Bring title insurers under anti-money laundering rules, former executive says
Title insurers have to be introduced underneath anti-money laundering guidelines to struggle in opposition to rip-off artists who impersonate householders to promote or mortgage their properties, a former insurance coverage government says.
Tim Hyde, who spent years within the title insurance coverage business in Ontario, mentioned dozens of circumstances involving impersonators in Ontario and B.C. confirmed the necessity for title insurers to be designated as “reporting entities” underneath Canada’s cash laundering regulation.
Hyde has been lobbying the federal authorities for the adjustments alongside fellow lawyer Kevin Comeau and Denis Meunier, an anti-laundering guide who beforehand labored at each the Canada Revenue Agency and Fintrac, Canada’s monetary intelligence company.
The spate of title fraud circumstances embody that of a Toronto condominium proprietor who found her property had been listed and offered final yr for $970,000 by somebody utilizing her title.
Owner Moffy Yu, who lives in China, advised The Canadian Press in January that she was shocked to find her title had been changed on the title and a stranger was dwelling within the property. Police mentioned they have been investigating.
Hyde, Comeau and Meunier wrote to Finance Minister Chrystia Freeland in November 2022, urging the inclusion of title insurance coverage corporations in Canada’s anti-money laundering regime because of the corporations’ involvement “in the high-risk real estate sector, which has been very attractive to money launderers and corrupt foreign kleptocrats.”
“Title insurance is not well understood,” Hyde mentioned. “Even though, frankly, it’s been around for 20 years, it’s insuring every mortgage in the country, it’s insuring every transfer in Ontario and it’s insuring most of the transfers in the rest of the country.”
Hyde mentioned title insurance coverage corporations have a bigger stake than attorneys, brokers or brokers in actual property transactions that contain cash laundering or id fraud, but they do not need to report suspicious transactions, not like counterparts within the United States.
Simply bringing title insurers underneath the Proceeds of Crime (Money Laundering) and Terrorist Financing Act will not remove title fraud, Hyde mentioned. But it may very well be a great tool within the struggle in opposition to launderers.
“It’s just, to me, incongruous that the entity that searches for the indicia of fraud the hardest has no reporting obligation to anybody except themselves,” he mentioned.
Hyde mentioned three huge U.S.-based insurance coverage corporations with Canadian subsidiaries management a lot of the title insurance coverage market in North America, and so they have anti-money laundering obligations to America’s Financial Crimes Enforcement Network.
“They’re already reporting a deal in Niagara Falls, New York, that they don’t have to report in Niagara Falls, Ontario,” he mentioned. “That just seems crazy.”
Unlike different insurance coverage insurance policies with month-to-month premiums, title insurance coverage polices contain a one-time fee to a small variety of corporations dealing with giant numbers of land switch and finance transactions, Hyde mentioned.
Not solely do these corporations hold data of these transactions, additionally they seemingly know of any crimson flags once they deny title insurance coverage protection, Hyde mentioned.
Bringing the corporations underneath anti-money laundering guidelines, he mentioned, would imply data of these denials and transactional paper trails may probably be used when investigating or stopping circumstances of title fraud.
But Daniel Pinnington, president and CEO of the Lawyers’ Professional Indemnity Company in Ontario, mentioned he does not consider title insurers in Canada can play a big function in stamping out cash laundering circumstances involving title fraud.
Pinnington mentioned title insurers like his firm, which is owned by the Law Society of Ontario, have a small market share and do not function the identical as American corporations which are extra concerned in actual property transactions by dealing with the receiving and transferring of funds.
“Obviously we’d love to see a reduction in title fraud because it leads to claims,” he mentioned. “Anything that can be done to reduce those frauds, we support it. Real estate fraud has been around for a long time.”
Pinnington mentioned subtle id theft involving authorities paperwork used to dupe attorneys and lenders is extra of a urgent challenge than cash laundering.
“It’s amazing how sophisticated these these frauds are now,” he mentioned.
He mentioned there’s been just a few “waves” of title fraud all through his profession, prompting provincial regulation societies and his firm to ramp up fraud prevention training for attorneys.
“Lawyers got more sophisticated about recognizing and spotting the red flags of fraud and we saw lawyers preventing them,” he mentioned.
The Financial Consumer Agency of Canada says there are two major avenues for actual property fraud involving titles to properties and bogus foreclosures proceedings.
“Title fraud happens when fraudsters steal the title to your home. They sell your home or apply for a new mortgage against it,” the company says. “Title fraud usually starts with identity theft, which may happen if someone steals your personal information.”
This report by The Canadian Press was first revealed March 28, 2023.
