Here’s a window of opportunity in the Metro Vancouver real estate market that needs closing: ownership anonymity.
As discussed in “Animus over anonymous ownership” (Business in Vancouver issue 1432; April 11-17), there are tax, liability and other legitimate reasons for holding property under the anonymity provided by shell companies and bare trusts, but those entities are also exploited all over the world to launder and conceal money generated through crime or corruption. Of particular concern for Metro Vancouver and other high-profile real estate markets across the country: Canada has become a magnet for the dark side of anonymous property ownership. Real estate is considered a prime sector for laundering money because of anonymous ownership and the lack of property investment transparency required in Canada and other countries.
In its Doors Wide Open: Corruption and Real Estate in Four Key Markets report released March 31, Transparency International points to a Financial Action Task Force report estimating that real estate accounted for up to 30% of criminal assets worldwide between 2011 and 2013.
Transparency International noted that Canada’s legal framework has severe deficiencies under four of 10 main areas “where legal loopholes or weak implementation/enforcement enable the corrupt or other criminals to launder money through the real estate sector.” Its report stated that nearly half of the 100 most valuable residential properties in Greater Vancouver are held through structures that hide their beneficial owners.
Ownership transparency is fundamental to ensuring the legitimacy of the funds used to buy property in any jurisdiction.
The affordability crisis facing residents in markets like Vancouver and Toronto is being worsened by the incoming flood of offshore investment dollars, especially when those dollars are not tied to the marketplace realities of legitimate business.
Canada needs to do a better job of ensuring that owners’ identities are not concealed from the agencies responsible for stemming the rising tide of gains from criminal enterprise.
