OREA calls on government to curb money laundering

by Neil Sharma22 May 2019

The Ontario Real Estate Association is lobbying the Progressive Conservative provincial government to take action and make laundering money through real estate difficult.

“We’ve called for a searchable public database to find out who the beneficial owners are of the numbered companies or numbered trusts,” said OREA’s CEO Tim Hudak. “If money is coming from a corrupt politician in China and they need to get the money out because a corrupt politician higher up the chain might take it from them, they layer it through numbered companies and eventually purchase property in Western jurisdictions like Canada, the U.S. or England, and they never attach their name to it—it’s usually a son or daughter, brother, sister or someone higher up in organized crime.”

A beneficial ownership registry could also help law enforcement identify criminal activity domestically or perhaps even in the country of the crime’s provenance.

“Police overseas can also identify that the politician’s daughter, let’s say, owns this property in Toronto, Vancouver or Montreal and will notify the RCMP,” said Hudak. “Similarly, the RCMP can connect a person, who has little income but is buying up many properties, to the original crime in, say, South America or an Asian jurisdiction.”

The association, alarmed by the reports on money laundering in British Columbia earlier this month, did its due diligence before reaching out to Premier Doug Ford’s government with recommendations. However, the government appears aloof.

“We suggested a beneficial ownership registry that would be publicly searchable and mandatory declarations of beneficial ownership with meaningful penalties for false declarations, so if a numbered company or numbered trust is set up, the owners must be named otherwise there will be steep fines or jail time for lying,” said Hudak.

Tom Storey, a Royal LePage Signature Realty team leader, notes that sales representatives aren’t privy to enough information in transactions involving dirty money to clearly ascertain that a crime is taking, or has taken, place, but he knows who could.

“Where they need to start first, if they’re going to get information on this, is with developers because this problem isn’t as pronounced in the resale market as it is in preconstruction,” said Storey. “Nobody knows who’s buying these preconstruction units other than the builders, but without the government going to them and asking for information they’re not going to openly give it up.”

Other professionals, like lawyers and mortgage brokers, involved real estate transactions aren’t regulated by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), but they could possess useful information the government agency can use to identify criminal activity.

“We do have solicitor-client privilege in Canada, but surely there must be some way to work with the Law Society to alert authorities about suspicious transactions, or to identify who’s putting funds into trusts,” said Hudak. “Countries like the United States and England, as well as the European Union, have addressed that, so we should be able to find a way forward as well, and if those countries are making it harder for money launderers, that means more is going to come to Canada, and the sad reality is every dollar of dirty money could take that home or investment away from law-abiding Ontarians.”

 

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