Real Estate Agreement Workflow with FINTRAC Compliance

In the real estate industry, adhering to FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) regulations is critical to prevent money laundering and terrorist financing. This article outlines a typical scenario for a real estate agreement and the associated workflow, highlighting key points where FINTRAC compliance is essential.

Typical Real Estate Agreement Workflow

1. Initial Client Meeting:
   • Client Identification:
     • Verify the identity of the client using government-issued identification.
     • Record the client’s details as per FINTRAC requirements, including name, address, and date of birth.
2. Property Search and Selection:
   • Assist the client in finding suitable properties based on their preferences and budget.
   • Schedule property viewings and provide necessary property information.
3. Making an Offer:
   • Prepare the offer to purchase, including all terms and conditions.
   • Ensure the offer complies with relevant real estate laws and client specifications.
4. Acceptance of Offer:
   • Once the offer is accepted by the seller, finalize the terms of the agreement.
   • Client Due Diligence:
     • Conduct enhanced due diligence if the transaction is considered high-risk (e.g., involving large cash amounts or clients from high-risk jurisdictions).
     • Report any suspicious activities to FINTRAC immediately.
5. Deposit Handling:
   • Large Cash Transactions:
     • Report any cash deposits of $10,000 or more to FINTRAC within 15 calendar days.
     • Ensure proper documentation and receipt for all cash transactions.
   • Electronic Transfers:
     • Report any electronic funds transfers of $10,000 or more entering or leaving Canada.
6. Mortgage and Financing:
   • Assist the client in securing mortgage approval if necessary.
   • Verification of Funds:
     • Ensure that the source of funds is legitimate and documented, especially for large sums.
     • Report any suspicious or unusual funding sources to FINTRAC.
7. Closing Preparation:
   • Coordinate with lawyers, lenders, and other parties to prepare for closing.
   • Ensure all paperwork is in order, including the title search and final property inspection.
8. Finalizing the Transaction:
   • Completion of Sale:
     • Oversee the final signing of documents and transfer of ownership.
     • Ensure the client understands all closing costs and responsibilities.
   • Record Keeping:
     • Maintain detailed records of the transaction, including identification documents and financial transactions, for at least five years as required by FINTRAC.
9. Post-Closing:
   • Ongoing Monitoring:
     • Continue to monitor the transaction for any post-closing activities that might raise suspicion.
     • Report any further suspicious activities to FINTRAC if they arise.

Key Points for FINTRAC Compliance

• Client Identification and Verification: Essential at the start of the relationship and must be thoroughly documented.
• Monitoring Large Transactions: Report cash and electronic transactions of $10,000 or more.
• Suspicious Activity Reporting: Any unusual or suspicious activities must be reported to FINTRAC immediately.
• Record Keeping: Maintain all records related to the transaction for a minimum of five years.

Additional Reporting Requirements

Large Cash or Crypto Transactions:

• File a report for any single cash or crypto transaction of $10,000 or more.
• Report multiple cash transactions that total $10,000 or more if they appear to be linked.

Electronic Funds Transfers (EFTs):

• Report any EFT of $10,000 or more into or out of Canada.

Suspicious Activity:

• File a Suspicious Transaction Report (STR) immediately upon detecting any activity that could indicate money laundering or terrorist financing.
• Examples of suspicious activity include unusual transaction patterns, clients unwilling to provide complete information, or other behaviors that raise suspicion.

Ongoing Monitoring:

• Continue monitoring for suspicious activities throughout the business relationship and transaction process.
• Report any new suspicious activities to FINTRAC as soon as they are identified.

Conclusion

Compliance with FINTRAC regulations is an integral part of the real estate transaction process. By following these steps and ensuring thorough documentation and reporting, real estate professionals can help prevent money laundering and terrorist financing while providing secure and transparent services to their clients.