NEWSLETTER AUGUST 30, 2016
A recent check of FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) revealed a disturbing fact: many real estate firms are not performing the basic verifications required under the law prior to completing a transaction, thereby opening the door to money laundering in real estate. Vancouver, Toronto and Montréal are particularly affected. Given that money laundering is used to finance terrorist activities, this fact provides real cause for concern.
Verifications prior to completing a real estate transaction
These verifications, which are governed under the Act, are mandatory and must be documented. The data obtained through FINTRAC as a result of an audit demonstrate that 38 brokerage firms had only partly implemented the required compliance plan, whereas another 47 had not introduced one at all. However, real estate brokers, agents and developers are subject to FINTRAC Guideline 1, and “have to report suspicious transactions and terrorist property to FINTRAC. They also have to report certain other financial transactions “. For example:
- the client has significant amounts of cash;
- the client uses bills:
- bound together by rubber bands;
- wrapped in plastic;
- that are still damp; or
- smell of soil.
Information
Real estate agents and brokers are required to identify their clients and to confirm the existence of entities or corporations, to verify the source of funds and to report suspicious transactions or large cash transactions. Thus, the information is an important component in verifying the identity of a client, which may involve doing research abroad. Real estate brokers may not have the resources with which to do those verifications.
An agent with expertise in information can verify the identity of a client and/or confirm the existence of an entity or corporation, as well as of its directors, in accordance with the FINTRAC guideline on client verification. Certain specialized firms can also validate the authenticity of documents and detect any falsification of information, signatures, etc. The real estate industry could benefit from relying on such firms.
What is FINTRAC
The Financial Transaction and Reports Analysis Centre of Canada (FINTRAC) is a independent and autonomous
law enforcement agency. It has the mandate to collect, analyze and communicate intelligence in order to deter and prevent the proceeds of crime (money laudering) and terrorist financing in Canada and abroad.
