The head of the Kamloops Real Estate Association said realtors are eager to curb money laundering in B.C., but argued there needs to be a more unified system of reporting from all those involved in transactions.
Money laundering in B.C. was responsible for an average five per cent increase in the price of homes last year due to more than $5 billion in dirty money from organized crime laundered through the province’s real estate sector, according to a new expert panel report chaired by former deputy attorney general Maureen Maloney.
She said the government’s new beneficial ownership database will help break through the wall of numbered companies and offshore shell companies, acting as a major step forward to combating the issue. Maloney also called for more data sharing and the creation of an intelligence unit within the B.C. government to keep on top of the issue.
Wendy Runge, president of the Kamloops Real Estate Association, said she feels the report is an encouraging step toward fixing the problem.
“We’ve been really active and transparent with the government to say we need to get a hold on this,” she said of the B.C. Real Estate Association, of which KADREA is a member.
Runge said she doesn’t think realtors are playing an active role in assisting money laundering, noting it’s common practice among B.C. realtors not to take cash deposits.
According to former deputy RCMP commissioner Peter German, realtors haven’t done a good enough job reporting suspicious real estate transactions to Ottawa’s financial regulatory agency, FINTRAC.
That federal body, however, doesn’t share information with B.C., according to German, who also noted there are no RCMP officers in the money laundering unit currently actively investigating cases.
Runge suggested there be a dedicated RCMP presence looking into money laundering.
“We need some partnership with an RCMP task force,” she said.
For every transaction, realtors fill out a FINTRAC report, which notes information such as where the funds are coming from, who they’re coming from and by what means. On the form is a box to check if the agent believes the transaction is suspicious, Runge said.
“We report any cash transaction and suspicious transactions, but lawyers don’t have to report the same things we report, neither do mortgage brokers, so there’s a problem there when we’re not all doing the same thing,” she said.
Runge said all parties involved in a transaction need to ensure they are collecting the same financial information and reporting it.
Though FINTRAC did get 9,500 suspicious reports on real estate transactions, most came from banks and other agencies, according to German.
Kamloops broker/realtor Vince Cavaliere of River City Realty told KTW a real estate agent has little involvement in the movement of money other than transferring deposits to lawyer’s trust accounts, noting it’s difficult to expect an agent to detect any nefarious activity unless the circumstances are fairly obvious.
He said more due diligence should be expected from lawyers involved handling the money.
“We may be the start to the chain, but the final straw in the entire transaction falls on the person that’s conveyancing and transferring title, and that’s the lawyer or the notary,” Cavaliere said.
In his report, German said the use of trust accounts by lawyers are essentially a black hole of solicitor-client privilege because investigators can only trace suspicious money until it reaches the lawyer, who holds it in trust for a client, after which it becomes untraceable.
Recommendations from the provincial report include suggesting Ottawa authorize FINTRAC to provide information to specified provincial regulators and anti-money laundering investigative agencies, and to require reporting entities in the real estate sector to conduct know-your-customer due diligence on beneficial ownership.
The B.C. Real Estate Association said in April it would join with four other agencies to keep the proceeds of crime out of real estate.
The other participating organizations include the Appraisal Institute of Canada, BC Notaries Association, Canada Mortgage Brokers Association and the Real Estate Board of Greater Vancouver.
Each organization has committed to sharing information, accepting only verified funds and making anti-money laundering education mandatory for its agents.
—with files from the Vancouver Sun