A drug and money laundering investigation called “Operation Mad Money—which stretched from Toronto to British Columbia to China—has shown links between illegal marijuana sales and Toronto’s booming real estate market, CTV News Toronto has learned.
The investigation, led by the Calgary Police Service, is part of an attempt to seize millions in what authorities allege are drug profits that ended up in money service businesses in the Greater Toronto Area, who passed them along to people trying to buy homes.
And it could be the tip of the iceberg, says one retired Royal Canadian Mounted Police officer and money laundering expert. In an interview, Garry Clement Ontario should follow in the footsteps of B.C. and call a public inquiry to assess how big an impact laundered money has in the property market.
“We know that this is going on, we know money is coming into the province. All you do is look at the number of condos that are sitting vacant,” Clement said.
“Canada really needs to sit down and realize we are still a very weak link. This case demonstrates that we have a long way to go.”
The investigation started with a Calgary police officer buying marijuana from websites called BudExpressNow and Cheapweed, a motion filed in Ontario Superior Court says.
Court documents claim the sites didn’t have a licence to sell, and an investigation showed they did more than $3 million in business through multiple feeder accounts, accepting electronic bank transfers with explanatory notes including “weedguy” and “ed and bills.”
Police watched money get deposited in bank accounts in Edmonton, and tracked some of that to three properties outside Vancouver, where they say it was used to pay $1.38 million in electricity bills.
The properties did have Health Canada licenses to grow about 5,000 marijuana plans, but a police raid in 2020 counted almost four times as many.
B.C.’s OffIice of Civil Forfeiture is applying to seize those properties.
In Ontario, authorities claim in documents filed in Superior Court that the alleged profits of the operation ended up in the control of Toronto-area money service businesses, which authorities say sent money in Canada to Chinese nationals interested in buying Toronto real estate.
In exchange, the Chinese nationals repaid the money in China, the documents say, pointing out that this is a way to circumvent currency controls in China that prevent money from easily being withdrawn from that country.
Ontario’s Attorney General is now applying to seize some $3.7 million in bank accounts it says contain money from the marijuana sales.
“The pattern of deposits into the subject accounts, including the frequent, large deposits made in round numbers, is indicative of unlawful activity,” the court application says.
“The contents of the respondent accounts are made up in whole or in part by proceeds of illegal online cannabis sales and/or are instruments of money laundering.”
The allegations are in civil court, which rely on a lower standard of proof than criminal court. Nothing has been proven and a judge is weighing the case now.
One lawyer for the recipients of the money told a recent court hearing they believed everything was legal and had no idea that the money deposited in their accounts could have come from unlicensed marijuana.
“The respondents were not in any way involved in the alleged unlawful acts that were apparently committed by unknown perpetrators,” said lawyer William E. Peppall.
“This is not a case of a delinquent individual, a felon, nor a criminal mastermind. The respondents are innocent bystanders who purchased for legitimate reasons Canadian currency at fair market value in exchange for their Canadian currency that was earned through legal means,” he said.
Clement, the money laundering expert, says the alleged arrangement has a lot in common with a scheme in B.C. where drug money was laundered through government-licensed casinos, and poured into real estate — so much that a government report found it was responsible for a five per cent surge in prices.
The B.C. government called a public inquiry known as the Cullen Commission. Clement said a public inquiry may be necessary in Ontario too.
“This shows we have a lot of gaps in our system,” he said.
FINTRAC, the federal agency which tracks money laundering, says it’s conducted 276 examinations in the past three years, and 700 real estate transactions in the last five years.
The agency says it’s issued nine notices of violation for non-compliance, five in the real estate sector for $143,219, two in money services for $143,219, and two in the dealers of precious metals and stones for a total of $272,910.
The agency said the money service business identified in the court case is registered, but it could not share anything it would have disclosed to police about the case.
The Department of Finance told CTV News Toronto in a statement it had invested $98.9 million over five years to enhance the RCMP and strengthen its foundations to help fight money laundering and identify proceeds of crime.
“New integrated money laundering investigative teams (IMLITs) will be created in British Columbia, Alberta, Ontario and Quebec, bringing together expertise from a variety of agencies to address high profile cases and advance money laundering and proceeds of crime investigations nation-wide,” a spokesperson said.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
