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Money laundering 'inflated Vancouver's property market'

Monday, 13 May, 2019

An expert report commissioned by the British Columbia (BC) government has estimated that billions of dollars of illicit money were laundered through property sales in the province in 2018, most of it in Vancouver.

The report by the Expert Panel on Money Laundering in BC Real Estate suggests that a total of CAD7.4 billion was laundered in BC during the year, of which CAD5.3 billion (USD4 billion) went through the real estate market. This represented about one in 20 real estate transactions.

As is usual in money-laundering operations, many of the purchases were overvalued. This had the effect of inflating general property prices by 5 per cent, the panel believes. Vancouver property has become especially attractive to foreign investors, causing its property market to boom in the past decade, growing 30 per cent in 2016 alone, against relatively stable real-estate prices in Canada as a whole.

'The amount of money being laundered in BC and through real estate is much more than anyone predicted', commented the province's Minister of Finance, Carole James.

The panel's chairwoman, Maureen Maloney, praised the BC government for proposing to introduce a registry of beneficial owners of land, which she described as 'the single most important measure that can be taken to combat money laundering in real estate'. She urged BC's finance minister to encourage her counterparts in other Canadian provinces to do the same.

She also called for tighter federal anti-money laundering legislation and practices, better data sharing, coordination and cooperation among agencies, and the introduction of unexplained wealth orders to confiscate property where there is no evident legitimate source of funds.

Maloney also recommended that BC should proceed with its commitment to require corporations to maintain beneficial ownership information, and require existing bearer shares to be converted to shares compliant with the Business Corporations Act 'within a specified reasonable time frame'.

BC's government has also amended the property transfer tax return to uncover beneficial owners behind corporations and trusts, and enacted legislation to allow information sharing on the homeowner grant with federal tax officials to improve tax enforcement. In addition, it has implemented a 'speculation and vacancy tax', which targets foreign owners and their families who own real estate in the province.