The Real Estate Broker’s Role in Fighting Money Laundering and Terrorist Financing

The Real Estate Broker’s Role in Fighting Money Laundering and Terrorist Financing

This type of criminal act can occur in any economic sector, even in real estate. Moreover, RE/MAX brokers are trained to recognize certain forms of illegal behaviour when conduction transactions.

 

Because they act as legal representatives during the purchase and sale of real property, they are key actors in the fight against money laundering and the financing of terrorist activities, just like financial institutions, accountants, and casinos, for example. 

In Conjunction with FINTRAC

In fact, real estate brokers must report any suspicious transaction to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). This is a federal government agency responsible for the enforcement of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the “Act”). FINTRAC plays a major part in the detection, prevention and deterrence of money laundering and of terrorist financing. 

Its main functions are to collect and analyze data regarding financial transactions, and then transmit this information to the Act’s administrative agencies, such as the RCMP and the Canadian Security Intelligence Service. From there, these organizations can investigate and, when applicable, lay charges against the individuals involved. Specifically, the information provided by FINTRAC is used by the different police forces to focus their inquiries and develop criteria for obtaining search warrants.

 

Real Estate as a Front for Money Laundering

FINTRAC defines money laundering as: the process whereby ‘dirty money’—produced through criminal activity—is transformed into ‘clean money,’ the criminal origin of which is difficult to trace.” Therefore, money laundering involves concealing, by various methods, the source of money obtained illegally (via drug trafficking, corruption, contraband, extortion, fraud, etc.).

Due to the high financial value that can result from the sale and purchase of property, real estate is an attractive sector for criminals. Which is why being able to rely on alert and knowledgeable brokers is so important.

 

How Real Estate Can Be Used to Finance Terrorism

To carry out their activities, terrorist groups need funds. This money can come from legal sources (e.g. personal donations or profits from charitable organizations) or unlawful sources (e.g. weapons dealing, kidnapping, fraud, etc.). This is where a broker can intervene: by identifying actions or transactions that seem shady to them. However, the connection between real estate and terrorist activities is more difficult to detect as the transactions are generally broken up into sums that are usually too small to raise alarm bells.

Which Transactions Must Your Broker Report to FINTRAC

  • Suspicious transactions
  • Large cash transactions
  • Large virtual currency transactions
  • Property owned by a terrorist organization

 

Here are a few examples of what might raise a red flag for a broker:

  • A client is selling a property below market value and offering an additional “under the table” payment.
  • A client is purchasing a property without viewing it.
  • A client is purchasing a property in another person’s name (other than their spouse).
  • A client is overly nervous about their real estate broker’s obligations regarding the prevention and detection of money laundering or terrorist financing.
  • A client is buying back a property they have recently sold.
  • A client makes a deposit by means of a cheque signed by another person (other than their spouse or a family member).
  • A financial transaction is entirely conducted anonymously (e.g. by a lawyer).

These are just a few examples of how real estate transactions can represent money laundering or terrorist financing opportunities.

 

Your real estate broker is therefore an important player in the fight against this kind of criminal activity. Don’t be surprised when they conduct identity checks or ask questions about the transaction you wish to undertake. It’s part of their job!

RE/MAX Québec

By RE/MAX Québec

By RE/MAX Québec

A leader in the real estate industry since 1982, the RE/MAX network brings together the most efficient brokers.