Toronto Seen as ‘Destination’ for Money Laundering: Watchdog Groups
22 Mar 2019

Loose reporting requirements and lax enforcement have made the Canadian housing market particularly appealing to international money launderers, three watchdog groups said in a report Thursday.

Under Canada’s anti-money laundering (AML) rules, real estate agents, brokers and developers need not always determine the beneficial owners or sources of funds from legal entities seeking to buy property. Nor do regulations on property registers require individuals behind the purchases to identify themselves in instances when they use companies, trusts or nominees to obtain real estate titles.

In criminal circles, such loopholes have led to the promotion of Canada as a destination for so-called “snow washing,” where “dirty money could be cleaned like the pure white snow,” according to Transparency International Canada, Canadians for Tax Fairness and Publish What You Pay Canada.

The three nongovernmental organizations focused the study on 1.4 million real estate-related transactions made in the Toronto metropolitan area since 2008. The payments comprised some $28.4 billion in property purchases made through corporate entities, the “vast majority” of which were privately held with owners who aren’t required to disclose their identities, according to the groups.

“While some of [Toronto’s] vacant properties might sit as investments for legitimate money… a worrying amount slips past regulators who do not really know who owns what, nor how much is being used for money laundering and tax evasion,” the report said.

All told, at least $20 billion entered the greater Toronto housing market over the past decade with little scrutiny from the nation’s chief AML supervisor and the financial institutions involved in the transactions, according to the organizations.

“There is no way of knowing how much additional money, through trusts and nominees, has entered the market without undergoing AML due diligence reporting,” the groups wrote in the report, which called on Canadian officials to expand existing financial crime laws, mandate the collection of beneficial ownership data and adopt geographic targeting orders and unexplained wealth orders utilized by other governments.

In December, Canada’s Financial Transactions and Reports Analysis Centre, or Fintrac, published a risk-based approach workbook for real estate agents, developers and others, outlining when and how regulated entities in the sector should vet their clients for AML risks.

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