Canada constantly shows up in top ten lists of happiest nations in the world, and best places to live. Canada has also earned the dubious honor of being a real estate money laundering haven.
Currently there are a number of loopholes in Canadian law. These allow individuals to purchase real estate anonymously through the use of corporations. This particular loophole allows for home purchases without oversight from law enforcement or tax authorities.
Real estate money laundering is an issue in the GTA
Given the amount of scrutiny that the Greater Vancouver Area received last year regarding real estate money laundering, the public has become more knowledgeable of these criminal tactics. It’s safe to say that few people are surprised to learn that the Greater Toronto Area (GTA) is also affected by real estate money laundering.
A recent study by Transparency International Canada (TI Canada), in cooperation with Canadians for Tax Fairness and Publish What You Pay Canada (PWYP-Canada) examined the vulnerability of the real estate industry in the GTA. The study analyzed over 1.4 million residential real estate transactions. They looked at a ten year period from 2008 to 2018.
The data shown by TI Canada paint an ugly picture
The report shows that corporate entities acquired $28.4 billion in GTA housing since 2008. Though there is nothing blatantly wrong about a corporation making a real estate purchase, the issue comes from the lack of transparency. The vast majority of these corporations are privately owned and do not disclose any information on who its beneficial owners are.
During that same period of time, $9.8 billion in GTA housing units were purchased by companies in cash. By doing so, they were able to bypass a large number of checks that could prevent real estate money laundering. This includes things such as determining the source of the funds, as well as who the beneficial owners are.
In that same period, private lenders issued more than $25.4 billion in residential mortgages in the GTA. Most of these mortgages are unregulated and do not follow anti-money laundrering obligations. Nearly 50% of those unregulated mortgages were made to corporate buyers. That, despite the fact that corporate purchases are reported to be less than 4% of total transactions.