Mortgage Broker is the magazine of the Canadian Mortgage Brokers Association and showcases the multi-billion dollar mortgage-broking industry to all levels of government, associated organizations and other interested individuals.
Issue link: http://digital.canadawide.com/i/1149461
8 | summer 2019 cmba-achc.ca CMB MAGAZINE editorialsummary What the German Report Got Wrong be mandated for mortgage and other professionals so that they are trained in recognizing and reporting suspicious transactions. 3. Federal anti-money laundering legislation allow FINTRAC intelligence to be made available to additional regulatory authorities. 4. Governments and regulatory agencies, including FINTRAC, better utilize on-the- ground experience of real estate professionals to develop compliance resources and test policy ideas. is will more likely result in well craed, practical regulation and foster a culture of compliance to protect consumers and the economy. 5. FINTRAC implement a framework to identify and report trends on a regular basis and do so in language that is consistent and understandable to professionals, the public and the media. Very clearly, the mortgage industry holds a shared, universal view that there is no place for money laundering in the real estate sector and supports reforms to ensure the elimination of money laundering. However, one challenge is that the government needs to learn from industry to get a more accurate understanding of how it works and is regulated. e term "unregulated lenders" is riddled throughout the German report and is intended to refer to private mortgage lenders. Of course this is a complete misnomer; private mortgage lenders are regulated by both mortgage broker and securities regulators. In scrutinizing the mortgage industry closely, the German report makes a startling number of false conclusions, some of which are as follows: M any members of the mortgage industry will be aware of the British Columbia government's recent probe into money laundering in the real estate sector, which takes a good, long, hard look at the role of mortgages in cleaning dirty money. Two government reports came out of B.C., the impact of which will in all likelihood reverberate throughout the country. A B.C. Ministry of Finance Report estimates that over $5 billion has been laundered through the sale, mortgaging and flipping of real estate, primarily funnelled through Canada's most expensive city, Vancouver. According to the report's authors, this activity amounts to about five per cent of all real estate transactions, and has the unintended impact of escalating real estate values by about five per cent. If the conclusions of the authors are true, money laundering has a real impact on the mortgage industry's client base, by making home ownership even less affordable. A second report came from former RCMP deputy commissioner Peter German, entitled "Dirty Money." It concludes that Canadian real estate has become a hotbed of money laundering for international criminals. is is primarily due to lax financial reporting rules combined with vastly inadequate policing and prosecutorial resources directed to curbing white-collar crime. German found international organized criminals, such as Joaquín "El Chapo" Guzmán's Sinaloa Cartel, the mainland Chinese gang called the Big Circle Boys and Iranian-based gangs to be embedded and active throughout Metro Vancouver. According to legal analyst Kevin Comeau, money laundering is challenging to detect as it is a derivative crime. Criminals are able to disguise the origin of illegally obtained funds so they look like they are from a legitimate source. e predicate crime, such as drug or human trafficking, occurs long before the multi-layered laundering activity. "at separation of time, place and actors creates the appearance of a benign event – merely another legitimate transaction in a world of millions of legitimate transactions." e crime of money laundering is therefore seemingly invisible and profoundly challenging to detect. In the real estate sector, recent skyrocketing real estate prices in Canada's major urban centres created an undeniable feeding frenzy, with flippers looking for a quick, easy li. A surge of legitimate cash changing hands through real estate transactions gave launderers the ideal backdrop to launder significant illegally obtained funds without a serious risk of detection. To help prevent money laundering, German and others have made a lengthy list of recommendations which essentially aim to beef up policing resources and create more transparency with corporate structures and real estate transactions. CMBA-BC got behind the problem by teaming up with other real estate industry groups and making its own recommendations for shared industry best practices, which include: 1. All real estate sector professionals accept funds only in forms that are verifiable through Canadian financial institutions. 2. Anti-money laundering education Money laundering is a serious hindrance to housing affordability and the functioning of the mortgage industry, so it's important to get the facts straight BY SAMANTHA GALE