Thursday, March 11, 2010

Real Estate and Money Laundering

Real Estate transactions have long been identified as a primary area where money from illicit sources has been laundered. How is this done?
Example: A would be Buyer enters into an Agreement of Purchase and Sale for which they submit a $10,000 "cash" deposit. The money is deposited into the listing real estate brokerage's trust account. The offer is conditional upon financing, a home inspection or some undertaking which eventually is not fulfilled and the Agreement becomes null and void. Both the buyer and seller sign a Mutual Release, the deal is aborted and the listing brokerage issues a cheque to the seller refunding their $10,000 deposit. Presto, the $10 grand has just been laundered.
FINTRAC, the Federal government's anti-terrorism/money laundering body charged with cracking down on and tracking the flow of illegally gotten cash, requires that REALTORS® obtain the personal identification from each and every client that we deal with. Most consumers understand this while the odd one takes some offence to this requirement, citing the "Privacy Act" as the reason they do not have to comply with providing their personal information. The Federal government's anti-money laundering terrorism legislation supersedes the Privacy Act. REALTORS® are required by law to record the personal identification of clients. This information does not go anywhere but real estate brokerages are require to maintain this information on file should a FINTRAC inspector arrive for an audit.
Do these audits happen? The answer is yes and failing to satisfy the government's requirements in this regard carries a stiff penalty. A Hamilton area real estate brokerage was fined $27,000 this past January for failing to comply with the FINTRAC requirements.
Call it Big Brother or whatever you want but the fact remains that federal law is not something to be taken lightly and completing the required FINTRAC form for each client is just one more document that needs to be completed for every real estate transaction undertaken.

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Royal LePAGE Locations North (Brokerage)

330 First Street, Collingwood, ON L9Y 1B4


Direct: 705-443-1037

Office: 705-445-5520 ext 230


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Rick relocated to Collingwood from Toronto in 1985 through a transfer with Goodyear Canada. In 1987 Rick was recruited by a major client of Goodyear’s, managing their Canadian business based in Barrie before moving to Chicago in 1992 as Vice President of Sales & Marketing. Upon returning to Canada in 1996, Rick ran an industrial products manufacturing company in Stratford, Ontario. In 1998 Rick returned to Collingwood with his two children. Rick is a licensed real estate Broker with Royal LePAGE Locations North in Collingwood and holds his MVA designation (Market Value Appraiser-Residential). He is an active volunteer in the community serving several years on the Board of Directors with the Collingwood Chamber of Commerce as Treasurer, 6 years on the Board of Directors for the Southern Georgian Bay Association of REALTORS® of which he is the Past President (2008) and currently serves on a committee with the Ontario Real Estate Association. Rick is a diverse executive manager with extensive experience in strategic planning, manufacturing, finance, human resources and quality assurance management.