FINTRAC Issues Warning on Laundering Tax Evasion Proceeds Through Real Estate

FINTRAC, Canada’s Financial Intelligence Unit (FIU), has issued a stern warning to financial institutions, emphasizing the importance of identifying when proceeds from tax evasion are laundered through real estate transactions. In collaboration with the Canada Revenue Agency, FINTRAC has released a new Operational Alert that outlines numerous red flags indicative of potential suspicious transactions.

FINTRAC stressed that these indicators should not be considered in isolation. “On their own, these indicators may not be indicative of money laundering or other suspicious activity,” it said. “They should be assessed by reporting entities in combination with what they know about their client and other factors surrounding the transactions.”

The alert includes a variety of indicators, such as:

- The use of cryptocurrencies as payment to property developers, investors, or speculators.

- Financing provided by a private lender or unlicensed money services business without a logical explanation.

- Transactions routed through mortgage brokers, immigration consultants, or tax haven trust accounts.

- Goods or properties transferred at an “excessively high or low” price without adequate supporting documentation.

- The same property being sold multiple times to different buyers or investors before it is built and ready for occupancy.

- Control of main services linked to the real estate industry by different members of the same family, such as real estate brokers, accountants, and lawyers.

- The value of purchased property being inconsistent with the reported wealth and income of the client.

- The use of investment vehicles or offshore accounts for property purchases.

- Large sums of money from foreign individuals or entities in countries that limit international transfers being wired through multiple smaller electronic transfers and ultimately invested in real estate.

- Involvement of real estate brokers with “past disciplinary issues.”

- Adverse media reports on the real estate professional or client involved in the transaction, including reports of crime or tax evasion.

- Real estate brokers or sales representatives acquiring and quickly reselling properties with unknown or third-party funds, sometimes using cash.

- Buyers making statements or inquiries about how to avoid paying taxes on real estate property.

FINTRAC reiterated the importance of not viewing potential red flags in isolation, stating that these indicators must be considered as part of a comprehensive assessment of a transaction. “It is a constellation of factors that strengthen the determination of suspicion,” it said. “These indicators aim to help reporting entities in their analysis and assessment of suspicious financial transactions.”

By fLEXI tEAM