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Countless houses are being built in new developments that are popping up on the margins of Niagara Falls, including this one off Mountain Road.

Glenn Lowson

Canada’s top anti-money laundering watchdog has assessed fines against two real estate brokerages, one in Markham, Ont., and one in Vancouver, but critics of Canada’s anti-money laundering effort say the cases highlight some of the weaknesses of the current regulations.

On Jan. 5, Re/Max All-Stars Realty Inc. in Unionville, Ont., received an “administrative monetary penalty” of $31,000 for “failure to provide, in accordance with a notice, most of the requested compliance program documentation for purposes of a compliance examination.” It was the first time a real estate company has been hit with such a penalty since the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) completed an overhaul of its audit and penalty assessment programs in 2019. That followed a 2016 rebuke from the Federal Court that condemned what it called FINTRAC’s sometimes arbitrary penalties. So far, five companies have seen administrative monetary penalties levied since 2019, among them Quebec’s lottery commission, Loto-Québec, which faced a $147,015 penalty in 2020.

There were few details made public about the Re/Max All-Stars penalty.

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“It’s not saying your policies or procedures didn’t comply. It says when we asked for your documents you didn’t give them to us. I’ve never seen one of those,” said Jacqueline Shinfield, a partner with law firm Blake, Cassels & Graydon LLP Toronto and co-lead of its Financial Services Regulatory group. Ms. Shinfield is critical of the limited information FINTRAC publishes, especially in contrast to detailed documentation provided by regulators in the United States.

“Just recently, FINTRAC had the obligation to make all these public — before they had the discretion — but if you look at the recent publications they are very concise,” Ms. Shinfield said. “It’ll be three lines and they will publish it … you just don’t know what really happened.

“I always question a regime that says it’s purpose is to encourage compliance and not to punish, when all that the publication does is effectively say ‘you did this wrong’ and points a finger at you and doesn’t let anyone else in the industry learn, other than give you reputational damage.”

The brokerage in question declined a request to comment on the substance of the penalty, but did share its frustration with publication.

“No company likes to have anything bad come out in public about them, that’s for sure,” said Michael Scriven, broker and manager for the Unionville office.

“I’ve audited dozens of real estate brokerages,” said Matt McGuire, a financial crime expert who is the co-founder of The AML Shop, a 20-person consultancy that trains and audits compliance programs. “If you look [at] FINTRAC’s results from conducting examinations you’ll find that nearly all of them have had a significant deficiency.”

“FINTRAC is well-respected internationally for its intelligence capabilities, not for its use of enforcement powers,” said Mr. McGuire, who is also critical of FINTRAC’s ability to publish claims of wrongdoing but share few details. Sometimes, he said, the reputational damage is more severe than the financial penalty. In some case studies, he said, 11 out of 12 companies that had anti-money laundering penalties imposed and published saw their businesses shut down, often because they could no longer obtain banking services from financial institutions leery of exposure to money laundering.

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“Re/Max INTEGRA takes compliance very seriously and we have taken steps to investigate the matter,” said Christopher Alexander, chief strategy officer at Re/Max Ontario-Atlantic Canada. “Each brokerage is responsible for ensuring that their agents and staff understand the regulatory environment in which they work and that their operations comply with all applicable laws and regulations. We are working to understand the details behind the imposed penalty.”

For sale signage outside a residential property in Barrie, Ont., on March 19, 2021.

Tijana Martin/The Globe and Mail

In response to questions about the penalty, FINTRAC spokespersons confirmed that the Re/Max branch is appealing the decision to the Federal Court.

“Canada’s assessment of inherent risks of money laundering and terrorist financing identifies the real estate sector as highly vulnerable to these threats as it is significant in terms of its size and scope and generates a large number of high-value financial transactions on an ongoing basis,” FINTRAC spokesperson Mélanie Goulette Nadon said in an e-mailed statement. “In 2019–20, FINTRAC conducted 399 compliance examinations, the largest number of which was focused on the real estate sector (146). Overall, the most common areas of non-compliance related to the implementation of adequate risk assessments, incomplete or generic policies and procedures, the implementation of a two-year review, and record keeping requirements.”

Mr. McGuire said he expects to see many more administrative monetary penalties assessed over then next few months as the Financial Action Task Force (FATF), an intergovernmental group set up by the Group of Seven in 1989 to combat international money laundering, conducts its recurring survey of Canada’s financial sector. “Our last one was in 2016, and it was not a spectacular report,” he said. “They’ve only just started fixing the things that were wrong then.”

The 2016 FATF report stated that Canada remains highly vulnerable to money laundering, with loopholes in the legal profession among other areas, scoring the effectiveness of its anti-money laundering laws as “substantial” on five of 11 measures, but only “low” to “moderate” on six.

“They have to get some numbers on the scoreboard,” Mr. McGuire said, “and they are going to be very eager to be writing these tickets.”

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Indeed, on March 22, just days after the Unionville penalty was announced, FINTRAC posted a new penalty against Park Georgia Realty in Vancouver, citing five violations related to documentation and training and imposing a $66,742 fine.

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