Criminals hiding billions of dollars in GTA real estate, watchdog claims

Transparency International Canada report called "Opacity: Why Criminals Love Canadian Real Estate" analysed 1.4 million home purchases since 2008 and found the true owners can be hidden behind corporations or through the use of unregulated lenders.

'Snow-washing' proceeds of crime inflating prices of GTA homes

An anti-corruption group claims criminals are using high-priced GTA real estate to launder money. (Graeme Roy/The Canadian Press)

Transparency International Canada claims in a new report that criminals are "snow-washing" billions of dollars through anonymous purchases of luxury homes in the GTA.

What does that mean?

"Bring your dirty money to Canada and it will be cleaned like the pure white snow," explains James Cohen of Transparency International.

The anti-corruption group, along with Canadians for Tax Fairness and Publish What You Pay Canada, presented their report on the risks of widespread money laundering at a news conference at Queen's Park on Thursday.

The report's authors looked at some 1.4 million residential property transactions dating back to 2008. Among the group's chief concerns is that privately-owned corporations have spent $28.4 billion on luxury residential homes (those worth between $7-10 million) over that timeframe and didn't provide information about their beneficial owners.

James Cohen, Executive Director of Transparency International Canada, says lax rules and enforcement, plus loopholes for private corporations who purchase residential homes has created an environment conducive to using real estate to launder proceeds of crime. (CBC)

Those companies also appear to have paid $9.8 billion in cash for homes, something that could allow them to dodge the scrutiny of financial institutions.

When they did require mortgages, half of the borrowing done by corporations was through unregistered lenders that are not subjected to anti-money laundering provisions, Transparency found.

The report says between 2008 to 2018, $25.4 billion in residential mortgages in the GTA fell under this category.

Report author Adam Ross noted that the Toronto housing market has ranked among the least affordable in the world, with rental properties in short supply and buying a home in the city out of the reach of many.

Adam Ross, a TI Canada researcher, conducted a risk assessment of the GTA housing market for money laundering and found corporate entities that buy luxury homes without financing to be potential 'snow-washing' operations. (CBC)

"Dirty money exacerbates this affordability crisis by adding extra demand from buyers who have a perverse incentive to overpay for properties in order to wash more dirty money through a transaction," said Ross.

"None of us wants to live next door to a criminal or to a property that sits empty and unmaintained."

Ontario's previous Liberal government brought in a foreign-buyers' tax in 2017 and instituted audits to discourage speculation, however it's unclear if that's cutting down on the activity.

Ross says lax enforcement of suspected money laundering has encouraged criminals to come here, as such cases rarely go to trial and are often settled out of court if they do.  

But he said he was glad that the federal budget tabled on Tuesday added $16.9 million in funding for the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), the country's intelligence unit devoted to detecting, preventing and deterring money-laundering.

Most transactions are transparent, real estate board says 

The Toronto Real Estate Board says there are already mechanisms to detect and deter money laundering in the real estate market, and that everyone involved must comply with federal rules, which are regularly audited by FINTRAC.

"It is also worth pointing out that the vast majority of the more than half a trillion dollars worth of transactions over the past decade were transparent in nature," TREB CEO John DiMichele said in a statement to CBC Toronto.

DiMichele said there's nothing wrong with property owners wanting to remain anonymous if they choose to. Ontario's land registry system allows companies or trusts to hold the title to property to accomplish that.


Philip Lee-Shanok

Senior Reporter, CBC Toronto

From small town Ontario to Washington D.C., Philip has covered stories big and small. An award-winning reporter with more than two decades of experience in Ontario and Alberta, he's now a Senior Reporter for the National Network based in Toronto. His stories are on CBC Radio's World Report, World This Hour, World at Six and The World This Weekend as well as CBC TV's The National and CBC News Online. Follow him on Twitter @CBCPLS.