Canada Is A Haven For Money Laundering

There’s a lot of ‘dirty money’ in the world, and many complex schemes to ‘launder’ this money and convert it into ‘clean’ funds. Real estate is a very popular venue for such laundering, particularly in Canada, as we have some of the weakest laws in the world to defend against money laundering.

A recent report from the CD Howe Institute has estimated that the magnitude of money laundering in Canada is on the order of $100-$130 billion per year, not exactly chump change. This has artificially distorted real estate prices in Vancouver and Toronto, as money launderers are typically not buying houses to live in, and often leave them vacant as renting them out would create an undesirable paper trail.

About 18 years ago (in the wake of 9/11), the Canadian Government created FINTRAC (Financial Transactions & Reports Analysis Centre of Canada), which requires real estate professionals to perform formal ID checks buyers and sellers of real estate, and to report any suspicious transactions and/or clients. However, there is a massive loophole: when the buyer is a corporation, there is no requirement to disclose the ‘beneficial owners’ of the corporation. This allows money launderers to hide their funds anonymously inside the corporation and makes it almost impossible to trace the funds to their source.

The author of the CD Howe report says that: “Anonymity and invisibility could be reduced by implementing a publicly accessible registry of beneficial ownership of companies, trusts and real estate. Structured properly, a public registry would offer a two-way flow of information – communication of beneficial ownership information to the world and communication of foreign-based information to Canadian authorities – which would bring more bad guys into the light of day.” 

The author goes on to say that: “Obstacles to following the dirty money could be reduced by creating a new criminal offence: a false declaration of beneficial ownership, whether made on a public registry or submitted by a customer to a Reporting Entity. Not only would such an offence bring more integrity to the beneficial-ownership information being disclosed; it would also provide a solid base from which law enforcement agencies could conduct investigations of suspicious transactions.”

Hopefully the Canadian government will take some action based upon these recommendations.