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So… Some of you might have noticed that your REALTOR is asking for copies of your identification and they have to keep on file before proceeding to a transaction or… some of you will be asked that when you would be conducting a transaction. I was questioned about it by a client of mine so I thought I’d share what the legislation is about and why it’s required with you too.
In a nut shell, the requirement stems from The Prceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) which was previously known as The Proceeds of Crime (Money Laundering) Act and was Amended in December 2001. Under the act, all money transactions need to be recorded for their origin and their destination. Industries that are effected by this are:
Accountants
Casinos
Financial Entities
Life Insurance
Money Services Businesses
Real Estate
Securities Dealers
General Public
I’m going to try to keep this posting brief and talk about real estate and how it will effect our business.
The Act requires all real estate sales representatives and brokers to “know” their clients and who they are representing. Basically, it’s a liability shift from our (real estate practitioners) perspective that we are now required by law to collect information, keep it safe, and report any suspicious activity (relating to money laundering or terrorist financing) to FINTRAC.
We are required to keep copies of identifications relating to clients that are purchasing any real estate in Ontario. This relates to Deposit funds that are provided, and when released in case of a release if the deal falls through.
In the past, criminals would use a REALTOR to put an offer on a property and could use a different name than his own or use a third party for the purchase. They could’ve used smaller amounts of funds (so it’s below the banks threshold to report a transaction) and put a deposit on the property. Once the deposit is received by a Real Estate Brokerage, it is required by law to keep the funds in a Trust Account. If the deal falls through, the brokerage would issue a draft (clean money) to the buyer in which case they were able to use it as legal money.
Going forth, any purchases being made would require the REALTOR to do the following:
- Get copies of Identification before proceeding to the purchase
- Find out where the funds are coming from i.e. large sum of cash or money order
- If the deal doesn’t go through, request identification when releasing funds and which bank they would be deposited to.
Real Estate Brokerages will further require any depositor to provide identification when submitting deposit checks and this includes any Real Estate Practitioner depositing funds on behalf of their client.
We live in a very different world since 9/11 and this is a welcome change to ensure anyone making money through illegal means is not able to use the proceeds or circumvent our systems to finance any terrorist activity. The stringent controls looks tedious but will help us be more secure and flag any illegal activities earlier.
If you’d like additional information about this topic, please feel free to visit FINTRAC website or contact me so we could discuss any questions or concerns in more detail.
The contributing factor,
Addy Saeed
Real Estate Sales Representative
Re/max Active Realty Inc., Brokerage
http://www.HeyAddy.com
