|| Press Release ||
Billions in Unknown Funds Flow Through Toronto Real Estate
Thursday, March 21, 2019 • Toronto, Canada
In Canada, individuals can own a property and hide this fact from law enforcement, tax authorities, and private sector entities with anti-money laundering (AML) obligations. Canada’s property registers allow beneficial owners to use companies, trusts, or nominees to hold title to property and remain anonymous, which facilitates money laundering in the real estate sector, or as it has come to be known in Canada, ‘snow-washing’.
Transparency International Canada (TI Canada), Canadians for Tax Fairness, and Publish What You Pay Canada (PWYP-Canada) examined how this industry is vulnerable to money laundering by analyzing more than 1.4 million residential property transactions in the Greater Toronto Area (GTA) dating back to 2008. The results can be found in the report Opacity – Why Criminals Love Canadian Real Estate (And How to Fix It).
Key Findings of the Report
Corporate entities have acquired $28.4 billion in GTA housing since 2008. The vast majority of those companies are privately owned, with no information on their beneficial owners.
$9.8 billion in GTA housing was acquired by companies through cash purchases during that period, much of it bypassing statutory AML checks on source of funds and beneficial owners.
From 2008 to 2018 more than $25.4 billion in residential mortgages in the GTA were provided by unregulated lenders with no AML reporting obligations. Nearly 50% of those unregulated mortgages were issued to corporate buyers, despite corporate purchases accounting for less than 4% of total transactions.
The good news is that opaque ownership and the other conditions that make our real estate markets vulnerable to money laundering can be addressed with relatively straightforward policy reforms. For starters, Canada’s federal, provincial and territorial governments should:
Require beneficial owners of real estate to identify themselves to land title authorities, and make that information available to the public in an open data format. Disclosure of beneficial ownership should be a prerequisite for any property transfer.
Require all companies and trusts registered or transacting in Canada to identify their beneficial owners, and publish that information in a central publicly available registry.
Amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its regulations to include other real estate-related businesses such as unregulated mortgage lenders, mortgage brokers, land registries, title and mortgage insurers, ‘for sale by owner’ companies, promoters and redevelopers.
Require all Designated Non-Financial Businesses and Professions (DNFBPs) to collect and verify beneficial owners, and conduct due diligence on Politically Exposed Persons (PEPs) and Heads of International Organizations (HIOs).
Develop made-in-Canada versions of Geographic Targeting Orders and Unexplained Wealth Orders to provide authorities with new tools to gather intelligence and seize unlawfully acquired real estate.