Printed . This content is updated regularly, please refer back to https://bcfsa.ca to ensure that you are relying on the most up-to-date resources.

Anti-Money Laundering Guidelines

Anti-Money Laundering Guidelines

Guidelines
Published on
a woman in a yellow top writing on a page

Select the section you’d like to navigate to.

Accordion items

Updated May 17, 2021
FINTRAC Regulatory Requirements for the Real Estate Sector

A summary from FINTRAC of regulatory requirements effective June 1, 2021

download icon Download PDF
Working with Clients: A Practical Guide to AML

Watch our video of a client interaction, with tips on explaining AML obligations.

arrow icon Visit
of 2

  • Guidelines

    BCFSA’s Guidelines provide a practical application of the information and give suggested best practice guidance to assist real estate professionals. These guidelines provide BCFSA’s interpretation of RESA and all other applicable legislation.

    In addition, BCFSA’s Guidelines may be a useful information source for the general public looking for information about standards of conduct for real estate professionals.

Purpose

Money laundering is a significant concern in British Columbia and Canada as a whole. Criminals may use real estate to hide or “clean” ill-gotten funds. Real estate professionals can help maintain public confidence in the real estate industry, by:

  • Complying with the requirements under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (“PCMLTFA”);
  • Being alert to indicators of potential money laundering; and
  • Knowing the steps to take when they see warning signs for money laundering.

These guidelines will help you understand the tools you can use to assist with your PCMLTFA obligations. These guidelines are not meant as a substitute for the Financial Transactions and Reports Analysis Centre of Canada’s (“FINTRAC”) guidelines, but are to provide additional guidance for real estate professionals specific to the B.C. context.

  1. Understanding the tools available and the importance of having early discussions with your client in order to assist with your Anti-money laundering (“AML”) obligations under the PCMLTFA.
  2. Considerations when working with a seller client.
  3. Considerations when working with a buyer client.
  4. Considerations when dealing with an unrepresented party.
  5. Understanding your professional and ethical obligations.

Guidelines

Understanding the Tools Available and the Importance of Having Early Discussions With Your Client in Order to Assist With Your AML Obligations Under the PCMLTFA

As a real estate professional, you have an obligation under the PCMLTFA to know the individual you are working with in a real estate transaction, whether you are in an agency relationship or not. This means that for certain activities and transactions you must:

  • Verify the identity of clients (and whether they are a politically exposed person or head of an international organization);
  • Confirm the existence of entities (a body corporate, a trust, a partnership, a fund or an unincorporated association or organization) and collect beneficial ownership information;
  • Determine third party involvement in a real estate transaction;
  • Conduct ongoing monitoring when a business relationship is formed (including a risk-based approach to assessing your business/client relationships); and
  • Report suspicious transactions or transactions linked to terrorist-controlled property.

While FINTRAC allows for real estate professionals to not verify an individual if they believe that this would inform them that a suspicious transaction report is being submitted, as a real estate professional you should be transparent with your clients about your professional and legal requirements. Having these conversations early in the transaction will not only clarify your obligations to obtain information about your clients but may also serve as a deterrent to money laundering activity. Early identification of clients will also help prevent this scenario from occurring. You should speak to your managing broker about how best to proceed.

It is important to consult your brokerage’s FINTRAC compliance policies and procedures to ensure you are aware of your specific responsibilities under your brokerage’s compliance program.

When working with clients and unrepresented parties you have several tools available to assist you with your obligations. For example, if you are dealing with a seller, you will want to obtain information through the Land Title and Survey Authority (“LTSA”), or if you are dealing with a company you may want to obtain information through the Corporate Registry.

Another tool that can be useful is the Land Owner Transparency Registry (“LOTR”). The LOTR is unique to B.C. and can assist you in satisfying some of your AML obligations. Some of the guidance below is intended to help you understand when and how to utilize LOTR to assist in fulfilling your AML obligations. The information you obtain from a LOTR search is publicly available information, but you are not expected to share the results with any other party other than your client.

In order for you to comply with your PCMLTFA obligations related to beneficial ownership, you must ensure that you collect all the PCMLTFA required information and, in some cases, verify the information collected. LOTR may be of assistance in acquiring and/or verifying this information, but in some cases it may not. It is important to note that just because you cannot find certain information using LOTR, it does not mean that you do not still have a duty to collect it, if required under the PCMLTFA.

You need to discuss with your client your PCMLTFA obligations. It is important that your client understands why you will be undertaking LTSA, Corporate Registry, or LOTR searches regarding their land ownership interests. Your conversation could include the following:

  • As a real estate professional, you have obligations under federal anti-money laundering legislation to know/identify who you are working with, which, in the context of a real estate transaction, would include understanding their current land ownership interests, whether legal or beneficial.
  • In B.C., we have a Land Owner Transparency Registry which makes some information on beneficial ownership and interests publicly available and requires purchasers to file a transparency declaration any time they make an application to register an “interest” (as defined in LOTA) in land.
  • The real estate industry is committed to being part of the solution to concerns about potential money laundering in B.C.
  • The regulator of real estate has issued guidelines setting the expectation that all real estate professionals will undertake available searches with respect to the ownership interests of their clients.
  • This is a routine part of a real estate relationship and, in the vast majority of situations, will merely confirm the ownership information already registered at the Land Title Office or provided by the client.

Remember you have an obligation to report suspicious transactions to FINTRAC. The information you discover when verifying your client’s identity, land interests, or beneficial ownership, whether through LOTR or otherwise, may have to be provided to FINTRAC. For example, if you discover information that does not match the information that your client has provided to you, and your client is unable to provide a reasonable explanation for the discrepancy, you may need to report this as a suspicious transaction. For more information on money laundering and terrorist financing indicators please see the AML regulatory information.

Considerations When Working with a Seller Client

As a real estate professional, you are responsible for identifying clients for:

  • Receipt of funds;
  • Client information records;
  • Large cash transactions; and
  • Suspicious transactions.

Although there are nuances to each of these client identification requirements (see the AML regulatory information for more detail as well as your brokerage’s compliance policies and procedures), in most cases, you will need to identify your client at the time a transaction takes place. However, the timing requirements under the PCMLTFA are not always conducive to established real estate practice, and so the guidance below encourages client identification at an earlier stage in the relationship. As part of your client identification requirements, you are also responsible for screening and identifying suspicious transactions, which includes assessing the facts and context surrounding the transaction, identifying red flags, and using a risk-based approach with your client.

If you identify/confirm that your client is an entity (a body corporate, a trust, a partnership, a fund or an unincorporated association or organization), you also need to collect beneficial ownership information that describes the ownership, control and structure of the entity, including corporations and trusts.

To assist with fulfilling these requirements, it is recommended that you perform a title search at the LTO on the property and a LOTR search on both your seller client and their property (using the Parcel Identifier (PID) number) at the time your brokerage enters into a listing agreement with your client. Prior to performing the search, you should ask your client if they have any unregistered interests in land in B.C. and advise them that you will be searching LOTR to verify this information as part of your AML obligations under the PCMLTFA. If the title search reveals that the property is owned by an entity, you should also perform a corporate registry search on the entity that owns the property.

A LOTR name search will provide you with a list of matching individuals and the city where they primarily reside, as well as the last three digits of the PID (i.e., the property) in which they have a LOTA interest. If your client’s name appears in the initial results, you should initiate a discussion with them if the information you are seeing does not align with the information you were provided by your client. For example, they may have told you that they do not have any LOTA interests in B.C., but their name shows up in the search connected to two properties.

Please note that the LOTR name search results may not be sufficient to definitively connect the information to your seller client. For example, a name search for “Richard Lee” may show more than one Richard Lee with a principal residence in a particular jurisdiction and being interest holders under LOTA. However, where potential matching information is discovered, it is appropriate to have a conversation with your client about whether the interests revealed in the LOTR search may relate to them.

A PID search will provide you with the reporting body and the name of the interest holders or settlors linked to the property, if applicable. If you do see a result from searching with the PID, it would be prudent to purchase a full report to gain insight into the interest holders of the property. If your client is an entity, the information found in the full report may also assist you in collecting some of the required beneficial ownership information that is needed under the PCMLTFA. A search of the property may also identify an interest holder that is, or is linked to, a terrorist, a terrorist group, or a listed person. In such a case, you should immediately file a terrorist property report and cease any further action with respect to the transaction. If any of the information found in the full report does not align with the information provided by your client, you should initiate a discussion with them to discuss the discrepancy.

Through the course of performing these searches you may also discover that you are in a potential conflict of interest. If this is the case, you must disclose this conflict of interest to your client and discuss with them how you are to proceed. For example, you may determine through your LOTR search that you are related to one of the interest holders.

If your client is unable to provide you with a reasonable explanation for any discrepancy relating to the information that you find in your LOTR search results, you should discuss the situation with your managing broker and consider whether the client relationship should be terminated, and a suspicious transaction report filed. Consult your brokerage’s compliance officer if you need further assistance in making this determination.

If corporations are involved, you should search information in the corporate registry to ensure that the corporation exists, and you have the correct corporate name. If you have concerns about whether the person you are dealing with has the authority to act on behalf of the corporation and sell the property, the corporate search may or may not be of assistance and you may have to make further inquiries.

A LOTR search of the property will disclose certain trusts, which may or may not show in the LTO records. If your LOTR search discloses a trust you should seek guidance from your managing broker and advise your client to seek legal advice.

It is important to note that if you, as the listing agent, are dealing with a buyer who is represented by another real estate professional in a transaction, you do not need to perform a LOTR search on the buyer. Any LOTR search would be conducted by the real estate professional who is representing the buyer, as part of their AML obligations. However, if your seller client instructs you to perform a LOTR search on the buyer, you should act in accordance with their instruction.

It is important to note that ownership structures can be complex, but it is not expected that you will become an expert in understanding them, as LOTR results will only display the ultimate interest holder(s) and will not display an organization’s complete ownership structure. You are, however, expected to identify disconnects between ownership information provided by a client and information revealed in a LOTR, LTSA, or Corporate Registry search or any other public search. When these disconnects arise, you need to discuss any unclear information with your managing broker who can provide guidance to you on how to proceed.

Considerations When Working With a Buyer Client

As a real estate professional, you are responsible for identifying clients for:

  • Receipt of funds;
  • Client information records;
  • Large cash transactions; and
  • Suspicious transactions.

Although there are nuances to each of these client identification requirements (see the AML regulatory information for more detail as well as your brokerage’s compliance policies and procedures), in most cases, you will need to identify your client at the time a transaction takes place. However, the timing requirements under the PCMLTFA are not always conducive to established real estate practice, and so the guidance below encourages client identification at an earlier stage in the relationship. As part of your client identification requirements, you are also responsible for screening and identifying suspicious transactions, which includes assessing the facts and context surrounding the transaction, identifying red flags, and using a risk-based approach with your client.

Furthermore, if you identify/confirm that your client is an entity (a body corporate, a trust, a partnership, a fund, or an unincorporated association or organization), you also need to collect beneficial ownership information (as part of your PCMLTFA duties) that describes the ownership, control and structure of the entity, including corporations and trusts.

To assist with fulfilling these requirements, it is recommended that you perform a LOTR search on your buyer client when you enter into a buyer’s agency agreement or, if no agreement is entered into, before writing an offer. Prior to performing the search, you should ask your client if they have any LOTA interests in land in B.C. and advise them that you will be searching LOTR to verify this information as part of your AML obligations under the PCMLTFA. If your buyer client is an entity you should perform a corporate registry search on the entity.
A LOTR name search will provide you with a list of matching individuals and the city where they primarily reside, as well as the last three digits of the PID (i.e., the property) in which they have a LOTA interest. If your client’s name appears in the initial results, you should initiate a discussion with them if the information you are seeing does not align with the information you were provided by your client. For example, they told you that they do not have any interests in land in B.C., but their name shows up in the search connected to two properties.

Please note that the LOTR name search results may not be sufficient to definitively connect the information to your buyer client. For example, a name search for “Richard Lee” may show more than one Richard Lee with a principal residence in a particular jurisdiction and being interest holders under LOTA. However, where potential matching information is discovered, it is appropriate to have a conversation with your client about whether the interests revealed in the LOTR search may relate to them.

If the search reveals ownership information inconsistent with the background information your client has provided you, and cannot be reasonably explained through a conversation with them, you should discuss the situation with your managing broker and consider whether the client relationship should be terminated, and a suspicious transaction report filed. Consult your brokerage’s compliance officer if you need further assistance in making this determination.

If the seller of the selected property is represented in the transaction, there is no need to perform a LOTR search of the seller or their property unless your client instructs you to do so, as the real estate professional representing the seller is responsible for knowing their client as part of their AML obligations. In this circumstance, however, you should obtain and review a copy of the title with your client.

It is important to note that ownership structures can be complex, but it is not expected that you will become an expert in understanding them, as LOTR results will only display the ultimate interest holder(s) and will not display an organization’s complete ownership structure. You are however expected to identify disconnects between ownership information provided by a client and information revealed in a LOTR, LTSA, or Corporate Registry search or any other public search. When these disconnects arise you need to discuss any unclear information with your managing broker who can provide guidance to you on how to proceed.

Considerations When Dealing With an Unrepresented Party

Unrepresented Buyers:

If you are representing a seller client, you should perform a LOTR search of the unrepresented buyer prior to your client entering into a purchase agreement with them. You have similar client identification obligations under the PCMLTFA, with respect to the unrepresented buyer, as you would if they were your client. With an unrepresented buyer, you must take reasonable steps to identify the individual and confirm the existence of an entity (if applicable), as defined in the PCMLTFA Regulation, and screen and identify whether the transaction is suspicious. You are also required to collect beneficial ownership information if the unrepresented party is an entity. Utilizing LOTR in this instance, in the same way as you would under guideline #3 above, may assist you in fulfilling these requirements. If the buyer is a corporation, you should also perform a corporate registry search on that entity.

Unrepresented Sellers:

If you are representing a buyer in the purchase of a property where the seller is unrepresented, you should first perform a title search on the property, and then a LOTR search on both the property and the individual seller prior to writing an offer. In this situation, your PCMLTFA obligations with respect to the unrepresented seller are virtually the same as if the seller were your client (you must take reasonable steps to identify them). Refer to guideline #2 above for details on your obligations. A search of the property may identify an interest holder that is, or is linked to, a terrorist, a terrorist group, or a listed person. In such a case, you should immediately file a terrorist property report and cease any further action with respect to the transaction. A search of the seller may assist you in fulfilling your beneficial ownership information collection obligations under the PCMLTFA and may also help you identify money laundering red flags that may aid in your determination as to whether a suspicious transaction report needs to be filed (see the AML regulatory information for more information). If the unrepresented seller is a corporation you should also perform a corporate registry search on that entity.

Understanding Your Professional and Ethical Obligations

As a real estate professional, you need to identify the areas of your business that are vulnerable to being used by criminals for conducting money laundering or terrorist financing activities. It is important that you take a risk-based approach (“RBA”) when assessing the risks associated with all the real estate services you provide, and develop a risk assessment process specific to your situation. See the FINTRAC RBA guidelines for more information on what an RBA entails. Please note that while some of the RBA guidance is brokerage specific, you still have a duty, as a reporting entity under the PCMLTFA who enters into business relationships, to develop and undertake an RBA. An RBA is intended to help you assess elements of your client/business relationships in order to identify possible money laundering or terrorist financing risks, and what measures you should apply to help mitigate any of these risks. Consult your brokerage’s FINTRAC compliance policies and procedures for more information on your specific requirements.

If you become concerned about the possibilities of money laundering in a real estate transaction, you should analyze the situation by asking yourself questions such as:

  • Have I seen any warning signs/indicators?
  • What do I know about my client or the unrepresented party?
  • Have I fully discussed the situation with my managing broker?
  • Should I or my brokerage file a suspicious transaction report?
  • What is the threshold for reporting?
  • If I go ahead with the transaction and it emerges that money laundering was involved, what will the impact be on my professional career?
  • What will be the impact of money laundering on the reputation of the real estate industry?

Ultimately, if you have any concerns or suspicions that money laundering or terrorist financing is taking place or took place at an earlier time, you should discuss the matter with your managing broker.

Relevant Cases

Case #1: Knowingly Assisted Client to Avoid Application of FINTRAC Rules

A licensee acting as agent for the buyer in connection with the purchase and sale of the property was found to have engaged in conduct unbecoming a licensee and other professional misconduct) when she knowingly assisted the buyer to avoid the application of the rules and requirements established by the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) by allowing the buyer to transfer money directly to her personal bank account in Canada when she knew or believed the buyer would make the transfer using a name other than the buyer’s own name.

Contravention: Section 35(2) of the Real Estate Service Act, among others.

Read the full case (will open in a new tab)

Managing Broker Considerations

Managing brokers are responsible for setting up a comprehensive and effective anti-money laundering compliance program. A compliance program provides the structure to ensure that your brokerage fulfils its obligations under the PCMLTFA. The following are the necessary elements of a compliance program:

  • Compliance officer – Appoint a compliance officer who will be responsible for the implementation and oversight of the compliance program. The compliance officer must have the necessary authority to carryout the requirements of the program.
  • Policies and procedures – Develop and apply written policies and procedures and keep them up to date. They must be approved by a managing broker or their delegate.
  • Risk assessment – A risk assessment is an analysis of the potential risks that could expose your business to money laundering. You must document and apply the risk assessment, including mitigation measures and strategies. The risk assessment must consider:
    • Your clients and business relationships;
    • The products, services and channels you offer;
    • The geographic location where you conduct your business;
    • New technologies and their impacts; and
    • Other relevant factors affecting your business.
  • Training program – Develop and maintain a written training program for employees, agents, and others authorized to act on behalf of the brokerage.
  • Review of compliance program – Review your compliance program every two years to ensure its effectiveness.

Remember that real estate professionals and brokerages enter into a business relationship with their clients after a single transaction. Once a business relationship is entered into, they are required to monitor this client relationship on an ongoing basis. The extent of that monitoring should be based on the level of risk the client poses in terms of money laundering/terrorist financing indicators. The brokerage’s policies and procedures should provide guidance on what ongoing monitoring should look like in different scenarios. You should ask yourself whether the risk is low, medium or high to determine what kind of ongoing monitoring is appropriate. It is important to note that after five years of inactivity the business relationship is considered to have ended.

While this ongoing monitoring is both a brokerage and real estate professional responsibility, the brokerage needs to develop policies and procedures to assist real estate professionals in being aware of and fulfilling this requirement.

You are required to provide certain reports to FINTRAC. The quality of your reporting will be part of FINTRAC’s examination of your business. Find more information on FINTRAC’s transaction reporting requirements.

The LOTR, LTSA and Corporate Registry are tools that can assist in fulfilling your brokerage’s PCMLTFA obligations. As a managing broker, you should ensure that your brokerage has a robust policy and procedure manual for the use of LOTR, LTSA, and the Corporate Registry; how to identify red flags; and when to report suspicious activity. It is recommended that you read through the AML information as well as the PCMLTFA guidance provided by FINTRAC to ensure you have a thorough understanding of the requirements and obligations that affect real estate professionals and brokerages.

Applicable sections of RESA/Real Estate Services Regulations/Real Estate Services Rules

Definitions

client: in relation to a licensee, the principal who has engaged the licensee to provide real estate services to or on behalf of the principal;

money laundering offence: an offence under subsection 462.31(1) of the Criminal Code.

terrorist activity financing offence: an offence under section 83.02, 83.03 or 83.04 of the Criminal Code or an offence under section 83.12 of the Criminal Code arising out of a contravention of section 83.08 of that Act.

trust account: in relation to a brokerage;

(a) a brokerage trust account maintained under section 26 [obligation to maintain trust account] of RESA, or

(b) a commission trust account maintained under section 31 [payment of licensee remuneration] of RESA;