Financial crimes have long been entrenched in Canada’s real estate and banking ecosystem, creating a deeply embedded problem that cannot be quickly undone. The damage is already done, and the landscape is shifting from accountability—which is arguably already at a high standard among mortgage brokers, bankers and realtors—to rigorous reporting. Real estate and mortgage professionals are now facing a seismic regulatory overhaul set to take effect on October 11, 2024. The Canadian government, after repeated criticism from the US and other international bodies for its lax and ineffective policies on anti-money laundering, and anti-terrorist financing, is finally taking action. Canada, a nation that has up until recently been strengthened by immigration and international investment, is now being forced to implement cumbersome and intrusive policies due to their mismanagement over the better part of the last decade of these same strengthening factors. The opportunity for proactive measures has passed; we are now in a reactive phase.

It’s pointless to debate the reasons or theories that have led to our current affordability crisis—how we arrived here is truly mind-boggling. Every country has its expensive cities, but few have seen costs escalate to a global scale like we have. It’s understandable that Vancouver is pricier than Calgary, but it’s both ridiculous and embarrassing that Vancouver ranks among the most expensive cities in the world for real estate. This is particularly troubling when most lifelong Vancouverites are nowhere near the income bracket needed to qualify for a mortgage on an average home. For the past 10 years, the average price of a single-family home in Vancouver ping-ponged between $1.3 – $2.5 million. So, how has our real estate market reached such unaffordable heights, especially if many of its residents have not been able to qualify for a mortgage? The answer is clear now: dirty money.

All those past bull runs in Vancouver, with multi-offer transactions, come to mind. I recall many instances where a young, unassuming couple—genuinely intending to purchase a home and start a family—entered the competitive bidding stage with a deposit cheque in hand, only to find themselves up against a numbered company (corporation) with a concealed identity from God-knows-where. You can guess how it ended for that young couple. Maybe they got a last-minute cash infusion from mom and dad, or perhaps they lowered their expectations and settled for a 600-square-foot condo. Some might have even decided to relocate to Calgary or Edmonton. The outcomes are endless. But regardless of the outcome, it’s fair to say that dirty money may have triggered at least a few of these scenarios. While international money launderers, drug lords, and organized crime don’t own every piece of property in Vancouver, it’s reasonable to assume that enough transactions occurred to have had some impact. Municipal governments certainly played a role in this mess as well, with their politically charged and bureaucratic zoning/permitting policies—all of which have contributed to making the construction of new properties even more unaffordable (but that’s a topic for another blog). 

Starting October 11, 2024, individuals and entities in the mortgage sector—including mortgage administrators, brokers, and lenders—will be required to comply with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. They must implement a compliance program, report transactions, keep records, and know their clients. FINTRAC (Financial Transactions and Reports Analysis Centre of Canada), Canada’s financial intelligence unit responsible for enforcing anti-money laundering and anti-terrorist financing regulations, will conduct assessments to ensure adherence and provide guidance, with significant penalties for non-compliance.