Buying Sandy Hill property by the numbers

Ralph Blaine

“Let’s face it, our country has a problem with financial crime”

On February 2 2024, this headline introduced a story by Niamh Leonard on page 4 of the Globe and Mail’s business section. Of course, it has long been known that Canada’s stable economic and justice systems make it a haven for money-laundering. This Globe story says that knowledgeable sources estimate that between “$45 billion and $113 billion is laundered in Canada each year.” The Globe story goes on to detail a major development in federal legislation that should help deter such “financial snow washing.” Ms.Leonard specifically mentions the distortion of real estate markets caused by the influx of dirty money. Is it possible that Sandy Hill is a lucrative haven for the illicit profits of human traffickers, internet hackers, and drug smugglers? Let me tell you what I discovered about a few property holdings in our neighbourhood…

Back in 2012, a for sale sign appeared on the lawn of my neighbour Sue’s house. She had done a lot of work on the house, and we were surprised when it was put on the market. Once it was sold, everyone was naturally eager to welcome our new neighbour. It was a bit of a letdown to discover that the new owner was 7242891 Canada Inc.—or rather a numbered company with that ID. Almost before you could blink an eye, Sue’s house had been subdivided into 10 rooms, whose residents shared one kitchen and two bathrooms. Who provided the money for 7242891 Canada Inc.?—almost impossible to find out. Whoever it was, a back of the envelope calculation suggests that the house they reconfigured would generate a net income of about $80 thousand per year, assuming they paid cash. They also got a very secure investment in an orderly, well-governed country.

A few months after Sue’s house sold, a nearby house on Daly was sold for $40,000 over asking price. The purchaser was 2304407 Ontario Inc.—another numbered company. And yes, this house was also chopped up into rooms for rent.

I’m sure that a thorough investigation of house sales in Sandy Hill would show that a significant number were purchased by numbered companies registered in Ontario (as Ontario Inc.) or federally (as Canada Inc.). Of course, none of this means that any of these numbered companies were incorporated for the purposes of laundering illicit money. It is just as likely that each one represents a group of legitimate investors who, for whatever reason, wanted to hide their identity. But that’s the problem with these numbered companies. Because the law shields the identity of the beneficiary owners, it is very difficult to prevent them being used to shelter dirty money.

But change is coming. The Globe story reports that the Canadian government has implemented rules that require federally incorporated companies to make public the names of their controlling owners. These names will be publicly accessible online. This means you or I should soon be able to find out who controls 7242891 Canada Inc., the company that bought Sue’s home.

Alas, the same is not true of the house sold on Daly Avenue. It was purchased by a numbered company registered in Ontario. Each province has its own registry of numbered companies and, according to Niamh Leonard’s story in the Globe, so far only British Columbia and Quebec have begun the process to make beneficiary owners of their numbered companies public.

Until Ontario follows suit, the residents of Sandy Hill, and any other neighbourhood in this province, will be hamstrung in efforts to determine to what extent our housing market is being distorted by money made on the backs of desperate immigrants, poor residents of Latin American villages terrorized by drug gangs, and hospitals here in Canada being held to ransom by computer-hacking rings­—money sneaking into our country through the back door of our own numbered companies.

Readers who are concerned about the rooming house issue in Sandy Hill might be interested in a February 27 Globe and Mail story by Laura Stone: