Loopholes in Canadian real-estate law allows money laundering

According to a report from Transparency International (TI), loopholes in Canadian law are allowing a “corrupt elite” to use the housing market for laundering money.

TI’s report found at least ten problem areas in law that deals with real estate transactions related with Canada, the U.S., the U.K and Australia – four countries that it has identified as being hot-spots for real estate-related money laundering.

“Canada’s legal framework has severe deficiencies under four of the 10 identified areas,” reads TI’s report. “In the other six, there are either significant loopholes that increase risks of money laundering through the real estate sector or severe problems in implementation and enforcement of the law.”

One glaring issue is the lack of rules in laws governing real estate requiring actual owner (or “beneficial owner”) be identified.

In Canada “there are no requirements for any person involved in real estate closings to identify the beneficial owner,” states TI’s report.

In a study published in December 2019, TI found that the government does not know who owns 46 of the 100 most expensive homes in Vancouver.

The report also found that 29 of the homes were owned by shell companies, either Canadian or offshore.

“Offshore companies pose a serious risk … because they are able to purchase property without needing to disclose any information relating to who ultimately owns and controls them to any government authority,” said TI in its report which also noted, money-laundering through real estate is becoming increasingly popular.

“Large amounts of money can be legitimized at once, maintaining or increasing its value. Investments in real estate are seen as an alternative for those who fear having offshore accounts frozen.”

Since banks are not involved in the cash purchases of homes, an over-reliance on them to spot money-laundering activities is essentially a loop hole being exploited, states the report.

Unlike in the other countries in the study, in Canada “there are no data on prosecutions against real estate agents or other professionals for facilitating money laundering.”

Although Canada has “the best model” for enforcement of money-laundering laws among the four countries studied, TI’s report states, Ottowa’s financial intelligence agency, FINTRAC, investigates relatively few real estate transactions.

TI’s report has laid out a series of recommendations, including requiring all professionals involved in a real estate transaction to disclose the actual buyer; this is applicable to companies as well: companies that are buying real estate should disclose the actual owner.

“Governments must close the loopholes that allow corrupt politicians, civil servants and business executives to be able to hide stolen wealth through the purchase of expensive houses in London, New York, Sydney and Vancouver,” said TI chairman José Ugaz in a statement. “The failure to deliver on their anti-corruption commitments feeds poverty and inequality while the corrupt enjoy lives of luxury.”

Categories: Creativity, Economy & Finance, Entrepreneurship, HR & Organization, Regulations & Legal, Strategy

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