Report found that real estate presents enormous money laundering vulnerabilities
As Ontario continues to struggle with a housing affordability crisis, the Ontario Real Estate Association (OREA) is calling on policymakers to get criminal money laundering out of the real estate market, so families are not competing with corrupt officials and drug dealers when looking for their dream home.
This week, the Cullen Commission investigating money laundering in British Columbia found that “real estate presents enormous money laundering vulnerabilities.” The commission found that provincial real estate legislation gaps put developers’ employees and For Sale By Owner (FSBO) operators outside reporting requirements aimed at identifying suspicious transactions.
The commission discovered concerns about unlicensed so-called real estate consultants and FSBO companies currently operating outside consumer protection oversight and hiding behind numbered companies to conceal criminal activities.
According to a CBC article, the commission report led by B.C. Supreme Court Justice Austin Cullen contains 101 recommendations covering areas from law enforcement to real estate and banking regulations. The report suggests that the province establish a dedicated provincial money laundering intelligence and investigation unit and appoint a commissioner to oversee the government’s approach to the problem.
The proposed anti-money laundering commissioner would be responsible for tracking how the government implements Cullen’s recommendations.
Cullen said that B.C. needs to strike out on its own to make progress because the agency tasked by the federal government to identify money laundering threats — the Financial Transactions and Reports Analysis Centre (FINTRAC) — is “ineffective,” and OREA agrees with Cullen’s recommendations to tackle the problem.
“Report after report has shown that criminal money laundering, like B.C, is a major problem in Ontario,” said OREA CEO Tim Hudak. “The Government of Ontario should follow B.C.’s lead and take steps to shine a light on dirty money that is crowding out hardworking families looking to achieve their dream of owning a home.”
Hudak said the Ontario government could do several things to fight money laundering in real estate, including creating a beneficial ownership registry using the land title system. A beneficial ownership registry would help stop the practice of criminals using shell companies to buy up Ontario homes, giving law enforcement and the government a vital tool to keep dirty money out of the province’s housing market.
“Sunshine is the best disinfectant when it comes to dealing with sophisticated criminals using shell companies and real estate to hide money,” said Hudak. “A beneficial ownership registry would allow law enforcement, tax authorities, media and everyday citizens to search for properties of corrupt officials, their families or people they may know who are involved in money-laundering crimes, and better connect money from criminal acts overseas to property purchased in Canada.”
Hudak said Ontario realtors also want to see loopholes in provincial rules closed so money launderers cannot use developer employees and FSBO operators to avoid detection as they must track and report suspicious transactions to federal authorities. “Since they aren’t regulated, employees of developers and FSBOs can skirt these rules creating a way for criminals to avoid detection.”
Law Times previously reported that the provincial government also introduced new measures to improve home buying and selling transparency. The new measures will take effect on Apr. 1, 2023.
The changes provide sellers with an “open offer process,” which allows home sellers to share bids on their property and disclose the details of competing offers if they prefer to do so. The open offer process means home sellers will no longer be restricted to selling their property through a closed or traditional offer system.
The new measures vest more powers in the Real Estate Council of Ontario (RECO) − the regulatory body that enforces rules for salespeople and brokers – “to better target enforcement and compliance initiatives to activities associated with the highest risk to the public.”
Furthermore, the new measures provide an updated code of ethics, which Hudak said will enhance professionalism by focusing on ethical obligations real estate agents have toward clients and the public.
The province also received royal assent for legislation to support the government’s More Homes for Everyone plan (Bill 109), outlining actions the province is taking to address Ontario’s housing crisis. Measures include protecting homebuyers from unethical development practices and accelerating development timelines to build more homes faster.