Starting June 23, 2008, changes to the federal Proceeds of Crime Money Laundering and Terrorist Financing Act impact how Realtors and their brokers conduct business.
FINTRAC The Financial Transactions and Reports Analysis Centre of Canada, is the Federal Government Agency created to provide suspicious transaction information to police and the Canadian Security Intelligence Service.
FINTRAC collects and analyses reports from accountants, banks, casinos, insurance companies, real estate professionals and trust companies as part of Canada’s push to combat money laundering and terrorist financing.
The Purpose The Federal Gov’t wants to ensure real property does not become a way for organized crime or terrorists to launder money or finance terrorism. In 2007 there were 193 case disclosures (where FINTRAC investigated and then disclosed to the police or CSIS) with a total value of $9.8 billion, almost double that of 2006. Of these, half had a real estate component of some sort.
Record Keeping We are now required to keep a Receipt of Funds record when receiving any amount of funds, cash or otherwise. We must also keep a client information record for every purchase or sale of real estate. This includes our client’s name or corporate identity, address, date of birth and information about the client’s occupation or principal business. If the client is a corporation, we must keep a copy of the official corporate records. All records must be kept for at least 5 years.
Suspiscions? As of June 23, 2008, if we know or suspect that the transaction is related to property owned or controlled by or on behalf of a terrorist or money launderers, we must not complete the transaction.
How to spot a suspicious transaction *a client arrives at a real estate closing with $10,000 or more in cash *a client provides photo I.D. that doesn’t resemble them *a client buys property in someone else’s name *a client does not want to put his/her name on any document that would connect him/her with the property or uses different names on offers, closing documents and deposit receipts *a client inadequately explains the last minute substitution of a buyer’s name *a client purchases multiple properties in a short time period, with no concern about the location or condition of each property *a client pays rent or the amount of a lease in advance using a large amount of cash *a client wants to make a substantial down payment in cash and the balance will be financed from an unusual source or offshore bank *a client claims their downpayment is from casino winnings but can’t remember which casino
Foreign Buyers if our client is acting for a third party, for example, buying a home for a relative or a friend in a foreign country, and we receive cash of $10,000 or more and create a client information/receipt of funds record, we must identify all third parties or use an agent to identity third parties. To identify a third party you require a written agreement in place that the individual or company is being identified to an agent (including a relative) and that the agent has seen the identification.
Penalties for Non-Complianceare severe. Up to $2 million fine and/or 5 years imprisonment if we fail to report suspicious transactions. If we tip off individuals on suspicious transaction reports – up to 2 years imprisonment. If we fail to keep property records – up to $500,000 find and/or 5 years imprisonment and if we fail to report a large cash transaction – up to $1 million fine.
The government is developing new administrative monetary penalties within the next year which will deal with brokers who do not have policies in place or fail to submit reports. The legislation will cover real estate developers in the future. Lawyers are exempt, though i understand that they report to the Law Society.
Will the above curtail criminals or will they find a way around the new legislation?
So please don’t be offended when I ask to see your personal ID, I’m only doing my job! I never thought my job description would entail police type duties. What would Norman Orwell have said? “I foresaw the future and wrote about it in a book called 1984″.