Foreigners break rules to purchase real estate

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A Globe and Mail investigative report revealed affluent Chinese investors are breaking one of their country’s laws -- which limits the amount of money that can be removed per year – often to purchase Vancouver real estate; all with the help of large financial institutions.

According to the investigation, banks have flagged over 8,200 suspicious transactions since 2012, the year China started cracking down on corruption. 96% of those transactions were carried out by the big banks, and many involved suspected money laundering, according to FinTRAC.

According to the Globe and Mail:

It is illegal for Chinese citizens to remove more than $50,000 (U.S.) a year from China without government permission, partly to stop corrupt millionaires from fleeing with their money. But a review of B.C. court cases by The Globe found they have worked around this restriction by sending millions of dollars into Vancouver-area banks through multiple wire transactions of smaller amounts by family and friends.

In one case, a B.C. court heard that former CIBC Financial Advisor Guiyun Ogden facilitated a 10 wire transfers into 10 different accounts for a total of $500,000.

"This process is often conducted using different remitters in the same Chinese city sending funds to one or more accounts in CIBC, then through a common financial adviser get the funds collected back in one account – to be paid out to a law firm," testified Kim Clark, a CIBC corporate-security investigator, according to the Globe.

According to Clark, the transactions allowed the individual to argue, “'I am not bringing in $500,000 (U.S.) from China; me and these nine other third parties are each bringing in $50,000.'"

The Globe contacted a number of big banks to inquire if they facilitate similar wire transfers. RBC was the only bank to answer the question “specifically.”

"Multiple wire transfers may be indicative of suspicious transactions," spokesman Don Blair told the publication. "Where RBC is of the view that a suspicious transaction report needs to be filed with FinTRAC, we will do so. In addition ... RBC may close accounts and terminate relationships."

The investigation comes as the debate about foreign investment in the real estate industry is heating up.
Prime Minister Stephen Harper has pledged to better track the prevalence of foreign investment if re-elected.

Click here to read the entire Globe and Mail report. 
  • Henry on 2015-09-09 11:04:52 AM

    This is a other reason for the real estate bubble.

  • Peter on 2015-09-09 11:10:53 AM

    I understand BMO is financing many of the big purchases from Chinese buyers in the lower mainland of Vancouver. 65% LTV and no questions about income or residency. My appraiser contact said most of the appraisals he does for +1.5mil properties are for BMO and Chinese clients. I thought the rules had changed for the big banks but obviously not. $500k isn't buying them a condo but somehow they are financing multi million dollar homes through our banks.

  • Layth Matthews on 2015-09-09 11:32:09 AM

    I realize it's irritating for those who want to live in downtown Vancouver or Toronto, but the influx of millions from foreign investors is success story for Canada. It raises the equity of existing home owners and stimulates surrounding communities where 1st timers can buy. Note, they come here because our laws are predictable and our environment is still relatively clean. We are effectively exporting our benign culture and holistic values. I predict this trend will only increase and diversify origination points, in the global warming future. Look at the demographics, immigration is the friend of the housing industry. Now, it would be nice if more immigrants actually wanted to live here year round. How many refugees are we welcoming?

  • Just Jack on 2015-09-09 2:31:14 PM

    Most of these transactions would be cash deals. If there is a mortgage placed on the property then that may in addition to money laundering be mortgage fraud. If the bank is facilitating these transfers then they too would be subject to a substantial fine. Now that Canada has an agreement with China to split the assets of money launderers you can expect the banks to self regulate themselves better. Banks got away with it because up until the beginning of the month it wasn't profitable for Canada's government to act.

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