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How do we follow the money? Canadian real estate gets ‘abysmal’ anti-money laundering grades – Global News

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An internal report from Canada’s anti-money laundering watchdog found nearly half of the real estate companies audited weren’t complying with key areas of the country’s anti-money laundering regime and experts warn these “serious gaps” can hurt criminal investigations. 

The report prepared by the Financial Transactions and Reports Analysis Centre of Canada (FinTRAC) for Finance Minister Bill Morneau included an audit of 172 real estate companies, brokers and developers in 2017-18.


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FinTRAC found a 52 per cent compliance rate when it came to training employees to detect money laundering or suspicious transactions and 53 per cent in the area of client identification – a requirement for real estate agents to verify a person’s identity.

“There is still a misunderstanding across the sector as to how the real estate sector can be used for money laundering and terrorism financing,” read the document obtained by Global News under access to information laws.

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FinTRAC’s on-site examinations targeted large brokerages in Vancouver, B.C.’s Lower Mainland, the Greater Toronto Area and Montreal. B.C. has launched an inquiry into how money laundering distorted housing prices in the province and fuelled the opioid crisis. 

Matt McGuire, a former intelligence officer for FinTRAC, called the compliance rates “abysmal.”

“It’s a significant non-compliance rate,” said McGuire. “How can you expect agents and brokers to detect suspicious transactions if they don’t know what they’re looking for?”


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When it comes to identifying clients, real estate brokers are required to record simple details to confirm a person’s identity, like information on a driver’s licence, according to McGuire.

I can forgive somebody not being able to pick out a suspicious transaction on a real estate deal, given a limited fact scenario, but I can’t forgive the sloppiness of not identifying somebody with a very simple set of rules.

“How are we supposed to follow the money if we don’t know who is involved?”

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Laws against money laundering and terrorist financing require sectors – like banking, casinos and real estate – to identify their clients, keep records and report large cash deals and other suspicious transactions to the federal government.

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FinTRAC warned that the real-estate sector “still has one of the lowest reporting levels” among sectors, but did not offer detailed numbers.

McGuire said Canadian real estate has been “extensively exploited” by the problem of money laundering and all financial sectors need to fight against it.

“It’s important in the first line of defence, the people actually interacting with those who are buying and selling property, pay attention to the potential for suspicious indicators that there might be crime behind the transactions.” 

The report did find the sector performed well in two other areas, including 100 per cent of companies fulfilling the requirement to have an anti-money laundering compliance officer and a 95 per cent pass rate with third-party determination – identifying a person or entity who instructs another person to conduct a financial transaction on their behalf.

McGuire said the 100 per cent compliance rate is misleading, as firms are graded solely on whether a person is identified by the company as a compliance officer.

“I can point and if somebody puts up their hand in the room, you have a compliance officer. One hundred per cent pass,” he said. “There’s no measure of how good you are or how well you know the requirements.”

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The report followed previous years of FinTRAC data from 2012-16 that showed more than 800 real estate companies had “significant” or “very significant” deficiencies with the anti-money laundering and anti-terrorist financing controls.


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Renée Bercier, a spokesperson for FinTRAC, said the real estate sector performed well in some areas, but needed to improve in the areas of training and identifying clients.

“What FINTRAC has found more generally in the real estate sector is that the level of compliance knowledge and resources varies across the sector and is often a function of an entity’s size, capacity and access to resources,” Bercier said in an emailed statement.

Bercier noted that not all 172 examinations assessed training or client identification.

“In order to address these issues, FINTRAC is working with real estate entities and the Canadian Real Estate Association to increase this sector’s understanding of their obligations under [anti-money laundering laws],” Bercier said.

The agency noted that over $172 million was allotted in the 2019 budget for the RCMP, CRA and FinTRAC to help crack down on financial crimes.

Warnings for Ontario and elsewhere

The CN Tower can be seen in the Toronto skyline in Toronto, Ontario. THE CANADIAN PRESS/Cole Burston

The CN Tower can be seen in the Toronto skyline in Toronto, Ontario. THE CANADIAN PRESS/Cole Burston


THE CANADIAN PRESS/Cole Burston

Criminals using Canada’s hot housing markets of Vancouver, Toronto and Montreal to launder illicit cash have grabbed headlines across the country.

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“The more criminal money there is, the more demand there is for property, the higher the prices go,” McGuire said. “That can impact the accessibility of housing.”

Global News first reported on a secret police study in 2018 that roughly $1 billion was laundered through B.C.’s real estate market in 2016 in homes valued above $3 million. Police did not study the non-luxury home market, but believe there is significant money laundering in lower-valued homes as well.

A subsequent report from a panel of B.C. experts on the issue estimated that the problem of money laundering in Canada’s real estate sector was roughly $46.7 billion.


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Denis Meunier, the former deputy director of financial intelligence at FinTRAC from 2008 to 2011, said the real-estate industry needs better training and more accurate record-keeping to help federal agencies tackle the billion-dollar problem.

“These requirements that haven’t been met are serious gaps,” he told Global News. “You’re supposed to find out if the person in front of me are ‘they doing business on behalf of someone else?”

Meunier said FinTRAC findings were particularly galling as real-estate brokers and firms had low compliance rates when it came to identifying clients.

“It’s not encouraging,” he said. “You’re looking at about half of the population that isn’t meeting the requirements.”

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Canada is a great place to launder money because of our lack of ownership transparency, according to experts.

Houses or condos can act as a kind of bank account for criminals, as they can park large amounts of illicit cash by buying up real estate and hide the purchases behind numbered corporations or shell companies located in offshore tax havens.

Meunier said client identification records can help guide investigators looking into organized crime.

“If you’re not recording, you’re not providing the right kind of information so that records are available when criminal investigations are conducted in [real time].”

Calls for change

Tim Hudak, president of the Ontario Real Estate Association, said he was “very nervous” that Toronto’s housing market could see an influx of dirty cash as B.C. regulators crack down.

“I’m very nervous that the Greater Toronto area will become the epicentre for dirty money in Western democracies,” Hudak told Global News. “For some reason, Canada still seems to be in a bit of the dark ages when it allows drug dealers to hide behind numbered companies and snap up real estate.”


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B.C. announced Canada’s first beneficial ownership registry set to begin in May 2020, aimed at ending the use of trusts, corporations or partnerships to hide transactions from public view. The province has also made a new anti-money laundering course mandatory for all real estate agents.

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Hudak has been calling on Premier Doug Ford’s government to adopt a beneficial ownership registry with harsh penalties for those who break the law. He also supported calls for anti-money mandatory training for people working in real-estate.

“If B.C. closes their door to the flood of laundered money, guess where it’s all going to go? The province of Ontario,” Hudak said.


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A spokesperson for Ontario Finance Minister Rod Philips said the province would not commit to its own registry but said it was in “consultations” on the issue with Ottawa and other provinces.

“The government is also engaging in various actions to address money laundering including collecting certain beneficial ownership information under the Land Transfer Tax Act and working proactively to assist the Canada Revenue Agency in addressing non-compliance in the real estate sector,” Scott Blodgett said in an email. 






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Bill Blair says federal government will assist in B.C. money laundering inquiry


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Quebec’s finance minister said the government held a “public consultation a few weeks ago” on corporate transparency and is currently under analysis.

“We are also working on reinforcing enacting stricter rules against tax evasion and are looking into giving more powers to Revenu Québec to reinforce transparency,” spokesperson Fanny Beaudry-Campeau said.

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For Hudak, tackling the issue of money laundering makes the housing markets in major cities a more even playing field.

“Our concern is that a young couple who’ve been scraping every dime together to finally find a place to call their own is left on the sidelines while some drug dealer’s niece snaps up that property.”

© 2020 Global News, a division of Corus Entertainment Inc.

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Appraisal company denies claims in Epic real estate probe – Saskatoon Star-Phoenix

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The appraisal company named in that report says its claims are flawed, while the prices Epic used cause wider ripples in the local housing market.

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The owner of an appraisal company that worked with a capsized Saskatoon real estate firm insists claims made in a court-ordered investigation are flawed.

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According to an Ernst and Young report into Epic Alliance Inc. released earlier this month, the company bumped up prices on its housing while doing minimal renovations. The company raised more than $200 million from investors, as appraisals typically assigned a value “well in excess of its original purchase price,” the report stated.

David Lazeski of Associated Appraisal — the appraisal company named in the report — disputes the claims.

Epic imploded earlier this year, when company founders Rochelle Laflamme and Alisa Thompson told worried investors that there was nothing left from the seemingly thriving company. That caused around 120 investors to turn to the legal system to find out what happened to millions of dollars.

Saskatchewan’s Court of Queen’s Bench ordered Ernst and Young to delve into the company’s practices and to prepare a report. The probe found spotty record-keeping and “that accurate electronic accounting records of Epic Alliance were not maintained prior to 2019.”

As well, the report stated, “(from) the Inspector’s review of appraisal documents, it appears that, despite their appraised values significantly exceeding their purchase price, many of the homes had not received significant renovations.”

According to the report, appraisals for Epic “were performed almost exclusively by Associated Appraisal Co.”

Lazeski, in an interview with the Saskatoon StarPhoenix, said his company only started doing appraisals for Epic in December of 2019. Epic opened for business in 2013. He said others were doing appraisals for Epic as well.

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The investigator never reached him for comment about the claims in the report, Lazeski said.

Lazeski, who said he did not personally work with Epic, said in an interview that the appraisals were typically conducted one year after Epic purchased the homes. The time elapsed between purchase and appraisal may contribute to the price difference, he said. Another factor may be Epic finding deals on the market, he added.

“Buying that number of houses, during the pandemic, I’m assuming (Epic) probably got some good deals,” he said.

“When we’re doing an appraisal and establishing market value, it’s based on current sales. That’s really the biggest factor.”

Epic bought at least 700 properties, mostly through its “fund a flip” program under which homes were acquired in low-income neighbourhoods in Saskatoon and North Battleford and were then supposed to be renovated for sale.

Once renovations were complete, Epic would bring on an appraiser. Those properties were then sold as part of the “hassle-free landlord” program and Epic leased back the properties to be rented or used for short-term accommodation, such as Airbnb.

The Ernst and Young report compared the total mortgage on each property with the appraisal commissioned by Epic. It found that the average property’s appraised value was $11,325 over the total mortgage.

The report cited one case in which Epic hired an appraiser one year after it bought a property. Photos of the interior “showed outdated appliances, countertops, and cupboards which were not indicative of a renovation occurring. Pictures of two bedrooms had carpet that was visibly stained,” according to the report.

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The home’s appraised value was $260,000 — which is $62,000 over its original price, according to the report.

Kari Calder, a Saskatoon realtor, says the price bump on Epic homes affected her business by undermining trust with clients.

She warned clients that the company offered low prices to find “desperate sellers,” then added new paint or flooring before listing the home at higher than market value. One seller lost her faith in Calder when her home sold low only for it to sell again at a higher inflated price, Calder said.

Calder won back the client’s trust by explaining the pattern she saw, but it’s a slice of a broader issue.

“I learned through a lot of trial and error that almost every Epic listing that came up as a comparable threw my evaluation off,” she said.

Calder used the example of four recent sales valued at roughly $250,000 to $265,000. If one sold for $315,000, she would include it in talks with clients to explain the overpricing of some homes on the market.

Former Epic homes may be entering the market if their owners see they’ve lost money on their investors. That could create a challenge for second-time buyers looking to sell their home for something bigger, Calder said.

“I suspect that the current owners of many of these flipped homes will be the ones taking the financial hit as they are the ones who unwittingly overpaid for the houses,” she said.

The Financial and Consumer Affairs Authority of Saskatchewan and Saskatoon police are conducting separate investigations into Epic.

  1. Epic Alliance Inc. founders Rochelle Laflamme and Alisa Thompson appear in a January video call to explain the company had collapsed. (Saskatoon StarPhoenix).

    Police investigating complaint against Epic Alliance

  2. Alisa Thompson cofounded Epic Alliance Inc., a Saskatoon real estate investment firm that collapsed in January, sparking a court-ordered investigation. Photo taken in Saskatoon, SK on Friday, January 31, 2020.

    Court probe offers look at collapsed Saskatoon real estate company

The news seems to be flying at us faster all the time. From COVID-19 updates to politics and crime and everything in between, it can be hard to keep up. With that in mind, the Saskatoon StarPhoenix has created an Afternoon Headlines newsletter that can be delivered daily to your inbox to help make sure you are up to date with the most vital news of the day. Click here to subscribe.

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What’s Next for the Real Estate Industry?

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Real Estate Industry

The real estate industry has never been static, but things have changed here more than normal on several fronts. The skyrocketing cost of housing is not the only major difference.

As technology evolves, disruptors are leveraging platforms to help people make more informed purchasing decisions. They’re also removing pain points along the journey, so buying a home doesn’t have to be a murky, slow, and excruciating process.

Let’s check out some of the technology in today’s real estate market.

Prop-Tech

Innovators like Regan McGee have made open digital marketplaces where homebuyers, especially millennials, can enjoy transparent data working for them. Compare qualified and verified local real estate agents based on their pricing, service, reputation, and experience level. Then, pick the agent who works best for you.

On a platform where agents vie with each other for your business, prospective homebuyers get further incentives like cashback or improved services, which are likely to be very appreciated given housing costs. As McGee explained to Toronto Life, “People think buying and selling real estate is complicated, but that’s a way for agents to justify their fees.”

Prop tech helps people entering the housing market for the first time learn what questions to ask so they don’t find out hard lessons after it’s too late. Homebuying doesn’t have to be a nerve-wracking, drawn-out process if you rely on today’s leading technological support.

Virtual Reality and Augmented Reality

While the development of virtual reality tech predates the COVID-19 pandemic, the need for remotely viewing property was only made more acute. Pictures and even videos of the property up for sale don’t give prospective buyers granular control over what they’re viewing.

Exploring a property using virtual reality lets you delve deeper into the home itself. Imagine looking at a picture of a home and wondering what’s around a certain corner you can’t see. Virtual reality lets you step inside the pictures and even the video and roam freely.

Facebook, now known as Meta, has people spending fortunes buying a virtual property you can’t actually live inside.

Short-Term Renting

Airbnb was originally meant to allow homeowners to rent out their space while they were away on vacation or for whatever other reason. In the years since, people have purchased property for the sole purpose of renting it out short-term on Airbnb.

Such practices have driven up the cost of living, and not every community is supportive. Local battles between long-time community members who resent living in ghost towns and short-term landlords who aren’t breaking any laws are increasingly common.

Each jurisdiction responds differently, but technology has created possibilities that didn’t exist even a few years ago, and that is definitely something to watch.

Technology has evolved so much in the past decade or so that it’s hard to think of a sector it hasn’t affected. From prop-tech platforms, developments in augmented and virtual reality, and apps that increase your property’s value, real estate is presently different than ever. In a way, the future of real estate is now.

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Canada real estate: When the appraisal falls short – CTV News

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The red-hot housing market over the last several months pushed many buyers fighting through bidding wars to put in unconditional offers at high prices.

But now that the market is cooling, some are ending up with mortgages that can’t cover the full cost of their home following an appraisal.

Toronto-based mortgage broker Mary Sialtsis says there are “very few options” for these buyers.

“In the last couple of years, but especially in the last couple of months, I’ve had a few different clients that have dealt with this situation,” she told CTV’s Your Morning on Friday. “Unfortunately, there are very few options when you’ve purchased a property with no conditions and no financing conditions.”

Nationally, home prices fell 6.26 per cent between March and April 2022 after peaking in February, according to the Canadian Real Estate Association. That’s meant some buyers are ending up with mortgages that are more than $100,000 shy of what they need.

In some cases, especially when the down payment from the buy is 50 per cent more, Sialtsis says the lender may just move forward with the mortgage based on the original price of the home, even if the appraisal is a lot lower.

“It’s a case-by-case situation,” she said.

Another option may be to get a second mortgage from a private or alternative lender. But if no other option works, buyers can try and negotiate a mutual release, which usually means forfeiting the deposit.

“For most, they end up going to the bank of mum and dad,” said Sialtsis. “I highly recommend if anyone is in this situation, reach out to your mortgage professional immediately.”

Sialtsis warns that putting in offers without any financing conditions puts buyers at a huge risk, as the buyer is legally bound to close the deal regardless of whether they’re able to get a sufficient mortgage.

“I really don’t think buyers fully understand the impact of those unconditional offers when they submit an offer to purchase a property,” she said. “It becomes a legally binding contract and that buyer is expected to close on the closing date. So, that’s one of the reasons why there’s very few options for this.”

But the cooling housing market isn’t all bad news. For those looking to buy a home, Sialtsis says now is a good time to jump in as buyers have a lot more leverage to negotiate.

“For many Toronto-area buyers, where often we’re dealing with multiple offers… it might be a good chance for you to get in and get a decent property with less competition or no competition and the opportunity to actually include a financing condition,” she said.

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