Money Laundering is linked to nearly $30 billion in GTA housing

As house prices in the Greater Toronto Area continue to rise to unaffordable levels, further putting the goal of homeownership out of reach for many, money laundering is being blamed as a major factor to the region’s soaring home prices.

According to a 2019 joint report titled OPACITY: Why Criminals Love Canadian Real Estate, billions of dollars in real estate transactions in the GTA alone can be linked to money laundering (and what to do about it).

The study, conducted by Transparency International Canada and the End Snow Washing Coalition, discovered a number of risk indicators in GTA real estate, including the fact that different corporations bought nearly $30 billion in local housing between 2008 and 2018, the majority of which was privately owned and had no information on beneficial owners.

During the same time period, the analysis discovered that unregulated lenders with no anti-money laundering reporting duties offered at least $35 billion (25 percent) in residential mortgages in the GTA.

During this time period, firms purchased $9.8 billion in GTA housing using cash or non-financed purchases, much of it avoiding statutory Anti-Money Laundering (AML) checks on the source of funds and beneficial owners.

Transparency International Canada’s Executive Director, James Cohen, believes that a publicly accessible property ownership transparency registry in Ontario would be a critical instrument in combating these issues.

To combat money laundering on a national basis, the federal government said in its April budget that a new database with information on beneficial landowners is in the works, with a completion date of 2025.

British Columbia has already announced the creation of a Land Owner Transparency Registry, which is being hailed as an important anti-money laundering tool. It will be a publicly searchable record of information about beneficial ownership of land in the province, according to the BC government. Beneficial landowners are persons who indirectly own or control land through a corporation, partnership, or trust.

Ontario, on the other hand, might be the second jurisdiction to crack down on housing fraud. The Anti-Money Laundering in Housing Act was tabled last week by Ontario NDP Housing critic Jessica Bell (University-Rosedale) and MPP Bhutila Karpoche.

The anti-money laundering bill aims to make housing more accessible by putting an end to the practise of numbered entities buying up large tracts of land while avoiding transparency. Individual owners must be disclosed by corporations, trusts, and partnerships that own real estate, and failure to comply can result in fines of up to $100,000.

The proposed bill would build on the Ontario government’s beneficial ownership transparency initiatives, which were announced in Bill 43, which proposed revisions to the Business Corporations Act as part of the Fall Economic Statement.

However, Bell claims that the Fall Economic Statement falls short since tiny modifications to address this major issue obscure beneficial owners’ identities and create large loopholes that trusts, partnerships, and foreign corporations may readily exploit to avoid taxes and launder money.

“While individual buyers are required to publicly register the property they own, investors can set up numbered corporations, trusts, and partnerships that are allowed to buy and sell property anonymously, making Canada a global hotspot for money laundering and fraud,” said Karpoche, adding, “Doug Ford has done nothing to crack down on shady real estate deals including money laundering, tax evasion, and rampant housing speculation.”

Despite the fact that everyone deserves the opportunity to own a house, rising prices and investor-driven speculation continue to be significant barriers for many Ontarians.

“If we want more of Ontario’s homes to be affordable for people and families, we need to take action to stop anonymous investors from outbidding families who just want to own one home,” stated Bell.

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