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UBC Real Estate Trading Services Licensing Course > Chapter 2.2: Money Laundering / FINTRAC > Flashcards

Chapter 2.2: Money Laundering / FINTRAC Flashcards

1
Q

____________: the process used to disguise the source of money earned from criminal activities

A

Money laundering

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2
Q

Money laundering is a __________________ in Canada under section 462.31(1) of the criminal code

A

Criminal offence

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3
Q

A money laundering offence is committed when we someone deals in any manner with property or the proceeds of property with the intent to __________ or ___________ it, knowing or believing that some or all of it was obtained or derived as a result of the commission of a designated offence

A

Conceal or convert it

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4
Q

Examples of money laundering

A

Drug trafficking
Fraud
Stock manipulation
Tax evasion

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5
Q

One negative impact of money laundering is that it may increase the ___________________________

A

Corruption of public officials

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6
Q

One negative impact of money laundering is that it threatens the “______________”.

A

Rule of law

Accountability of persons, institutions, and entities to follow our laws

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7
Q

One negative impact of money laundering is that it erodes the _______________________ who assist money launders

A

Public trust of professionals

Such as lawyers, accountants, realtors, etc

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8
Q

One negative impact of money laundering is that is that it reduces _______________ for public services (tax evasion)

A

Tax funds

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9
Q

One negative impact of money laundering is that it causes _________________________ (real property )

A

Distortions in the market

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10
Q

One reason real estate is attractive to money launders is due to its ________________, meaning large amounts can be laundered in a single transaction

A

High value

Houses are expenses so conveying $1m dirty money to clean money is substantial

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11
Q

One reason real estate is attractive to money launders is due to ______________, as fairly secure and stable assets cannot be stolen

A

Security

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12
Q

One reason real estate is attractive to money launders is due to its ______________, it doesn’t require a large degree of sophistication

A

Simplicity

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13
Q

One reason real estate is attractive to money launders is due to its _________________________, which typically increase in value over the long term

A

Potential for profit

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14
Q

One reason real estate is attractive to money launders is due to the _____________________________. Such as use of separate legal entities in real estate purchases/ sales, and unregulated lenders in financing

A

Variety of methods to launder money

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15
Q

One reason real estate is attractive to money launders is due to its ________________, as prices can be manipulated to control the amount of money laundered in a transaction

A

Subjective value

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16
Q

One reason real estate is attractive to money launders is due to the __________. There are ‘weak spots’ in the industry that criminals can exploit

A

Oversight

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17
Q

One reason real estate is attractive to money launders is due to the ___________. The identity can be hidden through the use of corporations, trusts, and nominees

A

Anonymity

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18
Q

One reason real estate is attractive to money launders is due to the ______________________. Criminals can flip properties as part of their money laundering activities without necessarily raising suspicion

A

Speculative component

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19
Q

There are ____ stages in the money laundering process

A

3

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20
Q

What are the 3 stages in the money laundering process

A

Stage 1: placement
Stage 2: layering
Stage 3: integration

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21
Q

Stage 1 - placement

Explain what happens in this step

A

Process of placing the proceeds of crime into the financial system

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22
Q

Stage 2: layering

A

Converting the criminal funds into another form in order to conceal the criminal origins of the proceeds

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23
Q

Stage 3: integration

A

Reintroducing and reintegrating the laundered funds into the legitimate economy to create the perception of legitimacy and having the funds appear to have been legally earned

In simple, putting the money back into circulation to make it look legal

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24
Q

Examples of Stage 1 - placement

A
  • Use of Smurf’s
  • using dirty money to repay loans
  • using dirty money for gambling (then converting the chips back into cash)
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25
Q

What does it mean to use a Smurf

A

arranging for multiple people to deposit small amounts of cash at different financial institutions

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26
Q

What are examples of stage 2 - layering

A

Cash deposits in other bank accounts, split and merge between bank accounts

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27
Q

What are examples of stage 3 - integration

A
  • may renovate a property by paying cash, with the sale of the improved property and the resulting profit appear to be legally earned
  • purchase high value items (lambo’s and such)
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28
Q

What stage is the most complicated money laundering stage

A

Stage 2 - layering

As it involves multiple complex transactions

May involve sophisticated professionals such as lawyers and accountants

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29
Q

There are _______ money laundering methods in real estate

A

3

Three

Tres

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30
Q

One money laundering method in real estate is the use of __________, ________ and __________

A

Corporate entities, trusts, and nominees

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31
Q

The use of corporate entities, trusts, and nominees is strategic why?

A

Because beneficial ownership is not recorded in any land title offices in Canada

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32
Q

Another money laundering method in real estate is the _______________

A

Use of cash

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33
Q

Use of money

Money laundering method #2

A

Purchasing, renting, renovating, lending, discharging, mortgages without lender involvement minimizes exposure to suspicion

34
Q

Money laundering method in real estate #3 is the use of _____________

A

Unregulated lenders

35
Q

Unregulated lenders

Money laundering method #3

A

Private and unregulated lenders are not subject to reporting requirements under PCMLTFA

36
Q

What does PCMLTFA stand for?

A

Proceeds of crime, money laundering, and terrorist financing act

37
Q

The PCMLTFA applies to 3 groups, who!

A

1) real estate brokers
2) sales representatives
3) real estate developers

38
Q

_______________ - acting as an agent for the purchase and sale of any type of real estate

A

Reporting entity

39
Q

PCMLTFA does not apply to a licensees ____________________________ (examples: leases or rental management)

A

Property Management activities

40
Q

What does FINTRAC stand for

A

Financial Transactions and Reports Analysis Centre of Canada

41
Q

Is FINTRAC separate from the RCMP?

A

Yes sir!

And they can even do their own investigations

42
Q

FINTRAC is an ____________________ which operates at arm’s length from the law enforcement

A

Independent government agency

43
Q

FINTRAC collects, analyzes, and discloses information to law enforcement and national security agencies to combat _________________________

A

Money laundering and terrorist financing

44
Q

Licensee have ____ key requirements to stay on top of when looking out for money laundering

A

4

45
Q

The 4 components the licensee must be aware of

A

1) compliance program
2) know your client
3) reporting
4) record keeping

46
Q

1) compliance program

_____________ must establish a compliance program for their brokerage, which provides the structure that ensures that the obligations under the PCMLTFA are fulfilled

A

Managing brokers

47
Q

2) Know your client (KYC)

A

Each licensee identifies their own client only

48
Q

There are 3 methods to best Know Your Client, what are they?

A

1) Government-issued photo identification method
2) credit file methods
3) dual process method

49
Q

1) Government-issued photo identification method

A

Part of know your client

ID must be authentic, valid, and current

Must either examine the document in person or virtually through sophisticated software that will analyze for security features

50
Q

What type of government issued ID is not valid

A

Viewing identification through video conferencing platforms such as zoom or Skype

51
Q

2) Credit File Method

Matching personal information provided by the client to a Canadian credit file that has been in existence for at least _______________

A

3 years

Three years!

52
Q

Dual process method

The name, _________, _________, or confirmation of account just match what the individual provided to the licensee

A

Name, address, date of birth

53
Q

Know your client (KYC) obligations can also extend to ___________, if they are not represented by another licensee

A

Non-client

54
Q

5 parts to the compliance program

A

1) compliance officer
2) policies and procedures
3) risk assessment
4) training program
5) review - every 2 years

55
Q

Four triggers to identify the person / entity

A

Trigger #1: receipt of funds (bank drafts, cashier cheques)

Trigger #2: purchase or sale transaction

Trigger #3: large cash transactions

Trigger #4: suspicious transactions

56
Q

____________ : a person / entity who instructs another person / entity to conduct an activity or financial transaction on their behalf

A

Third party

57
Q

Utilizing a third party creates separation between the _________ and the transaction by using “__________”

A

Criminal

Nominees

58
Q

Examples of nominees (aka third parties)

A

Corporations, trusts, associates, friends, and family members

59
Q

_______________________ is required in purchase and sales transactions and large cash transactions

A

3rd party determination

Realtors must take reasonable measures to determine if a client is acting on behalf of someone else

60
Q

3rd party determination is completed through a _____________________

A

Reasonable measures record

61
Q

There are multiple ways to confirm the existence of a corporate entity. What are 3 records you can use to confirm the corporation exists:

A

1) certificate of incorporation
2) certificate of active corporate status
3) record that has to be filed annually

62
Q

Licensees must also verify the corporations _______, ______, and the ____________________

A

Name, address, and names of its directors

63
Q

Reporting means providing certain documents to _________ and not to __________

A

FINTRAC

BCFSA

64
Q

3 different components to FINTRAC reporting

A

1) Terrorist property
2) Large cash transactions
3) Suspicious Transactions

65
Q

Terrorist Property suspicion must be reported to who?

A

Report must also be sent to the RCMP and the Canadian Security Intelligence Service (CSIS)

66
Q

Large cash transactions are considered what?

A

$10,000 or more in cash in a single transaction, or multiple payments of cash that add up to $10,000 or more in 24 hours

67
Q

If you notice a large cash transaction, aka more than $10,000 in one day, how soon should you report it?

A

Within 15 days

68
Q

_________________ is a key obligation upon licensees

A

Suspicious transactions

69
Q

Suspicious Transaction Reports (STR’s) must be submitted to _________________ as soon as practicable by a licensee when you determine that there’s reasonable grounds to __________ that a transaction is related to money laundering or terrorist financing offences

A

FINTRAC electronically

SUSPECT

70
Q

Record keeping must be kept in such a manner where they can be provided to ________ within __________ of a request

A

FINTRAC

30 days

71
Q

Records must be kept for at least ____________ from the date it was submitted to FINTRAC and include what documents!

A

5 yearS

Suspicious transaction reports 
Large cash transactions reports
Client information records 
Receipts of funds recorded 
Unrepresented party record
72
Q

What does AMP stand for

A

Administrative Monetary Penalties

73
Q

Administrative Monetary Penalties May range from ________ to ________ per violation

A

$1 - $100,000

74
Q

Administrative Monetary Penalties are not issued _________ in response to non compliance

A

Automatically

75
Q

FINTRAC may disclose cases of non-compliance to ____________ when there is extensive non-compliance

A

Law enforcement (but it isn’t mandatory, just must)

76
Q

FINTRAC must make public all ______________ imposed

A

Administrative Monetary Penalties

77
Q

Noncompliance can result in ________________ and or ____________

A

Administrative Monetary Penalties

criminal proceedings

78
Q

The maximum criminal penalties include up to $_________ and or _____ years if imprisonment

A

$2m

5 years

79
Q

A licensee is required to file a suspicious transaction report when they think a transaction is related to a money laundering or terrorist financing offence and it meets which of the following burden of proof?

A

Reasonable grounds to suspect

SUSPECT IS IMPORTANT 

80
Q

Which of the following statement about Fintracs administrative monetary penalties is true

A

FINTRAC is required to publish the names of the individuals or empties that have committed violations resulting in an AMP

UBC Real Estate Trading Services Licensing Course (24 decks)

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