Crime
Inside America’s Fastest-Growing Criminal Enterprise: Sex Trafficking
News release from the Free Press
Madeleine Rowley |
Biden’s border policies have led to an explosion in the forced prostitution of migrant boys and girls in the U.S. ‘If I wanted to, I could order a girl within 15 minutes. It’s that easy.’
Lisa slides a Hellcat pistol into her backpack, slinging it over her shoulder. She jumps out of the driver’s seat of her massive Ford F-250 as we head into a barbecue joint for lunch. Steel brass knuckles glint in the console beside a pencil-shaped, pronged object. She sees me looking at it.
“That’s my stabby-stick,” Lisa says before I even ask. “In case I can’t bring my gun somewhere. These guys are dangerous.”
“These guys” are sex traffickers, and dangerous doesn’t begin to describe them.
Many traffickers are members of Mexican or Salvadorian gangs, part of Cuban rings or the vicious Venezuelan group Tren de Aragua. Their modus operandi is luring migrant women and girls across the southern border, promising them good jobs once they get to America, and then forcing them into prostitution once they’re here, ostensibly to pay off the debt they incurred to get into the U.S. Hunting down sex traffickers is not for the faint of heart, and Lisa is not about to take any chances.
An athletic, no-nonsense blonde in her 50s, Lisa runs a small nonprofit foundation called Shepherd’s Watch, dedicated to bringing down sex-trafficking rings. Prior to starting Shepherd’s Watch in 2016, Lisa had been a telecom engineer and an expert at analyzing cell phone data used in court cases. In that job, she says, she saw a “disturbing” amount of child exploitation. “I couldn’t ignore it anymore.”
Lisa, who asked that we not use her real name, calls herself “an informant.” She lacks the authority to arrest a trafficker, and any attempt to rescue the girls herself could well get her killed. Instead, Lisa and a small handful of other Shepherd’s Watch investigators work to locate victims and their pimps and then turn the information over to police departments, sheriff’s offices, and other law enforcement agencies. Because Lisa and her team have gained credibility with law enforcement over the years, the police usually follow up on the information the Shepherd’s Watch informants provide. Sometimes they hit pay dirt, arresting the traffickers and removing the girls to a safe place.
“Law enforcement is understaffed and stretched too thin,” says Lisa. “That’s where we come in.”
At the barbecue joint off Route 75 in Dallas, Lisa pulls out her phone to show me the dozen or so online platforms that traffickers and pimps use to sell girls for sex. The platforms—which include apps like TikTok, OnlyFans, and Facebook—are chockablock with ads of women, usually wearing lingerie, their faces covered to prevent anyone guessing their age. The sheer number of ads is astonishing. “Each week, we track over 12,000 ads for women in Houston, 2,600 in San Antonio, 3,500 in Austin, and 14,000 in Dallas,” says Lisa.
I ask her if the sex trafficking of migrant girls had increased since the Biden administration threw open the border, leading to 8 million migrants crossing the southern border since 2021. “Yes,” she says. “Nearly all of my sex-trafficking rings now are migrant girls. The ads exploded within the first three months of the border being open. We started noticing new sites and ads in Spanish. That was very few before. Then sites dedicated to Latino girls popped up everywhere.” Since the border opened, Lisa added, over 90 percent of the ads are for migrant girls.
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Many traffickers are members of Mexican or Salvadorian gangs, part of Cuban rings or the vicious Venezuelan group Tren de Aragua. (Robert Gauthier via Getty Images)
“If I wanted to, I could order a girl within 15 minutes,” Lisa says. “It’s that easy.”
And she’s right. After lunch, we drive around the seedier areas of the Dallas suburb of Plano. We’re guided by Jack, an intelligence contractor for Shepherd’s Watch who specializes in geospatial analysis. Jack, who also asked to remain anonymous, works from an office in California. Formerly in law enforcement, he tracks phones using the location data in the background of mobile apps, identifies patterns with cell phone numbers, and does tattoo and facial recognition work. Federal agencies often engage him.
Pretending to be a client, Jack texts a woman on a website called Escort13. She is described as a “new Latina in the city.” The woman tells Jack that she’s at Motel 6 off the North Central Expressway in Plano. Like a scene in a spy movie, Jack relays the information from his California office to Lisa in Texas through the truck’s crackling speakers.
In her profile photo, the woman is dressed in a black, long-sleeve, crop top shirt and short black skirt—modest compared to pictures of some of the other girls that Lisa has shown me. Her dark hair hangs straight below her waist, and her phone covers her face, which conceals her age and identity.
Her profile says she’s 24 years old and that her home base is Philadelphia—neither of which is necessarily true. Gang-led trafficking rings tend to move their victims all over the U.S.; it’s one way they try to stay ahead of the law. So it’s no surprise this young woman is now working out of a motel in Texas. According to Lisa, Latin American girls like her go for anywhere from $130 to $160 per half hour.
After Jack makes contact with the woman, he tells Lisa, “She says to take a photo of the motel’s entrance, and then she’ll give me the room number.” Lisa snaps a photo through the windshield and sends it to Jack, who texts it to the woman and gets the room number. It’s on the second floor of the two-story motel. We drive to the far end of the parking lot, where we have a clear view of the balcony.
A Latina girl pokes her head out the door and cautiously looks around. Realizing no one is there, she retreats inside. A few moments later, a shirtless man throws up the shades in the room directly below her and swivels his head to look around the parking lot.
“That’s probably her pimp or a trafficker,” Lisa says. “Time to go.”
We peel out of the lot and drive to a Studio 6 motel two miles down the road, where Jack is communicating with another migrant girl. This motel doesn’t have balconies, and when Jack asks her to come to the lobby, she says no. We have no choice but to drive away.
Still, it’s been a successful afternoon. With Jack’s help, Lisa has found two possibly sex-trafficked women and one likely trafficker. When Lisa picks me up the following day, she’s on the phone with Plano law enforcement recounting what we saw the day before at the Motel 6.
“She looked young to me,” says Lisa.
In a follow-up phone call, Lisa tells me the police went to the motel to check it out, but the girl was gone. They think she was part of a trafficking ring.
“She’ll resurface,” says Lisa. “They always do.”
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Gangs lure migrant women across the border with the promise of good jobs, and then force them into prostitution once they arrive. (Illustration by The Free Press, image via Getty)
Deep inside the U.S. Department of Health and Human Services resides a tiny agency called the Office on Trafficking in Persons. A large part of its mission is to help survivors of sex and labor trafficking “rebuild their lives and become self-sufficient.” Among other things, it offers food assistance, medical benefits, and cash to migrant minors who have been trafficked but have managed to escape. Once their eligibility to obtain benefits is approved, they receive a document called the child eligibility letter.
Although the number of child eligibility letters the government issues is supposed to be public information, it became available on the trafficking office’s website only after I filed a Freedom of Information Act request. The numbers confirmed what Lisa had told me: Trafficking has increased—a lot—since Biden took office. During the four years of the Trump administration, the government issued an average of 625 letters per year to migrant minors who had managed to break free from their traffickers.
But in 2021, the first year of the Biden administration, that number jumped to 1,143. In 2022 it jumped again, to 2,226. Last year, the number stood at 2,148, but that was only through September; the fourth quarter hadn’t yet been counted. To put it another way, forced labor and prostitution among underage migrants more than tripled under President Biden, reaching record highs. And that only counted the handful who had escaped—not the thousands who were still held by the traffickers, the ones Lisa was searching for.
“The sex trafficking of minors, and human trafficking as a whole, is one of the fastest-growing criminal enterprises in the U.S.,” said Homeland Security Investigations Special Agent in Charge Mark Dawson after a big bust in Houston last year that saw the arrest of 10 traffickers, all of whom had gang connections.
Sex-trafficking victims often suffer horrific abuse, as I discovered when I spoke to Landon Dickeson, the 36-year-old executive director for Bob’s House of Hope in Denton, Texas, the only shelter for male sex-trafficking victims ages 18 and up in the country. Dickeson says they’ve seen teens from Central and South America who have been so tortured by their traffickers they can barely function.
Dickeson described caring for teens who have brain damage from being so heavily drugged—teens who have had their fingernails pulled out, and lemon juice poured on wounds. When I asked to interview one of their migrant residents, Dickeson said they simply weren’t in any condition to speak to anyone, much less a reporter.
“We think the cartels and gangs use torture as a control method for the males,” said Dickeson. “They’re not going to fight back if they chain their victims to a radiator, beat them up frequently, or drug them.”
The House of Hope residents often come branded or tattooed by the cartels and gangs who trafficked them, and most were cross-victimized—used as drug mules as well as for labor and sex.
Bob Williams, CEO and founder of Bob’s House of Hope, says they receive two to three calls a month to help minor males who have been sex trafficked. “There is not one shelter in the country for 12- to 17-year-olds,” he said. “This is a big problem because they get put in the system and don’t get the help they need.” Williams, who was sexually assaulted as a teen himself, says they’re working on procuring more funding to build a program for minors.
There is no question that the border crisis is the primary reason for the increase in the sex trafficking of migrants. Here’s how it works: When underage migrants cross the border unaccompanied by a family member, they are sent to a temporary holding facility run by one of a number of nonprofit organizations operating at the border. The NGOs are expected to move the migrants out within a couple of weeks because there are so many more coming in right behind them. During the time the migrants are in the holding facility, both the NGOs and the government are supposed to vet the people who will take them when they depart. These people are called sponsors, and the vast preference of everyone in the system is that they be relatives already living in the U.S.
But sometimes an underage migrant doesn’t have a family sponsor, which gives the cartels and gangs their opening. They pretend to be legitimate sponsors, and with the pressure on the NGOs and the government to move the migrants through the system quickly, gang members—who usually have their hooks into the migrant well before they’ve crossed the border—are accepted as sponsors.
How do they get away with this? They fill out applications in illegible handwriting, guessing (often correctly) that no one will look at it closely. They coach the girl or boy to say that their sponsor is a cousin or an uncle. And they take advantage of the fact that the federal agency overseeing migrant relocation, the Office of Refugee Resettlement—or ORR—is notoriously negligent in vetting sponsors.
For instance, the ORR is supposed to send fingerprints of nonfamily sponsors to the FBI to see if they have a criminal record, and to do background checks for child abuse or neglect. But earlier this year, the Department of Health and Human Services’ inspector general conducted a study of 343 randomly chosen minors to see if their sponsors had been vetted properly. Their findings, issued in February, concluded that 19 percent of the children were released to sponsors before the fingerprint and background checks were completed—meaning that criminals could well have taken migrant children without the government realizing it.
In July, Republican senator Chuck Grassley hosted a roundtable on the trafficking crisis at the border. Tara Rodas, 55, a federal employee who in 2021 worked at an emergency intake shelter in California, testified that while she was there, a 13-year-old girl from El Salvador was released to a sponsor in Ohio who was affiliated with the MS-13 gang.
In an email Rodas sent to a colleague at the time, which was released by Grassley, she wrote that “our team discovered that human traffickers are exploiting the HHS Unaccompanied Children. ‘Bad actors’ are recruiting, harboring, and transporting minors; using force, fraud, and coercion; for the purpose of involuntary servitude, debt bondage, slavery, and potentially commercial sex.”
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Migrants camping in the border area of Jacumba, California. (Katie McTiernan via Getty Images)
Deborah White, another whistleblower who worked at the same shelter, testified that migrant children were handed over to improperly vetted sponsors who used fraudulent IDs and different addresses to procure numerous unrelated children. “I had multiple cases that I reported on,” said White, meaning she reported suspicious sponsors to her supervisor. “One in particular where we sent 329 children to one address: two garden apartment [buildings] in Houston, Texas.” The supervisor, White told The Free Press in an interview, took no steps to investigate further, but instead told White that she wasn’t moving migrants out of the facility quickly enough.
Washington’s lack of interest in the sex-trafficking crisis is stunning. Sometimes it seems as though the only person in a position of power who cares about the issue is 91-year-old Senator Grassley. And he has been as passionate about it when Trump was president as he is now, during Biden’s presidency.
“I’ve been trying to protect unaccompanied children that are put in dangerous environments,” he told me in an interview. “These are the most vulnerable people, and somebody’s got to look out for them, and that’s me.”
As far back as 2014, when “just” 57,000 unaccompanied children crossed the border—less than half the current number—Grassley sounded the alarm that the Office of Refugee Resettlement was having trouble accommodating so many migrant children.
The next year, he wrote a letter to the Department of Homeland Security, saying that up to 3,400 unaccompanied children’s sponsors had criminal histories. Two years later, he urged the ORR to take responsibility for unaccompanied children who had ties to the gang. “Your agencies repeatedly pass the buck to each other. As a result, children are allowed to disappear. When these children disappear without any supervision, they are vulnerable to join dangerous gangs like MS-13,” he said.
Grassley reached across the aisle in 2019 and 2021, working with Democratic senators Dianne Feinstein and Ron Wyden, respectively, regarding allegations of sexual abuse and employee misconduct at ORR-funded shelters. Grassley and Wyden’s investigation found that between 2016 and 2020, ORR received nearly 7,500 reports of sexual misconduct involving an unaccompanied child staying at a shelter. Wyden attributed this to “years of mismanagement and poor oversight” by ORR.
With the election of Joe Biden—and the border crisis that ensued—other Republicans have jumped on the trafficking bandwagon, but Grassley has continued to lead the charge, using his staff to conduct significant investigations. In January, for instance, he sent a detailed letter to Department of Homeland Security Secretary Alejandro Mayorkas and FBI Director Christopher Wray, detailing evidence his staff had uncovered of unaccompanied children who were suspected of being in the hands of traffickers.
Democrats have been shamefully silent on the trafficking issue. At the roundtable Grassley held in July, not a single Democrat attended. Neither did Mayorkas. “Democrats didn’t come because they’re just too embarrassed to talk about the shortcomings of this administration on immigration,” Grassley told me. “Especially when you have HHS sending kids to MS-13 gang-related sponsors in Ohio. It’s hard to explain that.”
As for the Office of Refugee Resettlement, its track record remains abysmal. It has yet to do anything to reduce the sex trafficking that is taking place under its nose. On the contrary, it has lately been pushing through rules that will minimize the vetting of sponsors—for instance, making background checks optional instead of mandatory. This, of course, will allow the NGOs to push migrant children through the system even faster. But it will also make it easier for gangs and criminals to “sponsor” migrant girls after they’ve crossed the border. Grassley is trying to stop that from happening, but with the Democrats in control of the Senate, it’s an uphill fight.
That gangs are sex trafficking women and girls who cross the border—and that the Office of Refugee Resettlement is making it so easy for them—is an open secret to everyone who is part of the system. One proof point: An NGO operating at the border, the U.S. Committee for Refugees and Immigrants, started a program in 2022 specifically aimed at helping trafficked kids. Naturally, it is paid for by the Biden administration. Indeed, like all the NGOs at the border, the organization gets well over 95 percent of its revenue from the Office of Refugee Resettlement, in its case $292 million. Of that amount, $60 million goes to caring for unaccompanied children, including trafficked children, according to its 2023 federal filing.
The initiative for trafficked migrants is called the Aspire program. Aspire uses subcontractors to connect migrant children with immigration lawyers, food, clothing, and medical services. It also helps them get child eligibility letters so they’ll qualify for cash, which ranges from about $1,000 to $6,000, depending on the child’s needs and where they live.
Leah Breevoort, a supervisor for the U.S. Committee for Refugees and Immigrants trafficking services department, told me that most of the children whose cases they manage represent the most extreme cases of trafficking. The Aspire program currently has 767 migrants, all of whom have child eligibility letters. Rather matter-of-factly, she said she had seen cases in which the sponsor was trafficking a child, or when “the child has a debt from their travel journey, and therefore are working to pay off that debt.”
Once the children are released from the temporary shelters, they’re no longer the federal government’s responsibility, so even kids with child eligibility letters wind up having to fend for themselves. “We try to find a safe placement for that minor,” said Breevoort. “Sometimes it’s a homeless runaway shelter or another migrant shelter. But it’s really, really difficult.”
Immigration lawyer Emma Hetherington, the director of the Wilbanks Child Endangerment and Sexual Exploitation (CEASE) Clinic at the University of Georgia School of Law, also confirmed that some of the migrant children she’s worked with were sex trafficked by their sponsors or by another adult living in the same home.
At CEASE, Hetherington has seen an overlap with migrant children who were trafficked for both labor and sex. “This is a very vulnerable population,” she said. “They’re easier to manipulate because their basic needs aren’t being met. These kids did not and cannot consent to being trafficked.”
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A California Border Patrol agent processes migrants after they crossed into the U.S. from Mexico near Jacumba, California. (Qian Weizhong via Getty Images)
With the federal government mostly looking the other way, it falls to people like Lisa and local law enforcement to bust up sex-trafficking rings. And there have been some success stories.
In March, the Indianapolis Metropolitan Police Department rescued a teen girl and four other women who were being held in a house in the suburbs near a golf course by a sex-trafficking ring run by the Venezuelan gang Tren de Aragua.
In April, police in Socorro, Texas, near El Paso, raided a house where seven young girls were being sex trafficked. “We’re here to rescue those that otherwise might not have a voice,” said Chief David Burton at the time.
In May, the East Baton Rouge Parish Sheriff’s Office in Louisiana busted a sex-trafficking ring run by Tren de Aragua. There were up to 30 victims who were allegedly stashed in homes throughout Virginia, Louisiana, Texas, and Florida.
In August, the San Antonio Police Department, aided by Homeland Security, arrested two Venezuelan illegal immigrants for sex trafficking two women. The alleged traffickers forced the women to work up to 20 hours a day providing sexual services, under the threat of violence. The suspected traffickers took 60 percent of the money.
One law enforcement official who has focused on sex trafficking is Sheriff Grady Judd of Polk County, Florida. His experience is proof that something can be done about trafficking if law enforcement makes it a priority. The Polk County Sheriff’s Department frequently conducts operations in which, like Lisa and Jack, investigators pose online as clients to locate potential victims.
Their largest bust to date, which took place last March, yielded 228 arrests, with 13 potential trafficking victims rescued—10 of whom were migrants.
Although most of those arrested were “johns,” Judd’s office also nabbed several dozen traffickers, most of whom were illegal immigrants from Chile, Cuba, Guatemala, Mexico, Peru, and Venezuela. Since the bust, trafficking in Polk County has decreased, Judd told me.
“Traffickers think, ‘We’re not going to Polk County. We know what happened there. That sheriff don’t play,’ ” Judd said.
In many of my interviews, people told me that trafficking has become so widespread that I could find it anywhere in the country. I was skeptical about these claims, but Lisa wasn’t.
“I’ll show you,” she says one morning after filling her tank with gas. She pulls up a website on her phone—its tagline is “Where Fantasy Meets Reality”—and clicks on the profile of a foot spa in Dallas. In the description, the masseuse is described as “Asian, Chinese,” and it’s cash only, with a 60-minute massage priced at $60.
We drive into a strip mall and park in front of the foot spa. The business’s windows are tinted, making it impossible to see inside. There’s a hair salon next door, and a mother holds her toddler’s hand as they walk toward an adjacent grocery store. We watch as men enter and exit the spa.
We decide to enter ourselves, and the first thing I see are five security cameras trained on us. The front desk is unmanned, and there’s a small waiting area with a couch to the left. After a few minutes, a woman slowly opens a door that separates the front entryway from the massage area. Her bright pink silk robe hangs open, revealing black lingerie underneath.
“Do you have gift cards?” Lisa asks—pretending she wants to buy one for a male friend.
The woman looks confused and shakes her head, shooting us a furtive glance before closing the door.
Back in the truck, Lisa explains that there are sex-trafficking rings being run out of illicit massage parlors—basically brothels—all over the country.
After I return to my home near Baltimore, Maryland, I go online to see if there are any illicit massage parlors and foot spas near me.
I found one two miles away.
Madeleine Rowley is an investigative reporter. Follow her on X @Maddie_Rowley, and read her piece “Nonprofits Are Making Billions off the Border Crisis.”
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MxM News
Quick Hit:
Cartels are intensifying their threats against U.S. Border Patrol and ICE agents, employing increasingly sophisticated tactics, including drones, wireless tracking devices, and potential explosive attacks. As President Donald Trump strengthens border security measures, agents face growing dangers both at and beyond the southern border. Experts warn that these threats are an effort to counteract the administration’s immigration enforcement policies.
Key Details:
- Cartels are using drones and wireless tracking to monitor and potentially attack Border Patrol and ICE agents.
- The discovery of a security risk tied to body cameras has led CBP to suspend their use to prevent agents from being tracked.
- Leaks of ICE raids pose additional threats, increasing the risk of ambushes against agents conducting enforcement operations.
Diving Deeper:
Cartels along the U.S.-Mexico border are becoming more aggressive as President Trump enforces stricter immigration policies, with reports indicating that border agents are facing an escalating range of security threats. Fox News reports that Mexican cartels are leveraging new technology to track and potentially harm Customs and Border Protection (CBP) and Immigration and Customs Enforcement (ICE) agents.
Lora Ries, director of the Heritage Foundation’s Border Security and Immigration Center, emphasized that cartels are feeling the pressure from Trump’s border policies and are resorting to dangerous countermeasures. “The cartels are losing business. The encounters at the border are the lowest they’ve been in decades, and the cartels are not just going to give up that business quietly,” Ries told Fox News.
Among the threats agents face are drones used for surveillance, gunfire from across the border, and even the possibility of improvised explosive devices (IEDs). A recent internal memo warned that cartels might be planning to use snipers positioned in Mexico to attack U.S. agents. Additionally, agents are now vulnerable to tracking through wireless technology, prompting CBP to suspend the use of body-worn cameras after a social media post revealed they could be exploited via Bluetooth scanning apps.
The suspension of body cameras has raised concerns about increased false claims against border agents. Ries warned that “the number of claims of abuse are about to jump to exploit this lack of camera use,” underscoring the challenges agents will face without recorded footage of their encounters.
Beyond external threats from cartels, agents must also contend with internal security risks. Leaks about upcoming ICE raids have made enforcement operations more dangerous, potentially exposing agents to ambushes. Ries noted, “That subjects ICE agents to an ambush… Worse would be if aliens stay here and attack ICE agents, that is a risk.”
To counter these threats, border security experts stress the need for increased congressional funding to provide CBP and ICE agents with enhanced technology, equipment, and manpower. Ries urged lawmakers to act swiftly, stating, “Congress needs to hurry up” to ensure agents have the necessary resources to carry out Trump’s mass deportation efforts and secure the southern border.
As cartels escalate their tactics in response to Trump’s immigration policies, the safety of border agents remains a growing concern, highlighting the urgent need for stronger enforcement and security measures.
Canadian Banking Money Laundering Investigation Reposted in Light of Ottawa’s Fentanyl Czar Pledge
In response to Ottawa’s pledge to tackle fentanyl-linked money laundering—including the appointment of a “fentanyl czar” and new intelligence-sharing initiatives with the United States—The Bureau is reposting this February 2024 investigation estimating tens of billions, potentially several hundred billion, laundered through Vancouver and Toronto real estate via underground banking networks tied to China and global narcotics trafficking, including fentanyl.
FINTRAC’s 2023 analysis of 48,000 transactions involving members of the Chinese diaspora exposed vast wire transfers from Hong Kong and Mainland China, funneled through “money mule” accounts linked to students, homemakers, and shell businesses—including law firms. These findings raised serious concerns about Canada’s banking oversight but led to no prosecutions in Canada. The study also revealed laundering patterns central to the U.S. Justice Department’s $3 billion TD Bank case, with international students from China working with Beijing’s United Front networks playing key roles in the TD Bank money laundering, according to U.S. investigator David Asher, a former Trump Administration official. The revelations underscore how the so-called “Vancouver Model”—once centered on laundering drug proceeds through British Columbia government casinos—evolved during the COVID-19 pandemic, embedding itself deeper into Canada’s banking and legal systems. These findings align with research from SFU urban planner Andy Yan, who has documented how foreign capital distorts Canada’s housing market, with mortgage approvals and home purchases far exceeding reported local incomes.
At the heart of this investigation is HSBC Canada whistleblower “D.M.,” who believes they uncovered at least $500 million in dubious Toronto-area mortgages backed by fabricated remote-work salaries from China. After raising the alarm internally, D.M. says HSBC Canada introduced only superficial reforms and pressured him to delete critical records—deepening his conviction that Canada’s financial oversight remains dangerously weak.
Former RCMP investigators Garry Clement and Cal Chrustie, who reviewed D.M.’s evidence, warn that systemic vulnerabilities persist. Chrustie—who has extensively documented Canada’s weak regulations enabling underground banking linked to organized crime in China, Iran, and Mexico—pointed to the 2012 U.S. Justice Department case where HSBC was fined $1.9 billion over $881 million in cartel-linked transactions involving Mexico’s Sinaloa cartel and Colombia’s Norte del Valle cartel.
As Andy Yan has emphasized, governments at all levels bear responsibility for enabling foreign capital to flood Canada’s housing market without adequate transparency. “When you have programs designed to domesticate foreign capital into local real estate, you see these income-to-home-price incongruities,” he said.
Ottawa’s new fentanyl czar is tasked with coordinating intelligence-sharing and enforcement actions with U.S. agencies to disrupt fentanyl trafficking and related money laundering. Trudeau’s government has also pledged to designate cartels as terrorist organizations, a move that could have sweeping consequences for Canadian banks by exposing them to heightened U.S. financial scrutiny and enforcement actions.
It remains to be seen what position Liberal Party leadership favourite Mark Carney—former Governor of the Bank of Canada (2008–2013) and the Bank of England (2013–2020), and a globally influential banker—will take on Canada’s ongoing struggles with financial crime and illicit capital flows. While the Bank of Canada does not oversee financial crime enforcement, Carney’s extensive experience in international financial regulation—gained through his roles involving oversight at global institutions such as the Bank for International Settlements and his active participation in forums on financial stability—suggests he could offer valuable insights into Canada’s banking vulnerabilities. This is particularly noteworthy as he emerges as a political contender and potential Prime Minister.
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OTTAWA, Canada — The whistleblower, a Canadian business school graduate, was staggered by the suspicious home loans he discovered in 2022 when he joined a mortgage approval team in a small HSBC branch on the outskirts of Toronto.
He knew of suspicions surrounding Chinese capital in British Columbia real estate, but had never witnessed shady lending while working at an HSBC branch in Campbell River, a bucolic town on the coast of Vancouver Island.
When he arrived at HSBC’s bank in Aurora, an affluent suburb north of Toronto, he discovered explosive growth in home loans to Chinese diaspora buyers during the Covid-19 pandemic.
Chinese migrants living across Toronto were obtaining mortgages from HSBC while supposedly earning extravagant salaries from remote-work jobs in China. In one example, an Ontario casino worker that owned three homes also claimed to earn $345,000 in 2020 analyzing data remotely for a Beijing company.
Before joining HSBC Canada, the whistleblower had studied fake-income mortgage frauds for his Business Masters degree at Vancouver Island University. After arriving at Aurora in February 2022, while digging into the branch’s loan books and interrogating his colleagues, he made mind-blowing assessments.
Since 2015, the whistleblower concluded, more than 10 Toronto-area HSBC branches had issued at least $500-million in home loans to diaspora buyers claiming exaggerated incomes or non-existent jobs in China.
These foreign-income scams spiked during the pandemic, the whistleblower believed, because borrowers could somewhat plausibly claim to be working remotely in other countries while riding out Covid-19 in Canada.
While a small bank of Aurora’s size was expected to issue about $23-million in residential loans every year, this branch had shovelled out $88-million in mortgages in 2020, according to the whistleblower, and over $50-million in 2021.
The whistleblower, whomThe Bureau is calling D.M., immigrated to Canada as an international student from India, making him a minority among mostly Chinese-Canadian co-workers at the Aurora branch.
As D.M. probed his colleagues, his belief gained conviction, that HSBC Canada and other Canadian banks including CIBC had systemic problems with highly questionable mortgages issued to diaspora buyers with unverified sources of wealth in China.
Losing sleep, in April 2022, D.M. sent an audacious email to senior bank executives: “I am going to reveal potential mortgage fraud at HSBC Bank Canada and possibly some employees benefited from the fraud, financially pocketing thousands of dollars, which I call the proceeds of crime.”
D.M.’s explosive four-page complaint triggered an internal investigation that led to some reforms at HSBC Canada according to internal emails obtained by The Bureau.
But more than a year later, D.M. was so dissatisfied with the bank’s response that he risked sharing his story and numerous internal documents for an unprecedented journalistic investigation into Canada’s housing affordability crisis.
“I found out a huge mortgage fraud showing borrowers with exaggerated income from one specific country, China, pretending to be working remotely,” D.M. informed The Bureau in June 2023. “I believe the housing prices in Toronto are linked to this, because this is about income verification in banks, which is supposed to moderate demand.”
The Bureau asked HSBC Canada to review emailed information for this story and provide an appropriate manager for an interview regarding D.M. ‘s records and allegations.
“I won’t have anyone to speak with you directly,” Sharon Wilks, Head of Communications, responded. “But for context: As a global bank, HSBC is at the forefront of efforts to identify, prevent and deter financial crime … We will not do business with individuals or entities we believe are engaged in illicit conduct.”
Wilks added that HSBC Canada “can and do regularly exit relationships with clients whose activities we deem too risky.”
The Bureau’s seven-month investigation into D.M.’s allegations suggests HSBC Canada and other Canadian banks could have issued many billions of dollars in questionable mortgages to Chinese diaspora buyers, and a significant cause of Canada’s real estate bubble is hundreds of billions in illicit fund transfers from China into Canada, and bank lending that amplifies its impacts, especially in Toronto and Vancouver home prices.
“There are thousands of these cases, large scale,” D.M. said in an interview. “Hardworking Canadians are denied mortgages and these Chinese residents forge documents and get mortgages approved, heating up the already hot Ontario real estate markets.”
“These people don’t have steady jobs or income in Canada,” he alleged, “but what they are doing is scams to launder money, and get mortgages using fake documents.”
The Bureau’s investigation included asking seven prominent Canadian experts to assess some of D.M.’s documents, allegations and conclusions.
This investigation suggests D.M. ‘s calculation is plausible, that the Aurora branch and other Toronto-area HSBC branches have issued at least $500-million in questionable Chinese income loans since 2015.
But D.M’s findings could also change the public’s understanding of housing affordability in Toronto and Vancouver, a politically explosive issue expected to frame Canada’s upcoming federal election.
This is because, according to the academics and criminologists that reviewed D.M.’s documents with The Bureau, his evidence fits into FINTRAC’s much broader examinations of suspicious real estate and banking transactions.
In 2023, the anti-money laundering watchdog published a ground-breaking study into 48,000 Chinese diaspora banking transactions.
FINTRAC found that during the Covid-19 pandemic, because Canadian casinos were closed, Chinese underground banking schemes evolved, flooding electronic fund transfers from Hong Kong into Canadian bank accounts that served like corridors for murky real estate transactions.
The Bureau’s analysis also finds that what D.M. discovered in Toronto banks, finally sheds light on mysterious capital flows discovered by a prominent Canadian academic in 2015, in a study of Vancouver land titles and mortgages.
That examination of $525-million worth of real estate purchases in a six-month period found 66 percent of buyers in several affluent neighbourhoods were recent Chinese diaspora migrants, and most mortgages went to buyers with little or no income in Canada.
Similarly, what D.M. found in his probe of pandemic-era loans could be called the evolving “Toronto Method” of an underground banking system discovered first in Vancouver, and found to be laundering a stunning $1.2-billion in cash from Mainland China through British Columbia government casinos in 2014.
This system of shadowy transfers was dubbed the “Vancouver Model” by an Australian professor, and brings together transnational organized crime, affluent Chinese nationals seeking to export their wealth abroad, and Canadian casinos, banks and real estate, in transactions that evade policing because the pivotal cash exchanges are done off the books by professional money launderers serving the global Chinese diaspora.
According to FINTRAC’s 2023 study of 48,000 pandemic-era transactions, this evolving Vancouver Model network “simultaneously facilitates money laundering and the circumvention of Chinese currency controls”
“As a result of the temporary closures of Canadian casinos due to the COVID-19 pandemic, professional money launderers began to diversify their money laundering methods,” FINTRAC’s study says.
“During this time, FINTRAC observed a rise in money laundering typologies involving transferring large sums of funds to Canada from foreign money services businesses, often located in China, notably Hong Kong, and the laundering of the funds primarily through the real estate, securities, automotive and legal professions.”
These wire transfers from China were routed into bank accounts of “multiple, unrelated individuals in Canada,” that served as “money mules” in byzantine networks involving Canada-based real estate developers, real estate agents, mortgage brokers and banks.
These Chinese diaspora bank account owners often claimed they were students, homemakers, office managers, or unemployed, FINTRAC reported.
They sometimes used their accounts to send bank drafts to others in Canada for home purchases, or served as “straw buyers” for offshore investors.
“Mortgage payments are sourced from incoming funds from China,” FINTRAC’s alert said.
FINTRAC’s study doesn’t say that Canadian banks knowingly issued fake-income mortgages to Chinese diaspora buyers in Toronto.
But in an interview, D.M. said banking staff are trained to guard against fraud, and the loan application packages he reviewed in Aurora beggared belief.
“The bank found out that one lady works in a casino part-time but got a $1.4 million mortgage showing over $300,000 annual income,” he said. “Plus she takes money as benefits from the government, for her two kids.”
In other examples, an HSBC mortgage client claimed to earn $700,000 annually for remote work in China, while simultaneously living in Canada and paying off a $10,000 student loan.
Another woman who owned homes in Aurora, Markham and Scarborough, worked part-time as a hairdresser while also claiming to earn $536,280 at a “Business Manager” job in Guangzhou.
“Canadian workers have been put out of the real estate market by people working as a hairdresser that own a couple homes,” D.M. said in an interview.
“How is that fair?”
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The most shocking case reviewed by The Bureau, shows that one woman that owns at least four Toronto properties opened her HSBC Aurora bank account in 2013, claiming to be a “Homemaker with no annual income.”
But her Toronto account soon received incredible amounts of wire transfers from HSBC China accounts, and paid out “high value cheques” to third parties for real estate purchases.
This case suggests “Toronto Method” shadow banking described in FINTRAC’s 2023 study has been seeping into Toronto real estate for about a decade.
And yet in 2020, this same woman applied for another HSBC Canada mortgage, claiming to earn $763,000 remotely from her job in China.
This evidence from the HSBC whistleblower complements the seminal investigations of Simon Fraser University academic Andy Yan, who examined sales from August 2014 to February 2015 in several communities on Vancouver’s westside. The average home price in Yan’s study was $3-million.
Looking back at his Vancouver findings in comparison to D.M.’s Toronto banking documents, Yan told The Bureau “I think this helps affirm some of my early work that I did, almost nine years ago.”
“This goes to the core of our banking system,” he said, “and how are we verifying identities and how are we verifying incomes.”
In Yan’s controversial study the vast majority of mortgages went to buyers listing their occupation as home-maker, followed by students, and managers. HSBC and CIBC were the dominant lenders.
Unlike the HSBC whistleblower, Yan had no access to internal banking data regarding the purported origin of funds behind these mortgages taken by Chinese diaspora buyers.
But in an interview, Yan said what he found most interesting back in 2015, was suspicions that Chinese migrants were often buying homes with bulk cash, weren’t accurate. The truth was more complex and seems to be clarified by D.M.’s mortgage findings in Toronto.
“It’s about that global flow of capital, and how it’s multiplied by Canada’s mortgage and lending system,” Yan said. “Because you have to remember, one of the biggest conclusions about my study was that it wasn’t bags of cash that were being used to purchase Vancouver homes outright. They were loans being used. So now, I’m thinking, this is where my study connects up to what you have discovered in Toronto.”
“The interesting story here,” Yan added, “is what happens in Toronto real estate may not repeat Vancouver, but it perhaps rhymes.”
Probably the most famous Chinese property owner from Yan’s 2015 study areas is Huawei executive Meng Wanzhou. In 2009 her family bought a home in Vancouver’s Dunbar neighborhood for $2.73 million, land titles show. In 1998, ten years before Vancouver Model transactions started to surge in Vancouver real estate, the home was sold for $370,000. The home is now valued at almost $6-million.
Ashleigh Rhea Gonzales, a former RCMP data scientist who recently published a criminology thesis finding Chinese diaspora underground banking causes significantly more money laundering into Canada’s real estate than previously estimated, said that D.M.’s findings resemble her own Vancouver Model research.
“This whistleblower’s allegations of widespread mortgage fraud at HSBC Canada align with some of the first-hand accounts from staff of some Canadian financial institutions that I have come across in my research on money laundering in British Columbia,” Gonzales said.
Gonzales, who worked for RCMP’s anti-gang unit in British Columbia until 2023, says she found reports of mortgage fraud accelerated “during the uptick in the Canadian housing bubble after the Vancouver 2010 Olympics,” and continued to surge from 2015 to 2018.
With all this considered, and comparing data sources in this story with previous evidence confirmed in British Columbia’s Cullen Commission, The Bureau estimates that from 2014 to 2023, well over $200-Billion in Vancouver Model and Toronto Method funds could have poured through underground diaspora networks and Canadian financial institutions into Toronto and Vancouver’s real estate.
A federal official not authorized to comment publicly also examined D.M.’s banking leaks for The Bureau, and called this information “explosive.”
The official said money laundering is increasing in Canada, and D.M.’s belief that Chinese-income mortgage fraud has boosted home prices in Toronto is likely true, but also should apply for Vancouver and Montreal real estate prices. The official noted that other nations require tax agencies to verify incomes for mortgages, which isn’t the case in Canada.
“It matters for our next generation because of the impact on the housing market,” the official said.
Queen’s University professor Christian Leuprecht – editor of Dirty Money, a new academic text that probes how Ottawa’s weak regulation has “turned the Canadian federation into a destination of choice for global financial crime” – also reviewed some of D.M. ‘s leaks.
“It’s not a new problem, but you’re taking it to the next level,” Leuprecht said.
“Why does this matter? Because organized crime isn’t just laundering their ill-gotten gains, like any good business person, when they buy real estate, they generate a down payment, then get a mortgage for the rest. Why buy one property when you can buy four?”
“Do you know how many mortgage frauds we have in our books?”
The Bureau’s review of HSBC Canada emails and D.M.’s text messages, shows he came to believe numerous employees at the Aurora branch had direct knowledge of faked Chinese income mortgages, and a veteran manager with oversight of more than 10 Greater Toronto branches knew about broad and questionable mortgage lending for Chinese diaspora clients.
Months after D.M. blew the whistle internally he exchanged texts with another employee, identifying colleagues that they believed had knowledge of diaspora mortgage scams.
The texts suggest D.M. believed HSBC Canada and other Canadian banks continued to hold vast amounts of suspicious foreign income mortgages, which could cause systemic loan quality risks if Toronto’s real estate prices decline.
“Do you know how many mortgage frauds we have in our books,” D.M. texted to his colleague. “It’s insane.”
“She told me,” the colleague replied, referring to an HSBC branch manager.
“She was like, if you do come, you gotta be prepared for the mortgage payout.”
“These people showed fake income and got mortgage,” D.M. continued. “Now interest rate is high, they can’t cope.”
“Other branches did the same thing too,” his co-worker replied. “I heard there’s a lot.”
“Absolutely,” D.M. texted. “All branches engaged in it.”
“This is like the unspoken secret,” his co-worker concluded. “I’m pretty sure other banks have it too. My Aunt have no income and got a mortgage for 700k. They just need a Covenanter from China.”
Generally, in mortgage contracts a covenanter takes responsibility for the loan if the primary borrower defaults.
Internal records reviewed by The Bureau confirm that on April 18, 2022, D.M. sent a lengthy complaint email to senior HSBC Canada executives, informing them of allegations he’d learned from his colleagues.
In it, he alleges that an Aurora manager had informed him of a complaint letter posted to the branch, that accused mortgage brokers and branch employees of colluding in scam mortgages emanating from Mainland China fraud networks.
Pointing to specific examples, D.M. claimed that another branch colleague had admitted processing numerous loan applications without meeting his clients, because a branch manager delivered her subordinates foreign income client applications so “they did not have to get sales themselves.”
“Surprisingly all these clients he would get will have foreign income most of the time very inflated like 400k or 670k a year,” D.M. wrote. “To me that’s suspicious, but he never questioned the branch manager because in Asian culture it’s disrespectful to question elders.”
D.M. also informs his bosses that one Aurora bank manager opened up to him, saying she believed allegations of mortgage fraud collusion involving some branch staff.
“She said yes, she knows specially in Mainland China there is a team who would even answer emails and phone calls verifying [Chinese income] but it’s a sophisticated and well organised scam,” D.M. ‘s email to HSBC Canada managers says.
His complaint explains that he continued to press an Aurora bank manager on her knowledge of fraud allegations.
“When I asked for such a serious issue if she raised a HSBC confidential [complaint] or not she evaded my question,” D.M. wrote. “Now we all love numbers, but I don’t think the bank will like these kinds of numbers achieved through this way.”
Describing why he contacted HSBC Canada executives directly, the whistleblower’s complaint says he felt confused and isolated, but D.M. decided “local leadership if not participated, at least turned a blind eye,” to Chinese fake-income scams, forcing D.M. to “bring up a serious issue against people of superior positions.”
“I could not have stayed silent, in fact I could not sleep well thinking about it,” his April 2022 complaint says. “It reminds me to some extent what happened with the Home Capital Group.”
“The whole thing is wrong on so many grounds,” D.M. continued.
“Now I know one more reason why Canadians and permanent residents are not getting into the housing market. It’s not only HSBC such things are happening across other Canadian banks as well.”
In the Home Capital case, the Ontario Securities Commission fined the prominent Ontario-based subprime mortgage lender in 2017, alleging Home Capital failed to disclose several of its mortgage brokerages had major problems with faked-income mortgages.
D.M. concluded his four-page complaint to senior executives, writing: “I recommend all mortgage deals of this branch in the last 3 years at least if not longer with Foreign income be probed.”
“Bank statements can be verified directly with the foreign banks or use a reputable third party to verify,” he suggested. “When we find someone with Fake ID or trying to impersonate someone we call the cops. But these people, both staff nor clients who did fraud were reported.”
Hours later on April 18, 2022, an HSBC Canada executive emailed back: “I am going to refer this to our Fraud and Risk teams and they will investigate your concerns.”
“The Implications are Broader”
The next day D.M. continued to hound HSBC Canada managers with emails to support his allegations, spotlighting the absurdity of massive Chinese remote incomes claimed by diaspora buyers.
He pointed to one woman with a $1.6-million HSBC Canada mortgage.
“The client claims to be in Canada but [is] a office supervisor in China. [In the] age of remote working in which country [does] a office supervisor makes 400k please tell me,” D.M. wrote.
“[W]hen I asked the co-worker she said her job is not to use the brain or be a police, when I asked do you think she makes that kind of money and how is she doing her job being in Canada to be an office supervisor in China[?]”
Pointing to another document, D.M. warned his managers about Ms. Chen, who claimed to make $721,000 annually as “project manager” for a Beijing telecommunications company, to secure a $1.89 million mortgage.
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Again on May 4, 2022, D.M. emailed executives, suggesting internal records for an Aurora client named Ms. Lin had been altered soon after D.M. blew the whistle on fake Chinese income loans.
His email, which included Ms. Lin’s client profile, warned: “Something interesting happened yesterday, they added a China address to go with [the] story of working in China, please see below.”
The Aurora branch banking records disclosed to The Bureau show that Ms. Lin owns three homes in the blocks surrounding Pacific Mall in Markham.
“The client was onboarded on 24th March with Canada address only and Canadian tax residency,” D.M.’ s email continued.
“She claims to be working in China and have foreign income, so the story she is stuck in Canada due to Covid is very interesting. Suddenly yesterday she decided her address in China. Someone saw the discrepancies and the branch team decided to change it.”
“To me that’s a red flag done to align with the story portrayed.”
Next, D.M. exposed Ms. Lin’s foreign income claim.
“She works for Food processing company, a logistics officer making 273k a year,” he wrote. “I don’t know which logistics officer can work when physically in a different company and also who makes 273k working as a logistics officer.”
Citing another internal banking record, D.M.’s email pointed to Ms. Lin’s $273,000 income and said “it’s interesting how they did the verification.”
The email continues to explain that branch records showed Ms. Lin and her husband had a joint mortgage with a balance of $497,000 at CIBC.
But suddenly during Covid-19, Ms. Lin applied for a new mortgage for $1.2 million with HSBC Canada.
“When I see such things I can’t stay quiet,” D.M.’s May 2022 email says. “[I] was assuming with the new rules things will stop, [but] declining the mortgage or retraining the staff is like treating the symptoms.”
He added that many suspicious Chinese income loans had been “flagged by our Fraud Team already.”
The whistleblower’s scathing assessment ends with the observation that D.M. didn’t believe “someone woke up and decided to scam the bank, but [worked with] a sophisticated network of agents who are training people what to say and answer.”
“The implications are broader and as a responsible bank and citizen we have to,” request investigations from the Canadian Revenue Agency or Ontario Provincial Police, D.M. asserted.
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The Bureau asked Gonzales, the former RCMP data scientist, to review some of D.M.’s documents and conclusions.
“From what I have reviewed, D.M.’s findings align with what appear to have been commonplace practices by some groups of staff complicit from the front line, middle office, and back office and sanctioned by management,” Gonzales wrote, adding “whether knowingly or not depends on the individual work cultures.”
The Bureau also asked Stephen Punwasi to review D.M. ‘s leaked banking documentation.
Punwasi is a financial expert who founded Better Dwelling, a real estate analysis website with a large following of young professionals trying to understand why they’re excluded from home ownership in Canadian cities.
He also provided analysis for British Columbia’s 2018 report into Vancouver Model money laundering in casinos, real estate and luxury vehicles.
What Punwasi explained to the report’s author, former RCMP executive Peter German, is that even though Vancouver Model money launderers don’t comprise a majority of buyers in Vancouver, their willingness to overbid on home sales causes ripples that sends prices skyrocketing, especially during times when political turmoil inside China triggers increased capital flight.
“In 2015 and 2016 Ontario saw this flood of money from China, just like British Columbia, and it was not just to do with immigration, it was due to President Xi’s political crack down on corruption,” Punwasi said. “I think we’ve seen that capital flight in Ontario and B.C. in two big cycles, also including 2020 and 2021.”
The Bureau asked Punwasi if the banking records disclosed by D.M. help to explain Toronto’s real estate price surges.
“Absolutely,” he said, pointing to the case of Ms. Lin (who claimed a $273,000 remote-work income in China) and her three homes surrounding Markham’s Pacific Mall.
Property buyers that aren’t shopping for shelter, but for capital flight or money laundering vehicles, are what Punwasi terms the “marginal buyer.”
“The marginal buyer is like an exuberant buyer on crack, so if they are motivated to move as much money as possible,” he said, “the larger the mortgage they can get, it helps them to overpay for homes, and that can cause the price to launch.”
“So if you see a townhome in Toronto going for $2-million, you don’t know if it is mortgage money laundering or someone buying a place to live. You just have to compete with the going price.”
Punwasi says housing prices are a powerful political issue that will shape the next federal election.
But at the same time, young generations are confused by competing explanations on the causes of Canada’s housing affordability crisis, Punwasi believes, whether its lack of housing supply due to restrictive zoning bylaws, or increased demand due to recent immigration surges, or other factors that make Canada’s housing bubble an outlier in the Western world.
“There are so many conflicting narratives right now that people find it hard to believe the scale of impact that money laundering can have on Toronto real estate prices,” Punwasi said. “But no one has thought it through, that having criminals run our renting stock is a liability.”
Punwasi also believes that Prime Minister Justin Trudeau’s government has decreased scrutiny of money laundering in recent years.
He points to new data uncovered in a ministerial inquiry from Conservative MP Adam Chambers, who is a proponent of tougher money laundering laws, which found sharp declines in Canadian Revenue Agency audits of FINTRAC leads.
“The systemic corruption in housing has been snowballing,” Punwasi said, “to where it’s turned into, maybe the banks don’t need to check where the incomes are coming from, and now whole generations can’t find stable shelter.”
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“Delete, delete, delete”
HSBC Canada emails reviewed by The Bureau show that while the bank appears to have responded to some of D.M. ‘s recommendations in 2022, troubling mortgage applications and problems with existing Chinese income loans continued.
A January 2023 email to an Aurora branch manager from HSBC Canada’s office in Montreal pointed to a client named Ms. B., who worked at an Ontario government casino, and owned homes across Toronto, in Richmond Hill, Newmarket and East York.
Documents show she obtained an HSBC Canada mortgage for $1.26 million in 2016, and that HSBC Canada staff “confirmed” in July 2021 that she was earning $345,000 with a remote work job in Beijing.
Despite her incredible claimed income, documents show, Ms. B. was having trouble paying at least one of her three mortgages.
An email from a “Senior Loss Mitigation” employee in Montreal to an Aurora branch employee says: “client is going through a tough time … her income is limited … I know she collect rent and she use it to pay her second mortgage. Please review the situation with the client to see if there is any special agreement available to her.”
But Aurora’s branch wrote back to the Montreal branch: “What we have told her is … if she really can’t pay, then she just have to put her house for sale … but she doesn’t want to do that.”
In an interview D.M. told The Bureau this case was typical.
“What they are doing is AirBnBing these properties,” he said. “But they can’t manage with higher interest rates.”
He said during mortgage application interviews at the Aurora branch he would often look across his desk and ask questions without letting clients know he was looking at their income claims from purported Chinese companies on his computer screen.
“Most of these people don’t even know what type of company is in their job profile,” he said.
And documents reviewed by The Bureau show that mortgage applications consistent with Fintrac’s 2023 Chinese money laundering report continued in Aurora.
In May 2023, D.M. emailed a senior HSBC Financial Crime Compliance investigator, writing “Just came across two profiles of clients and I have strong evidence these mortgages were also obtained with fake docs and fraudulently.”
When the investigator responded “I will take a look,” D.M. replied: “One had a CDA student loan of 10k and making 700k in China. Makes no sense, there are many other anomalies.”
In interviews, D.M. told The Bureau he waited “patiently for a year” after reporting his Chinese-income mortgage concerns to HSBC Canada managers, before concluding the bank’s response was insufficient.
“This has been going on for seven years and no one spoke up,” he said. “In my first meeting last year, they asked me a lot of questions, like why didn’t you use the normal channels? But I had no faith in the normal channels.”
“Many bank staff were obviously involved,” D.M. alleged. “It was not one or two employees turning the blind eye but the entire system, someone verifying those fake offer letters and pay stubs, or their bank statements from China.”
D.M. said his concerns also included HSBC Canada’s proposed sale to RBC, which was announced in 2022, about six months after D.M. ‘s April 2022 internal complaint. The sale was approved in December 2023 by Canada’s deputy Prime Minister Chrystia Freeland.
Christian Leuprecht, among other experts interviewed for this story, agreed that D.M.’s allegations of widespread Chinese-income frauds at HSBC Canada could raise questions about whether Freeland, Canada’s finance minister, had knowledge of mortgage lending investigations inside HSBC when she approved the sale.
Freeland directed RBC to “establish a new Global Banking Hub in Vancouver,” and “maintain Mandarin and Cantonese banking services at HSBC branch locations,” a Department of Finance statement says.
Ultimately, D.M. says he chose to share his story with Canadian citizens partly because he felt pressured to erase evidence from his whistleblower complaint emails.
A June 2023 email from the bank’s personnel department says “we hereby demand that you immediately and permanently delete any and all HSBC information on any personal email accounts.”
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