Canadian Real Estate Continues to Attract Dirty Money, Federal Agency Says

A for sale sign is displayed in front of a house in Toronto on Sept. 29, 2021. The Canadian PressEvan Buhler

Canada’s real estate market is an attractive one for those looking to launder money, according to the country’s financial intelligence agency.

“Canadian real estate is considered to be attractive both as a destination for laundered funds and as a channel to launder the proceeds of crime,” says an operational alert issued by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).

“Professionals in the real estate sector can wittingly or unwittingly facilitate tax evasion and money laundering methods,” said the alert, as first reported by Blacklock’s Reporter.

The alert, which was issued in partnership with the Canada Revenue Agency, says tax evasion is another growing concern in the industry.

“One such method involves financing the purchase of property outside a financial institution with no logical explanation provided. This is often done by relying on a private lender or unlicensed money services business.”

Many cases of tax evasion use “straw buyers,” the alert said.

“Straw buyers are often students, non-residents, residents with strong familial ties outside of Canada, corporations or trusts,” it said.

“Straw buyers serve as intermediaries to distance the funds from the ultimate beneficiary and conceal ownership. ... Such schemes can also be characterized by a lack of information on foreign clients’ overseas activities.”

FINTRAC said warning signs can include multiple incoming electronic funds transfers that are below currency restrictions imposed by countries like China and Iran.

In 2023, FINTRAC released a report that said China was behind many money laundering incidents and other fraudulent financial activity in Canada. It said investment firms and individuals listed as financial planners or investors often received large bank drafts coming from unknown sources in China.

FINTRAC said it had analyzed a sample of about 48,000 transactions in relation to money laundering through underground banking schemes. In these cases, the majority of the wire transfers were from entities or individuals in China. The money moved through casinos, real estate, securities, automotive, and the legal profession, the report said.

New Rules Target Money Laundering

In a regulatory notice issued July 6, the Department of Finance indicated it would be bringing in new rules to target money laundering in the real estate sector.

It involves changes to the Proceeds of Crime and Terrorist Financing Act, which will require realtors to identify anyone connected to buying or selling Canadian property.

The report said the real estate market is “highly vulnerable” to money laundering. If left unchecked, it can undermine the integrity of the financial system and national security.

Title insurers would be required to authenticate clients’ identities and report suspicious transactions to FINTRAC, according to the notice.

Jennifer Cowan and Isaac Teo contributed to this report.