The Province

Real estate is prime for crime

Experts say high-tech system can help spot fraud, money laundering deals

- SAM COOPER scooper@postmedia.com twitter.com/@scoopercoo­per

Experts say that money laundering, fraud and tax evasion in B.C.’s speculativ­e real estate market could be impossible to tackle unless agency informatio­n silos are broken and enforcemen­t is increased with hightech efficiency.

Concerns first reported by The Province in August 2015 that Vancouver’s property market is at risk of being flooded with dirty cash were confirmed after a six-month review by Fintrac, Canada’s anti-money laundering agency. Fintrac audited about 80 real estate firms in Vancouver and found 55 companies had “significan­t deficienci­es” in the way they report the identities and money sources of investors.

Spokesman Darren Gibb said findings show Vancouver homes can be used to launder money.

In addition to Fintrac’s findings, The Province and other media have uncovered cases showing that realtors, unlicensed brokers and circles of investors are involved in shady flip deals which can allow investors to launder money and dodge taxes while insider agents score excessive fees and rip off clueless sellers.

Prominent West Vancouver realtor Grant Connell told The Province he recently came across a Lower Lonsdale condo deal in which a realtor represente­d both the buyer and seller in an unlisted sale, and seems to have caused the seller to lose $500,000.

“She sold it for $700,000 and shortly after an identical unit in the building was sold for $1.2 million,” Connell said. “I am tired of my clients and other vulnerable, unsuspecti­ng people getting screwed.”

Dan Zitting, chief product officer for Vancouver “big data” analytics firm ACL, is an expert on detecting patterns of crime in vast pools of data. In interviews, he explained his fears of widespread fraud in B.C.’s property market, and how Canadian agencies could start tackling it.

“Vancouver real estate is obviously at very high risk for being used as a transfer and holding vehicle for laundered money,” said Zitting, adding that the results of Fintrac’s compliance review “really is quite scary, both for the stability of the housing market and the potential to support and propagate issues of organized crime.”

Zitting said Fintrac’s compliance review is a good start, but the informatio­n should be shared among other agencies and “across the entire population of real estate records and transactio­ns.”

“Vancouver real estate is obviously at very high risk for being used for ... laundered money.” — Dan Zitting

Every B.C. real estate deal piles up records from realtors, mortgage brokers, bankers, notaries, lawyers, buyers, sellers and industry overseers. In isolation these records are just noise. But by combining all records in a smart software program and “asking the right questions” of the data, bad deals and bad players automatica­lly rise to the surface, and a big picture emerges.

Software would flag questionab­le deals for further investigat­ion, as opposed to the current system in which various agencies get tips and do one-off investigat­ions.

In limited cases, Fintrac and the CRA say, they are allowed to share informatio­n with other agencies, but it is clear that these agencies generally operate in silos, or “black holes” of informatio­n, as NDP MLA David Eby describes Fintrac.

The CRA employs data-analytics in some cases, but there is not a system in which relevant agencies freely share real estate records to gain an omniscient anti-fraud overview.

Proof is in the lack of enforcemen­t. In the past five years the CRA has prosecuted one man, Dr. Raymond Ambrose Liang, for $365,000 in unreported income from four assignment clause flips and a condo sold through a shell company. Fintrac has fined only seven realtors across Canada, ever.

“Until those risk indicators are automated and the red flags are investigat­ed, and ultimately prosecuted as crimes, it may be nearly impossible to actually change the behaviour,” Zitting said.

As an example of how data from different sources can be crossed-referenced, Zitting said transactio­ns could be tested to show where the same buyer and seller are involved in multiple transactio­ns .

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