What Alberta Mortgage Brokers can Learn from the Cullen Commission Report Image

What Alberta Mortgage Brokers can Learn from the Cullen Commission Report


by Gary Siegle, RECA Regulatory Compliance Advisor, Mortgage Brokers

While perhaps not as prevalent as in larger jurisdictions with accelerated real estate markets, Alberta’s real estate industry is vulnerable to money laundering.

The Cullen Commission report, released in mid-June, is an extensive public inquiry report on money laundering in British Columbia (BC). Part IV of the report includes recommendations which specifically pertain to the mortgage sector. While these recommendations are for the BC industry, they are worth considering here as well, especially for Alberta mortgage licensees who are also licensed in BC.


  • give the mortgage broker regulator a clear and enduring anti-money laundering mandate
  • change the definition of mortgage brokering to include money lenders
  • require mortgage broker registrants (licensees) to provide extended criminal and police background checks, including police database information
  • require mortgage brokerages to submit annual information returns to give the regulator better insight into industry trends and risks
  • enhance sector education to include detection and reporting of fraud and money laundering
  • increased financial penalties for any parties found to have participated in money laundering
  • allow the regulator to order disgorgement of profits from misconduct
  • create a rule requiring real estate licensees to report suspected unregistered mortgage brokering activity
  • impose a duty to act in the best interests of a client or investor, to act fairly, honestly and in good faith; and fulfill know your client identification obligations
  • create a new provincial money laundering intelligence and investigation unit, which would have an information-sharing arrangement with the mortgage and real estate regulator
  • make mortgage brokers reporting entities under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (federal jurisdiction which is being considered currently by FINTRAC)

Cullen Commission Recommends Enhanced Regulation of Private Lending

Private lending of mortgages is an area of particular concern when it comes to money laundering as it is currently an unregulated business in Alberta. Private lenders include mortgage investment corporations (MICs), investors who pool their capital (syndicated mortgages), or individuals lending their own money.

Canada Mortgage and Housing Corporation estimates that MICs account for one percent of residential lending in Canada and have been growing steadily in prominence for several years. These special entities allow individuals to pool funds and invest in mortgages where source-of-funds declarations from investors are currently not required.

Participating in a syndicated mortgage is another way money laundering may be facilitated as this type of lending involves multiple parties and there is currently no reliable way to identify the participants.

The Cullen Commission report recommends the following regulatory enhancements regarding private lending transactions in BC:

  • place onus on non-regulated mortgage lenders to make source-of-funds inquiries of investors
  • require mortgage registrations to include all owners of the mortgage (particularly important in syndicated mortgages, as there is no way to identify participants)
  • amend the definition of “interest in land” to include mortgages (in the BC Land Owner Transparency Act) to ensure beneficial owners of a charge cannot obscure their ownership
  • create a separate licensing regime for private mortgage lenders
  • ensure the regulator of private mortgage lenders has access to land titles data, including new mortgage registrations, in a form that allows it to identify unlicensed lenders
  • remind lawyers to remain vigilant to ensure loans on any foreclosures were legitimate
  • require “source-of-funds” declaration be filed in court for every recovery of debt claim
  • give court authority to refuse debt action or foreclosure if the court is not satisfied with the validity of the “source-of-funds” declaration or if the court concludes the funds were derived from criminal activity


The Cullen Commission shines a light on the extent of the gaps in legislation that exists, which can allow for money laundering to occur within the mortgage industry in BC. RECA will monitor the steps taken by BC regulators and determine the applicability (if any) to the mortgage brokerage business in Alberta.

RECA encourages Alberta mortgage brokers and associates to broaden their understanding of how money laundering may occur in the mortgage sector and take any additional steps to protect the integrity of the mortgage industry.

Licensees should know their clients (both borrowers and lenders) and if something seems out of place it is always best to inquire further or to contact RECA for more information on regulatory compliance.

If you have any questions or comments regarding this summary of the Cullen Commission, please contact Gary Siegle, Regulatory Compliance Advisor, Mortgages by emailing: gsiegle@reca.ca.

Share your Experience

Have you encountered situations where you suspected money laundering in Alberta? Do you think these, or similar recommendations would benefit the Alberta mortgage industry as well?

Want to Know More?

What prompted these recommendations for the mortgage sector? Pages 871–873 in the report contain indicators of suspicion of fraud and money laundering. More generally, pages 874–878 contain suspicions of indicators of real estate transactions by phase and may be of interest to real estate licensees as well.

Review further recommendations regarding money laundering vulnerabilities of private lenders. The summary of private lending vulnerabilities is on pages 912-913.

Review and download the full Cullen Commission Report.

Warning it is an 1800 page report—this link goes directly to the section on real estate. The Mortgage Broker issues referenced can be found on pages 871-873 and the private lending recommendations can be found on pages 912-913.