B.C. real estate broker sues money-laundering watchdog over $255,000 penalty

The B.C. Supreme Court is seen in Vancouver, B.C., in this June 2, 2015 file image. (THE CANADIAN PRESS/Darryl Dyck)

A B.C. real estate broker has filed a lawsuit against Canada’s money-laundering watchdog after being hit with a $255,000 penalty.

In January, the Financial Transactions and Reports Analysis Centre of Canada (Fintrac) issued a notice of violation to Pacific Place-Arc Realty Ltd., a real estate broker that has offices in Burnaby, Surrey and Richmond. Fintrac alleged that Pacific had committed six violations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated regulations.

The violations related to allegations that Pacific had deficient procedures and processes that were required to be implemented under the law.

One allegation involved a failure to develop compliance policies and procedures that fully covered the requirements for verifying client identity, determining third parties, record-keeping of business relationships and receipt of funds.

Another had to do with an alleged failure to fully assess and document the money laundering or terrorist activity financing risk of its geographic locations, products and delivery channels.

A third referred to an alleged failure to submit a suspicious transaction report where there were reasonable grounds to suspect that transactions were related to a money laundering offence.

Chilwin Cheng, a lawyer for Pacific, said that the company denies any allegation, and there’s no allegation that they actually engaged in money laundering.

“None of the allegations are about money laundering, active money laundering or engaging in money laundering,” he said. “It’s a failure to address and implement procedures that Fintrac had sought to have implemented by my client.”

After Pacific chose not to respond to the allegations, the federal financial intelligence unit in July imposed the $255,750 “administrative monetary penalty.”

Pacific operates within a larger group of companies called Pacific Place Group. The Group offers personal insurance, investment, real estate brokerage and property management services. Pacific is also licensed as an insurance broker.

Of the nine such penalties recorded on Fintrac’s website, the penalty for Pacific is the largest amount levied so far by the federal agency. The next two highest fines imposed were both for $206,000 and involved companies in Quebec. Four of the nine penalties have involved B.C. firms.

Cheng said it’s his client’s position that there’s a “whole layer” of provincial legislation, with Pacific being regulated by the Real Estate Council of B.C., that imposes similar or identical measures.

“We’re not against money-laundering regulations. It’s integral to the integrity of our financial system, but we have a certain division of power in Canada and this kind of regulation ought to be handled at the provincial level, not the federal level, and that’s the thrust of our claim.”

Cheng said certain administrative provisions of the federal legislation fall into provincial jurisdiction and should be declared null-and-void, with the company also seeking to quash the penalty.

He said there have been a number of challenges to individual fines but Pacific’s B.C. Supreme Court lawsuit is the first legal challenge he’s aware of to the Fintrac compliance regime on federalism grounds.

No response has yet been filed to the lawsuit. In an email, Fintrac said they had no comment as the matter is before the courts.