Despite all of the revelations of the sources and methods of the Vancouver housing bubble over the last two years, the situation remains largely unresolved. Ditto in Toronto. The foreign buyers’ tax has had only a limited effect and has problems. Fueled by dark foreign money housed in anonymous offshore shell companies like those disclosed in the Panama Papers, the money is managed by local financial manipulators at the behest of unidentifiable persons overseas. The foreign buyers continue to enjoy the weakest enforcement jurisdiction in Canada
Despite all of the revelations of the sources and methods of the Vancouver housing bubble over the last two years, the situation remains largely unresolved. Ditto in Toronto. The foreign buyers’ tax has had only a limited effect and has problems. Fueled by dark foreign money housed in anonymous offshore shell companies like those disclosed in the Panama Papers, the money is managed by local financial manipulators at the behest of unidentifiable persons overseas. The foreign buyers continue to enjoy the weakest enforcement jurisdiction in Canada
‘Corrupt Elite’ Still Laundering Money In Canadian Housing: Transparency International Report
British Columbia’s gleaming gem, Vancouver, is found to still be the worst case example
Reblogged: The Huffington Post Canada | By Daniel Tencer
Posted: 03/31/2017 12:16 pm EDT Updated: 5 hours ago
Loopholes in Canadian law are allowing a “corrupt elite” to use the housing market for money-laundering, says a new report from Transparency International (TI).
The report found 10 problem areas with the laws related to real estate transactions in Canada, Australia, the U.K. and the U.S. — four countries it identifies as being hot-spots for real estate-related money laundering.
“Canada’s legal framework has severe deficiencies under four of the 10 identified areas,” TI stated in the report. “In the other six, there are either significant loopholes that increase risks of money laundering through the real estate sector or severe problems in implementation and enforcement of the law.”
This Grey’s Point “tear down” property shown here, recently sold for over $9 Million, more than $1 Million over the asking price of $7.8 Million. There were 11 offers, all cash, and no offer included any contingencies.
One glaring problem is a lack of rules requiring that the actual owner (or “beneficial owner”) of a property be identified. In Canada “there are no requirements for any person involved in real estate closings to identify the beneficial owner,” the TI report stated.
The report found that 29 of the homes were owned by shell companies, either Canadian or offshore.
“Offshore companies pose a serious risk … because they are able to purchase property without needing to disclose any information relating to who ultimately owns and controls them to any government authority,” TI said in the report published Wednesday.
The report noted that money-laundering through real estate is growing increasingly popular.
“Large amounts of money can be legitimized at once, maintaining or increasing its value. Investments in real estate are seen as an alternative for those who fear having offshore accounts frozen.”
This chart from Transparency International shows what is known, and not known, about the ownership of Vancouver’s 100 most expensive homes.
Because of over-reliance on banks to spot money-laundering activities, and because banks aren’t involved in cash purchases of homes, money-laundering is going unnoticed, the report said.
And like in the other countries studied, in Canada “there are no data on prosecutions against real estate agents or other professionals for facilitating money laundering.”
Canada has “the best model” for enforcement of money-laundering laws among the four countries studied, the report said, but Canada’s financial intelligence agency, FINTRAC, investigates relatively few real estate transactions.
The report lays out a series of recommendations for governments, including requiring all professionals involved in a real estate transaction to disclose the actual buyer. This should also be required of companies that are buying real estate, the report said.
It also suggested that professionals involved in real estate transactions, such as lawyers and realtors, be registered with a country’s anti-money laundering authorities before they are allowed to practice.
“Governments must close the loopholes that allow corrupt politicians, civil servants and business executives to be able to hide stolen wealth through the purchase of expensive houses in London, New York, Sydney and Vancouver,” TI chair José Ugaz said in a statement.
“The failure to deliver on their anti-corruption commitments feeds poverty and inequality while the corrupt enjoy lives of luxury.”
A mysterious Chinese company, Anbang Insurance Group has attracted the attention of The New York Times, The Wall Street Journal, Forbes, Fortune Magazine, and government authorities in the United States and other countries. The cause of the scrutiny has been Anbang’s sudden involvement in a number of massive multi-billion dollar real estate investments around the World. Formed in 2004, Anbang apparently holds assets worth at least $295 Billion, but a months-long investigation by the New York Times has revealed an extremely opaque structure, empty offices, obscure shareholders, and extensive political connections to the Chinese elite. Analysis of Anbang and its operations holds a potential lesson for Canadian authorities fretting over foreign buyers and skyrocketing real-estate prices.
A mysterious Chinese company, Anbang Insurance Group has attracted the attention of The New York Times, The Wall Street Journal, Forbes, Fortune Magazine, and government authorities in the United States and other countries. The cause of the scrutiny has been Anbang’s sudden involvement in a number of massive multi-billion dollar real estate investments around the World. Formed in 2004, Anbang apparently holds assets worth at least $295 Billion, but a months-long investigation by the New York Times has revealed an extremely opaque structure, empty offices, obscure shareholders, and extensive political connections to the Chinese elite. Wu Xiaohui, Anbang’s Chairman, is married to Deng Xiaoping’s granddaughter and involved with at least two others with family connections to the People’s Liberation Army. Both Wu and his wife, Zhuo Ran have disappeared from Anbang’s list of shareholders after the New York Times investigation began. Anbang has all the earmarks of a Panama Papers situation: Chinese money laundering, corruption at the highest levels, and mysterious shell companies. Analysis of Anbang and its operations is a cautionary tale for Canadian authorities fretting over foreign real-estate buyers and skyrocketing real-estate prices.
Last Spring, as B.C. Premier Christy Clark was preparing to announce new regulations to stem the flood of non-resident residential real-estate buyers, she simultaneously flew to China on a trade mission with a group of B.C. commercial real estate moguls, apparently to reassure the Chinese that B.C. was still interested in Chinese commercial real-estate investment. But by the time Clark made her trip to China, questions about the Anbang Insurance Group’s ownership had already been flying in the U.S. financial press for over two years. Whether it may have been more prudent for Clark to defer promoting Chinese commercial real estate investment in Vancouver, only time will tell. What does appear clear is that China is demonstrating a much more aggressive, arrogant and even hostile tone in its relations with both Canada and the United States. This is evidenced by this week’s G20 Summit in Hangzhou, beginning with the deliberate snubbing of Barak Obama on arrival in China, and a number of other incidents, including Trudeau’s inability to achieve an agreement with China on canola oil. Canada needs to be smarter about how it deals with these new realities.
Anbang Insurance Group Corporate Headquarters, Beijing
The dingy fourth floor of this building in Beijing houses two companies that control assets of Anbang Insurance Group worth more than $15 billion.
Wu Xiaohui, Chairman of Anbang Insurance Group
Reblogged from The New York Times
A Chinese Mystery: Who Owns a Firm on a Global Shopping Spree?
Owners of Anbang, a Chinese insurer behind a wave of multibillion-dollar deals, include relatives and friends of its politically connected chairman.
Pingyang County’s verdant hills still hint at a long-lost China. Rice paddies and villages surround its bustling towns, and in the fields, farmers wade into the mud to plant seedlings as they have for thousands of years.
It is an odd place to find the people behind a Chinese corporate powerhouse that is turning heads on Wall Street with a global takeover binge. Yet the area is home to a tiny group of just such people — small-time merchants and villagers who happen to control multibillion-dollar stakes in the Anbang Insurance Group, which owns the Waldorf Astoria in New York and a portfolio of global names and properties.
American regulators are now asking who these shareholders are — and whether they are holding their stakes on behalf of others.
The questions add to the mystery surrounding a company that seemed to come out of nowhere, surprising deal makers with offers to pay more than $30 billion for assets around the world.
Anbang’s shopping spree is part of an outflow of money from China that has reshaped global markets but has often been shrouded in secrecy, sometimes by prominent Chinese looking to shift their wealth abroad without attracting attention at home. That poses a problem for international regulators trying to identify the buyers behind major acquisitions and to assess the riskiness of these deals.
The Anbang shareholders in the Pingyang County area hold their stakes through a byzantine collection of holding companies. But according to dozens of interviews and a review of thousands of pages of Anbang filings by The New York Times, many of them have something in common: They are family members and acquaintances of Wu Xiaohui, Anbang’s chairman, a native of the county who married into the family of Deng Xiaoping, China’s paramount leader in the 1980s and ’90s.
In many ways, Anbang and Mr. Wu appear to be archetypal products of China’s mix of freewheeling capitalism and Communist Party dominance, a formula that has fueled nearly four decades of untrammeled growth.
Anbang got its start as an auto insurance company in 2004 in the eastern Chinese city of Ningbo. For years it was only a minor player. But it took off as it became more aggressive with its finances, buying stakes in Chinese banks and bringing in money by selling high-risk, high-yield investment funds to ordinary Chinese.
Mr. Wu, 49, a former car salesman and low-level antismuggling official, led Anbang through this transformation and is now known as one of China’s most successful businessmen. He wears tailored suits and polished loafers,hobnobs with the likes of Stephen A. Schwarzman of Blackstone, and sometimes holds court at Harvard.
But he does not appear in Anbang’s filings as an owner.
It is common in China for the wealthy to have their shares in companies held in others’ names. Known in Chinese as baishoutao, or white gloves, these people are often trusted relatives or acquaintances. Many defend the practice as a way to protect their privacy in a nation where riches can be a political liability. But others say white gloves can be used to hide ill-gotten gains and thwart corruption investigators.
On the fourth floor of this shabby building in Beijing is an office that is home to two companies with a total stake of more than $15 billion in assets of one of China’s biggest financial conglomerates: the Anbang Insurance Group.CreditGilles Sabrie for The New York Times
Anbang did not respond when asked if Mr. Wu was a shareholder and declined to answer questions about its owners.
The company, a spokesman said, “has multiple shareholders who have made all required disclosures under Chinese law. They are a mix of individual and institutional shareholders who made a commercial decision to invest in the company. Anbang has now grown to be a global company thanks to the support of these long-term shareholders.”
For investors and regulators, white gloves can make it difficult to evaluate the financial health of a Chinese buyer. Ownership may be concentrated in the hands of a few people, posing hidden risks, and companies with government connections could be vulnerable to political shifts or become magnets for corruption.
“It is very important for businesses to know who they are ultimately doing business with, and for investors, what they are investing in,” said Keith Williamson, a managing director in Hong Kong at Alvarez & Marsal, a firm that carries out corporate fraud investigations.
It is not clear whether the shareholders in the Pingyang County region are holding large stakes on behalf of anyone else. But on May 27, Anbangwithdrew its application with New York State to buy an Iowa insurer, Fidelity & Guaranty Life, for $1.6 billion. Regulators had asked about ties between several shareholders with the same family names, said one person briefed on the matter who spoke on the condition of anonymity.
A $6.5 billion deal for a portfolio of hotels that includes the Essex House in New York and several Four Seasons locations is awaiting results from a security review by the American government. In March, Anbang withdrew a $14 billion bid for Starwood, the operator of Sheraton and Westin hotels, in a move that surprised Wall Street.
The company could come under greater scrutiny as it prepares to sell sharesin its life insurance business on the Hong Kong stock exchange next year. Already, at least one major New York-based investment bank has raised concerns about Anbang’s ownership after studying its shareholding structure to evaluate whether to help with its overseas deals, according to two people involved in the matter who asked not to be identified because the process was private. The bank did not participate in Anbang’s deals.
Separately, the Chinese magazine Caixin reported in May that Chinese regulators were examining Anbang’s riskier financial products. It is unclear where that inquiry stands or whether Anbang’s ownership structure is being investigated.
President Xi Jinping has waged a campaign against graft since taking office, and the use of white gloves has recently come under scrutiny. “White gloves are accompanied by power’s black hands,” the Communist Party’s disciplinary watchdog wrote in a report last year.
Questions about Anbang’s owners come as Chinese companies make deals around the world — sometimes representing efforts by China’s powerful to move money out of the country, as the economy slows and the party tightens its grip on everyday life.
Photo
Wu Xiaohui, chairman of Anbang, at a global insurance conference in 2015.CreditBen Asen/International Insurance Society
China has encouraged some capital outflow to improve the performance of its investments and expand its influence. But the subject of the elite moving money overseas is politically sensitive, raising questions about the source of their wealth and their confidence in the Chinese economy.
Luo Yu, the son of a former chief of staff of China’s military, said China’s most politically powerful families had been transferring money out of the country for some time.
“They don’t believe they will hold on to power long enough — sooner or later they would collapse,” said Mr. Luo, a former colonel in the Chinese Army whose younger brother was a business partner with one of Anbang’s founders. “So they transfer their money.”
At its founding in 2004, Anbang had an impressive list of politically connected directors. Records show early Anbang directors included Levin Zhu, son of a former prime minister, and Chen Xiaolu, the son of an army marshal who helped bring Communist rule to China.
Then there was Mr. Wu, who was born Wu Guanghui but was known as Wu Xiaohui from a young age. Relatives said he grew up in a Catholic family; a crucifix sat on his aunt’s dining room table, and she wears a necklace with a portrait of the Virgin Mary.
Mr. Wu married Zhuo Ran, a granddaughter of Deng, the Chinese leader who brought China out of the chaos of the Mao era. Together, Mr. Wu, Ms. Zhuo, Mr. Chen and their relatives owned or ran the companies that controlled Anbang, according to company filings.
Anbang leapt onto the global stage with last year’s purchase of the Waldorf Astoria and its aborted bid for the Starwood chain. By this year, Anbang’s assets had swelled to $295 billion.
It is not clear what prompted Anbang’s sudden interest in overseas assets. But the shift came after a reshuffling of its ownership structure that also led to the injection of more than $7.5 billion into the company.
Company documents filed with Chinese agencies show that the number of firms holding Anbang’s shares jumped to 39, from eight, over six months in 2014. Most of those firms received large injections of funds. At the same time, Anbang’s capital more than quintupled.
Ms. Zhuo disappeared from the ownership records by the end of that year. Many of Mr. Wu’s relatives did as well. Mr. Wu and Mr. Chen had disappeared earlier from the records.
Photo
The Anbang Insurance Group owns the Waldorf Astoria in New York, above, and a portfolio of global names and properties.CreditChang W. Lee/The New York Times
Mr. Zhu, who does not appear to have owned shares, disappeared in paper filings from Anbang’s roster of directors by 2009, though he was listed as a director on online government filings as late as 2014.
Mr. Wu, Mr. Chen and Mr. Zhu did not respond to requests for comment, and Ms. Zhuo could not be reached. In March, Mr. Zhu told Chinese reporters that he was not an Anbang director.
Anbang’s current shareholding firms are not well-known names in China, and some appear to have been set up just to hold Anbang shares. One lists its address as the empty 27th floor of a dusty Beijing office building. Two more list an address at a mail drop above a Beijing post office.
Using corporate filings, The Times compiled a list of nearly 100 people who own shares in the firms and traced about a dozen to Pingyang County or nearby. Reporters visited the area, in China’s eastern Zhejiang Province, and interviewed dozens of residents, including several whose names appeared on the list. They also interviewed an uncle, an aunt and a nephew of Mr. Wu.
The latter two, as well as others in the area, said one name matched that of his sister, Wu Xiaoxia. The family members said several other names matched those of Mr. Wu’s extended kin, including two cousins and others on his mother’s side of the family. Through their various stakes in Anbang shareholding companies, these people control a stake representing more than $17 billion in assets.
Other names matched local acquaintances of Mr. Wu, including Huang Maosheng, a local businessman who confirmed in a brief phone interview that he had a business relationship with Mr. Wu but declined to elaborate.
One village leader and neighbors identified the names of four of Mr. Huang’s relatives — including some whom they described as common workers — from among those on the list. Their Anbang holdings represent about $12 billion in assets.
Another resident, Mei Xiaojing, said two names on the list matched those of her relatives. Asked if she knew Mr. Wu, she said, “Well, yes,” then ended the phone conversation and did not respond to subsequent calls. Through multiple holding companies, those three people have a stake representing about $19 billion in Anbang assets.
As Anbang rose, so did Mr. Wu’s profile. In 2013 Mr. Wu secured a yearlong position as a visiting fellow at the Asia Center of Harvard, joining a growing list of politically connected Chinese billionaires with ties to Harvard.
Ezra F. Vogel, a professor emeritus at Harvard who wrote a biography of Deng, said he met Mr. Wu on several occasions.
“He had this staff of sharp people who were working for him,” Mr. Vogel said. “It seems that they were doing the detail work, and he was the friendly man supplying the connections.”
Nobel Prize-winning economist Joseph Stiglitz has quit an advisory panel to Panama’s government set up after the Panama Papers scandal. Some 11.5m documents, leaked from Panama law firm Mossack Fonseca, revealed huge offshore tax evasion.The government appointed a panel to look at Panama’s financial practices. But Mr Stiglitz and and Swiss anti-corruption expert Mark Pieth, who also quit, said government interference in their work amounted to “censorship”. The seven-person panel also included Panamanian experts. “I thought the government was more committed, but obviously they’re not,” Mr Stiglitz told Reuters news agency. “It’s amazing how they tried to undermine us.”
Panama Papers: Joseph Stiglitz quits as Panamanian Govt adviser
From BBC News, August 5, 2016
Nobel Prize-winning economist, Joseph Stiglitz is one of two advisers to Panama’s government who have stood down
Nobel Prize-winning economist Joseph Stiglitz has quit an advisory panel to Panama’s government set up after the Panama Papers scandal.
Some 11.5m documents, leaked from Panama law firm Mossack Fonseca, revealed huge offshore tax evasion.
The government appointed a panel to look at Panama’s financial practices.
But Mr Stiglitz and and Swiss anti-corruption expert Mark Pieth, who also quit, said government interference in their work amounted to “censorship”.
The seven-person panel also included Panamanian experts.
“I thought the government was more committed, but obviously they’re not,” Mr Stiglitz told Reuters news agency. “It’s amazing how they tried to undermine us.”
A statement by Panama’s Ministry of Foreign Affairs said “the Panamanian government understands both resignations and internal differences”, adding that it maintains a “real commitment to transparency and international co-operation”.
The ministry said it had already acted on some recommendations made in the panel’s preliminary report and was considering others, without specifying which measures had been taken.
But a statement by Mr Stiglitz and Mr Spieth to Reuters said they were concerned that the panel’s final report would not be published.
“We can only infer that the government is facing pressure from those who are making profits from the current non-transparent financial system in Panama,” Mr Stiglitz said.
The Panama Papers were investigated for months by hundreds of investigative journalists, including staff from the BBC.
The documents, which were first detailed in April, revealed the hidden assets of hundreds of politicians, officials, current and former national leaders, celebrities and sports stars.
They list more than 200,000 shell companies, foundations and trusts set up in tax havens around the world.
Mossack Fonseca said it had been hacked by servers based abroad and filed a complaint with the Panamanian attorney general’s office.
The company said it did not act illegally and that information was being misrepresented.
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