Photo: Omer Wazir/Flickr
Where in the world is the next safe haven for money launderers?
Unless the country’s federal government takes action, it could be Canada — in no small part because of the potential for homebuyers to purchase property anonymously — the Canadian chapter of the non-governmental agency Transparency International suggests.
“In Canada, more rigorous identity checks are done for individuals getting library cards than for those setting up companies,” said Paul LaLonde, TI Canada’s president and chair, in a statement.
Those looking to launder money can set up a shell company or trust (a legal arrangement where someone manages an asset such as property on behalf of others). Then, the actual owner, called a beneficial owner, can use one of these channels to purchase a Canadian home without exposing their identity, according to No Reason to Hide, the organization’s new report.
Law enforcement agencies can try to obtain info on the beneficial owner through a court order, but this might lead to the owner becoming wise to an investigation, the report notes, giving them time to cover their tracks.
TI Canada looked into land title records to explore who owns the 100 most-valuable homes in Vancouver, earlier this year named the world’s best performing luxury housing market.
The organization found 46 per cent of these upscale properties — together amounting to more than $1 billion in assets — were held in ways that mask beneficial owners.
In particular, shell companies held 29 luxury homes. Meantime, nominees appointed by the beneficial owner and trusts laid claim to 11 and 6 homes, respectively.
A Financial Action Task Force (FATF)’s evaluation report, published in September, appears to share some of TI Canada’s findings on shadowy dealings in the Canadian housing market, calling the country’s real estate sector “highly vulnerable” to money laundering.
“Companies and trusts can be structured to conceal the beneficial owner and can be used to disguise and convert illicit proceeds,” it said.
TI Canada recommends the federal government create a public registry of companies and trusts, including their beneficial owners, to crack down on criminals taking advantage of the system, calling it “low-cost, high-impact way” to prevent misuse. “It would improve the effectiveness of law enforcement and tax authorities.”
