Federal memo estimates up to 30% of lobster catch in Atlantic Canada goes unreported

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 country's largest fishery.

An internal memo in August to DFO's deputy minister said it's estimated that between 10 and 30 per cent of lobster landings in the region are unreported, and the department said in a statement it is working to map out criminal networks and money laundering in the sector.

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

"It's tough for the ones that are playing by the rules to be able to compete in this industry when you have this other illegal activity occurring."

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

Commercial lobster fishermen are required to fill out logbooks daily, including dates, vessel and licence numbers, location fished, the number of traps hauled and the weight of lobster when it is sold. The information provides valuable data to DFO to help analyze the health of the stock.

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 estimates are applied to 2018-2021 landings data, unreported catches range from $176 million to $681 million annually.

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

The memo said DFO is working with the Canada Revenue Agency to do audits in the sector to "gather insights." The department is also turning to FINTRAC, the country's financial intelligence unit, with the aim of identifying "key players."

"Unreported catches can contribute significantly to the decline of stocks and the fragility of our marine ecosystems," the statement said.

"It also undermines economic stability and fairness among participants in a fishery and can damage Canada's international reputation for sustainable fishing."

Morley Knight, a retired former assistant deputy minister with DFO, said the problem has grown in the last decade, as a fishery that once provided a modest living can now ring in hundreds of thousands of dollars a year or more in income for a licence holder.

That kind of big money brings with it a lot of tax. Some income tax can be shaved off if the fisherman is willing to under-report how much lobster they are bringing to shore, selling a portion for cash at the wharf to a buyer also willing to fudge the numbers.

Knight said he's been told the problem is being fuelled, in part, by buyers from outside the Maritimes, some of whom deploy intermediaries to show up at wharves with "briefcases of cash." That puts pressure on local buyers who feel forced to follow suit.