Real estate deals a growing focus for FinTRAC

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Canada's anti-money laundering watchdog is seeing increased reporting of suspicious transactions involving Vancouver real estate as awareness of the warning signs improves, but important blind spots remain.

Gérald Cossette, director of the Financial Transactions and Reports Analysis Centre of Canada (FinTRAC), said in an interview Thursday that a significant increase in training of real estate professionals about what to look for is bearing fruit.

Reports from the real estate sector, which has traditionally flagged very few transactions to FinTRAC, rose by 180 per cent in the agency's most recent fiscal year. Even so, Mr. Cossette said his agency still has too little information to draw meaningful patterns, and scant information from brokers and banks that actually handle the money when a property is sold.

His remarks come at a moment when hot housing markets in Vancouver and Toronto have drawn increased scrutiny to the flow of foreign money into Canadian real estate. In recent years, multiple reports have highlighted deficiencies in the Canadian broader regime for detecting suspicious activity. Yet the real estate sector is considered particularly vulnerable to money laundering because some of those involved, such as lawyers and Quebec notaries, don't face the same reporting requirements as other professions.

"The money is being transacted through a mortgage broker, through a bank, through another intermediary," Mr. Cossette said. The agency can ask realtors to file reports, "but we're not convinced, in the long run, that unless we can look at other intermediaries, we have the whole picture."

In Toronto, "we're still trying to figure out what is happening," he added.

Mr. Cossette gave remarks at a rare gathering of four directors from some of the world's most prominent anti-money laundering agencies, hosted in Montreal by the Association of Certified Anti-Money Laundering Specialists (ACAMS). Among others, he was joined on stage by Jamal El-Hindi, acting director of FinTRAC's influential U.S. counterpart, the Financial Crimes Enforcement Network (FinCEN).

FinCEN has experimented with targeting specific geographic areas of the real estate sector that show signs of a concentration of suspicious activity for deeper analysis. Mr. El-Hindi said it's too early to draw firm conclusions, but that the preliminary data show promising signals.

"It confirmed some of our concerns with respect to what may be happening in the [U.S.] real estate sector," he told the ACAMS audience.

Bruno Dalles, director of TRACFIN, France's equivalent financial intelligence unit, and Stiliano Ordolli of the Money Laundering Reporting Office Switzerland (MROS), both stressed that institutions from a range of industries need to understand the value of the data they collect, and share more of it actively with regulators and with law enforcement.

In 2013, a report by Canada's Senate concluded there is "a lack of clear and compelling evidence" that the Canadian regime does a sufficient job of detecting and deterring money laundering and terrorist financing, by contributing to successful prosecutions. And an international evaluation by the Financial Action Task Force (FATF), an intergovernmental body that sets worldwide standards, raised specific concerns about the low number of suspicious transaction reports filed by the real estate sector.

FinTRAC received nearly 25 million reports last year, though most were routine notifications about transactions above certain thresholds – for example, international transfers above $10,000. About 126,000 were suspicious transaction reports (STRs), which tell a more detailed story. But over a recent three-year period, only 9,556 STRs related to the real estate sector were filed with FinTRAC, according to the FATF – or 3.8 per cent of the total during that span.

While FinTRAC has boosted its outreach to the real estate and notary sectors in B.C., encouraging more frequent reporting, it has no authority to demand specific information.

"The real estate sector has not provided a significant number of transactions, or a number of transactions that would be statistically meaningful so we can draw a pattern and say, when you see this, it does look like money laundering," Mr. Cossette said.