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1. Money Laundering

Money laundering is the process used to disguise the source of money or assets derived from criminal activity. Money laundering techniques are very diverse and are often highly intricate.

According to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), the money laundering process usually includes three stages:

  1. Placement: involves placing the proceeds of crime in the financial system
  2. Layering: involves converting the proceeds of crime into another form and creating complex layers of financial transactions to disguise trails and the source and ownership of funds; This stage involves transactions such as the purchase and sale of securities, goods or real estate
  3. Integration: involves placing the proceeds of crime back in the economy under a veil of legitimacy 

The money laundering process is continuous. Dirty money is constantly being introduced into the financial system It allows criminals to enjoy illicit funds in a normal way and thus reinforces criminal activities.

The money laundering process can be used to disguise a wide variety of illegal activities, such as drug trafficking, smuggling, fraud, extortion and corruption.

The real estate industry

The real estate industry is at high risk of being targeted by money launderers for the following reasons:

  1. Real estate transactions relatively simple
  2. Large amounts of money can be laundered in a single real estate transaction;
  3. Real estate is usually a safe asset
  4. Resale provides a potential profit
  5. Dirty money can be integrated in a simple way by making, for instance, mortgage payments in cash
  6. The subjectivity of the value of a property allows for overvaluation and thus the integration of large amounts of dirty money
  7. The legislative framework is relatively limited in that some professions are not subject to all the requirements of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) (e.g., notaries and lawyers)
  8. Money launderers also need homes
  9. Using third parties and nominees in real estate transactions helps ensure anonymity1

Injecting illicit funds into the housing market can artificially inflate selling prices, thus making homes unaffordable. When criminals move from one housing market to another, the losses can be substantial.

1Following the adoption of the Act to give effect to fiscal measures announced in the Budget Speech on March 21, 2019 and to various other measures, nominee agreements entered into in the course of a transaction having tax consequences must now be disclosed to Revenu Québec, in the form and manner prescribed for that purpose. Failure to do so exposes the parties to a fine of up to $5,000 (s. 1079.8.6.4).
Last updated on: December 14, 2021
Numéro d'article: 208772