With heightened attention on potential money laundering in BC’s real estate sector, Realtors may need to grapple with increasing regulatory requirements; particularly regarding the collection, retention and reporting of information. The escalating requirements correspond to numerous public inquiries, which have been tasked with uncovering systemic deficiencies and making remedial recommendations.
Indeed, it is a fluid situation that will continue to evolve for some time, however, now is as good a time as any to review your obligations.
As a Realtor, you need to be fully aware of the regulatory obligations you have and be skilled at spotting and reporting suspicious activities and behaviours. Those requirements primarily stem from the federal Proceeds of Crime (Money Laundering) and Terrorist Financing Act and associated Regulations. The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is responsible for enforcing the regulatory framework.
In this article, we will review the requirements regarding:
- Client identification
- Record keeping
- Compliance programs
Real estate agents must confirm the identity of their clients (individuals and entities) with respect to the following:
- Receipt of funds (cash or any other form).
- Client information records (individual identification and/or entity confirmation).
- Large cash transactions (Note: In 2019, the Fraser Valley Real Estate Board implemented a ban on cash in real estate transactions under the Rules of Cooperation, with the exception of rentals and leases).
- Suspicious transactions.
There are some exceptions to the client identification requirements. For instance, you do not need to verify the names of corporate directors when confirming the existence of a securities dealer. Furthermore, you do not need to re-identify people or re-confirm the existence of entities unless you have doubts about the existing information on record. There are also some exceptions when receiving funds directly from financial entities and public bodies.
FINTRAC provides full details on client identification rules, including the exceptions, here.
You are required to document certain client and transactional information with respect to the following activities:
- Suspicious transaction report records (FINTRAC provides details on suspicious transaction reporting requirements here. FINTRAC also has a guidance document which provides information on how to complete a suspicious transaction report).
- Large cash transactions (as noted previously, the Fraser Valley Real Estate Board has banned cash transactions, with the exception of rentals and leases).
- Client information records (client identifications and/or entity confirmations).
- Receipt of funds records (cash or any other form).
- Unrepresented party records (individual identification and/or entity confirmation).
- Reasonable measures records (if you are unable to meet an obligation, you must document that you took reasonable steps to do so).
Similar to the client identification rules, there are some record keeping exceptions. For example, if you are required to keep a record concerning information that is already recorded, you do not need to record it again. Additionally, in some circumstances you do not need to keep transactional records when funds are received directly from financial entities or public bodies.
FINTRAC provides full details on record keeping rules, including the exceptions, here.
To ensure compliance with the regulatory obligations, your brokerage is required to have a compliance program. To that end, the following elements must be included in the program:
- Appointment of a compliance officer who handles implementation of the program.
- Development of written compliance policies/procedures that aim to mitigate risks.
- Risk assessment of business activities and relationships.
- Development of a written compliance training program for employees, agents, etc.
- Implementation and documentation of a compliance program effectiveness review.
FINTRAC provides full details on compliance program rules here.
FINTRAC has a Risk-based approach workbook that is specifically designed for the real estate sector which may be helpful to you or your brokerage. The workbook provides guidance on how to identify sector-specific risks and how to create and implement effective safeguards.
Education and Learning Resources:
Real Estate Council of BC
- The Real Estate Council of BC has a new course titled Anti-Money Laundering in Real Estate, which is mandatory for all licensees.
- CREA has a short video called “Introduction to Canada’s FINTRAC Regime.” In the video, Simon Parham, Legal Counsel for CREA, discusses Realtor obligations under Canada’s anti-money laundering laws.
- CREA also has a number of other anti-money laundering resources that can be found in their Compliance Resources page on REALTOR Link®.
- BCREA recently launched a nine-week, self-directed online course titled “Mastering Compliance: Anti-Money Laundering Training for Brokers.” The registration period has passed for the first offering of the course. However, if the course was successful, BCREA will likely offer the course again. More information on the course and other helpful anti-money laundering resources from your provincial association can be found on their Anti-Money Laundering Resources page.
- BCREA also recently introduced the Individual Identification Information Record, a one-page form that aims to facilitate Realtor and brokerage compliance with the client identification rules.
Source: FVREB Professional Standards