WILLINGTON: As of January 1, foreigners are banned from buying property in New Zealand because of soaring real estate prices. Canada should have done the same years ago. But Canadian governments remain clueless. Last month, the Canada Mortgage and Housing Corporation claimed misleadingly that “non-residents” own a small portion of housing – a mere 3.4 percent in Toronto and 4.8 percent in Vancouver.
That statement underscores the incompetence of the country and its principal lender. Ownership is hidden in Canada because the country is a giant secrecy haven where anyone from anywhere can, and does, buy properties through offshore shell companies, nominee shareholders, trusts, or law firm fronts. The only glimpse into the scale of foreign speculation abuse was an analysis in 2015 by anti-corruption organization, Transparency International, of Vancouver’s 100 most valuable property deals: Nearly 50 per cent of ownerships were hidden through shell companies, nominees and trusts.
Secrecy facilitates money laundering and has contributed mostly to excessive real estate prices and the fact that Canadian consumer debt is the highest in the world, representing a grave economic risk.
Canada is a hot money haven because cash deposits or questionable wire transfers that cannot be deposited into banks without verifying the source of funds flow through real estate brokers, developers, and law firms then are deposited into banks for payment.
An example surfaced last May, after a prolonged probe by the Law Society of British Columbia, when a West Vancouver lawyer was found guilty of professional misconduct for allowing $26 million from unknown sources to flow through his trust account even though he did no legal work to earn the money. He was a conduit like thousands of lawyers, notaries, proxies, and real estate professionals for helping hide illegal proceeds and money looted from elsewhere into real estate or illicit payments. The Vancouver lawyer ignored “a sea of red flags” and never asked the source of funds or where they were deployed. He admitted there was “risk involved” so he charged a tenth of one per cent of the amount, but did no legal work for the client.
Lawyers in Australia, Britain, and Europe are now required to determine and disclose the beneficial ownership of any client and provide that information on demand to tax authorities or law enforcement officials.