Every so often, there’s a strange acronym that crosses your eye and you wonder, what in the world is that? Well here’s another – FINTRAC. This acronym stands for Financial Transactions and Reports Analysis Centre of Canada.
As an organization, FINTRAC remains largely obscure and unknown to many. Only when they are faced with a scenario such as having to present their ID may the name surface. If this is your first time hearing about FINTRAC or learning what they do, keep in mind that they’re stated purpose is to keep monetary transactions crime-free.
But what does that have to do with real estate you ask? As disconnected as the two may seem, they actually play a pretty big role in Canadian real estate.
What FINTRAC Wants From Real Estate Clients & Why
An article published in 2016, revealed that FINTRAC discovered a number of “deficiencies” among real estate companies dating back to 2012. Labelled as “significant” or “very significant”, the deficiencies included issues such as poor record keeping and failure to adopt anti-money laundering policies.
The agency discovered as many as 468 of these deficiencies (among 823 examinations) falling under the “significant” category. 28 of those companies were listed as having “very significant” deficiencies while 324 fell under the “limited” deficiency category. Regardless of the category, all of these issues pose risks to the safety of Canadians.
The danger of not having strict standards for these kinds of crimes aren’t to be taken lightly since they can have devastating consequences for home buyers. So FINTRAC acts as a regulatory body, ensuring that both realtors and home buyers comply with standards designed to keep money laundering and other crimes out of the picture.
What FINTRAC Wants From Realtors/Real Estate Developers
FINTRAC has provided a set of reporting requirements that real estate developers must follow. The category of real estate developer applies to anyone who after 2007 has sold one of the following to the public:
- At least five new houses or condo units
- At least one new commercial or industrial building
- At least one new multi-unit residential building each of which contains five or more residential units; or
- At least two new multi-unit residential buildings that together contain five or more residential units
For developers, they must comply with FINTRAC’s obligations in terms of providing information to prevent issues as suspicious transactions and funding of terrorism. They include the following:
- Reporting – FINTRAC’s reporting standards pertain to the responsibility that realtors have to report suspicious transactions, the funding of terrorist activities and cash transactions in excess of $10,000.
- Record keeping – Realtors must keep records of items such as large cash transactions, client information records, and copies of official corporate records.
- Ascertaining identity – Realtors must take steps to identify the individuals behind transactions; that includes large cash ones, those who realtors keep client information records or receipt of funds records on, and those who they believe have sent suspicious transactions.
- Use of personal information – When collecting personal info, realtors must comply with the Personal Information Protection and Electronic Documents Act (PIPEDA). This means the realtor must inform the client that they are collecting information about them.
- Business relationship(s) – When realtors conduct two or more transactions, they must ascertain the identity of the individual and confirm the existence of a corporation/entity.
- Third-party determination – When large cash transactions must occur, it’s essential for the realtor to know if the individual is acting on behalf of a third party. If they are, then the realtor must collect specific information on that third party.
- Compliance regime – The compliance regime refers to a five-point system. This includes: 1) The appointment of a compliance officer, 2) The development/application of written compliance policies and procedures, 3) Assessment and documentation of risks of money laundering, terrorist financing, and means to reduce risks, 4) Implementation/documentation of ongoing compliance training, 5) Documented review of the policies’ and procedures’ effectiveness, training program and risk assessment
The penalties for non-compliance can be severe, ranging from 2-5 years of imprisonment and $500,000 – $2 million in fines depending on the offence.
What Does This Mean For Pre-Construction Condo Buyers
As we mentioned earlier, FINTRAC has made it mandatory for realtors to collect information and verify the identity of those making transactions – in other words, you, the pre-construction condo buyer. For this reason, you can expect to have a realtor to ask for certain pieces of I.D. and other info such as your name, address and occupation as a confirmation of who you are. It may seem intrusive and the practice has certainly thrown some buyers off.
Again, the purpose of this is to ensure that all real estate transactions are taking place within legal boundaries, free of any activity that could endanger the safety and privacy of Canadians.
Putting a Face To FINTRAC Canada
FINTRAC defines themselves as Canada’s financial intelligence unit (FIU), assisting in “the detection, prevention and deterrence” of finance-related crimes such as money laundering and funding of terrorist activities.
Not only do they keep realtors safe, customers, in line, but also, they see to it that no other business is advertently or inadvertently risking Canadians’ safety due to their transactions.