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Fraud Protection

On June 23rd, 2008 new federal money laundering and anti-terrorist financing regulations came into effect that require real estate agents and brokers to collect and verify personal identification information from buyers and sellers, including those involved in corporate transactions.

Your REALTOR® requires this identification information to comply with the law. It is the federal Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) that requires financial institutions and real estate agents, among other professionals and services covered by the legislation, to identify customers who conduct financial transactions. These include depositing funds or buying and selling real estate. The Act also requires real estate agents to keep these identification records for five years.

Canada has had substantial anti-money laundering and terrorist financing legislation since 2001. Since then REALTORS® have had a legal responsibility in Canada’s efforts to combat money laundering and terrorist financing, by reporting any cash transactions of $10,000 or more, or reporting suspicious real estate transactions.

Those original legal requirements still exist but under these new regulations, REALTORS® must now document personal information and proof of the identity of their client in each and every transaction, including occupation. If the client is a corporation, REALTORS® must obtain official corporate documents, and the names of directors. If the buyer or seller is in another city, province or country and no in-person meeting is held, REALTORS® must now use an agent or “mandatary” to identify third parties or use two of five verification methods set out in the PCMLTFA and regulations.

The new compliance requirements effect even a buyer or seller not using the services of a licensed real estate practitioner. If there is a real estate agent involved in the transaction, they are also required by law to now verify that private buyer or seller’s information as well.

The Financial Transactions and Reports Analysis Centre of Canada, or FINTRAC, collects, analyzes and discloses financial information and intelligence on suspected money laundering and terrorist financing activities. It was created as part of a Canadian government initiative to fight money laundering and terrorist financing. Although it operates at arms length from law enforcement, FINTRAC's primary role is to provide law enforcement agencies with information to help them with their investigations.

The following persons and entities must report suspicious and certain other transactions to FINTRAC:

  • real estate brokers and agents;
  • financial entities including banks, credit unions, caisses populaires, trust and loan companies and agents of the Crown that accept deposit liabilities;
  • life insurance companies, brokers or agents;
  • securities dealers, portfolio managers and investment counsellors who are provincially authorized;
  • persons engaged in the business of foreign exchange dealing;
  • money services businesses;
  • accountants and accounting firms when carrying out certain activities on behalf of their clients;
  • casinos; and
  • individuals and any entity importing or exporting currency or monetary instruments (such as a money order) of $10,000 or more.

Additional information about this federal legislation, and the role of real estate agents and FINTRAC in the reporting system is available here or call toll-free: 1-866-346-8722.