Blog by Carol Lome, Broker

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Agents must verify ID

Here is some information on new money laundering laws for all Toronto Home Buyers and Sellers.

New federal money laundering and terrorist financing laws now require anyone buying or selling real estate in Canada using the services of a real estate agent to provide proof of identity, and provide personal information to their agent.

The requirement for real estate agents to verify ID is in Bill C-25, which in effect is the second phase of Canada's program to prevent money laundering and anti-terrorist financing. It was passed in 2007, but the new regulations went into effect June 23rd of this year.

Canada has had comprehensive anti-money laundering and terrorist financing legislation since 2001. That was when real estate agents first had legal requirements in Canada's efforts to combat money laundering and terrorist financing. Real estate agents were required to report any cash transactions of $10,000 or more or report suspicious real estate transactions.

This meant that if an agent was involved in the purchase or sale of a property and suspected that money laundering or terrorism financing was involved, they had to report details to the Financial Transactions and Reports Analysis Centre of Canada, or FINTRAC. It is a federal government agency set up to collect, analyze and disclose financial information and intelligence on suspected money laundering and the financing of terrorist activities.

Those previous legal requirements still exist, but now real estate agents are required to do more. To begin with, real estate agents will now have to report even attempted suspicious transactions. According to FINTRAC, an attempted transaction is one where an offer has been submitted, but not necessarily accepted.

Real estate agents now have to document proof of the identity of their client in each and every transaction, and keep that information on file for five years in case it is required by FINTRAC. If the client is a corporation, they must ask for corporate documentation, and for the names of the corporation's directors. If the buyer or seller is in another city, province or country and no in-person meeting is held, realtors must now take steps to verify the identity of the buyer or seller, such as the use of an agent or "mandatary."

Even buyers or sellers who are not represented - in other words not using the services of a licensed real estate practitioner - may have to provide personal information as well. If there is a real estate agent involved in the transaction representing the other participant, that agent is also required by law to now verify and record the personal information of the private buyer or seller as well.

The new law also says that every time funds are received during the course of a real estate transaction, such as a deposit, a real estate agent must record the amount obtained and how it was obtained.

The real estate broker is required to keep all this information on file for five years, and provide it to FINTRAC if requested.

Real estate is one of a number of industries required to comply with the new money laundering and terrorist financing rules. Others include accountants, financial entities such as banks, securities dealers, money services businesses, casinos and life insurance companies.

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