Vancouver's housing market vulnerable to money laundering says federal agency

Scores of real estate firms in Greater Vancouver aren't complying withfederal anti-money laundering regulations that compel them to identify clients and keep precise records,according to the federal agency thatenforces theselaws.

Last summer, the Financial Transactions and Reports Analysis Centre(FINTRAC) began tolookclosely at the real estate sector in Vancouver,quadrupling the number of examinations it carries out.

It said examiners visitedmore than 80 real estate firms, andfound dozens of instances where theyfailed to comply with federal regulations.

• 'Shadow flipping' loophole to be closed, says Premier Christy Clark

Among other things, the examinersfound that the some real estate firms weren'tfollowingrecord-keeping practices, had failedto identify clients,and didn't properly assessrisk.

Founddeficiencies

FINTRAC spokesman Darren Gibb said the agencyfound that in 55 cases, the real estate firms' practices were "significantly" below standards.

As a result, Gibb saidVancouver's real estatemarket "is at risk for being used for money laundering."

He said several of the violations were serious enough to warrant fines. In the past, Gibb saidthe agency has uncoveredpoor record-keepingin Vancouver-area real estate firms, but the latest results mark a "significant increase from previous years."

The agency's findings come amidallegations that some realtors in Vancouver's hot housing market have gained financially fromby a practice known as "shadow flipping."

On Friday, Premier Christy Clark announced thatreal estateagents will no longer be able to profit fromshadow flipping.Clark said the government wasclosing a loophole around the practice of contract assignments that will demand sellers not only give consent to any assignment put in place, but must give informed consent.

Foreign ownership has also become a contentious issue.A studyconducted last yearthat suggested that foreign buyers from China are fuelling price increases sparked cries of racism.

Agents sayrules change

The FINTRAC findings sparked an indignant exchange Friday with the Canadian Real Estate Association (CREA), which trains realtors.

Randall McCauley, CREA's vice-president of government and public relations, conceded thatit has to do a better job educating realtors on the laws and compliance. But McCauley saidFINTRAC rules related to real estate change so often, it's hard to keep up.

"Theregulations change,and as they change, it's hard to keep pace," McCauley said. "That's why we've invested time and effort to help brief our members."

But Gibbargued that federal anti-money-laundering laws have been in place since 2001 and it's up to realtors to know and adhere to those laws. He said the agency has spent a lot of time with realtorsexplaining their obligations.

"The real estate sector needs to understand that that we all have a shared responsibility," he said. "They simply need to follow the law, which FINTRAC will enable, but we'llalso ensure that they do."

In recent years, Gibb said FINTRAChas sent compliance assessmentquestionnaires to 9,000 real estate brokers and agents, which he saidhelps them understandtheir obligations to adhere to anti-money laundering laws.

With files fromFarrah Merali