Duhaime's Financial Crime & Anti-Money Laundering Law in Canada

As reported in the Vancouver Sun (“Landmark ruling for Chinese bank”), a Chinese bank has won a landmark ruling against a Chinese foreign national who allegedly disappeared from China with an unpaid $10-million dollar loan in 2014, and quickly purchased four Vancouver-area homes.

Our firm, Duhaime Law, acted as counsel for the China CITIC Bank, a state-owned bank in China in the litigation to seek a mareava injunction to freeze assets and recover the loan.

China CITIC Bank won a freezing order (mareava injunction) against three luxury homes in Surrey last summer.

In B.C. Supreme Court in February, Shibiao Yan was ordered to comply with an arbitration ruling in China to repay China CITIC Bank for the loan he took out in 2014, as president of a company named Tanyuan Wood.

CITIC alleged that Yan and his wife Yahui Gao bought a Vancouver home and three South Surrey homes worth about $8 million in total over several months in mid-2014, shortly after he withdrew $10-million in one transaction from the bank’s line of credit.

“Based on … routine anti-money laundering due diligence, CITIC Bank believes that Mr. Yan and (his wife) Ms. Gao disappeared from China,” legal filings from the bank say.

Court documents say that Yan applied for the credit line from CITIC in June 2014. Yan incorporated the B.C. company TYMY Investments in March 2014, legal filings say, and his wife bought the $2.5-million Vancouver home a month later.

Yahui Gao still owns the Vancouver home where the family is believed to live, according to court filings. This home was not subject to the freezing order and is now assessed at $3.94 million.

The three Surrey homes bought in 2014 and originally subject to CITIC’s freezing order have been sold and “collection remains difficult,” according to Christine Duhaime, the Vancouver lawyer who obtained the so-called Mareva injunction against Yan’s B.C. assets.

In September 2016, Yan’s lawyer successfully applied to alter CITIC’s freezing order to exempt any bank accounts or property assets of TYMY Investments, Yahui Gao, or another person named Pengfei Luo, legal filings say. The order only applies to Yan’s money at an HSBC branch in Vancouver, a Scotiabank branch in Richmond, and a TD branch in Richmond.

“They said that the homes were owned by a trust, and that there is a beneficial ownership structure,” Duhaime said in an interview, explaining Yan’s application arguments. “And therefore other people like his wife were the owners, and he wasn’t. So CITIC bank wasn’t entitled to take the proceeds of the homes. The homes proceeded to be sold, because the court said … we don’t know that really he is behind this (home ownership.)”

B.C. court and corporate documents show that Shibiao Yan of 712 West 64th Avenue in Vancouver registered the company TYMY Investments Ltd., on March 7, 2014. On the same day Shibiao Yan ceased to be a director, records say, and two new directors were named — Yahui Gao and Pengfei Luo — both with mailing addresses at 712 West 64th Avenue.

Duhaime said CITIC’s court actions against Yan will continue.

Meanwhile, court filings from CITIC say that Yan and his company Tanyuan Wood are subject to numerous collection efforts in China.

“Mr. Yan has other creditors in China, who we understand have attempted to locate him. In the past, CITIC bank applied to freeze the property of the Mr. Yan in China … including real property, and learned his properties were frozen by other creditors.”

CITIC’s filings say that in December 2014 Yan sold his Tanyuan shares worth about $6.5 million in breach of their loan agreement. In July 2016 CITIC attended Tanyuan’s office site and found “there are not 35 employees employed at Tanyuan Wood, as alleged by Mr. Yan — there are zero employees employed at Tanyuan Wood.”

Duhaime said that Yan is in Canada on a visitor’s visa.

Court filings from CITIC say that the bank’s anti-money laundering and international asset collection office undertook a global search, in 2016 a private investigator collected a number of documents outside the 712 West 64th home of Yahui Gao, including a “destroyed HSBC Premier World MasterCard,” in the name of Shibiao Yan, torn letters from Scotiabank in Richmond informing Yan and Gao that their accounts would be moved to a new branch, and a torn bank draft from Toronto Dominion Bank in Richmond for $400,000, payable to Ms. Gao.

There was also a torn note that included the words Tan Yuan, which said “until the official investigation to find out the true facts I naturally will return to carry on business,” legal filings say.