Real estate is one of this era’s few high-yield investments. Vancouver and Toronto lead the way in Canada, with heated bubble-like markets.
But there may be bad actors at the markets’ edges, with sinister motives. This according to the Financial Transactions and Reports Centre (FinTRAC), a federal agency that monitors compliance and enforces federal money laundering legislation. (Their chief purpose is to provide financial intelligence to law enforcement and national security agencies.)
In this piece in the Globe and Mail, Kathy Tomlinson reviews recent activity by FinTRAC. We do not get any sense from this about the size of the real estate problem and its effect on prices.
The Financial Transactions and Reports Analysis Centre (FinTRAC), which enforces the legislation, says it found “significant” or “very significant” deficiencies within some five dozen B.C. brokerages in the past year. It decided to step up scrutiny over worries that money primarily from China is being laundered through Vancouver real estate.
“There were concerns being raised that those in the real estate sector were not fulfilling the obligations under the act, as well as other concerns expressed about the movement of money,” said spokesperson Darren Gibb. “The real estate sector is highly vulnerable to money laundering.”
FinTRAC’s 2015 annual report surprised me with the breadth of its abilities and its worldwide connections. Clearly, their focus is not on real estate prices. However, their effectiveness at combatting money laundering begins with reporting from businesses such as those in the real estate sector, where big dollars change hands.
Through our compliance program, we ensure that businesses on the front lines of Canada’s legitimate economy meet their legal obligations. Our robust guidance, assessment, enforcement and feedback activities are focused on ensuring that businesses provide us with the information that we need to support our partners’ money laundering and terrorism financing investigations.
Given the importance of suspicious transaction reporting to our analysis and financial intelligence, we reached out to businesses last year to enhance their awareness of their obligations in this regard and, more importantly, to strengthen their understanding of what constitutes a useful suspicious transaction report. We also refined the methodology that we use to assess compliance related to suspicious transaction reporting and communicated it broadly to businesses across the country. As a result of these efforts, and an increased commitment from businesses, suspicious transaction reporting increased by 11 percent in 2014–15, and the quality of the reports that we are receiving has improved markedly. This has had a real impact on the financial intelligence that we are able to generate and disclose to our partners.
As Tomlinson reports, the real estate sector has concerns over training and extra work for its agents around money laundering and the federal legislation. Others also have concerns, but in a different sense, calling for more training.
Money-laundering expert Christine Duhaime says the federal agency deserves credit for increasing enforcement, but it should do more.
“I do think it’s good that FinTRAC is increasing its compliance. I just wish they’d do 800 [examinations] instead of 80,” said the Vancouver lawyer, who adds that she talks to many agents who are uninformed.
“Most don’t even understand the laws or what they are supposed to do,” she said. “[Brokerage firms] have to hire consultants and experts, and then you have to hire somebody to be a compliance officer – or appoint someone – so it’s really expensive.”