How A Little Money Laundering Can Have A Big Impact On Real Estate Prices

Money laundering in Canadian real estate is a widely accepted fact of life these days, but the impact isn’t. Government and academics are still debating how much money is needed to distort a market. The truth is, not a whole lot is required to distort any asset market. This is a problem the stock market has been dealing with since the 1920s, and the reason it’s so highly regulated.

The key to understanding how laundering impacts prices, is understanding the marginal buyer. If you understand how prices are set, it doesn’t take long to see it’s not the amount of money that’s the issue. Price distortions can be the result of capital velocity, and the intention of the marginal buyer.

Squad Goal: Money Laundering

First, let’s clarify laundering. Money laundering is the process of making illegally-gained proceeds appear legit. Those proceeds can be from monstrous activity, like fentanyl trafficking. Sometimes it’s less nefarious, like earned income evading a country’s arbitrary capital controls. All of it is illegal however, and is people are trying to hide it. There’s a few ways to do it – but the all follow the same basic process.

Money laundering is usually done in three phases – placement, layering, and integration. Placement is the introduction of cash into a legitimate system. Layering is conducting multiple transactions through multiple accounts, to obfuscate a trail. Integration is working the money back into the legit system. Properly laundered money should be extremely difficult to tell from legitimate business.

One last time, the goal is clean money. Parking cash long term in assets is not typical – these aren’t investors. That said, the layering process usually involves moving cash around very quickly. Fast moving cash often leaves a wake, especially if it’s moving through real estate. To understand why, you need to understand a few concepts – marginal buyers, money laundering, and sales comps.

Marginal Buyers Be Cray, Cray

The marginal buyer is an important part of any asset market, especially fast moving ones. This is the person(s) or company that’s willing to pay the most for an asset. They are a small percent of the potential buyer pool, but the ones that actually buy the assets. The competition between marginal buyers is key to asset price escalation. Every market has one on the way up, but skill and motive determine how healthy the outcome is.

If the marginal buyer is a rational investor, they’re thinking about liquidity. They’re restrained in their bidding price, because they need to be able to make a profit. Rational consideration helps to keep a market sane. If the buyer isn’t bound by rationale or logic, things start to get sloppy.

A cannabis company making $20 million a year in revenue fetching close to the valuation of GM? An investment condo that produces negative cash flow? The buyers of these things aren’t making rational decisions. It doesn’t mean they can’t make money, but they are playing a game of greater fool. You’re hoping that the next buyer is more irrational than you – whether you know that’s the plan or not. When you have an influx of irrational money, it’s hard to figure out what’s real.

The Objective of Money Laundering

When you buy an asset, whether a home or an oz of pink kush, you try to get the best value for your time and money. You want a deal. The seller is trying to extract the maximum price they can get from you, without driving you away. They don’t want you to get a great deal. The balance of interests go back and forth, and is a fundamental part of a functioning market. Opposing interests help balance things, plus or minus a dash of exuberance.

If you are money laundering, that’s not the case. The objective is to move as much cash, as fast as possible. This often involves large assets, and the bigger the price – the better. Especially if there’s a recurring payment component. Both the seller and the money laundering buyer want the highest acceptable price.

Sellers often feel somewhere between a genius and a lottery winner when they find this buyer. Competition between interests align, and there’s minimal friction preventing prices from going higher. The seller assumes their master negotiation skills prevailed. The money laundering buyer gets to move more money than they were asking for. The buyer seems “irrational,” but that’s just the market. Real estate agents without a clue, begin to rationalize and normalize this behavior. There’s no more land is a popular explanation.

Understanding How Real Estate Prices Are Born

We all know how prices are born. When a homeowner finds a selling agent they love, they go into a quiet backroom, make a few strokes, and boom! The multiple listing service spits out the comparables, a.k.a. your comps. Comps are a fancy way of saying what has sold around you, like the neighbor’s house. These numbers are then used to establish a baseline price, which a selling agent tries to push higher.

No comps in your neighborhood? No problem, we’ll use the neighborhood next door. Eventually, the arbitrary line disappears that separates the pricing in neighborhoods. This is when you hear dumb things, like “Shaughnessy Heights adjacent.” This spreads like a virus, from one neighborhood to the next.

Vancouver Real Estate Prices Overheating

A time-lapse of real estate sales in the City of Vancouver. Herd behavior can be observed in clusters, as people pay over or under the list price – based on whether other people are doing it.

Source: Better Dwelling. 

Poisoning The Comp System

Smarter real estate agents can already spot the problem here. Let’s look at an example, say you’re shopping for a home in Anyplace, BC. You’re watching the homes in the neighborhood climb at an average of 5% from last year. You find a place you’re ready to put on offer on, do some research, and come up with an offer. All of a sudden, a money launderer shows up, and offers the owner 10% over ask for a “quick close.” You’re not too worried, your agent told you the place a few doors down is going to be on the market next week.

Unfortunately, the new place now uses the home owned by the money launder as a comp. Now the ask is 10% more than you were expecting, because the marginal buyer set the price down the street. Someone else bites, and buys it before it “goes too high.” Now the money launderer’s buy was just validated in the system. But wait – there’s more.

Remember, the goal of laundering isn’t to buy a house, it’s to clean the money. They list the home again, let’s say another 10 points higher than bought. Bonus points if they can turn it into a wash trade, and sell it to another associated launderer. A regular family shopping down the street uses your washing machine as a comp for their buy. Behavior typically only seen in the frothiest of asset bubbles, can surface quickly. Exuberant buyers, both illicit and legit, compete and drive prices higher.

Driving Exuberance In Canadian Real Estate

An index of exuberance Canadian real estate buyers are demonstrating, in relation to pricing fundamentals. Once above the critical threshold is breached, buyers are no longer using fundementals. Instead they resort to market momentum, and the possiblity of reward is justification enough.

Source: Federal Reserve Bank of Dallas, Better Dwelling.

Now in this example, just a few sales would have helped to push the comps up to 21% higher. There would also be hundreds of sales validating the price movements in between. Each time the launder injects capital, they inject a new marginal buyer. The whole time, Boomers are stoking the coals on this fire, explaining this is “earned equity.” If you want your own, you need to work as hard as they did. Standing by as each irrational player enters the market is exhausting work. Boomers also had to save uphill for a down payment… both ways, in the snow or something.

“It Wasn’t That Much Money”

Still think a small amount of money can’t influence prices? Clearly you’re not familiar with another asset class – stocks. CNBC host Jim Cramer once ranted that his fund could manipulate stock prices with as little as $5 million. Nav Singh Sarao, spoofing just $170 million worth of orders, set off events that led to the DJIA losing $1 trillion in just a few minutes. Note: the orders were spoofed – meaning he only had a fraction of the money. More formally, academics determined traders can use less than $500,000 to raise a stock price 1%, by targeting the bottom half of the liquidity spectrum.

Smack That Ask: It’s Not What You Pay, It’s What You Think People Will Pay

An example of Dynamic Layering, the spoofing technique used by Nav Singh Sarao. The lower dots are bids placed, that only sometimes execute as a trade. Free markets can’t effectively determine if participants are executing trades in good faith – required for natural price balance.

How A Little Money Laundering Can Have A Big Impact On Real Estate Prices - Nav SaraoSource: US Department of Justice. 

Each of the situations are different, but have two common things – influence and intent. While not that much money, each example precipitated events that had a big impact. The actual trades weren’t so important, so much as influencing volatility. Setting the marginal buyer definitely counts as an event that influences market direction.

Each one of these events are also easily mistaken for an accident, which conceals intent. Fat finger, trade algo gone wild, and/or eager market buyer. Each one of these situations could have been caused by regular, everyday occurrences. Now it’s unlikely that money laundering is focusing on systematic trading of homes to inflate prices. It could however, be one of the times an unintentional destabilization of a market is just a side effect.

Velocity may also be playing a large roll here. When cash goes into one house, it’s eventually sold. That cash likely gets pumped through multiple transactions for the purposes of layering. That means more houses are being bought with the money, and profits. More sophisticated operations also have combine layering with an integration platform. Bonus points if the integration platform is registered with FINTRAC. That way the integration platform is also in charge of submitting suspicious transaction reports.

Combine this with an opaque comp system with closed data, and it’s really hard to catch. The chances of buyers being able to do their own due diligence on a property buy is virtually nil. Closed systems also mean no wide scale analysis of the transaction. There’s very little way for anyone outside of regulators to actually be able to determine it.

Where’s The Money At?

While Canadian cities are debating whether dirty money impacts prices, the rest of the world made up its mind. Transparency International UK found a significant correlation between shell companies, and elevated prices. London for instance, has 87,000 homes owned by anonymous companies. According to Christoph Trautvetter of Netzwerk Steuergerechtigkeit, the estimated impact from dirty money in London is 20% of the price increases.

London, UK Average Home Sale Price

The average sale price of a London, UK home. The estimate removes the 20% of annual gains attributed to the influence of money laundering. The number also assumes no laundering was done prior to 2008. LOL.

Source: HM Land Registry (UK), Better Dwelling.

There’s a similar setup brewing in Canada, politicians are just a little less willing to look into it. Transparency International Canada found 50,000+ Greater Toronto homes bought by companies without known beneficial ownership. Even worse, $20 billion of the funds used were not subject to any anti-money laundering checks. In Vancouver, local politicians are still claiming money laundering is over exaggerated. Meanwhile, in European Parliament, Vancouver is literally being used as an example of opaque ownership distorting home prices.

Money Laundering Through Commodities Is Old News, The Velocity Is New

Laundering money through real estate is far from new, but the velocity and volume is. Traditionally, launderers would buy, hold, and sometimes even rent the places out. The lack of scrutiny in real estate transactions, has always made it a prime landing spot. Every city has a few well known families connected to local mobs, that just happen to be in real estate. The impact to home prices are minimal when the volume is low and slow.

Treating real estate like a global commodity market makes it fast and high volume. The real estate industry in Canada encourages foreign capital. In fact, Canadian banks openly helped clients with “placement,” obfuscating deposit trails. The faster you can place, the faster prices rise, and the more they welcome foreign capital – the easier the wash.

This has always been an issue stock markets have had to deal with. Equity is issued, artificial volume inflates prices, and launderers liquidate to unsuspecting victims. Equity markets have increased ownership transparency on larger exchanges, making it more difficult. However, it’s still common, especially on European and Asian stock exchanges. Treating real estate like a stock market encourages the same type of laundering, without the transparency.

Fun fact: The now defunct Vancouver Stock Exchange was popular with money launderers. It was so popular, Forbes called Vancouver the “Scam Capital of The World” in 1989. The Coordinated Law Enforcement Unit in British Columbia warned the government of organized crime on the exchange as early as 1974. Those warnings were largely ignored. Are you also sensing a pattern here?

Money laundering is not the sole reason for much higher prices, but it fans the flames. Low interest rates and easy lending allow regular families to provide liquidity. If a launderer can’t get clean cash, they don’t transact. There’s no appeal without house horny buyers overbidding comps, or rapidly flipping.

Money laundering investors however, can influence the direction of the market. A real estate market is only as good as its last comp, set by the marginal buyer. If that marginal buyer was laundering money, they have motivation to overpay. Regular households buying into this, provide comp validation, and liquidity. Most households never consider where their liquidity is going to come from.

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65 Comments

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  • Trader Jim 5 years ago

    What if the money launderer is a combination of Sarao and moving large amounts of irrational cash? How many people were in bidding wars with a money launderer as well?

    • David 5 years ago

      That is actually the case in Vancouver. There have been quite a few well known situations where a known money launderer is bidding against a family. The family usually doesn’t take the hint, and victoriously “wins” the bidding war.

  • rustinpeace 5 years ago

    Brilliant analysis. Very easy to see when shopping for houses. A lot of condos sell for much higher than comparables and thus raising the price of everything else around it. Sellers are unwilling to budge and eventually they will net someone in. Problem with laundering is that people are trying to move money volume and dont care about losing a few percent here and there. Not sure when and how this is going to end. DoFO has not interest in fixing the housing market in Ontario. Nice to see BC enacting some regulation

    • ak27 5 years ago

      “DoFO has not interest in fixing the housing market in Ontario.”

      Not even a partisan issue, people in Ontario just won’t acknowledge there’s a problem. If they don’t, neither will the government. I remember reading this piece on BD from a lawyer, that basically explains (without overtly stating) that (alleged) money launderers are openly fighting in court.

      https://betterdwelling.com/city/toronto/court-hears-of-unexplained-millions-from-china-and-toronto-real-estate/

      • rustinpeace 5 years ago

        Ford has considered getting rid of the foreign buyers tax. Not sure if he will go through with it but I think he is not too concerned about the housing market heating up further

        • Ak27 5 years ago

          Foreign buyer tax doesn’t matter tbh. Foreign “investors” need liquidity from people that can afford to buy the homes from them. They can push the liquidity, but if the BOC is the one funding the bonds to support the mortgage, you’re double dipping into a currency that’s going to be printing junk.

          No investors to hide amongst means no use in money laundering in the market.

  • Jack 5 years ago

    “arbitrary capital controls” is right on. Not all money laundering is drug dealers. Some of it is “alternative banking” and buying of investment homes. These are a net benefit to cities, by increasing the wealth of homeowners, that spend back into the economy.

    70% of households own a home. Allowing foreign money to speculate enriches the general population, by increasing global demand for housing stock.

    • Mossy 5 years ago

      Dear Jack,

      China, India, Iran etc., countries of origin for most of Canada’s foreign buyers, all have capital controls. Whether it’s drug dealers or regular businessmen, they are breaking their country’s own laws when they take large sums out of their country. In most cases that money is undeclared, i.e. they have not paid tax on it. That tax that could fund public services in those countries, and you know, make life bearable for the billions of poor that live there. In the law, receipt of stolen goods is a crime. The money that fuels our property market technically belongs to the government of those countries, i.e. the people, sometimes directly, as in many cases, business owners are not paying wages but still manage to own multimillion dollar properties here and in London, NYC, etc.

      There is no way to put a good spin on this. The longer we refuse to acknowledge
      this, the more we are complicit in the exploitation of the poor/ middle-classes in other countries. There’s a word for it, actually: neo-colonialism. And Canada is not the morally superior nation it likes to make itself out to be.

    • Oldog 5 years ago

      Let us be clear.
      Money laundering is, by definition, an illegal activity. If it is not illegal then it cannot be laundered.
      The problem in Canada is that the government has no interest in finding out whether foreign money coming into Canada is or is not being laundered, which is a nice way of saying that it effectively condones laundering and has done so for decades. It really is that simple.

      • Jack 5 years ago

        Yes, but the concept of illegality isn’t as black and white as everyone thinks it is. Should you not have the ability to move money you legally earned outside of the country you earned it in?

        Circumventing Iran or China’s controls are illegal in those countries, but not in Canada. We have no capital controls. If we enforce capital controls for other countries, what’s next? Do we start arresting former Saudi citizens that critique their government? Do we stop taking in refugees, because their local countries don’t want them to leave?

        • MH 5 years ago

          Money laundering is a crime in Canada. The attempt to spin it as a benefit to Canadian economy and something that is not “black and white” is a testament to how effed-up things have become.

        • Erna 5 years ago

          But what is your moral standpoint regarding this? I guess for you money has nothing to do with morals and ethical behaviour.

      • MH 5 years ago

        As of March 2019 US deems Canada a major money laundering country.

        https://globalnews.ca/news/5102137/us-canada-major-money-laundering-country/

        What’s telling is that the report says that there are tools in place to spot the money laundering, it’s just that Canada does not want to do anything about it. It’s time to end this charade and establish the Ministry of Money Laundering and Tax Evasion at every level of government in Canada.

    • Smaug 5 years ago

      Allowing foreign money to speculate enriches the general population, by increasing global demand for housing stock.

      What you clearly meant to say was: Allowing foreign money to speculate enriches certain segments of the population at the expense of other segments, and in fact creates no new wealth at all, just asset price inflation.

      There, fixed it for you.

    • Sharon Margaret Sommerville 5 years ago

      “Allowing foreign money to speculate enriches the general population, by increasing global demand for housing stock” huh, huh… thank you Milton Friedman. And, in doing so disconnects housing prices from the local economy making it impossible for local residents to purchase decent, affordable housing. Yep, great way to ensure an entire generation of young people can’t afford to purchase housing because they are competing with the ultra rich from who knows where.

      • Smaug 5 years ago

        Milton Friedman never promoted rampant housing speculation, and in fact his brand of monetarism would have prevented most speculative bubbles by restricting money supply growth, thus limiting credit and forcing interest rates higher.

    • Beau Tanner 5 years ago

      This is simply incorrect. The number you’re citing is Canada-wide, and skews elderly. Many of those households you are describing have adult children living at home. Young middle class people in BC’s Lower Mainland will not be able to own homes unless prices fall drastically ($70k/year is not nearly enough to responsibly buy homes in the region). It means more of their money is going to rent or to service debt, less is going to the economy. The standard of living of the middle class is severely degraded by speculators, money launderers, and satellite families buying up the housing stock.

  • Oldog 5 years ago

    There is one point that you left out, which explains why launderers are willing to bid up prices. The “market value” of dirty assets is usually around 30-40% of the market value of an equivalent clean asset, so bidding 10% or more over the asking price is a no-brainer.
    I moved to Vancouver from Toronto in 1990. I am a CPA with some experience in forensic accounting. When I looked at the property market I quickly concluded that laundering was running rampant, as it has continued to do until today. Everybody, including the regulators and the politicians, turned a blind eye, because they were all getting rich. When we moved from Vancouver in 1996, the guy who bought our house in Kerrisdale offered to pay in diamonds. No kidding.
    I do not live in Canada now and I will not return until they clean up the cesspool, and I am not holding my breath.

    • La Young 5 years ago

      “the guy who bought our house in Kerrisdale offered to pay in diamonds. ”

      Only in Canada. Maybe Hong Kong.

    • Ethan Wu 5 years ago

      Even higher if you need to launder from very non-friendly regimes. Mainland money is viewed as highly desirable by most markets, so there’s little skepticism.

      “Lebanon, the United Arab Emirates, Iran, the United States and China”
      https://www.peacearchnews.com/news/rcmp-says-montreal-group-laundered-tens-of-millions-in-drug-money/

      Remember, this isn’t a single race of people causing an issue. It’s a class of criminal that found a loophole. By “cracking down” on Chinese money, we’re missing the fact that China’s money launderers are just the most visible. Italian, and Middle Eastern gangsters have long known Canada is an easy place to wash.

      • Jie Jing 5 years ago

        Exactly. Even money coming through China isn’t necessarily Chinese. Malaysian, Indian, Indonesian, French, German, Iran, UAE… the list goes on forever. Canada is the washing machine of the world. It’s biggest export is the image it’s corruption free, which is helpful for snow washing.

        • Beau Tanner 5 years ago

          This may be true, but the vast majority of money laundering in BC originates in Mainland China. The data points to this, anecdotal evidence does as well… at this point this is uncontroversial.

    • CanadaSucks 5 years ago

      I have felling that Whites people of quality are abandoning Western nations (US, UK, Australian, NZ, France) and dispersing themselves through the world and Asia. I also see no future in Whites Western nations. I was watching a video of Australia White guy saying the same thing. I thing Canada is done and you will see racial war in Toronto, Montreal, Vancouver between Asian, Arabs, Blacks and Indian.

      I am happy for you that you were able to leave this country.

      • Oldog 5 years ago

        Please take your racism somewhere else. I will not post any more comments on this site if they continue to permit this sort of rhetoric. FWIW, I left Canada because I needed to make a living and I still love the country. I will not move back to live there until the real estate market sorts out, because I am too old to buy at the top of a rigged market.

        • CanadaSucks 5 years ago

          Yes I am racist and proud, Canada is a shit hole and will always be a shit hole, Youi pretend to love Canada and leave as to make money somewhere else. Typical two face Canadianmyn

          • Smartir 5 years ago

            You speak the truth. Canada has become a complete disaster. Unfortunately almost the entire population has blinders on.

            I, too, have left Canada and refuse to move back until the government grows a backbone and cleans up the country.

          • Bluetheimpala 5 years ago

            I was going to respond on the shitter but this requires a keyboard and it was getting hella sloppy in there (fajita tuesday!)…I mean, I’ve seen you on this block and thought that you were slightly subversive but more or less an idiot who didn’t know better (Think your cat learns to type and is a racist but in a sort of benign cat way…hint: they haaaate dogs!)…what is your point? This is a Canadian site with a little international exposure (go wolfstreet!) but ultimately you’re meowing up the wrong alley. While Canada has its flaws it is far from a shit hole so your comment is more petulance than insightful. Heck, you’re not even being subversive at that point! But that’s ok, Papa Blue will let it slide but like the rest, I don’t forget and I will come for you every day so slow your roll buttercup. You can slam canada but don’t be a racist asshole…dicks like me love assholes and I literally used to torment people on irc chat and icq, so coming here is like going to starbucks on a saturday morning…lol…Tock.BD4L.

      • Obi 5 years ago

        While “whites people of quality” is an aggressive term, there’s some truth. High skilled workers typically move at the end of a significant business cycle, and those without “professional” designations are “stuck.” This is by government design.

        Places like Canada don’t negotiate two way deals for low skilled workers in other countries, they make it one way. Anyone can come here, it’s economic stimulus. Only the country’s elite can permanently leave if they need too.

      • Kate 5 years ago

        Being angry with your government for being way too lax and corrupt is one thing; blaming gangs, drug dealers, etc for screwing over citizens and wanting them to be punished also totally understandable; but to blame everyone that doesn’t have white skin for societies problems? Come on. This argument just helps the elites, 1% ers and government by taking the heat off them so they can continue to live their lavish lives since you’re too busy worrying about how the immigrant neighbours afford to buy a second Toyota that you don’t have time to question the board position your former minister just got or the $5 million bonus a CEO just gave himself…

  • JJ 5 years ago

    Great article!

  • :| 5 years ago

    Excellent article and insight into money laundering. I used to work in valuations, and comparable sales prices being propped up by money laundering marginal buyers was always a concern. I’ve always been curious though, how are individuals able to move large amounts of money overseas without trace? I think the article alluded to banks helping these individuals secure mortgages, is that right?

  • Do Better Stephen 5 years ago

    Use of African American Vernacular English in the subheads doesn’t make you cool. It just makes you a cultural appropriator.

    • Ty Edwards 5 years ago

      🚨 SNOWFLAKE ALERT 🚨

      Are you referring to “Cray Cray?” Something the gay community has been saying for over a decade, and it’s in the dictionary?

      People need to stop saying non-offensive things are race specific. If I play golf, is it appropriation of Scottish culture? Can I make fried rice? Or is that considered appropriation?

      England’s national dish is curry? Somehow not cultural appropriation. 🤔

    • Smaug 5 years ago

      Pointing out alleged cultural appropriation doesn’t make you sophisticated or worldly. It just makes you a whiner with nothing else to contribute.

    • SMH 5 years ago

      Thank God a social justice warrior stepped in! Obviously we need to be focused on the real issues facing Canadians as opposed to the heaps of illegal money rolling in distorting our economy and sending many hardworking, tax paying Canadians into bankruptcy or even worse homelessness – remember it’s a culture not a costume! Phew! Now that the world is back in order, I need to attend to my avocado toast.

      Please go back to Facebook where you’ll have much more fish for your bait.

    • Bluetheimpala 5 years ago

      Ughhh….I notice an uptick of retardation with Stephen’s articles because they get more exposure. While I laughed at first I can’t honestly believe this is a real comment from someone who is not being paid to be subversive and support the narrative of hyper-liberalism to create fury and fire within the right. How single minded do you have to be to view every example of ‘outsider using insider lexicon/symbols’ as appropriation and by extension racist? All just more distractions. Focus people. Focus. Tock. BD4L.

  • Kyle L 5 years ago

    This is a fantastic article. I would encourage everyone to contact their MPs and voice their concern over this issue. Our government needs to take this seriously.

    • Ty Edwards 5 years ago

      Good idea. I’m actually going to be forwarding this article to my MPP (Ontario’s version of an MLA).

  • Grizzly Gus 5 years ago

    Current model – Sell fentanyl or other drugs. Launder the money through real estate driving up prices. Create more homeless people and business for your drugs. Rinse wash repeat. If bubble ever bursts = more customers and voters desperate for “foreign capital”. Call anyone a racist who points this out.

    Proposed solution – Launch a commission into all property transactions involving numbered corps. If beneficial owner does not step forward and/or does not have ability to prove how they got their funds. Confiscate property and convert it into affordable housing for the poor and working classes that were displaced by money laundering in the first place.

    • Smartir 5 years ago

      Correct observations, disgusting proposal.

      You can’t just take back what you allowed someone else to buy.

      The government needs to get in front of this..

      • Grizzly Gus 5 years ago

        But we can build affordable housing and make the drug dealers pay for it!

      • Grizzly Gus 5 years ago

        Also “Smartir”. Have you ever heard reference to “Proceeds of crime” or police auctions?

        The government missed its chance to get in front of this despite years of warning from numerous security agencies.

      • Wiz Rhymes 5 years ago

        Good lord. Are you actually saying if you made money by using crime, you should get to keep it?

    • mmr 5 years ago

      Last year I mention this. Real estate at Toronto will never fall like 1990 because world has changed. In 1990 there were no money pouring in to Toronto and very few developing countries. Fast forward 2019 some of the Asian economies and across developing world grown many folds hence money will keep pouring in city like Toronto from certain class. It wont change and government wont stop it. Its simple truth. Immigrants from different part of the world will keep investing here. along with black money holders. Some county like India tax to GDP ratio is 13 percent meaning people don’t pay tax. Don’t mean they are drug dealers its normal people don’t pay any thing to the government and if those money invest here will it be drug money? no its not but technically it is money laundering. Same goes for much of the developing world. My point is look at growth of ultra net worth people in the world out of top 10 growing countries all are developing countries. and rich from those places want piece of developed world send there kids here and enjoy the good life.

      • Jie Jing 5 years ago

        This is incredibly stupid. Real estate prices are related to the work generated by the human capital involved. Canada is a country with a GDP the size of Texas, with home prices 10x higher.

        The only way prices “stick” are if the value of money fails to rise, and inflation takes hold. Mexico and Japan are both countries where home prices are “rising” just not in real numbers. Toronto is still at the same number it was 4 years ago if you price it in USD. Look at assets prices in USD like WCS, and you’ll see how screwed Canadians are.

        Glad I moved back to China, because at least locals know the corruption is robbing them blind. Canadians still think they’re making money, when they get a fast one pulled over on them.

        • Mossy 5 years ago

          Oh mah gawd thank you Jie Jing. Spot on with your comment on Canadian attitudes to govt vs. Asians, who at least have some common sense.

          Mmr, you’re right. I’m gonna stop paying my taxes in Canada (not tax avoidance but evasion, get the difference??) and get my money out to buy property in some Caribbean paradise. But I’m still gonna send my kids to local public schools, use the roads here, public health care and all the rest. And you don’t get to call me a criminal, because hey, we love people like that here in Canada, no?

      • Mtl_matt 5 years ago

        I mean why would you want to live in Milan, Paris, London, Sydney, New York, LA or Miami when you can live in Toronto, right? There’s plenty of big cities, and you’re out of your damn mind if you think your “center of the universe” is the only destination for that money.

    • Wiz Rhymes 5 years ago

      “Launch a commission into all property transactions involving numbered corps”

      Let’s just start with a FINTRAC system that will know if someone changes their name, and registers for a money business. Right now changing your name is enough to not bring up a flag in their system.

  • GB 5 years ago

    Since the majority of Canadians own their own Real Estate – there is little desire for laws to change. “As long as my biggest asset keeps going up who cares ? “

    • Wei 5 years ago

      It’s true, but very short sighted. I own in Vancouver. Every day the neighborhood becomes more and more empty, and storefronts shutter. It’s getting to the point where the city is starting to feel like the country.

  • Asterix1 5 years ago

    Our government should be criminally charged for being complacent about money laundering, and in the process facilitating and encouraging this illegal act. No regulations, no investigating, no prosecution, no budget and no drive to fix anything!

    FINTRAC, RCMP and the rest of the lot, all asleep at the wheel.

    Canada is a money laundering paradise, the World knows it, yet Ottawa and the provinces rather close their eyes and let Canadians suffer through bloated and artificial real estate prices.

  • AJ 5 years ago

    Bravo Stephen!! In my opinion, this is one of the best articles you have written so far ( and you have written a lot of good ones) Money laundering almost acts like a money multiplier provided liquidity exists creating debt/money in addition to washing dirty cash. Asset inflation caused by these actions affect the entire society as taxpayer dollars are used to backstop any losses for the big lenders

    • Wei 5 years ago

      Re: the multiplier, I was thinking that as well. I recall reading about the multiplier used in an old article on here about the speed at which a dollar travels. It was 1.8 if I recall correctly.

      Let’s say it was $100 million in Vancouver, used as 35% downpayments = $285 million. Let’s say 10% appreciation on those units per year for 5 years. That’s $460 million, or $175 million in profit on top. Now flip at 35%, you’re at $1.315 B, without any checks.

      • Mikey Oppenheim 5 years ago

        Now try that number with condos. $100 million @ 5% for a presale = $2 billion in pre-sale inventory, now flip it to locals. Repeat until the cows come home, your launderer collects commission. If you think launderers aren’t collecting commission as a method of payment, you think Realtors are above a scam that still happens frequently in the stock market.

      • AJ 5 years ago

        The sad part is that the banks are the ones helping in placing this money in the legitimate market thereby creating this bubble and then are bailed out by taxpayer dollars when the bubble bursts.

        • AJ 5 years ago

          This is the perfect example of the “PERFECT CRIME “!!!!

  • Ian G. 5 years ago

    This is why we don’t trust sociology profs and flag waving journos that pretend to understand how price mechanics work. Money laundering is a form of fraud, just like Nav’s price spoofing, just like price fixing, just like deliberately lying about the price of goods.

    The impact is the same, people are defrauded from their hard earned money because they believed in a narrative.

  • Evan Li 5 years ago

    Knew some good stuff was coming when I saw your name in the Transparency International Toronto money laundering report. When do you show us where the bodies are hidden?

  • Straw Walker 5 years ago

    Laundering money through “placement” was never really discussed.
    That is putting illegal funds straight into legal front companies as if it is part of that companies income.
    The Chinese triads prior to Hong Kong reverting back to the Chinese invested billions into Vancouver real estate and large businesses that were headed up by prominent BC business men.
    Billions are being laundered through these so called legit businesses each year.
    Vancouver is another name for Gotham City

  • SUMSKILLZ 5 years ago

    When a country’s economy hollows out, eventually something is going to fill the void. Dot Com #1, RE, Dot Com #2…

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