VANCOUVER — A groundbreaking criminology thesis has found the Pacific Rim strategy, a high-level framework of policies started in Pierre Trudeau’s government to dramatically increase investment and immigration from China, has exponentially increased Canada’s vulnerability to money laundering and “economic espionage, foreign interference, and Transnational Organized Crime operations.”

The research paper by Ashleigh Rhea Gonzales tackles sensitive matters that she says have been ignored by Ottawa for decades, because successive governments have prioritized Pacific Rim trade and wealth derived from affluent migrants and underground banks over Canada’s national security and housing affordability.

The hard-hitting thesis suggests Justin Trudeau’s enthusiastic pursuit of Pacific Rim policies incentivizes money laundering, and raises questions of “systemic corruption” within his and prior administrations.

Stephen Harper’s government also used the Pacific Rim framework but mitigated its impacts, cancelling a federal immigration-investor program found to be rife with fraud, which also boosted home prices in Vancouver through “millionaire visa” migrants from China that bought luxury homes but often paid little income tax in Canada.

Gonzales, a Simon Fraser University data scientist who worked until 2023 with the RCMP’s anti-gang forces in British Columbia, also breaks ground by conceiving an economic model to more accurately assess the scale of global funds laundered into Canadian homes, banks, casinos and financial products.

She found that a provincially-commissioned study that estimated about $5.3-Billion laundered into B.C. real estate in 2018, likely significantly under-calculated the scale of illicit funds channeled through Vancouver’s Chinese diaspora.

This system of underground transfers between China and Canada, dubbed the ‘Vancouver Model’ by an Australian professor, brings together transnational organized crime, affluent Chinese migrants seeking to export their wealth, and Canada’s government and financial professionals, in a mutually-beneficial web of transactions that evade police enforcement, because the pivotal international transactions are completed through off-the-books cash exchanges managed by criminal bankers.

According to Gonzales, Canada’s Pacific Rim policies have boosted domestic wealth as intended.

But unintended consequences in national security and inequality, including skyrocketing real estate prices and harms from the opioid epidemic that RCMP attribute to Vancouver Model financing, are now seriously undermining Canadian society.

“Many of these factors, such as the exponential growth in size and valuation of the real estate sector, have become double-edged swords in creating new economic opportunities for some and decreasing accessibility to an affordable cost of living for others,” the thesis finds.

“100 percent this is impacting housing affordability,” Gonzales said in an interview, adding the fentanyl trade stemming from Chinese transnational gangs that causes thousands of deaths annually in British Columbia, couldn’t flourish unless governments continued to accept Vancouver Model investment.

“Directly are there lives being lost?” she said. “No. Indirectly? Yes.”

As Gonzales explains it, the “grey zone” economy that has proliferated from half a century of Pacific Rim trade policy, has become self-perpetuating, with the same factors that make Vancouver Model money laundering hard to detect, attracting even more shadowy global money.

Meanwhile, Vancouver’s economy is an increasingly useful tool for state-sponsored infiltration that becomes harder to regulate as Chinese investment becomes more important to Canada’s treasury.

According to Gonzales’ thesis, Canadian intelligence believes President Xi Jinping’s foreign interference includes Beijing’s fostering of partnerships between organized crime and money laundering networks and Chinese security officials, that combine to exert influence in Canadian society, by leveraging diaspora investment in real estate, finance and industry.

This type of Chinese Communist economic influence in Canada can manifest because Xi’s military, security and business systems are directed to work together for Beijing’s geopolitical objectives, according to Gonzales, while Xi’s regime attempts to “manage the Chinese diaspora overseas as agents of Chinese foreign policy.”

“There is a strategic gain in these partnerships that culminates in something ideologically problematic to Canadian sovereignty,” her thesis says, “[with investments from China] destabilizing democratic sensibility when persistent and at scale.”

And yet, Canada’s regulatory and criminal justice system has failed to adapt to what Gonzales calls “hybrid threats” stemming from these Chinese state actor and organized crime networks, which her paper broadly classifies as Beijing’s “Party-State-Military-Market nexus.”

“The emergent risk has been widely downplayed due to the many who have benefitted or continue to benefit from the tensions between Canada’s economic development efforts and security challenges,” Gonzales writes. “In taking this position, the thesis asserts that those in positions of power could be complicit in perpetuating and benefitting from the systemic corruption sustained by these illicit financial flows.”

Asked to explain in less academic terms, Gonzales paraphrased a quote from CSIS director David Vigneault, who has said that Canada’s national security relates directly to economic security.

The concept has also been examined in previous reports by The Bureau, that found Justin Trudeau’s administration has ignored urgent recommendations to crack down on Chinese and Indian intelligence operations targeting diaspora communities, because powerful ministries such as Global Affairs Canada, prioritize trade with China and India over CSIS’s national security interventions.

Gonzales also finds that scrutiny of Vancouver Model money laundering and foreign interference enabled by the Pacific Rim strategy has been suppressed by the “extreme and inappropriate” tendency to dismiss scrutiny of illicit funding from China as “xenophobic due to the British Columbian and Canadian values of ethnocultural diversity, Asia Pacific diaspora, and neoliberalism.”

In an interview, Gonzales said she chooses to probe these sensitive topics directly, using an academic lens that includes diversity and inclusion studies, and consideration of her own Asian background, including Filipino, Spanish, and Chinese ancestry.

“The Pacific Rim strategy has been prioritized for so long,” she said. “You need to have a realistic evaluation of the outcomes, and you need to be able to ask the question, when does too much of a good thing, become not a good thing?”

But in the current state of affairs, Canada’s enforcement regime effectively ignores underground banking networks in diaspora communities, and so “the traditional path to prosecution does not work, and their deterrence effects are moot,” Gonzales writes.

For this to change, Canadian agencies need to penetrate the informal transfer networks that facilitate the Vancouver Model, Gonzales says, and proactively “outreach to vulnerable demographics to bolster awareness, resilience, and resistance against hybrid threats, organized crime, and nation-state threat actors.”

This won’t be easy, because diaspora banking networks in Canada thrive through deep bonds of community trust that are designed to work outside of regulated financial channels.

It is this social networking and trust factor — otherwise known as “Guanxi” in Chinese culture — that probably makes the scale of Vancouver Model impacts in Canadian real estate larger than previous estimates, according to Gonzales.

“By prioritizing prevention, law enforcement, and community outreach efforts B.C. and Canada [can] safeguard the financial system and sensitive business sectors,” her thesis concludes. “Until then, the [Anti-Money Laundering] regimes of B.C. and Canada remain at risk of maintaining their willful blindness to and complicity in the problem.”