April 14, 2016

Fintrac pushes real estate industry to help regulator fight money laundering

Posted in Keith Knutsson, Real Estate at 8:59 am by Keith Knutsson

The federal agency tasked with curbing money laundering has been stepping up its efforts to educate real estate agents about their obligations to monitor and report suspicious transactions, documents show.

The anti-money laundering watchdog put together a work book and a webinar for real estate agents, and last summer gave a presentation to the Canadian Real Estate Association, according to emails obtained by The Canadian Press through an access-to-information request.

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Despite the federal agency’s educational efforts, there appears to be some uncertainty on the real estate association’s part about some of the regulations.

Private email exchanges show CREA officials peppering the Financial Transactions and Reports Analysis Centre, known as Fintrac, with questions about how the rules should be interpreted.

New rules

Under federal law, real estate agents are required to identify their clients, verify where their money is coming from and report suspicious or large cash transactions to Fintrac.

However, a representative of the Canadian Real Estate Association whose name was redacted notes in an email to Fintrac that compliance in the real estate sector is low.

Meanwhile, the Department of Finance has identified the real estate industry as highly vulnerable to money laundering and terrorist financing given its “very significant” size and the fact that it often involves large sums of money changing hands.

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Those looking to hide their identities and the source of their funds can do so by conducting transactions through third parties and using complex corporate structures, the department said in an assessment published last year.

Fintrac has dedicated “significant time and effort” to working with the Canadian Real Estate Association, the agency said in an email, including reviewing the association’s online training, providing feedback on the group’s anti-money laundering manual and helping interpret policies.

“What we have found more generally in the real estate sector are issues with compliance regimes, policies and procedures, training, as well as record-keeping and reporting,” Fintrac spokeswoman Renee Bercier said in an email.

“The level of compliance knowledge and resources varies across the sector and is often a function of an entity’s size, capacity and access to resources.”

Red flags

Randall McCauley, vice-president of government and public relations for the Canadian Real Estate Association, admits that compliance is a challenge within the industry.

One of the reasons is because some of the rules are out of synch with how the industry operates, McCauley says.

For example, under the regulations, an individual who conducts two transactions within several years is considered higher risk and should be subject to additional monitoring, McCauley says.

However, McCauley notes that it’s very common for a family to sell a home and then purchase a new one within a very short time frame.

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“I think there’s room for Fintrac to work with us to understand the nature of the business,” McCauley says.

McCauley says CREA has been investing significantly in trying to bring realtors up to speed with federal rules, including sending two representatives on a cross-country tour to deliver presentations to its members.

He says that despite its recent efforts, Fintrac is not doing its part.

“If you were doing nothing and you do something then technically, I guess, yes that’s an improvement,” McCauley says.

The federal agency has also not been very clear in its answers to CREA’s policy questions, McCauley says.

“Any rule, regulation or law is subject to interpretation,” he says. “We’re asking, ‘How would you interpret this regulation?’ … and they won’t give us a clear answer.”

Source: http://www.cbc.ca/news/business/fintrac-real-estate-1.3533312

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