Proceeds of Crime in Vancouver Real Estate

Starting June 23, 2008, changes to the federal Proceeds of Crime (Money Laundering) and Terrorist Financing Act will impact how Vancouver real estate agents conduct business.

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Currently

Since 2001, if Realtors® received, deposited, withdrew or payed funds of $10,000 or more they had to:

  • keep records
  • identify clients
  • report suspicious transactions when the transaction is complete

Further, they have to report to the federal Financial Transactions and Reports Analysis Center of Canada (FINTRAC).

Starting June 2008

Identifying clients

  • As noted, real estate agents must identify their client. The requirement is to see government-issued identification including a driver’s licence or passport. The old rule was that they did not have to ask to verify your identification again if they recognized you.
  • If they have any doubts about the information previously collected, the new changes require them to now identify you again at the time of the transaction.
  • If the client is a corporation, they must be provided with required identification within 30 days of the transaction. Needed is a copy of the official corporate records showing provisions relating to the power to bind the corporation regarding the transaction. Additionally, the Realtor® will also need the names of the directors unless the corporation is a securities dealer.
  • If another Realtor® is acting on your behalf they must identify you as such and ensure they have met these obligations.
  • If a you are not represented by a Realtor®(for example, for sale by owner) while other parties are represented, the Realtor® must also identify those parties not represented.

Third party determination (foreign buyers)

  • If as a Buyer, you are acting for a third party, for example, buying a home for a relative or a friend in a foreign country, and you receive cash of $10,000 or more and create a client information/receipt of funds record, you must identify all third parties or use an agent to identity third parties.
  • As the Buyer for that third party, you must identify the third party and you will require a written agreement in place that the individual or company is being identified to a Realtor® (including a relative) and that the Realtor® will be given the identification you provide.

Record Keeping

The Realtor® will be required to keep a Receipt of Funds record (similar to a large cash transaction record) when receiving any amount of funds, cash or otherwise.

Realtors® must keep a client information record for every purchase or sale of real estate.

This includes your:

  • name
  • corporate identity
  • address
  • date of birth
  • information about your occupation or principal business if the you are a corporation
  • we must keep a copy of the official corporate records

To track funds and maintain client information records, they must keep all records for at least five years from the date they were created.

Suspicion

If the Realtor® suspects that a transaction is related to property owned or controlled by or on behalf of a terrorists or money launderers, they are bound to not complete the transaction.

What Realtors® will be watching for:

  • you arrive at a real estate closing with $10,000 or more in cash
  • your photo I.D. bears no resemblance
  • you try to buy property in someone else’s name
  • you refuse to use your name on any document that would connect you with the property
  • you use different names on offers, closing documents and deposit receipts
  • at the last minute you provide an inadequate explanation to substitute the buyer’s name
  • you buy a number of properties in a short time period, with no concern about the location or condition of each property
  • you choose to pay rent or the amount of a lease in advance using a large amount of cash
  • you want to make a substantial down payment in cash and the balance will be financed from an unusual source or offshore bank
  • you claim that your down payment is from casino winnings but can’t remember which casino

Realtors® are required to report attempted transactions or any transaction that they have reasonable grounds to suspect is related to money laundering or terrorist financing. They must report it whether or not they receive a commission or whether they have fiduciary duties regarding the transaction.

They must take reasonable measures to identify the individual who conducted the transaction. They can’t be penalized under privacy legislation for disclosing this information since we are obligated to disclose by law.

Why real estate?

The federal government 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.

Information Courtesy REBGV

Got a Vancouver Real Estate question? I’ll do my best to answer it. Call or send me an email. Larry

About Larry Yatkowsky

Larry is a recognized real estate expert. A veteran professional, his experienced counsel leads Vancouverites in his west side community to place their trust in a man passionate about his work. Uncompromising ethics bring a balanced approach to realizing your real estate dreams.

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*Disclaimer: Statistics Courtesy REBGV. While believed to be accurate they are not guaranteed.
**Numbers provided may vary as they are dynamically posted by the REBGV.

Reader Comments:

February 22nd, 2008 at 7:34 pm

Oh, don’t you just love fighting crime?

Since this act was initially introduced, I can’t say that I’ve had a single transaction that I would say was “suspicious.” I realize that real estate could be a target for launderers but I’ve sure never met one.

I don’t mind the idea of “identifying” people though. Every day, I get more concerned about my agents working with strangers. This would likely be a good way to really get to know who your dealing with early on.

February 22nd, 2008 at 7:43 pm

I found your site on technorati and read a few of your other posts. Keep up the good work. I just added your RSS feed to my Google News Reader. Looking forward to reading more from you.

Jennifer Lancey

February 22nd, 2008 at 9:59 pm

Norm – yep actually I think it time for all good Realtors to get the spandex suite with the big S on the front. Personally, I’ll pass on the cape.

It would be a good thing to know just how many of the records sent to Fintrac are from my area. I suspect being a port might be more enticing to these types. There is a lot of funny money in this town. I have run into a number of transactions where they insist on having the ability to change the name on the deal at a later date.
Many sellers don’t care as long as they get the money. As a level of protection I include a clause that the property can only be transferred to the person whose name appears on the offer.

Jennifer – thanks and I hope I can keep you informed and laughing.

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