The Proceeds of Crime Money Laundering Terrorist Financing Act (PCMLTFA) applies to real estate brokers and sales representatives/agents. A broker or agent/representative is defined under the Act as a person or entity that is registered or licensed in a province to sell or purchase real estate. For employees of a reporting entity, the requirements under the PCMLTFA are the responsibility of the broker. However, the employee still has obligations to report suspicious transactions and terrorist property.
The obligations under the PCMLTFA relate to reporting requirements (related to suspicious transactions, terrorist property, and large cash transactions), record keeping, ascertaining identity, third party determination, and compliance regimes.
Failure to meet one’s obligations under the PCMLTFA can lead to administrative penalties or criminal sanctions. Violations under the Act are categorized as minor, serious, and very serious. For a minor violation the maximum penalty is $1000. For a serious violation, the maximum penalty is $100,000. For a very serious penalty, the maximum violation is $100, 000 for an individual and up to $500,000 for an entity, such as a brokerage. The determining factors for assessing a penalty are (i) the harm caused by the violation, (ii) the compliance history of the reporting entity, and (iii) the non-punitive, compliance-encouraging objectives of the PCMLTFA.
Criminal penalties are a possibility as well, with a maximum of up to 5 years in jail and fines that can climb into the millions of dollars, depending on the nature of the violation(s).
The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC – the government agency responsible for enforcing the PCMLTFA) has had the ability to levy monetary penalties since December 30, 2008, but it maintains that it is committed to working with reporting entities to ensure compliance with the Act and that monetary penalties are used as a last resort only after other measures to ensure compliance have proven ineffective.
However, on March 3, 2010, FINTRAC published (publication on the FINTRAC website: another form of punishment that can have devastating consequences to a business) the first fine it had assessed against a real estate brokerage. HomeLife Effect Realty in Hamilton was fined $27,000 for being in violation of the PCMLTFA. FINTRAC found that the brokerage had committed four violations: (i) failure to appoint a person to be responsible for the implementation of a compliance program, (ii) failure to develop and apply written compliance policies and procedures, (iii) failure to assess and document risk and, (iv) failure to develop and maintain a written ongoing compliance training program.
The obligations under the PCMLTFA are real, FINTRAC is real, and the penalties it is starting to levy are very real. Make sure you are prepared!