Real estate groups issue recommendations on money laundering

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British Columbia real estate associations say they do not have the tools to detect money laundering in the sector and are calling for changes to federal legislation to facilitate cross-agency information and better enforcement.

The sector has been under intense scrutiny as the housing markets soared in Vancouver and Toronto. The B.C. government hired a retired senior Mountie to investigate the problem of money laundering in the province and his report looking at the real estate sector in particular has been delivered to government.

On Monday, the B.C. Real Estate Association (BCREA), the BC Notaries Association, the Real Estate Board of Greater Vancouver, the Appraisal Institute of Canada and the Canadian Mortgage Brokers Association jointly issued five recommendations to government.

Darlene Hyde, chief executive of the B.C. Real Estate Association, said the sector is sprawling and complicated.

“We felt we had to come together as a group because real estate is so complex and there are so many players in a real estate transaction,” she said in an interview, pointing to realtors, mortgage brokers and lawyers as examples.

“Money laundering is invisible to us. We don’t have visibility into a lot of the problems. And the enforcement activity has been, I would say, siloed and a little bit fractured.”

The group recommends that the federal government amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to allow intelligence from the Financial Transactions and Reports Analysis Centre of Canada (FinTRAC) to be made available to additional regulatory authorities, including the B.C. Securities Commission and the Financial Institutions Commission (FICOM).

FinTRAC, the federal agency that tracks money laundering and terrorist financing in the country, has received criticism for operating in secrecy and being too passive in its communication of intelligence that could be valuable in criminal investigations.

“There’s an observation that there has been a lack of information flow amongst all the regulators and law enforcement agencies around just what is the scope and extent of money laundering in the province,” Ms. Hyde said.

The group also recommends that FinTRAC “implement a framework to identify and report trends on a regular basis and in language that is consistent and understandable to professionals, the public and the media.”

As well, mandatory anti-money laundering education is recommended for all real estate professionals, and real estate sectors that are not already required to do so are advised to accept funds only in forms that are verifiable through Canadian banking institutions.

The group recommends that government and regulatory agencies better utilize the on-the-ground experience of real estate professionals to develop compliance resources and test policy ideas.

“This will result in well-crafted, practical regulation and foster a culture of compliance to protect consumers and the economy,” according to the group’s submission to government.

In the past, B.C. Attorney-General David Eby has identified real estate agents as part of the problem.

“The realtors appear not to be taking the rules or the reporting obligations seriously, and Fintrac seems to be not too concerned when they see mass non-compliance,” Mr. Eby said in 2016.

But on Monday, he and Minister of Finance Carole James applauded the industry associations for this work, calling the steps practical and valuable.

“This commitment by real estate professionals to collaborate and develop best practices will go a long way towards getting dirty money out of the real estate market, protecting consumers and helping industry professionals improve their knowledge and regulatory compliance,” the two said in a joint statement.

Last week, Mr. Eby released further details of an independent report into money laundering by former RCMP deputy commissioner Peter German, including that the federal RCMP team responsible for these crimes is running with a skeletal staff that refers files to the provincial civil forfeiture office rather than conducting criminal investigations and recommending charges.

Most of Mr. German’s report is expected to be released in coming weeks.