Wednesday, June 15, 2022

At a glance (3 minute read):

  • Supreme Court Justice Austin Cullen's report made 101 recommendations on how the province could better combat money laundering, including a dedicated money laundering intelligence and investigation unit and a commissioner to oversee government's approach.
  • The report also found that there isn’t evidence that money laundering is causing housing unaffordability.
  • Read the report and watch for more of our analysis and commentary in the weeks ahead. 

On June 15, after hearing from 199 expert witnesses over 18 months, the commissioner of BC’s public inquiry into money laundering released his findings.

In it, Supreme Court Justice Austin Cullen made 101 recommendations on how the province could better combat money laundering.  Among them, he’s calling for the provincial government to establish a dedicated money laundering intelligence and investigation unit and appoint a commissioner to oversee the government's approach.

While real estate received less attention than casinos and other areas of concern, such as cryptocurrencies, the report found that the current federal anti-money laundering system, FINTRAC, is ineffective, stressing that the province needs to take action to tackle the issue. 

Cullen further concluded that REALTORS® have a poor record of reporting money laundering concerns under FINTRAC, saying that there’s significant confusion within the profession on how to comply with these federal reporting duties.

"One of the principal reasons for the poor record of anti–money laundering reporting and compliance among realtors is the persistent but mistaken belief that money laundering in real estate means buying houses with bags of cash. Another cause of the poor record of anti–money laundering reporting and compliance is confusion among realtors about how to comply with their federal anti–money laundering obligations. Most real estate agents and brokers have no background in compliance or anti–money laundering measures, and there is significant frustration in the industry about the lack of guidance. There is a need for clear, simple guidance from FINTRAC about when transactions must be reported."
The Cullen Commission report

The Cullen Commission also found that there isn’t evidence that money laundering is causing housing unaffordability.

"I wish to be clear that I do not urge the provincial government to take up the recommendations contained in this report on the basis that they will resolve British Columbia’s housing affordability challenges. There are strong reasons to think that fundamental factors such as supply and demand, population increase, and interest rates are far more important drivers of price."
The Cullen Commission report

Our government relations, professional standards and other experts are poring through this 1,804-page document and will have more analysis and commentary on its findings in the weeks ahead.

Other real estate highlights from the report

The BC real estate sector is highly vulnerable to money laundering – According to Cullen, BC’s real estate market is attractive to criminals who want to invest their illicit proceeds. Money laundering in real estate typically involves loans, mortgages, and in some cases, lawyers’ trust accounts. 

Realtors have a poor record of anti–money laundering reporting and compliance – Most Realtors and brokers don’t have an anti–money laundering background, and may not recognize what a suspicious transaction looks like. Cullen acknowledged there’s significant frustration in the industry about lack of guidance from FINTRAC. He stressed the need for clear, simple guidance from FINTRAC about when transactions must be reported. 

Effective regulation of the mortgage lending industry is essential – Cullen believes the lending industry needs regulatory modernization. The Mortgage Brokers Act needs to be replaced, along with separate legislation aimed at regulating private lending.