Cash deals raise suspicion

By: Frank  O'Brien March 27, 2003

If you pay cash for your next house in Canada you had better have a very good reason or a very good lawyer. As of Jan. 31, 2003, Canadian real estate agents and sales people must report suspicious large cash transactions under the federal Proceeds of Crime Act (also know as the Money Laundering Act). The Act came into force nearly two years ago, but it was only in January that the regulation on reporting real estate cash transactions over $10,000 became law. The new regulations are fairly sweeping and even include a series of smaller transactions done within a short period of time – 24 hours or less—if they total $10,000 or more. So what is money laundering? Basically, it's a process whereby "dirty money" produced by criminal activity is transformed into "clean money." In real estate, a suspicious transaction is one in which there is reasonable grounds to suspect that it is related to money laundering. For Realtors, transactions include buyer's deposits. Suspicious transactions must be reported to Financial Transactions & Reports Analysis Center (FINTRAC). Federal regulations not only apply to all real estate sales representatives but include a number of financial intermediaries as well. "Some large cash transactions may be totally innocent," said Stephanie Corcoran, president of the Real Estate Board of Greater Vancouver, who refers to a hypothetical case where a group of offshore buyers pool cash money to buy real estate. However, realtors now must tell the government of any such instances if the deal appears at all shady, Corcoran said. Failure to do so could result in a five-year prison term and/or a fine of $2 million. Realtors must report large cash deals when they are receiving or paying funds; depositing or withdrawing funds; and transferring money by any means during a real estate deal. Realtors have 30 days to report the instance if they suspect a transaction is related to money laundering. The Act has some rather scary overtones. Reporting persons, for example, are not allowed to inform anyone, including the client, about the contents of a suspicious transaction report, or even that such a report has been made, if the intent is to impair a criminal investigation. As well, the reporting person is protected from any criminal or civil proceedings for making a report in good faith. The Canadian Real Estate Association (CREA) has suggested that a transaction may be suspicious if: Client does not want correspondence sent to home address. Client repeatedly uses an address but frequently changes the names involved. Client presents confusing details about the transaction. Client over justifies or explains the transaction. Client is secretive and reluctant to meet in person. Client's home or business telephone number has been disconnected or there is no such number when attempting to contact client. Client uses aliases and a variety of similar but different addresses. Client uses post office box or general delivery address, or other type of mail drop address, instead of a street address when this is not the norm for that area. Client offers money, gratuities or unusual favours for the provision of services that may appear unusual or suspicious. Client arrives at real estate closing with an unusual amount of cash. Client purchases property in the name of a nominee such as a relative or associate. Client does not want to put his or her name on any document that would connect him or her with the property, or uses different names on Offers to Purchase, closing documents and deposit receipts. Client inadequately explains the last minute substitution of the purchasing party name The Proceeds of Crime legislation was in the works long before Sept. 11, 2001. In fact, the first phase came in almost exactly two months later and now is seen both as an anti-crime and anti-terrorism tool. However, it is also a commentary on our increasingly restrictive society.

Frank O'Brien can be reached at fobrien@dccnet.com.

Copyright 2004 Inman News