Independent MP Kevin Vuong flagged the issue of fraudsters using fake income for mortgage loans in Parliament, citing an investigative report linking these schemes to Chinese money laundering that has been driving the Canadian housing crisis.
He added that “these frauds fuel real estate bubbles” and reinforce earlier discoveries regarding Chinese money laundering in the Canadian real estate market.
Mr. Vuong highlighted an instance involving a woman who owns four Toronto properties. She opened her HSBC Aurora bank account in 2012, declaring herself a “Homemaker with no annual income.” However, her Toronto account quickly received substantial wire transfers from HSBC China accounts and issued “high value cheques” to third parties for real estate purchases, according to the whistleblower.
A separate instance involves a woman working part-time as a hairdresser. Despite her part-time occupation, she owns multiple homes across Ontario and simultaneously claims an income of $536,280 for a “Business Manager” position in Guangzhou.
The whistleblower stated that “there are thousands of these cases,” where Chinese residents in the country allegedly use forged documents to secure approved mortgages.
In response to Mr. Vuong’s inquiry regarding the government’s strategy to tackle fraudulent purchases of Canadian homes and their potential role in the housing crisis, Prime Minister Justin Trudeau highlighted his government’s initiatives to regulate the influx of foreign funds into Canada’s real estate.
Housing Crisis and Money-Laundering
The cases, disclosed by the HSBC employee, resonate with earlier studies that connected Chinese money-laundering schemes and underground banking to the housing crisis in major Canadian metropolises such as Toronto and Vancouver.The project’s focus broadened nationally during the COVID-19 pandemic, driven by shifts in money launderers’ methods due to the temporary closure of casinos.
“During this time, FINTRAC observed a rise in money laundering typologies involving transferring large sums of funds to Canada from foreign money services businesses, often located in China, notably Hong Kong, and the laundering of the funds primarily through the real estate, securities, automotive and legal professions,” the study stated.
FINTRAC noted that these wire transfers from China were directed into the bank accounts of “multiple, unrelated individuals in Canada,” who acted as “money mules” for the underground banking network.
Matching the HSBC employee’s revelations, the report also mentioned that people involved in underground banking schemes often had jobs like students, homemakers, office managers, and real estate agents, or were unemployed.
“While most of these reports involved suspected money laundering activity in and around Lower Mainland casinos, concerns were also raised about money laundering in other sectors of the economy, including ... the real estate sector, where there were suggestions that money laundering activity was contributing to the rapid increase in housing prices in the Lower Mainland and other parts of the province,” the report stated.
