The federal Department of Fisheries and Oceans suspects hundreds of millions of dollars worth of lobster is caught in Atlantic Canadian waters each year but never reported to authorities, raising both tax evasion and conservation implications in the largest fishery of the country.

An August internal memo to DFO’s assistant minister said an estimated 10 to 30 percent of lobster landings in the region go unreported, and the department said in a statement it was working to identify criminal networks and money laundering in the sector .

“It’s mind-boggling,” said Osborne Burke, president of the Nova Scotia Seafood Alliance, which represents about 150 lobster buyers and processors and has called for a crackdown on unreported cash sales.

“It’s hard for those who follow the rules to be able to compete in this industry when there’s this other illegal activity going on.”

Allegations of illegal and unreported fishing have become a flashpoint on the East Coast, both in the lobster sector and the hugely profitable but extremely busy spring fishery for juvenile eel. Some critics have blamed DFO for what they call a lack of enforcement.

Commercial lobster fishermen are required to complete logbooks daily, including dates, vessel and license numbers, location fished, number of traps pulled and weight of lobster when sold. The information provides valuable data to DFO to help analyze stock health.

In recent years, the value of reported lobster landings has fluctuated between $1.2 billion and $2 billion annually. The internal DFO memo, which was released under access to information laws, said if the estimates are applied to 2018-2021 landing dates, unreported catches range from $176 million to $681 million annually.

DFO declined an interview request. A statement said the estimates were prepared by the department’s economists and provided to a steering committee last year. Officials were unable to come up with exact figures to indicate the extent of the problem.

The memo says DFO is working with the Canada Revenue Agency to conduct audits in the sector to “gather information.” The department is also calling on FINTRAC, the country’s financial intelligence unit, to identify “key players”.

“Unreported catches can significantly contribute to declining stocks and the fragility of our marine ecosystems,” it said.

“It also undermines economic stability and equity among participants in a fishery and can damage Canada’s international reputation for sustainable fisheries.”

Morley Knight, a retired former DFO assistant deputy, said the problem has grown over the past decade, as a fishery that once provided a modest living can now bring in hundreds of thousands of dollars a year or more for a license holder. .

That kind of big money comes with a lot of taxes. Some income taxes can be reduced if the fisherman is willing to underreport how many lobsters they bring ashore by selling a portion for cash at the wharf to a buyer who also wants to lower the numbers.

Knight said he’s been told the problem is fueled, in part, by buyers from outside the Maritimes, some of whom send middlemen to show up at the piers with “briefcases of cash.” This puts pressure on local buyers who feel compelled to follow suit.

Aside from revenue being hidden from the Canada Revenue Agency, he said, the main concern if there is significant misreporting is that DFO doesn’t have a good sense of whether lobster catches are increasing or decreasing and whether the stock remains healthy.

Knight advocated for a dock monitoring program for the lobster industry, in which employees of third-party companies check the catch when it is weighed at the dock, similar to what already happens in quota-based fisheries such as crabbing.

He said such a system “isn’t perfect”, people find ways to cheat, and admitted there could be pushback from fishermen and buyers worried about logistics, but he believed it would be a “significant improvement over the situation current”.

Burke pointed to a lawsuit filed this week by the United Fisheries Conservation Association that claims a Shelburne County, Nova Scotia lobster pound is buying illegally caught lobster. In his view, the industry is being forced to investigate and take action against those who break the law when that should be DFO’s responsibility.

The larger problem, he said, is the criminal elements that have descended on the sector. He said he has seen photos of trucks with bags of money in the back and suspects the lobster fishery is being used to launder dirty money from other criminal enterprises.

Those willing to pay cash for the lobster and keep it off the books give fishermen better prices, Burke said, meaning they are able to outbid legitimate buyers.

The other concern, he said, is that unreported catches undermine the sustainability of the fishery in the eyes of global markets, noting that sea lobster is currently certified by the Marine Stewardship Council, an international non-profit organization that sets standards for sustainable fishing.

Nova Scotia Fisheries Minister Kent Smith said organized crime related to the illegal off-season lobster fishery in the province’s southwest is “terrorizing the community.” while the fishery for young eels, also known as spilites, along the Nova Scotia and New Brunswick rivers has been destroyed by poaching, threats and violence.

DFO rejected criticism from both the commercial fishing industry and Smith that enforcement was inadequate. It was noted trap, vessel and lobster crisesand highlighted dozens of arrests this spring after the cancellation of spilita fishing, although it is not yet known how many lead to prosecution.

Last May, federal Fisheries Minister Diane Lebouthillier sent a letter to all fishermen in Atlantic Canada and Quebec saying the department was working to detect and stop “unreported cash sales.”

this fall following a meeting between Lebouthillier and Smith regarding illegal fishingDFO has released a statement suggesting the province should ban cash sales in the lobster sector, an observation Smith said “doesn’t make sense.”

The province did it introducing new licensing requirements for fish buyers and processorsand Smith said more holding facilities will be inspected and their records checked.

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