May 25, 2016 by admin

Critics say feds lax on real estate sector compliance with anti-money laundering law

TORONTO — Ottawa needs to beef up its efforts to combat money laundering in the real estate industry, say critics and housing observers after documents revealed that dozens of companies haven’t shown how they’re trying to detect questionable transactions.
The Canadian Press reported this week that at least 85 firms have not fully implemented compliance plans intended to flag questionable transactions — including cases where money laundering is suspected — nearly 15 years after they were legally required to do so.
“We can have the best rules possible around keeping laundered money out of our real estate market, but if no one is enforcing those rules, what good are they?” said David Eby, the NDP housing critic in British Columbia, where some have said the housing market is particularly susceptible to money laundering.
“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.”
Data obtained from Fintrac through an access-to-information request showed that 38 companies had only partially implemented a compliance regime while another 47 had not at all. The names of the companies were not included in the documents.
The data was compiled from 337 compliance assessment reports that were submitted to the federal anti-money laundering agency from roughly 1,000 companies in the real estate sector. It represents only a sliver of the overall industry — there are about 20,000 real estate companies overseen by Fintrac.
“I just wonder how many more audits with dismal results like this have to be returned to Fintrac and the federal government before they decide to really crack down,” Eby said.
A spokeswoman for Finance Minister Bill Morneau, to whom Fintrac reports, directed questions to the federal agency.
Darren Gibb, a spokesman for Fintrac, said compliance assessment reports are only one tool that the agency uses in its enforcement process.
“They educate our risk-based approach, and that’s essentially all that they’re supposed to do,” Gibb said.
Fintrac has used the data gathered from the compliance reports to significantly boost the number of on-site examinations it is performing in the real estate sector, he said.
It has also invested “significant time and effort” into working with the real estate industry and the Canadian Real Estate Association to help realtors better understand their obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, Gibb added.
But Christine Duhaime, a lawyer specializing in anti-money laundering and counter-terrorist financing, said most of the realtors she has met have no compliance plan, no compliance officer and don’t know what a suspicious transaction is or how to report one.
“I literally have never met a realtor across the country who really understands or fully complies with AML (anti-money laundering) law,” Duhaime said.
A U.S.-based short seller who has been a vocal critic of the Canadian housing market says it’s clear that policy-makers and law enforcement are not doing their job.
Marc Cohodes, who once ran a hedge fund called Copper River Management, says he believes it’s illegal activity such as money laundering — and not local demand — that’s driving house prices in the red-hot market of Vancouver higher, given that price growth has outpaced wages.
“It’s just not real and it’s not sustainable and it won’t last,” he says. “Unless people do something and do something quickly, it’s going to blow the place up.”
The federal NDP consumer affairs critic says it’s troubling that Ottawa has been ignoring its responsibility to ensure that companies are complying with anti-money laundering laws.
“The government should not be taking a lax approach to these practices,” Brian Masse said in an email.
“Instead it needs to ensure that real estate markets aren’t being used for money laundering — and that money laundering isn’t helping to drive rising real estate costs for Canadians.”
The Real Estate Council of Ontario said it will remind its members of their legal obligations as a result of The Canadian Press report.