Tips for agents on identifying money laundering

by Justin da Rosa21 Nov 2016
FINTRAC releases comprehensive guide for identifying and reporting instances of money laundering related to real estate.

“The exploitation of real estate by criminals for money laundering purposes is well recognized internationally and underscores the importance of quality reporting on relevant suspicious transactions,” the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), said in a 14 page brief. “Many countries are increasing their efforts to implement counter measures following the Financial Action Task Force (FATF)’s work on this topic indicating that the real estate sector is highly susceptible for many reasons: for example, easy price manipulation and a variety of complex options for selling/purchasing/financing with anonymity.”

FINTRAC said in the brief, entitled Indicators of Money Laundering in Financial Transactions Related to Real Estate, that most illicit money related to real estate filters through the residential housing market. IT also claims there are deficiencies in the industry’s compliance programs.

Money laundering is a crime that has wide-ranging effects, according to FINTRAC.

“As an example, in the real estate sector, the injection of illicit funds into the housing market can artificially inflate selling prices thus making homes unaffordable, and increase the risk of investment losses when criminals move their operations to other markets,” FINTRAC said.

The watchdog provided a list of indicators to help real estate professionals, including agents, identify potential cases of money laundering.

Those include: clients asking for a lower purchase price than the one negotiated for to be recorded on the documents; clients purchasing under someone else’s name; clients buying back properties they recently sold; buyers showing little interest in profiting through rent from investment properties; Foreign buyer clients who have no connection to Canada other than that specific real estate purchase.

Those are just a few of the indicators. The rest can be viewed by reading the entire brief.

Some facts from anti-money laundering agency Fintrac’s annual report for 2015-16 tabled Thursday:
 
  • Financial transaction reports received: 23,727,393.
 
  • Disclosures of actionable intelligence to partners: 1,655.
 
  • Of those, disclosures related to terrorist financing: 483.
 
  • Queries received from international allies: 240.
 
  • Compliance examinations conducted across Canada: 739.
 
  • Administrative monetary penalties issued: 22.
 
  • Penalty imposed on an unnamed Canadian federally regulated financial institution: $1.15 million.
 
(Source: Financial Transactions and Reports Analysis Centre of Canada, annual report 2015-16)

With files from Canadian Press

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COMMENTS

  • by Dave Lowe 11/21/2016 2:07:32 PM

    Ok - let's see if we can wade through this. The nearly 24 million financial transactions reported in 2015 resulted in 700 or so compliance investigations, from which 22 sanctions arose. I'm no financial wizard, but my I-phone says that is .0000000092 per cent sanction-able, non-compliance incidents per transaction.
    The one biggie mentioned in the article was for a 'federally regulated financial institution' which sounds like code for 'Bank" - it sure ain't a real-estate Broker.
    So while the industry runs around with its hair on fire, in fear of these tax-collectors (and lets face it - FINTRAC hasn't caught many terrorists but it has caught a few tax evaders), just how much better a compliance rate than 99.999999908% does the CCRA honestly expect us to achieve?

    Years back, I asked a FINTRAC rep how terrorists FINTRAC had snared, and was told that the information was 'classified'. I then asked if it was more than 'one'? Guess that earth-shaking info is classified too, 'cause I'm still waiting for the answer

  • by Maxy 11/22/2016 1:32:49 AM

    Great read. interpretation of data is always embellished to back the opinion held or conclusion desired by the "statistician". Talking about classification of information, do not be surprised that if you ask Prime Minister's office for the name of our Prime Minister, the answer you may get will be - "the information is classified", period.

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