In my experience as a real estate lawyer and speaker, when a real estate brokerage has a proper FINTRAC compliance program, not only do they stay out of trouble with FINTRAC auditors, but they actually close more deals without any negative consequences.
However, the opposite is also true. When you do not have a proper program, it is more likely that your deals may not close, as lenders are conducting their own due diligence on every potential buyer, and title insurers are performing due diligence on buyers as well as sellers.
In addition, the penalties administered by FINTRAC can be extremely damaging to a brokerage. Not only are the penalties increasing, but the brokerage is publicly named on the internet, which can severely harm your brand image and reputation.
Administrative penalties are increasing
In the last three years, seven administrative penalties have been issued against brokerages across Canada, ranging from a minimum of $50,000 to over $250,000.
In March 2024, a prominent real estate brokerage in Toronto was penalized $107,827.50 after FINTRAC auditors uncovered multiple violations, including failure to adequately document their KYC procedures, insufficient risk assessment, lack of proper ongoing compliance training and gaps in identity verification records. The penalty—announced online—highlights exactly why brokerages must stay vigilant.
To see the full list, simply Google “public notice of FINTRAC monetary penalties.” The reasons vary, including not having a proper FINTRAC compliance regime, failing to ensure everyone in the brokerage is properly trained in FINTRAC guidelines, and lacking tools to identify suspicious transactions before, during, or even after a deal has closed.
Key questions every brokerage should ask clients
Here are some key questions, drawn from my own FINTRAC training courses and brokerage audit reviews conducted over the years, that you should ask every client to ensure your brokerage knows your client and stays out of trouble:
“How did you find me?”
The answer to this question should immediately place the person within your community of clients. It could be a referral from a relative, co-worker, or a family whose child plays soccer with yours. When a new client fits into your community, they’re not laundering money.
“Where do you work?”
The occupation of the client demonstrates their connection to their community. This is one of the primary criteria reviewed by FINTRAC auditors. When clients are connected to their communities, they are unlikely to be laundering money. Additionally, employed clients typically qualify more easily for a mortgage.
Always check potential clients online
There are powerful apps available now to properly identify clients immediately, ensuring they are not using forged identification documents or listed on any suspicious databases. You can also use these apps to monitor your clients even after closing.
Think like a landlord when evaluating clients
You know the grief a landlord suffers when they don’t properly qualify a tenant. You must understand the consequences you’ll face if you’re dealing with a suspicious client. A negative online story involving you and a suspicious client will follow you for years, seriously impacting your brand image.
Pay close attention to the buyer’s body language when asking FINTRAC questions—there should be no hesitation, avoiding eye contact, or changing the subject.
Be ready to “tell a story” about every new client
Be able to clearly answer the following questions for each client:
- How was the client referred to you?
- What is the purpose of the transaction?
- Where is the down payment coming from?
Having a clear story helps explain any issues that may arise later.
Ensuring your brokerage is fully compliant protects your business and your reputation, and ultimately allows you to focus confidently on closing more deals.