Fast cars and easy money: Insurance agents penalized for role in luxury car 'grey market'

thomas more than vi years after a provincial cover into money laundering warned well-nigh the lift of a so-called "grey market" exporting Canadian luxury cars to China — many of the insurance agents who processed paperwork enabling the shadowy deals are facing sanctions.

The Insurance Council of B.C. — which regulates agents and brokerages — has issued fines and suspended licences in recent months of more than a dozen agents who helped exporters sidestep rules designed to prevent them from sending new vehicles out of Canada.

According to a series of disciplinary orders, the agents facilitated the purchase of one-year insurance policies on hundreds of Mercedes, BMWs and other luxury vehicles — knowing they were destined to be cancelled within days as the cars were shipped off to China.

In some cases, the agents even acted as so-called "straw buyers" themselves — purchasing high-end vehicles with money given to them to act as fronts for exporters.

Because the two organizations share the same acronym — a point of occasional confusion in the industry — the council will be referred to as "the regulator" for the rest of this story.

A 2020 report by accounting firm MNP described straw buyers as "individuals who represent themselves as the purchaser of the vehicle for their own use when in fact they are deployed by the person or company who is the conduit for exporting the vehicle to the foreign market."

"The scheme typically involves an order for a specific vehicle from a buyer in a foreign market. The order is received by a contact or exporter which may or may not be affiliated with organized crime," says the confidential report, which was written for the regulator.

"The straw buyer is paid a commission which can range between three per cent and five per cent."

Insurance agents penalized for role in luxury car 'grey market'

It's not illegal to export a new vehicle, but companies like BMW and Mercedes have their own dealerships in China, so they began placing conditions on sales and leases forbidding the resale of vehicles for export from Canada.

They also installed tracking software to ensure cars remain in North America.

Both of them are licensed insurance agents now — even as others are finally facing penalties for behaviour that occurred years ago.

In the most recent decision, insurance agent Wanan (Page) Li's licence was cancelled this July after she was caught acting as straw buyer for an exporter who funded her purchase of a $116,000 Mercedes in 2023.

"She provided the vehicle to a male who paid her $30,000 in cash and a promise for the balance owing to be delivered at a later date," the report says.

"He never delivered the initial funds and allegedly advised her to make a stolen vehicle claim for the vehicle."

Li was ordered to take ethics courses and banned from the profession for three years. She told the regulator she will also have to pay $1,665 a month for the next six years to cover off the money still owed for the car loan.

The orders against them are cited as precedent for the recent penalties and are written in a type of anonoymized legalese that makes their actions difficult to understand.

The scheme was discovered in December 2017 when a manager at the East Vancouver brokerage where Lin and Cua worked discovered a stack of licence plates stored under one of their desks.

A preliminary investigation revealed "a pattern of issued policies that were subsequently cancelled within a few days."

The confidential memo says Lin and Cua worked with a Burnaby used car dealership that "circumvented an agreement between Mercedes Canada and Mercedes dealerships that barred the sale of luxury vehicles directly to export companies, using a third party."

"The agent issued one-year policies knowing that the vehicles would soon be sold to (the used car dealer); he was also aware that the policies would soon be cancelled, and that he would collect commission on the transactions."

Both men also purchased vehicles on behalf of trading companies. Lin said he bought several vehicles on behalf of a numbered company.

"The agent drove these vehicles to a pre-designated parking lot, and the numbered company provided him with a bank draft to pay for them; he also purchased an insurance policy which he subsequently cancelled," the report to the minister says.

"While there are no rules preventing these types of transactions, they are believed to conflict with the spirit of the Motor Dealers Act."

Fung processed 55 short-term transactions involving new or newer luxury vehicles.

"Any money I made, it wasn't worth it. Insurance was supposed to be my career and I wouldn't jeopardize it for this. I regret it happened."

In another of the regulator's decisions, Dawei (David) Diao was suspended for 18 months — beginning in March 2025 — after he admitted using editing software to alter vehicle registration documents.

He also processed 137 short term policies, many of them paid for with the same credit card.

"The Licensee further explained that when cancelling the policies, the premiums were usually refunded by cheque because the individuals wanted to collect points on their credit cards."

"We continue to monitor broker activity and we're also reviewing our processes to determine if there are other ways to help mitigate inappropriate broker activity related to commissions."

German's money-laundering report claimed that organized crime figures were "unhindered in their ability to launder the proceeds of crime through high-end, luxury vehicle purchases within Greater Vancouver."

He said vehicle dealers had accepted large sums of cash from "suspicious individuals" to pay for the cars, and that there was no way to determine the source of wealth for the straw buyers or the exporters paying them.

"Provincial employees identified numerous red flags of money laundering; including 4,108 unique straw buyers, with 48 making in excess of 11 transactions, one making in excess of 25 purchases, and 1,000 apparently linked to one exporter," German's report said.

German noted that the province also paid out millions in provincial sales tax rebates issued to straw buyers and exporters who had the gall to apply for PST refunds on their pricey purchases.

By contrast, the MNP report said further information was needed about the source of the funds used to buy the vehicles to make a determination as to whether money laundering was involved.

In a statement, a Ministry of Finance spokesperson said the province received a total of 16,550 refund applications related to motor vehicle exports between 2016 and 2021 — the year B.C. Acted to end PST refunds on grey market vehicle transactions.

The ministry also noted that a provincial commission on money laundering that followed German's report suggested further data was needed on the involvement of money laundering in grey market exports.

"The extent to which proceeds of crime are actually being laundered through vehicle export versus the use of legitimate funds is unclear," a ministry spokesperson said.

"Engaging in grey market exports with the use of legitimate funds is lucrative because of the international price difference that can support profits for resale to buyers in other jurisdictions that exceed the purchase price paid in Canada."

Just this April, FINTRAC also brought in new regulations requiring car dealerships to report suspicious transactions and watch for red flags around the purchase or leasing of passenger vehicles valued at more than $100,000.

In an interview, Insurance Council of B.C. Director of professional conduct Marko Goluza said the regulator initiated its own investigation into short-term cancellations after complaints against Lin and Cua — which explains the six-year lag between German's report and recent sanctions.

The regulator has issued 17 decisions against agencies and individuals totalling 20 years in suspensions or prohibitions, five licence downgrades and $90,000 in fines. Goluza said the longest suspension was for 10 years.

"We do look at precedent. We look at the reach and the mandate of the professional regulator and that is how we sanction," he said. "So if somebody loses their ability to work in an industry for a year, that's a very significant deterrent for a professional."

Goluza said the regulator also has the ability to refer files to other bodies — like the Canada Revenue Agency or the RCMP — where wrongdoing occurs.

Beyond the regulator's decisions, B.C.'s courts have also seen a raft of lawsuits filed by car companies against alleged straw buyers.

In a lawsuit filed by Mercedes this summer, a Burnaby car salesman is accused of acting as a straw buyer for an exporter who shipped a 2020 Mercedes to China, in violation of the sales agreement.

"The defendants conspired with one another to obtain the vehicle from the plaintiff through fraudulent means and export the vehicle to China for profit," the notice of claim says.

In what appears to be a legal first, an amended claim filed in September cites German's report as grounds for punitive damages against the alleged straw buyer and the exporter.

"The defendants' active and knowing participation in the grey market export of luxury vehicles is conduct that merits an award of punitive damages in order to punish (them) and deter others from engaging in similar acts for profit."

Both the buyer and the exporter have denied the allegations.

---

---