chapter 3 money laundering

Question 1

Which of the following scenarios would require a licensee to identity a person under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act?

a. A licensee receives funds from an unidentified person who is represented by another licensee.
b. A licensee receives four separate $5,000 payments (of cash) within 12 hours from a single unidentified person.
c. A licensee is representing an unidentified person when a purchase of real estate occurs.
d. A licensee receives funds from an unidentified person in the form of a bank draft.

1. B and D only
2. C and D only
3. B, C, and D only
4. All of the above

Answer 1

Correct Answer: 3

Option (3) is correct because the licensees in scenarios B, C, and D are all required to identify someone. As part of a licensee’s Know Your Client obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, there are four main triggers that require a licensee to identity a party in a real estate transaction. A licensee must identify their client if they receive funds from a person in any form. For that reason, the licensees in scenarios B and D must identify a person. Scenario B also falls within the large cash transaction trigger for identifying a person. Additionally, licensees must identify their client when a purchase and sale of real estate occurs, meaning that the licensee in scenario C must identify a person. Scenario A does not require a licensee to identity the unidentified party because each licensee needs only to identify their own client.

Question 2

Which of the following is TRUE with respect to money laundering through real estate transactions?

1. The only way to launder money is through buying physical property with physical cash.
2. Real estate is highly attractive for money launderers because real estate is a fairly stable asset.
3. The use of a corporate entity guarantees that money laundering is not happening, as beneficial ownership is publicly recorded at the Land Title Act registry.
4. Money laundering is best dealt with by banks and other financial institutions.

Answer 2

Correct Answer: 2

Option (2) is correct because one of the many reasons which real estate is attractive for money launderers is that real estate is a fairly secure and stable asset that cannot be stolen and is less susceptible to dramatic decreases in value in the long term. Option (1) is incorrect because most money laundering is done through electronic means, not through physical cash. Option (3) is incorrect because the use of a corporate entity is commonly used to launder money, as these entities mask the beneficial ownership of property. While the Land Ownership Transparency Act has been enacted to help fight the hidden ownership of land in B.C., this does not mean that money launderers have automatically stopped using corporate entities in their money-laundering schemes. Further, beneficial ownership is recorded in the Land Owner Transparency Registry, which is different than the Land Title Act registry. Option (4) is incorrect because licensees often have useful insight into money laundering, given their role as “boots on the ground”.

Question 3

Which of the following is TRUE with respect to suspicious transactions under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act?

1. The threshold for reporting a suspicious transaction is “reasonable grounds to believe”.
2. Suspicious Transaction Reports must be filed within 30 days of meeting the threshold for the filing of a Suspicious Transaction Report.
3. Suspicious Transaction Reports must be submitted electronically to the British Columbia Financial Services Authority .
4. Potential red flags that could initiate suspicion or indicate that something may be unusual without reasonable explanation are known as money laundering/terrorist financing (“ML/TF”) indicators.

Answer 3

Correct Answer: 4

Option (4) is correct because it is a true statement. ML/TF indicators are potential red flags that could initiate suspicion or indicate that something may be unusual without reasonable explanation. Option (1) is incorrect because the threshold for reporting a suspicious transaction is “reasonable grounds to suspect”. Option (2) is incorrect because Suspicious Transaction Reports must be filed as soon as practicable after meeting the threshold for the filing of a Suspicious Transaction Report. Option (3) is incorrect because Suspicious Transaction Reports must be submitted electronically to FINTRAC.

Question 4

Which of the following statements regarding a licensee’s reporting obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act is TRUE?

1. If a licensee receives over $5,000 or more in cash in a single transaction, or multiple payments of cash that add up to $5,000 or more in a 24-hour period, the licensee must file a Large Cash Transaction Report within 15 days of the transaction.
2. A Terrorist Property Report must be filed within one year of a transaction where a licensee believes that property under their control is owned by a terrorist group.
3. Even if the monetary amount is small, licensees have an obligation to fill out Suspicious Transaction Reports as soon as practically possible when they determine that there are reasonable grounds to suspect that a transaction is related to money laundering.
4. A hunch that money laundering is occurring, on its own, meets the threshold of “reasonable grounds to suspect” which is required to file a suspicious transaction report.

Answer 4

Correct Answer: 3

Option (3) is correct because there is no monetary threshold for reporting on a suspicious transaction, and licensees have an obligation to fill out a Suspicious Transaction Report as soon as practicable when they determine that there are reasonable grounds to suspect that a transaction or attempted transaction is related to the commission or attempted commission of a money laundering or terrorist financing offence. Option (1) is incorrect because the threshold amount of money is $10,000, not $5,000. Option (2) is incorrect because a Terrorist Property Report must be filed without delay by a licensee when the licensee knows or has reason to believe that property in their possession or under their control is either owned or controlled by a terrorist group. Option (4) is incorrect because “reasonable grounds to suspect” is a step above a simple suspicion or hunch. A simple suspicion or hunch, by itself, is not enough to amount to “reasonable grounds to suspect”.

Question 5

Which of the following statements regarding money laundering is FALSE?

1. Money laundering is the process used to disguise the source of money earned from criminal activity, and most of it occurs through electronic, non-cash transactions.
2. It was estimated that over $7.4 billion was laundered in British Columbia in 2018.
3. Money laundering often has the negative effect of decreasing real estate prices, which cuts down on real estate licensee commissions.
4. Money laundering can have the effect of eroding the public trust of professionals who assist money launderers, such as real estate professionals.

Answer 5

Correct Answer: 3

Option (3) is correct (false) because money laundering has not resulted in a decrease in real estate prices in the British Columbia real estate market. Option (1) is incorrect (true) because money laundering is the process used to disguise the source of money earned from criminal activities, and is commonly done through the financial system electronically. Option (2) is incorrect (true) because it was estimated that $7.4 billion was laundered in British Columbia in 2018. Option (4) is incorrect (true) because money launder has the effect of eroding public confidence and trust in professionals who assist money launderers.

Question 6

Which of the following definitions BEST describes reasonable grounds to suspect?

1. A suspicion that money laundering is occurring, that a licensee has formed based on an assessment of facts, context, and indicators.
2. A licensee has a simple suspicion of a money laundering offence. The licensee cannot articulate why they have this suspicion, but this specific licensee usually has good suspicions.
3. A licensee has reasonable grounds to believe a money laundering offence is occurring and can point to verified facts that show a probability of money laundering.
4. A licensee believes that there is a possibility that a money laundering offence is occurring, yet cannot point to any reasons for their belief.

Answer 6

Correct Answer: 1

Option (1) is correct because reasonable grounds to suspect occurs when a suspicion has been formed that money laundering is occurring, based on an assessment of facts, context, and indicators. Option (2) is incorrect because a hunch, or simple suspicion, is not enough to ground reasonable grounds. Being unable to articulate reasons for a suspicion is a sign of only having a simple suspicion, and nothing more. Options (3) is incorrect because it describes the threshold of “reasonable grounds to believe” which is a higher threshold than “reasonable grounds to suspect”. Option (4) is incorrect because if a licensee cannot point to any reasons for believing that money laundering is occurring, then they only have a simple suspicion, not reasonable grounds to suspect.