Money-laundering data raises red flags


TORONTO – At least 85 real estate companies have not implemented a plan showing how they are trying to detect money laundering and other suspicious transactions, nearly 15 years after they were required to do so, according to data obtained by The Canadian Press.

The federal anti-money laundering agency received 337 compliance reports from roughly 1,000 companies in the real estate sector it surveyed — including brokers, sales representatives and developers — between Jan. 1, 2013, and Feb. 8, 2016.

The data, which was obtained through an access-to-information request, represents only a small sampling of the real estate industry. There are about 20,000 companies in the real estate sector that are required to report to Fintrac.

An analysis of the data contained in those reports found that roughly a quarter of the 337 respondents admitted they had not yet fully implemented a compliance regime, which has been required by federal anti-money laundering laws since 2001.

Thirty-eight of the companies said they had only partially implemented a compliance regime, while the other 47 said they had not even begun to do so. The names of the companies were not included in the documents.

Fintrac spokesman Darren Gibb says some of the reports weren’t sent back because the companies no longer exist, while others simply failed to respond.

Fintrac routinely sends out compliance reports to various sectors to gather information about the companies it regulates, says Gibb.

Those reports can sometimes lead to further enforcement actions such as on-site examinations, he says.

“If we see an assessment report come back and it’s clear that the entity is not where they should be, then certainly that’s a flag for us that it may be examination-worthy,” says Gibb.

“Or conversely, if we don’t get an assessment report coming back, that’s potentially an even bigger flag.”

If violations are discovered during an examination, that could lead to fines of up to $100,000 per violation for individuals and up to $500,000 per violation for companies, depending on severity.

Gibb was unable to specify how many of the 85 companies that did not have a compliance plan were fined, noting that the reports are only one factor that the agency considers when deciding whether to investigate a particular firm.

“It is only one small piece of the puzzle,” says Gibb.

The largest number of firms that admitted they have yet to finish implementing a compliance regime was in Quebec, where there were 32 such companies.

Gibb said he could not speculate as to why the figure was higher in Quebec than in other provinces.

In Ontario, 19 firms said they hadn’t fully implemented a compliance regime, while in Alberta there were 12 such cases. Eight of the B.C. real estate firms surveyed reported that they hadn’t finished setting up a compliance regime.

Meanwhile, 43 of the companies surveyed nationwide said they had not yet appointed a compliance officer, as required by law.

Ottawa also requires companies subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to have a system in place for training their employees on how to comply with the law.

The data obtained by The Canadian Press found that 42 of the 337 companies surveyed by Fintrac had only started implementing a training system, while 57 had not even begun yet.

Pierre Leduc, a spokesman for the Canadian Real Estate Association, says keeping up with the changes to anti-money laundering laws is a challenge for the real estate sector because most realtors work on their own and are not big corporations like banks or casinos.

“In addition, until recently, awareness was low, which is why CREA embarked on a national information tour to raise awareness and explain compliance responsibilities,” Leduc said in an email.