Yo, Criminals! Toronto Real Estate Doesn’t Do Laundry
June 27th, 2008 Categories: Home Buyers, Home Sellers, News Wire
Ten years ago, if you’d told me I’d have to take off my shoes in order to go through security at the airport, well, I wouldn’t have believed you. In fact, I might have placed a call to your family and made some discrete inquiries regarding your state of mind. Now, it’s an accepted part of the airport flight departure process. It might be an inconvenience, but that’s the world we live in, so off come the shoes and there goes my unfinished bottle of designer water into the bin.
That’s The World We Live In.
That phrase finds its way into my thoughts an awful lot these days. It made yet another appearance on Monday. Here’s why.
New Regulations Affect
Toronto Real Estate
Effective June 23, 2008, new regulations have come into force under The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). The purpose of this federal Act is to help detect and deter money laundering and the financing of terrorist activities.
It’s BIG business. Criminal proceeds from money laundering are estimated to be in the billions, so it comes as no surprise that the opportunities real estate transactions present are highly attractive to money launderers.
You might not be aware that real estate agents have always had reporting obligations under the Act (which was introduced in late 2001); specifically to report cash deposits of $10,000 and over (which could be absolutely legitimate or not), and to report any suspicious transactions. As such, it’s quite likely that no reporting took place with respect to any Toronto real estate deal with which you were involved.
However, the new federal regulations affect every Toronto (actually, Canadian) real estate transaction where one or both parties are represented by a real estate broker or sales representative. This applies to individuals as well as corporations and other legal entities, including third parties.
Toronto Buyers And
Sellers Comply With Regulations
As your real estate agent, I am now compelled to collect and verify personal information that was not previously required, and to document the source of your deposit monies. The paperwork will be retained for (possible) later use should it be deemed necessary for investigation purposes.
Yes, more paperwork to add to the pile!
Personal information including full legal name, address, date of birth and occupation is collected and recorded on mandated forms. I must also verify this information by viewing a valid and not expired acceptable identification document such as a driver’s license or passport. For a complete list of information collected, and acceptable documents in the Province of Ontario, contact me.
If I represent the buyer (where both parties have representation), I must also complete a report on the receipt of all funds received during the real estate transaction, no matter the amount and regardless of who retains the deposit.
If I represent one party to the transaction (let’s say it’s the buyer) and the seller is not represented (because it’s a FSBO), I must collect and validate information for the non-represented party. Due diligence never takes a holiday!
No one gets a pass on this. Even if I’ve known you since kindergarten, acted as your maid of honour, and enjoyed a slice of your divorce cake, I must still formally collect this information. That applies to parents and other family members. It’s just that serious!
Most likely you’ve got your documents in order; however, if you’re helping a family member or friend with their upcoming real estate deal and you think their documents might be out-of-date or not readily available, double-check and if need be help them get their paperwork in order. No one wants a good deal to fall apart over insufficient documentation.
Corporations and other legal entities (e.g., partnerships) can also be buyers and sellers of real estate. Also, third parties (someone acting on behalf of another) can be involved in real estate deals. These entities must also provide verifiable information. Contact me for more details.
When Are Forms Completed?
FINTRAC, the federal agency that administers this legislation, recommends that the forms be completed for a buyer when the offer is submitted and a deposit made, and completed for the seller when the seller accepts the offer.
However, my position is that I need to know as soon as possible that you intend to comply with the new regulations, and as such I’m discussing this reporting requirement very early in the relationship. If you won’t provide this information I must walk away from the deal as I can’t represent you, so I need to know this sooner than later.
Meet Me In Toronto?
A lot of real estate deals are written by clients that agents never meet as they do not reside in Toronto. One example that comes to mind are off-shore investors in the Toronto resale and new condominium market.
We can still do business with such clients, but the requirement to provide verifiable information still stands. Brokers must have approved agents in place who handle the paperwork and visually validate information using equivalent identification documents. Imagine the effort involved in ensuring the paperwork is in order when working on a transaction with a client who is an overseas corporation.
Toronto Media
Misreads Public Reaction
There’s been commentary in the media with respect to the anticipated reaction to this new reporting requirement. Along the lines that buyers and sellers are going to be rather pissy about the whole thing.
Well, I disagree. I think a lot of people are fed up with the criminal activity that surrounds real property and the illegal proceeds that arise from such activity. I’m fed up with what’s happening to home owners who are victims of mortgage fraud, electronically removed from title of the homes they’ve paid off decades ago, with fraudulent mortgages then placed on their homes. And I know you are, too!
It’s a disgrace that while affordability and homelessness are bona fide concerns for the City of Toronto, grow houses continue to be a blight on our neighbourhoods. It’s a disgrace that after these properties are vacated, the houses are not fit to be occupied due to mould. They require either significant, expensive work in order to reclaim them, or they’re tear downs. When some people struggle to find housing.
So, no, I think when people understand why we must collect this information they’ll be on board. It’s a pain, on its own it certainly won’t stop this type of crime in its tracks, but it’s one very small assist for those who are tasked to put an end to this type of criminal activity.
Because that’s the world we live in.
Are you thinking of buying or selling Toronto real estate? Call Lauren at 416–550–6991. I’m not afraid of paperwork!
