Ottawa is bringing in new rules to deal with rising real estate fraud and money laundering in Canada, according to a newly released government report.
Changes to the Proceeds Of Crime And Terrorist Financing Act will require realtors to identify anyone involved in the purchase or sale of property in Canada, said a July 6 Department of Finance regulatory notice.
“Currently real estate representatives are only required to take ‘reasonable measures’ to identify unrepresented parties,” the department wrote, as first reported by Blacklock’s Reporter.
“Despite the reasonable measures approach, money laundering risks in the real estate sector continue to increase as do reports relating to criminals’ use of the real estate sector for money laundering. Given these factors the ‘reasonable measures’ approach may need to be strengthened.”
The report did not give details about the prevalence of real estate money laundering, but said it remains an issue for the government to tackle.
“The Canadian real estate market has been identified as a sector highly vulnerable to money laundering,” the report said. “Canada’s anti-money laundering and anti-terrorist financing regime must continuously monitor and adapt to new risks and threats which, if left unchecked, can undermine the safety of Canadians, the integrity of the financial system, and national security.”
The new regulations would obligate title insurers to authenticate clients’ identities.
They would also be required to report suspicious transactions to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and determine whether transactions involved “politically exposed persons and heads of international organizations,” the notice said.
Many realtors are on board with stricter regulations, the House of Commons Finance Committee heard in a 2021 meeting.
Brian Santos, then-chair of the Ontario Real Estate Association government relations committee, told the committee that money laundering is a “multi-billion dollar problem” in Canada’s housing market.
“It contributes to crowding out hardworking families looking to achieve their dream of one day owning a home,” he said. “Realtors do not want to see a single dollar of dirty money competing against hardworking young families in our housing market.”
New regulations should “remove the anonymity of perpetrators of money-laundering crimes,” he added.
Advocacy group Transparency International has called Canada a “la la land for financial crime.”
“It might not come as a surprise to hear that local crooks buy their houses with the proceeds of crime,” the group said in a 2019 report. “But property is also an appealing asset class for individuals looking to launder and invest large sums of dirty cash, and there are few countries quite as welcoming as Canada.”
Tens of billions of dollars in transactions from 2008 to 2018 were deemed suspicious in the Toronto housing market.
“In all, at least $20 billion appears to have entered the GTA housing market in the past 10 years without oversight from FINTRAC and the financial institutions tasked with conducting AML due diligence on beneficial owners and source of funds,” the report said.
“Canada’s lack of beneficial ownership transparency makes our entire country an attractive destination for money laundering or ‘snow washing’.”
