Real Estate Boom Ripe for Money Laundering?

As far back as 2006, Canada was actively pursuing a tougher stance on anti-money-laundering and anti-terrorist financing. At the time this took shape with the introduction of new bills, as well as an increase in funding for The Financial Transactions and Reports Analysis Centre (FinTRAC), the RCMP and the Department of Justice. During this period, The Honourable Jim Flaherty, then Minister of Finance remarked, “Canada’s New Government will continue to be relentless in its battle against money laundering and terrorism financing.” This staunch anti-money-laundering legislation might explain then, why it came as such a shock last month when one of Canada’s most respected newspapers published an article possibly connecting the Vancouver real estate market to fraudulent activity.

In a shocking exposé published last month, The Globe and Mail reported that they had uncovered “dozens” of Vancouver based real estate firms who had failed to comply with federal anti-money-laundering laws. In place partly to help realtors identify who their real estate clients are, as well as the source of their money, it was reported that in some instances these laws had been ignored at their most basic level; in particular, it seemed, when dealing with potential home buyers from abroad. Among their many findings, The Globe reported that in some cases, real estate agents failed even to ask for identification such as driver’s licenses and passports. In essence, the result of these ongoing issues has been reported as a real estate market that is severely “vulnerable” to money laundering from abroad.

Research undertaken by (FinTRAC), which is the body who enforces the anti-money-laundering legislation, found that here in Vancouver some brokerage firms had failed to report “suspicious or large cash transactions” required by law. This all emerges on the back of public concerns that too much money is pouring in from abroad, thereby saturating the market and driving up housing prices. Although palpable in the general spirit of time, these sentiments really came to a head when a Point Grey teardown sold for $80,000 over its asking price, making headlines all over the country in the process.

It’s hard to say though, whether the possibility of Vancouver real estate as a money-laundering hub was already on the minds of Vancouverites? What is certain is that as the prices of homes on the real estate market here continue to soar into the multi-million dollar range, many are asking themselves (and one another): who can afford to buy these houses, and how?

And if all this wasn’t enough, most lenders are expressing increased wariness over assignments. Whether a standalone issue, or a trickle down result of the recent bad press, it’s hard to say. What is clear is the struggle to find mortgages for their clients who have purchased an assignment. Many lenders are now saying they will not lend on any assignments and the ones that will look it at it may only lend on the original purchase price and not the assigned amount. Part of this issue was explored in yet another article published by The Globe, which delved into assignment sales. In it, The Globe reported “Assignment clauses are an obscure but increasingly ubiquitous feature of domestic real estate transactions in B.C.’s Lower Mainland, where feverish real estate prices have triggered a frenzy of buying and selling, and a national debate about the risk of an overheated market and the role of foreign investment.”

With emotions running high over the price of housing in Vancouver, this new information couldn’t have come at a more tempestuous time. Although the proverbial jury is still out on making a case for money laundering here, these malpractice issues in the real estate sector continue to be investigated.

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About Atrina Kouroshnia

Atrina Kouroshnia is an independent, licensed, mortgage broker in the province of British Columbia. She has a degree in Human Relations & Commerce, and past work experiences in HR & Real Estate Development. She comes to the table with great customer service and problem-solving skills. Her approach to finding the best mortgage solution involves both short and long-term planning, making sure her clients are in a suitable mortgage that is flexible to their needs.