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FINTRAC—Does it really help prevent money laundering?

Posted April 16th, 2015 under myths and truths.

Back in 2000, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act was passed in an effort to disrupt the financing of organized crime and terrorism.

Since then, real estate brokerages have been required to verify the identity of all people or businesses that deal in real estate. This is supposed to help prevent money laundering by creating a paper trail of personal information that can be requested by FINTRAC (the agency that oversees the act).

Well, thousands of felled trees and hundreds of thousands of pages of information later, the paper trail could stretch around the world.

Records of people's identities are gathering dust in file folders of Brokerages across the country, but is anything actually being accomplished?

If you were a criminal who needed to launder a large sum of cash—we're talking hundreds of thousands of dollars here—would you just pick up the phone and call the first real estate agent or lawyer you found? Or would you already have a crooked one on your payroll for exactly that purpose?

Furthermore, wouldn't you just buy and sell privately, thus avoiding the identity check completely? (Only sales through a brokerage are subject to the identity check.)

Meanwhile, average people's personal information must be kept for 5 years by the brokerage. Even if the brokerage takes excellent care of this information, it's still more of a privacy risk than not keeping it at all.

Not only that, but lawyers are forced to verify the identity of people who just had their identity verified by the agent. The whole thing is overkill.

Also important to note is that the FINTRAC requirements are not intended to prevent identity theft, which is mostly done electronically, again with the help of a crooked salesperson or lawyer. Since a stolen identity looks just like the real thing, recording that identity for FINTRAC isn't going to prevent identity theft, so there's no benefit in that regard.

The bottom line is, criminals who are dealing in such huge sums of money aren't going to be caught by such obvious measures. All it does is inconvenience the rest of us.

Want to know more about FINTRAC and proof of identity? Just ask me, I'll be happy to help.