B.C. real estate brokerage firm LeHomes Realty has been fined $282,397 for not complying with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
The brokerage is officially known as Pan Pacific Platinum Real Estate Services Inc. and formerly known as New Coast Realty, which has a history of regulatory findings against it.
LeHomes failed to submit a suspicious transaction report where there were reasonable grounds to suspect that transactions were related to a money laundering offence, according to findings from the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) issued in a statement Oct. 6.
Numerous other violations were found. LeHomes failed to ensure that an appointed person was responsible for implementing a compliance program; failed to develop and apply sufficient compliance policies and procedures for its regulatory obligations relating to third-party determination, receipt of funds records and business relationships and ongoing monitoring; and failed to take into consideration the money laundering or terrorist activity financing risk of its products and delivery channels, its geographic location or its clients and business relationships.
Among other violations, LeHomes failed to develop and maintain a written and ongoing training program for its staff on anti-money laundering (AML), nor was there any means to test the effectiveness of its policies and procedures.
LeHomes, with offices in Vancouver, Richmond and Burnaby, also failed to keep complete client identification records, according to FINTRAC.
As New Coast Realty, the brokerage was scrutinized by the Globe and Mail, which exposed alleged shadow flipping activity in 2016.
But the Real Estate Council of BC determined in August 2018, following an investigation “that there is insufficient evidence to warrant disciplinary action against New Coast Realty in connection to allegations that training provided by the owner and practices at the brokerage put consumers at risk.”
However, while there was no finding against the brokerage as an entity, the council issued 10 fines and five suspensions against individuals licensed, or formerly licensed, at the brokerage. Many more licensees at LeHomes have since been disciplined.
The Commission of Inquiry into Money Laundering in B.C. found real estate to be vulnerable to money laundering, although it made no conclusion as to the extent such activity impacts home prices.
Of the 101 recommendations Commissioner Austin Cullen made in his June 15 final report, 40 are directly related to real estate, and several others are ancillary, such as proposals to strengthen AML policies within financial institutions and the asset forfeiture legal regime, as well as greater controls on notaries and lawyers, who process transactions.
Cullen’s recommendations suggest that real estate licensees are largely uneducated on AML measures and that both managing brokers and sub-brokers require education "focusing on the detection and reporting of fraud and money laundering in the industry."
Cullen also recommends the BC Financial Services Authority (which replaced the council in 2021), put in place measures for better data collection and that it implores real estate licensees and notaries to record source of funds information should FINTRAC not do so on a federal level. He also wants BCFSA to mandate AML programs at each brokerage as a licensing condition.