In recent weeks, news headlines revealed that the Vancouver real estate sector is currently the focus of a Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) anti-money laundering audit that has already been underway for several months. According to reports, the increased scrutiny is justified by FINTRAC risk analyses indicating that the real estate sector has a relatively high risk of money laundering when compared to other sectors that are subject to the federal government’s anti-money laundering legislation. This has raised compliance concerns and questions from real estate developers.
The Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (Regulations) impose identity verification, record keeping, monitoring and reporting requirements on developers when they sell new real estate to the public. According to the FINTRAC guidelines, developers are exempt from these requirements for every sale they conduct through a licensed broker or sales representative contracted to act on their behalf as long as that broker or sales representative is not acting as an employee of the developer. However, every developer that has sold at least 5 new houses, condos, or other equivalent property since 2007 must establish a compliance program and appoint a compliance officer to oversee that program even if they plan to conduct all of their sales through licensed brokers and sales representatives. Compliance program requirements under the Regulations include the establishment of anti-money laundering policies and procedures, regular review of compliance efforts, on-going risk assessment, and training for employees, agents and others acting on behalf of the company.
Amendments to the Regulations were proposed by the Department of Finance on June 18, 2015 and are still undergoing review. If enacted without change, these amendments would modify client identification, reporting, and record keeping requirements, add risk assessment criteria, and incorporate changes that better facilitate the use of online technologies, among other changes. More information about the proposed amendments can be found at: http://gazette.gc.ca/rp-pr/p1/2015/2015-07-04/html/reg2-eng.php.
In order to assist developers with meeting their FINTRAC obligations, we have developed a FINTRAC compliance manual setting out those obligations along with suggested policies and procedures, forms, templates and other useful resources.