What role has dirty money played in Canada's real estate market?
Recent media reports have expressed concerns that Canada has become particularly prone to money laundering through the real estate sector. Under a cloak of secrecy, criminal networks have laundered the proceeds of crime through patterned gaming funds in casinos; the purchasing or selling of properties; accessing financial institutions through approved gatekeepers; assisting in the purchase or sale of property; and using mortgage and loan schemes, all of which present high risks that leave financial entities open to money laundering activities and market abuse. The infiltration of criminal networks in Canadian real estate leaves question marks on the fitness and propriety of gatekeepers to safeguard the housing markets and mitigate the downstream effects on Canadians.
More specifically, these reports cast a shadow of doubt on financial reporting in the real estate sector and raise concerns about the transparency of real estate transactions in Canada. More troubling, however, is that these types of financial transactions appear to occur with the frequency, impunity, and scale that have never been experienced before. They also raise questions about the ability of trusted professionals to be gatekeepers and report suspicious transactions to regulatory authorities. Gatekeepers (estate agents, lawyers, and accountants) must prevent and curb money laundering and terrorist financing.
While all of these gatekeepers have critical roles in addressing money laundering activities in the real estate sector, accountants, in particular, have a crucial role in the fight against money laundering in Canadian real estate. Accountants have specific anti-money laundering (AML) obligations under Canadian law and must be on the alert for potential criminal activities. More specifically, accountants have specific reporting obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), namely, to establish compliance program; implement procedures to verify the identity of their clients; complete reports about suspicious transactions and submit them to FinTRAC, and keep records. However, the real challenge for the accounting sector is that the scope of the activities to which reporting is applied is exceptionally small. Accountants must know about the triggering activities associated with schemes related to reporting suspicious transactions, reporting terrorist property, and reporting large cash transactions.
For more on this topic, please join Royal Roads University professor Mark Lokanan, a leading national voice on financial crimes in Canada, as he joins an expert panel assembled by McMaster University and Canada Housing and Mortgage Corporation (CHMC) to discuss Dirty Money in Canadian Housing.