looking to launder money.

That warning was issued by lawyer and former RCMP deputy commissioner Peter German in testimony at a House committee meeting this week.

German — who authored two explosive “Dirty Money” reports for the B.C. government detailing the depth of money laundering in the province — spoke to the Standing Committee of Fisheries and Oceans (FOPO) as part of its ongoing investigation into foreign ownership and corporate concentration of fishing licences and quota.

German stressed his expertise lies in scrutinizing money laundering, organized crime and corruption, not fisheries policy.

However, he noted the lack of transparency and the federal government’s marginal understanding of who owns or controls West Coast fishing licences and quota are red flags that have been raised at FOPO repeatedly.

Additionally, in B.C. there are no apparent conditions on ownership of licences or quota, which control access to Canadian fisheries, German said.

“When you don’t have a transparent ownership system, in which the public is able to see who the ultimate, beneficial owners are of fishing licences and quotas, you are vulnerable to the involvement of [foreign] state actors, organized crime and money launderers,” German told the committee.

The purchase and sale of West Coast fishing licences and quota were flagged by the province as points for investigation during German’s second report on money laundering in 2019, which highlighted the use of luxury cars and real estate transactions to wash illicit money, he said.

“It is worth noting that the linkage between fisheries, organized crime and money laundering is a subject which has been studied internationally, including by the UN Office on Drugs and Crime,” German told FOPO. Criminality tied to the fishing industry hasn’t been a focus of major investigation in B.C., according to the 2019 Dirty Money report.

However, the high degree of concentration of ownership of West Coast fisheries licences and quota — a set share of allowable catch — revealed during research for the report was “alarming,” German said. As was the degree of ownership by foreign entities and non-citizens.

The top four “visible” owners of quota in the groundfish trawl, halibut and sablefish fisheries are foreign entities or individuals who don’t work the deck of fishing boats but own up to half of the B.C.’s quota for those species, the report concluded. Its findings were based on interviews and data from Ecotrust, a public policy group focused on the well-being of rural communities that also presented to FOPO earlier in May.

Owners of commercial fishing licences in B.C. are listed in a registry but often as numbered companies, which makes determining who owns or controls the licence difficult, the report said.

This protects licence-holders from public scrutiny. On the Pacific coast, there are also no citizenship or residential conditions or vetting of the buyers or the money used to purchase licences, quota or even fishing boats (which can all value into millions of dollars).

Money-laundering concerns aren’t as prevalent on the East Coast because the federal government has regulations that limit ownership of commercial licences to local fish harvesters who operate their vessels, German said.

As a result of B.C.’s money-laundering investigations, the province has created a landowner transparency registry to curb money laundering in real estate, German noted. The federal government is also in the process of developing a public corporate ownership registry to tackle money laundering, tax evasion and prevent the funding of terrorist groups.

“The same should apply to the fisheries,” German stressed.

“We cannot simply allow our fisheries to be sold to unknown persons using unsourced funds.”

Establishing laws or mechanisms to prevent money laundering will be ineffective unless dedicated staff and funds are also deployed, he added.

“It's a case of having enforcement agencies that are resourced and enabled and prioritize this type of work.”

Transactions involving fishing licences, quota and boat sales also don’t have to be filed with FINTRAC, the federal intelligence agency monitoring suspicious financial activity, German added.

“This is regrettable, as it eliminates an important source of intelligence for investigators seeking to ensure that the fisheries are not being used by organized crime,” German said.

“Dirty money must be laundered and it will inevitably move to areas of less resistance.”

The committee asked German for further detail on the possible links between quota ownership and money laundering uncovered during his investigation.

“[There] was an individual who had purchased a large number of quotas and was also a whale gambler in our casinos,” German said, adding that alone doesn’t demonstrate a connection to organized crime.

“That’s not a conclusion that we could draw,” he said.

However, the example highlights potential concerns when the provenance of money used to purchase fisheries and quota — or any other commodity — is vague and unknown, German said.

It’s a problem faced in various sectors, including the sale of luxury cars or boats, he said, adding unvetted funds were at the root of B.C.'s casino money-laundering debacle, which ultimately prompted stricter rules in the gambling sector.

“Is the source of funds legitimate?” German asked.

“Or are the fisheries being used as part of a broader attempt to invest money obtained through crime, or avoiding overseas capital controls or evading taxes?”

Rochelle Baker / Local Journalism Initiative / Canada’s National Observer