Canadian Mortgage Fraud Rampant At HSBC, Lawmaker Demands Investigation

Greater Toronto’s soaring prices got a lift from mortgage fraud at a major bank. Earlier this month investigative journalist Sam Cooper and The Bureau, revealed whistleblower allegations of a massive mortgage fraud scheme at HSBC Canada’s Greater Toronto operations. RBC acquired the bank shortly after the alleged incidents occurred, with the government approving the sale just a few weeks ago. Now a Canadian lawmaker wants an investigation into the issue and for the country’s largest bank to set aside $100 million for any resulting fines.

Mortgage Fraud At HSBC Helped Fuel The Toronto Real Estate Boom

Cooper’s investigation reveals Toronto has its very own unique real estate money laundering model, not unlike Vancouver. The Toronto Model involves purchasing a home with a mortgage obtained with fake income, verified by a fraudulent remote job overseas. Payments are then made with overseas funds deposited into their account by a laundering broker on the other end. Enterprising entrepreneurs then need more properties as their “income” grows. 

The method does not trigger immediate alarms on a quantitative basis, since there is little to identify. The deposits appear just like regular income from the job verified by the bank. Yes, you just figured out the potential issue—how much effort actually goes into this employment verification? Cooper’s HSBC whistleblower implies at least one branch had staff that was in on it.  

“The whistleblower informed his bosses the fraud was sophisticated and likely involved HSBC Canada staff and scam centres in China that verified fake banking and employment records”

Sam Cooper, The Bureau.

The Greater Toronto Area branch, located in the affluent suburb of Aurora, suddenly saw explosive growth in 2020. They estimate the branch was doing nearly 4x the business one of its size was expected to do. Despite its size, it managed to attract a number of people without steady jobs in Canada, but high-paying executive roles overseas.  

Their review of mortgage documents from the branch show quite the list of characters. There’s a part-time casino worker with 3 Greater Toronto homes that claimed an income of $345k/year as a data analyst in Beijing. Or the part-time hairdresser with homes in Aurora, Markham, and Scarborough that also earned $536k/year as a “business manager” in Guangzhou. 

Heck, it’s not even clear income needed to be made at all. One homemaker “with no annual income” was able to purchase at least four homes with mortgages from the bank.  

Despite the success of HSBC’s mortgage lending business, the company chose to exit Canadian banking suddenly. What’s the rush? 

Canada Approved HSBC Sales Despite Knowledge of Mortgage Fraud

HSBC recently wound up its Canadian business after this sudden surge, and was acquired by RBC. As Cooper’s reporting emphasizes, the timeline leaves significant questions about who knew what, and whether the country swept this issue under the rug. 

FINTRAC identified a Greater Toronto Area mortgage fraud scheme involving the Chinese diaspora community that had occurred during the pandemic. It was publicly disclosed after an investigation in 2023, describing a similar scenario to the one alleged at HSBC. 

Canadian Finance Minister Chrystia Freeland would have been well aware of the issue by the time her department approved the sale in December 2023. 

Canadian Lawmaker Wants Investigation, $100m Set Aside For Fines

One Canadian lawmaker wants to know how these issues were glossed over? MP Adam Chambers, of Simcoe North, notified Parliament of his notice of motion to investigate the circumstances around HSBC. He also wants RBC to set aside a significant sum of cash to cover any fines that may result from an investigation into HSBC’s Canadian operations. 

“With respect of Royal Bank of Canada’s purchase of HSBC Canada, the Committee call on the government to require an amount equal to no less than $100M be set aside in escrow for a period of 18 months to cover any fines, penalties or levies that may potentially be against HSBC Canada in connection with any current or future investigations by regulators or authorities under relevant legislation or regulations, including the Proceeds of Crime and Money Laundering Terrorist Financing Act,” stated MP Chambers in Parliament.  

Another fine would just be the latest for RBC, which appears to have been caught off guard. This past December, FINTRAC announced it had issued the bank a $7.4 million fine for lapses in its suspicious transaction reporting. It was the largest fine ever delivered by the agency.  

Earlier this month, a US-based subsidiary of RBC called City National Bank was also hit with a whopping US$65 million fine for a similar issue. Those Americans take this stuff a lot more seriously, apparently.  

The bank and its subsidiary have since corrected the issues observed by regulators. It’s not clear that RBC discovered the issues prior to Cooper’s reporting. That’s what MP Chambers hopes to discover.

Cooper’s full bombshell investigation into HSBC’s alleged Greater Toronto Area mortgage fraud can be read at the Bureau.

6 Comments

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  • Techron 4 weeks ago

    Well fuck me sideways, what in the name of “banking” is this country involved in? Is it the initial mortgage fraud OR the coverup that is more interesting here?

  • Alex 4 weeks ago

    Are they demanding an investigation into income falsification abroad? Maybe start with the fake income documents in Canada that are being brought to the bank en masse to get mortgages? After all, it would be easy to check all this. But no one will do it. Because everyone knows what they will find, and everyone is afraid of this truth!

  • Tim 4 weeks ago

    I constantly hear about these allegations of mortgage fraud in Canada. It’s reported as if it’s rampant in our industry. Why do they NEVER name the people involved? Not just the names of the accused, what are the names of the bankers, brokers and lawyers involved?

    Anyone with a computer can create a fake document, but due diligence by legit professionals can weed out fake documents with very little effort.

    In order to run these so-called elaborate mortgage scams, you need these professionals involved working together. Most mortgage deals are arranged by a mortgage professional, underwritten by a lender and finally approved and signed off by a lawyer. I do not believe fraudulent files could get done without inside assistance from the so-called professionals involved.

    In Ontario, we have FSRA to regulate mortgage agents and brokers, they have implemented thousands of pages of legislation designed to promote public confidence in the mortgage industry. The rules for mortgage professionals are very stringent. OSFI regulates the banks/lenders and the Law Society regulates the lawyers. Apparently, all of these scammers have figured out how to bypass all the rules and regulations without detection from the regulators.

    Solution, NAME NAMES! Let’s rid our industry once and for all of these morally bankrupt criminals, they are not professionals, and they make the rest of who follow the rules look like shady criminals.

  • Duddly-Do-Right 4 weeks ago

    Duddly-Do-Right
    Institutions and corps. like Tricon/Blackstone (these two scumbags recently merged to become even stronger…) should be banned from buying up homes that they claim we could not otherwise afford to live in, unless they rent them back to us. We could afford them, if the likes of these stopped buying them up and pushing prices north. Approx. 2 years ago, the CEO of Tricon was interviewed on 60 minutes claiming his company is doing a service to us and making the “American Dream” possible. The interviewer was in clear disagreement and kept pushing how renting a house could be the “American Dream”? The CEO kept dodging the question. The interviewer cornered him on many accounts but what stuck in my mind was that the CEO said they plan to expand NORTH to Canada. And indeed they did. A few months after the interview, there was a tiny article in the paper about Tricon coming to the rescue as a landlord – LOL – yeah right. Tricon officially expanded to Ontario and BC, I believe it might already be in Alberta too.
    That’s just one side of the whole thing… but who should be banned from supporting this nonsense is our very own Canadian Pension Plan. Our CPP money is heavily invested in REITs, which support this housing scam. Taxpayers deserve to have a say in whether they are in favor of having their money invested in a grand Ponzi scheme that is robbing future generations of the chance to ever become homeowners.
    What’s awful about the whole thing is that the properties bought up by these corps. will never ever again be back on the market for sale, only for lease, and ONLY IF they ever go bankrupt. We can only wish the whole Ponzi scheme crashes and burns. I can’t imagine and fear where this country is heading….

  • Tim 3 weeks ago

    I constantly hear about these allegations of mortgage fraud in Canada. It’s reported as if it’s rampant in our industry. Why do we NEVER name the people involved? Not just the names of the accused, what are the names of the bankers, brokers and lawyers involved?

    Anyone with a computer can create a fake document, but due diligence by legit professionals can weed out fake documents with very little effort.

    In order to run these so-called elaborate mortgage scams, you need these professionals involved working together. Most mortgage deals are arranged by a mortgage professional, underwritten by a lender and finally approved and signed off by a lawyer. I do not believe fraudulent files could get done without inside assistance from the so-called professionals involved.

    In Ontario, we have FSRA to regulate mortgage agents and brokers, they have implemented thousands of pages of legislation designed to promote public confidence in the mortgage industry. The rules for mortgage professionals are very stringent. OSFI regulates the banks/lenders and the Law Society regulates the lawyers. Apparently, all of these scammers have figured out how to bypass all the rules and regulations without detection from the regulators.

    Solution, NAME NAMES! Let’s rid our industry once and for all of these morally bankrupt criminals, they are not professionals, and they make the rest of who follow the rules look like shady criminals.

  • Dan 2 weeks ago

    chinese saying ” cheat if you can or you will be cheated”. they are all cheaters and scammers IMHO

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