Shell companies and legal trusts used in real estate laundering
Neil Sharma
REP
Canadian real estate is being exploited by international money launderers, according to a report from the C.D. Howe Institute.
The report’s author Denis Meunier, a former deputy director with Canada’s anti-money laundering agency—estimates between $5bln and $100bln is laundered through the country every year. The laundered money is the proceeds of crime involving drugs, smuggling, tax evasion and corruption.
The money has made its way into Canadian real estate and businesses because shell companies’ and legal trusts’ owners aren’t required to be identified.
Meunier notes that European countries have made registries public, thereby revealing asset owners, but Canada has dated transparency laws. In fact, he says the loopholes are so conspicuous that comparatively trifling forms of registration ask for more identification.
Canadians “Must provide a government approved photo identification to obtain a bank account, library card or official documents, such as a passport and driver’s licence,” says Meunier’s report. “No such scrutiny is placed on the beneficial owners of corporations or parties to a trust.”
Earlier this year, British Columbia was the subject of intense scrutiny over links between the fentanyl trade, casinos and real estate, and Meunier points to the fact that the provincial government is on the record as promising reforms. In its 2018 budget, the government assured that a publicly accessible registry will identify the real owners of real estate in the province.
Meunier also censured Ontario’s provincial and Toronto’s municipal governments for being passive about identifying beneficial owners of corporations and trusts involved in real estate. Moreover, he says the consequences of money laundering and tax evasion are assumed by taxpayers.
To rectify the problem, the report recommends reforming corporate registries and forcing corporations, trusts and reporting entities, like realty brokerages, to fully disclose beneficial ownership information. An additional measure recommended by Meunier’s report is adopting the European model of beneficial ownership transparency, which would then put Canada on par with international standards.
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