Untangling money laundering regulations for Canadian real estate

What you need to do

If you’re a reporting entity, the PCMLTFA and FINTRAC require you to implement a formal AML compliance program.

Your compliance program must be upheld by five pillars:

1. Compliance Officer: Responsible for your compliance program and the first point of contact for FINTRAC.
2. Policies and Procedures: Outlines what requirements you need to meet and how your program will meet them.
3. Risk Assessment: Determine the AML risks specific to your business, along with measures that will be taken to mitigate such risks.
4. Training: Develop a training program for all staff and agents, including those involved in real estate deals. It should outline the role they play in helping you stay AML compliant.
5. Effectiveness Review: A biennial (at a minimum) testing program to review the AML program and ensure it’s effective and current. It may be conducted by either internal or external auditors.

Understanding the full scope of your obligations may sound daunting, but with the proper advice and expertise, it doesn’t have to be. It’s important to remind yourself that all the complex rules and responsibilities can essentially be boiled down to strong record keeping, maintaining a healthy level of scrutiny, and reporting suspicious transactions, amongst others.

Your mandate is to act as a first layer of defence against Canadian real estate being used to facilitate crime. It is generally better to be overly diligent when reporting to FINTRAC and have them respond that it’s a non-issue. The alternative is to become complacent and miss something you should have reported.

Although it is not an exhaustive list, below are examples of questions you should be asking yourself to ensure you’re vigilant about AML:

• Am I dealing with the buyer directly, or are they trying to shelter themselves or their identity through a third party?
• Does the buyer hold a political position?
• Does client activity not match client profile?
• Is the corporate structure too complex?
• Is there a clear purpose for the transaction?
• Am I selling the property to someone who owns or controls a substantial stake in another entity? If so, is it a legitimate and trustworthy entity?
• Am I aware of the types of reports I can (and should) send to FINTRAC, such as Suspicious Transaction Reports (STR), Terrorist Property Reports, Large Cash Transaction Reports (LCTR), and Large Virtual Currency Transaction Reports?
  • For example, an LCTR is warranted when you, as a real estate professional, receive $10,000 or more in cash in a single transaction, either in a single payment or multiple payments that add up to that amount.
• Do I maintain adequate records of the movement of funds, identification of unrepresented parties, and the reports I’ve filed with FINTRAC?

You don’t need to take on AML compliance alone

If your AML compliance program needs work, the good news is that you have access to the guidance and resources you need to get started. A qualified AML practitioner and advisor can inform you what regulations apply to you (if any), educate you about the compliance regime and FINTRAC’s expectations, and walk you through how to build your compliance program.

Some tasks, like conducting your effectiveness review, drafting your policies and procedures document, and training your staff, can be delegated to an outside expert. The AML compliance process can provide confidence and peace of mind for your real estate business. Stay informed and ahead of the regulations so you can focus on the opportunities that matter most to your bottom line.