On February 22nd, the Toronto Star printed an article that mortgage fraud has become big business in Canada with a 150% rise in criminal transactions detected just last year according to the credit reporting agency Equifax. Levels of fraud have been increasing wildly since 2008. Equifax has been working closely with major lending institutions trying to identify fraudulent loans before money is handed over. As a result of this joint effort, Equifax helped to detect a $2.8 million in attempted mortgage fraud in 2011.
Because the Canadian real estate market has been unusually hot over the past decade, this has led to an increase in US style “liar loans” where homeowners exaggerate their incomes, or years on the job, to get loans for houses they really cannot afford. Other fraud schemes have included identity theft which defrauds a legitimate owner out of their homes or builders who borrow money by using inflated values of the units they are building only to take the money and run before the project is completely built or sold out.
It may take up a year or more to build up credit under fictitious names, starting with credit cards and working up to lines of credit. There is a trend towards quick hits where fraudsters can net $200-$300,000 per fake identify, more than most people make on their jobs in a year. This has had an impact on innocent consumers and lenders.
What does this mean to me as a buyer or a seller?
The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), Canada’s financial intelligence unit, was created in 2000. It is an independent agency, reporting to the Minister of Finance, who is accountable to Parliament for the activities of the Centre. It was established and operates within the ambit of the Proceeds of Crime (money Laundering) and Terrorist Financing Act (PCMLTFA) and its Regulations. FINTRAC’s mandate is to facilitate the detection, prevention and deterrence of money laundering and terrorist activity financing, while ensuring the protection of personal information under its control.
Your REALTOR® is required to use due diligence in following the FINTRAC rules which includes reporting any suspicious transactions (large sums of cash, third party involvement). The REALTOR® will ask you to complete an Individual Identification Information Record and provide acceptable identification. If you are selling, the REALTOR® on the buying side must also follow due diligence and obtain appropriate identification and report any suspicious activity.
Your REALTOR® is an important link in trying to reduce fraudulent real estate activity.