Realtors in BC are being asked to act as police to help prevent money laundering within the real estate industry. The practice of adding responsibilities to small business to do government's job is an old and antiquated concept yet it persists today. So why should the public care?
So what is money laundering in the BC real estate market? In general, laundering is the process of making illegally-gained proceeds appear legitimate. If a criminal suddenly starts buying assets with cash, it attracts the attention of many government and police agencies. To hide the sudden rise in their own net worth, criminals like to wash the money through other transactions that can make the money in their bank accounts appear as if it was from legitimate sources. Some of the favourite methods are casinos (you can walk away and say you won the money, which is also tax free).
In Britosh Columbia, an expert panel was appointed by the Minister of Finance in September 2018 to review money laundering in the real estate sector after two independent reports revealed that B.C.’s real estate market is vulnerable to criminal activity and market manipulation. The panel’s final report (PDF, 4.7MB) was released in May 2019.
In their review of the sector, the Expert Panel estimated that more than $7 billion in dirty money was laundered in B.C. in 2018, and between $800 million and $5.3 billion was laundered through the real estate market, raising housing prices by an estimated 5%.
Sadly, rather than police it themselves, the BC government has placed a large degree of reporting into the hands of Realtors, licensed and trained real estate professionals. This is a rather misguided effort because it has two unexpected consequences.
First, any realtor who is involved with the criminals that are laundering the money can easily help them avoid detection. In British Columbia, realtors are carefully screened but a few nefarious types could slip through this process. Another side effect is that the watchdog can levy fines which results in lawsuits. On December 3, 2021, a news story broke about a realtor suing the watchdog back based on an alleged errant action.
Secondly, it places more strain on legitimate realtors who now must add law enforcement to their already large list of duties. This means that real estate agents are not focusing 100% of what they are supposed to be doing - getting the absolute best terms for you in real estate transactions.
We will follow future developments in this area and as always, bring the most relevant information about it's impact on the Victoria, BC Real Estate market.