Fraudsters With Chinese Ties Buying Canadian Homes With Fake Income: MP Citing Media Investigation

Independent MP for Spadina-Fort York Kevin Vuong rises during Question Period in Ottawa on March 23, 2022. The Canadian Press/Adrian Wyld

Independent MP Kevin Vuong flagged the issue of fraudsters using fake income for mortgage loans in Parliament, citing an investigative report linking these schemes to Chinese money laundering that has been driving the Canadian housing crisis.

“Whistleblower information from HSBC documents show rampant mortgage fraud by people using fake high salaries from fake jobs in China to get mortgages and buy houses in Canada. How’s it possible for a person with no income to buy four houses?” Mr. Vuong said during Question Period in the House of Commons on Feb. 7.

He added that “these frauds fuel real estate bubbles” and reinforce earlier discoveries regarding Chinese money laundering in the Canadian real estate market.

His comment alludes to a recent article by investigative journalist Sam Cooper, citing an anonymous whistleblower employed at an HSBC branch in Aurora, Ontario. The report outlines how some individuals in the Chinese diaspora community, claiming to work in modest-paying jobs or even being unemployed, secure substantial mortgages based on fake or exaggerated income. The income is falsely linked to remote work in China and, in specific instances, to non-existent jobs.

Mr. Vuong highlighted an instance involving a woman who owns four Toronto properties. She opened her HSBC Aurora bank account in 2012, declaring herself a “Homemaker with no annual income.” However, her Toronto account quickly received substantial wire transfers from HSBC China accounts and issued “high value cheques” to third parties for real estate purchases, according to the whistleblower.

A separate instance involves a woman working part-time as a hairdresser. Despite her part-time occupation, she owns multiple homes across Ontario and simultaneously claims an income of $536,280 for a “Business Manager” position in Guangzhou.

The whistleblower stated that “there are thousands of these cases,” where Chinese residents in the country allegedly use forged documents to secure approved mortgages.

In response to Mr. Vuong’s inquiry regarding the government’s strategy to tackle fraudulent purchases of Canadian homes and their potential role in the housing crisis, Prime Minister Justin Trudeau highlighted his government’s initiatives to regulate the influx of foreign funds into Canada’s real estate.

In 2022, the federal government banned foreign investors from buying residential property in Canada. On Feb. 4, Ottawa extended this ban, initially set to expire on Jan. 1, 2025, for an additional two years until Jan. 1, 2027. This initiative affects foreign commercial enterprises and individuals who are not Canadian citizens or permanent residents.

Housing Crisis and Money-Laundering

The cases, disclosed by the HSBC employee, resonate with earlier studies that connected Chinese money-laundering schemes and underground banking to the housing crisis in major Canadian metropolises such as Toronto and Vancouver.

This includes a 2023 study by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). The anti-money laundering watchdog has been investigating money laundering in casinos in British Columbia under the initiative dubbed “Project Athena.”

The project’s focus broadened nationally during the COVID-19 pandemic, driven by shifts in money launderers’ methods due to the temporary closure of casinos.

“During this time, FINTRAC observed a rise in money laundering typologies involving transferring large sums of funds to Canada from foreign money services businesses, often located in China, notably Hong Kong, and the laundering of the funds primarily through the real estate, securities, automotive and legal professions,” the study stated.

In its examination, FINTRAC reviewed roughly 48,000 transactions related to the laundering of proceeds from crime through underground banking schemes. The bulk of disclosures associated with underground banking mainly included incoming wire transfers from entities or individuals in China.

FINTRAC noted that these wire transfers from China were directed into the bank accounts of “multiple, unrelated individuals in Canada,” who acted as “money mules” for the underground banking network.

Matching the HSBC employee’s revelations, the report also mentioned that people involved in underground banking schemes often had jobs like students, homemakers, office managers, and real estate agents, or were unemployed.

The Cullen Commission, initiated by the B.C. government in 2019 to explore reported casino-related money laundering, also received testimonies on how drug crimes and the laundering of proceeds of crime have contributed to a housing affordability crisis in the province.

In its final report, published in 2022, the commissioner acknowledged public concerns, as reported in the media, regarding the correlation between increasing real estate prices and foreign ownership in British Columbia’s real estate market.

“While most of these reports involved suspected money laundering activity in and around Lower Mainland casinos, concerns were also raised about money laundering in other sectors of the economy, including ... the real estate sector, where there were suggestions that money laundering activity was contributing to the rapid increase in housing prices in the Lower Mainland and other parts of the province,” the report stated.