Banks offer little on how B.C. man with criminal record could allegedly launder money in real estate

A pair of financial institutions, named in a B.C. civil forfeiture suit that alleges a Richmond man laundered money in real estate, would not answer questions about how a man with a lengthy criminal record and no “legitimate” income could obtain mortgages and a home equity line of credit.

In a civil claim filed on Jan. 4, Stephen Hai Peng Chen, also known as Hoy Pang Chan, is accused of using money obtained from drug trafficking to pay for properties in Vancouver and Richmond.

The B.C. civil forfeiture office lawsuit lists two transactions that involved TD bank mortgages and and a separate National Bank home equity line of credit, known as a HELOC, used to purchase a Vancouver property.

Chan has not responded to the lawsuit. The civil claim contains allegations not proven in court.

The TD bank said it could not, for privacy reasons, comment on any specific customer relationship or specific regulatory reports.

TD spokesman Jeff Meerman pointed to information stated by the civil forfeiture office in the claim, repeating that TD, as mortgagee, “did not participate in or know of or have reason to know of the unlawful activity.”

National Bank offered some comment on the case, saying the home equity credit line was based on the three borrowers’ net worth: their equity and investments. Chan’s parents – Xiong Guang Chen and Jue Ming Chen – were involved in the transactions, according to the court records.

In response to Postmedia questions, National Bank did not specifically address Chan’s criminal record, which dates back to 1990 and includes convictions for assault with a weapon; assault causing bodily harm; possession of property obtained by crime; making, having or dealing in instruments of counterfeiting; and extortion.

Neither bank would say whether it filed a suspicious-transaction report to Fintrac, the financial transaction and reports analysis centre of Canada, which gathers, analyzes and, in some cases, discloses financial intelligence.

“National Bank has an AML (anti-money-laundering) regime in place and complies with all applicable laws but will not provide specific information about its internal procedures,” National Bank spokesman Jean-Francois Cadieux said in a written statement.

TD also said it has an anti-money-laundering system in place. “We operate in full compliance with applicable anti-money laundering, anti-terrorist financing, sanctions and anti-bribery legal and regulatory requirements, as well as our own internal risk policies,” Meerman said in a written statement.

Fintrac, headquartered in Ottawa, did not respond to questions about whether it received a suspicious-transaction report from either bank and how it would respond. In a written statement, spokesman Dino Roberge said Fintrac was precluded, under federal law, from speaking on information it may have received or financial intelligence that it may have disclosed to police about suspicions of money laundering or terrorist activity financing.

The civil forfeiture filing against Chan provides one of the few explicit examples of how, allegedly, drug trafficking money is being laundered in real estate in B.C.

An independent B.C. government report established that money was being laundered through B.C. casinos and a similar independent study has been launched into the real estate sector.

Transparency International Canada’s executive director, James Cohen, said the Chan case potentially shows how many gaps there are in the anti-money-laundering system, given the number of players involved, including financial institutions, lawyers, real estate mortgagers and notaries. “It’s not just one institution or one actor; there are systems-level changes that need to be addressed here,” said Cohen.

During a 2015 RCMP investigation, Chan was identified among a number of customers of an allegedly illegal money services business in Richmond, Silver International, which was accused of laundering as much as $220 million a year.

The civil forfeiture claim alleges that Chan faked employment records and pay statements.

In 2010 and 2015, Chan purchased Richmond properties with TD bank mortgages, both of which have since been sold. In 2015, Chan and his parents obtained a National Bank HELOC of $1.35 million on an East 5th Avenue home and used it to purchase a West 42nd Avenue apartment, according to court filings. Nearly $370,000 in cash and just over $381,000 of the credit line was used to purchase the apartment. The credit line was paid off in six months, say the court records.

“Payments to pay off the utilized credit on the HELOC ($381,000) were made by cheques drawn from the account of another financial institution, including one from a notary,” said Cadieux, the National Bank spokesman.

In the Chan case, the civil forfeiture office is suing to seize an East 5th house and West 42nd apartment in Vancouver — their combined assessed value is $2.7 million — and more than $67,000 in cash.