What should multi-residential property owners know about the Proceeds of Crime (Money Laundering) and Terrorist Financing Act?
This is an important piece of legislation that’s had a significant impact on financial transactions across a wide variety of business activities, including banking, mortgage financing, real estate brokerage, insurance, securities, accounting and legal, to name a few.
The Act was introduced in the early 2000s, following the 9/11 attacks. The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) was established as the agency responsible for collecting and analyzing information to assist with the detection and prevention of money laundering and terrorist financing in Canada.
In short, the Act requires all financial institutions and others affected by this legislation to:
- Report suspicious transactions to FINTRAC;
- Keep records related to cash transactions;
- Take specific measures to identify individuals and entities with whom business is done; and
- Determine whether those persons are acting for third parties.
For the most part, these requirements do not directly apply to multi-residential property owners and managers in the day-to-day management of their property. However, when conducting business with a financial institution such as opening a bank account, obtaining mortgage financing or a construction loan, the person and/or corporation will be subject to the Act. A complicated-looking form or questionnaire must be completed by lenders and attached to the commitment letter or loan agreement before any transactions can occur.
Leo St. Germain is a vice-president in MCAP’s commercial mortgage group.
