On September 30, 2010 one of the landmark abuse of dominance cases in Canada was settled after approximately four years of investigation by the federal Competition Bureau and negotiations with The Canadian Real Estate Association, one of the largest single industry trade associations in Canada.
The Consent Agreement entered into between the Competition Bureau and CREA has, in addition to ending one of the few Canadian abuse of dominance cases in the past twenty-five years, also raised an interesting legal question on whether the mere posting of a listing on the MLS® system by a licensed REALTOR® imposes FINTRAC reporting obligations on the posting REALTOR®. The Consent Agreement is summarized here.
The essence of the Consent Agreement is the requirement that CREA amend its rules to require member real estate boards across Canada to allow REALTORS® to offer mere posting services on the MLS® system to sellers of residential real estate. The MLS® system is a cooperative real estate selling network, operated by local Canadian real estate boards and CREA, on which members of organized real estate in Canada (REALTORS) may list properties for sale for a fee paid by their clients.
A mere posting service involves posting a property for sale on the MLS® system by a REALTOR® without the requirement for the REALTOR® to provide any other real estate services for their client (such as acting as agent for their client), the effect of which may be to turn the MLS® system into a type of Craigs List.
While one of the principal rationales for CREA’s MLS Rules that were subject to challenge, and significantly amended as a result of the settlement with the Bureau, was to ensure that REALTORS fulfilled their fiduciary duties to their clients (as agents), it is not yet clear what the full impact of the rule changes will have on the vendor/REALTOR relationship. In particular, the changes to CREA’s MLS Rules and the introduction of a mere posting real estate listing system in Canada has created uncertainties regarding the application of Canada’s anti-money laundering rules to REALTORS posting properties for their clients.
In this regard, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act imposes certain reporting obligations on real estate sales representatives and real estate brokers to file large cash transaction reports, suspicious transaction reports and terrorist property reports with FINTRAC under certain triggering conditions. Under the Act, those reporting obligations arise when real estate sales representatives or real estate brokers act as agents in respect of the purchase or sale of real estate, not when they act in respect of the listing or marketing of the home on the MLS® marketing system.
Whether REALTORS® who merely post listings are acting as an agent in respect of the purchase or sale of real estate has not been judicially determined and it remains unclear whether REALTORS® in that situation have a reporting obligation to FINTRAC under the Act. The FATF Forty Recommendations, which form the basis of the reporting obligations in the Act, require that FATF jurisdictions implement customer due diligence and record keeping requirements for real estate agents only when they are involved in transactions for their clients concerning the buying or selling of real estate.