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This FAQ explains the impacts of money laundering on BC and outlines the tools used by real estate professionals to identify and combat money laundering and terrorist financing, and the part you as a consumer play.
Money laundering can occur when criminals try to legitimize ill-gotten funds by making legitimate purchases, thereby hiding the original source of those funds.
In 2019, the Expert Panel on Money Laundering issued a report called Combatting Money Laundering in BC Real Estate, which provided a number of recommendations to help identify and reduce the occurrences of money laundering through real estate.
The effects of money laundering extend well beyond the real estate market. The Expert Panel report found that money laundering has had the effect of increasing housing prices by five percent. The Panel also concluded that money laundering can facilitate other criminal activities.
Knowingly being involved in a money laundering scheme can lead to charges under the Criminal Code of Canada and prison sentences of up to 10 years. Where real estate is involved, those properties may also be subject to forfeiture.
The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is Canada’s financial intelligence unit with the mandate to help different sectors prevent and deter money laundering and terrorist financing. In order to meet this objective, FINTRAC requires all real estate professionals to:
- Verify the identity of all their clients and unrepresented parties to a real estate transaction;
- Report certain transactions to FINTRAC for further scrutiny. This includes transactions that are:
- suspicious transactions where reasonable grounds that they are related to money laundering or terrorist financing exist;
- transactions where it is known that the property is controlled or owned by terrorists or a terrorist group;
- transactions where cash over $10,000 is received by the real estate professional through a single transaction or multiple smaller transactions (such as to pay the deposit on the property).
When requested, your real estate professional must also submit all transactions requested by FINTRAC within 30 days.
Your real estate professional may ask you to provide a piece of government-issued photo identification which includes your name, your photo, and a document number. They will record this information on a form which will be kept confidential in their brokerage file should FINTRAC request it.
Your real estate professional may also verify your identity through a credit file check from a Canadian credit bureau and match your name, birth date, and address you provided to that document. If you are representing a corporation, your real estate professional will search for verifying information such as a certificate of incorporation and will record the corporation’s name, address and names of the directors.
Depending on your circumstances, a real estate professional may require additional information before they can assist you in the purchase or sale of real estate.
Like all aspects of your real estate transactions, your real estate professional’s obligations to you are governed by the Real Estate Services Act and its Real Estate Services Rules. Within those rules is the duty to always maintain the confidentiality of information respecting a client. This means, that other than when required by law, your real estate professional will keep all personal information about you confidential in perpetuity.
If you have any concerns, we invite you to contact one of our Practice Standards Advisors for further information.
This content was developed with financial support from the Real Estate Foundation of BC.