Is Toronto’s Booming Real Estate Market Really Exposed to Money Laundering?

22 October 2018
Joshua Chisvin

Is Toronto’s booming real estate market really vulnerable to money laundering?

According to theToronto Star, the answer is yes. Why’s that? Well, because real estate agents aren’t notifying authorities of suspicious property transactions. Simple as that. And as a result, this has lead the national anti-money laundering agency, FINTRAC, to step up its audits of the industry.

Quick refresher:

By federal law, real estate agents are required to file suspicious transaction reports. From 2013 to 2017, there were more than 2.5 million real estate transactions in Canada. In that same five year period, real estate agents and developers made only 197 suspicious transactions reports.

These reports are critical to FINTRAC’s analytical process and the financial intelligence it generates for police, law enforcement and national security agencies. And because suspicious transaction reports have a narrative component, these reports also have the potential to provide tremendous intelligence value to the centre.

The small number of reports demonstrates that relying on real estate agents to catch money launderers isn’t going to work. Nope. It’s self-reporting and, really, people aren’t going to police themselves. After all, large commissions create something of a perverse financial incentive for agents, which deters them from filing reports.

Unfortunately, in a lot of these cases, the agents know what’s going on. At least that’s what theToronto Starsuggests. Which means it’s an unrealistic — and somewhat silly — expectation that those doing it are actually also going to raise their hand and voluntarily say they’re helping someone launder money.

As I mentioned, FINTRAC has recommended stricter anti-money laundering rules for the real estate sector. Thankfully, they see it as a serious issue, just like I do. What’s more, we both want to stop those using the real estate industry for ulterior motives.

SOURCE: Toronto Star

  Real Estate