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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