How REALTORS® Help Prevent Money Laundering in Real Estate: Identifying and Reporting Suspicious Transactions
By: Ellen Baragon, guest contributor
Brokerages, managing brokers, compliance officers, brokerage staff and REALTORS® are uniquely positioned to assess certain aspects of a real estate transaction that others may not have access to. By complying with your professional obligations to file a Suspicious Transaction Report (STR) and share suspicious transaction information with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), you play an important role in helping to combat money laundering in real estate.
When does a transaction reach the threshold of requiring an STR? FINTRAC has outlined the following measures below as a guide:
- A simple suspicion is characterized by a person’s “gut feeling” that causes them to suspect a transaction is amiss, but there are no underlying facts, context or red flags to support this suspicion. An underlying fact about a transaction is one that is known to exist. This can include details such as the date, time, location, amount or type of transaction, account details, financial history, or criminal background. A simple suspicion is not grounds to submit an STR to FINTRAC.
- The reasonable grounds to suspect threshold is met when the underlying facts, context and red flags point to the possibility that a money laundering or terrorist offence has occurred, even if it has not been proven. Therefore, it’s important to note that if the assessment of facts, context and indicators provides reasonable grounds to suspect, an STR must be submitted to FINTRAC.
- The reasonable grounds to believe threshold is met when the underlying facts, context and red flags suggest a probability that a money laundering or terrorist offence has occurred, and the underlying facts have been verified to support this probability. This is a higher threshold than the grounds to suspect, although both meet the standard for submitting an STR to FINTRAC.
FINTRAC guidelines can help you determine if there are reasonable grounds to suspect or believe that a transaction is related to money laundering or terrorist offences or attempts to commit such crimes. If you are unsure, you should speak to your brokerage compliance officer for clarity and to assess conclusively if an STR is required.
Money laundering red flags for Realtors and brokerages
To help Realtors and brokerages determine when an STR needs to be filed, the following indicators of money laundering and terrorist financing can serve as ‘red flags’. Please note, this is not an exhaustive list.
- A client provides minimal, vague or fictitious information that cannot be readily verified.
- The buyer’s agent is especially guarded about their client.
- The client is in an undue hurry to complete the purchase.
- The purchase is made without anyone viewing the property; the buyer shows no interest in the features of the property.
- The sale price is abnormally high or low.
- The client has an unusual lack of concern regarding commissions or other transaction costs.
- The property is purchased without a mortgage, which is not consistent with the characteristics of the buyer.
- The client is not able to account for the source of payment from their income or assets.
- The client tells you that funds are coming from one source, and at the last minute the source changes.
- Payments arrive from several individuals or sources.
- The client requests an unusual or uncustomary way to handle the transaction.
- A residential property is titled in the name of a third party.
- The purchased property is immediately resold, and the resale entails a significant increase or decrease in the purchase price.
Filing a Suspicious Transaction Report
Once you have completed the appropriate measures and determined that the reasonable grounds to suspect threshold has been reached, you must complete an STR as soon as practicable. The STR must be complete and accurate, clearly articulating your brokerage’s suspicions, and that of your brokerage, and referencing all underlying facts, context and indicators that led to the suspicion. This is important because any missing information could cause potential harm to FINTRAC’s analysis and the picture it provides to law enforcement.
Who should file the Suspicious Transaction Report?
Realtors and brokerage staff are encouraged to talk to their compliance officer to determine who will file the report.
What does a complete Suspicious Transaction Report consider?
A complete STR includes, but is not limited to, the following information:
- when the transaction was completed or attempted,
- if the transaction was attempted, the reason it was not completed,
- the financial instruments or mechanisms used to conduct the transaction,
- where the transaction took place,
- the grounds to suspect that the transaction or attempted transaction is related to the commission or attempted commission of money laundering or terrorist offence,
- how the transaction took place, and
- the parties to the transaction, in particular: the conductor, beneficiary and holders of all accounts involved; identifying information on the parties involved in the transaction; the owners, directors, officers, and authorized signers or entities involved, information on the ownership, control and structure of the business; each individual or entity’s role; information about the relationships between the parties.
Keep suspicious transaction reporting confidential
It is an offence to disclose that an STR has been made, is being made, will be filed or to disclose the contents of the report with the intent to prejudice a criminal investigation.
Remember, STRs supply FINTRAC with important data about trends, patterns, relationships and entities of money laundering activity in Canada, which in turn assists law enforcement in investigating and prosecuting offenses. By submitting STRs to FINTRAC when appropriate, Realtors and brokerages can play a key role in helping authorities reduce the risk of money laundering to BC’s financial system and the larger economy.
For more information and resources on anti-money laundering, visit BCREA’s AML resources page.
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