> The whistleblower, whom The Bureau is calling D.M., immigrated to Canada as an international student from India, making him a minority among mostly Chinese-Canadian co-workers at the Aurora branch.
> “I am going to reveal potential mortgage fraud at HSBC Bank Canada and possibly some employees benefited from the fraud, financially pocketing thousands of dollars, which I call the proceeds of crime.”
> FINTRAC’s study doesn’t say that Canadian banks knowingly issued fake-income mortgages to Chinese diaspora buyers in Toronto. But in an interview, D.M. said banking staff are trained to guard against fraud, and the loan application packages he reviewed in Aurora beggared belief.
> The Bureau’s review of HSBC Canada emails and D.M.’s text messages, shows he came to believe numerous employees at the Aurora branch had direct knowledge of faked Chinese income mortgages, and a veteran manager with oversight of more than 10 Greater Toronto branches knew about broad and questionable mortgage lending for Chinese diaspora clients.
> Pointing to specific examples, D.M. claimed that another branch colleague had admitted processing numerous loan applications without meeting his clients, because a branch manager delivered her subordinates foreign income client applications so “they did not have to get sales themselves.”
> “She said yes, she knows specially in Mainland China there is a team who would even answer emails and phone calls verifying [Chinese income] but it’s a sophisticated and well organised scam,” D.M. 's email to HSBC Canada managers says. [...] “When I asked for such a serious issue if she raised a HSBC confidential [complaint] or not she evaded my question,” D.M. wrote. “Now we all love numbers, but I don't think the bank will like these kinds of numbers achieved through this way.”
Witnessed this first hand at RBC when my brother from Hong Kong was inquiring about getting a mortgage in Toronto since he wants to move back to Canada with his two young kids.
We found a random mortgage specialist (a Chinese lady) at RBC. Without knowing the full picture of my brother's income situation, she immediately suggested that she could get the mortgage approved regardless, just needed to fake some documents.
It was astonishing how she went straight to the point so quickly to someone she met the first time.
She also said a lot of people has non-taxed income and needed a way to get a mortgage before the real estate price becomes out of reach.
Don't get me wrong, it's definitely a problem, and something needs to be done, but lets also try to keep it in perspective... $500 million could well be 500 mortgages in Toronto. That would be about 0.02% of the private dwellings in Toronto.
TFA says: "The official noted that other nations require tax agencies to verify incomes for mortgages, which isn’t the case in Canada."
I don't know if it's a legal requirement, but I sure know I had to hand over all of _our_tax information to the bank to validate income when getting a mortgage in the US. You have to sign a form saying the bank is allowed to pul your data from the IRS; you're not just handing over paperwork and promising that it's legit.
Total conjecture: 1. US banks do not face nearly as diverse a set of applicants, and 2. are only required to hold the loan for 5 years.
1. It is very common in Canada for a person with wealth acquired outside the country to apply for a home loan. At the time I was approved as a guarantor for a home loan for over half a million CAD, I had only been in the country for 2 years, and had no credit history with any Canadian institution (out of laziness I just was added to my wife's accounts as a signer and cardholder when I moved). They accepted copies of my American credit history and bank statements, but had no real way to verify their truth. In the US, I don't think that (relatively) wealthy immigrants wanting a home loan are nearly as common. Richmond, BC is a great example of this: avg home price is 1.5mm and 60% of the residents are immigrants.
2. Canadian mortgages are refinanced every five years, traditionally (it is possible to get a longer term, but very uncommon). Combine this with the fact that Canadian real estate has ALWAYS gone up (until now), and financing a home really wasn't a risky thing. If a bank didn't like a customer, they could refuse to refinance after 5 years. If a bank foreclosed, they were basically guaranteed to be made whole.
> Are US banks just a lot more strict about source of income than Canadian banks?
American financial regulators are much more comfortable letting banks fail than their Canadian or European counterparts. (In part this is because of the sheer diversity of banks we have.) Being fined out of existence is a real possibility for an American bank. That shapes behavior.
The irony is the US talks a lot about financial transparency for other countries, but the US itself is the preferred place if you're looking to launder money.
No. I've purchased homes in both countries and from what I've seen, US banks are far less strict. Policies, procedures, and operations are very undisciplined at many US banks (compared to Canadian banks). I have noticed some are starting to become more strict in the past 5 years though.
a non-trivial portion of residential real estate transactions across the USA never apply for a loan. In certain areas it is more so. When real estate retail value rises fast, money appears from everywhere -- hint, not from first time home buyers.
The USA Federal system of mortgage loan gurantees has been gamed seriously, over and over since the 80s. It is a whack-a-mole for enforcement. All the parties close to the transactions have exactly the wrong incentives, most of the time. One of the defendants in a recent "pay cash to get your kid into elite school via fake sports" scandal was a mortgage broker in San Diego County. The Judge after reviewing evidence, reportedly told the man on the record "you are a thief." etc
Yes, but it’s partly the government’s fault. There’s literally no way for mortgage lenders to pull your tax records in order to verify income. There used to be some third party services to connect to the CRA but they got shut down and replaced with… nothing.
To maybe offer a different perspective:
I think the Canadian mortgages linked to Chinese accounts will likely all be paid.
What may be happening is that there is a lot of underground chinese financial activity that is not recorded in Canada and part of this 'network' is utilized to get money out of china.
> I think the Canadian mortgages linked to Chinese accounts will likely all be paid.
This is a "heads, I win", "tails, you lose" type of scam. The mortgage holders are all judgement proof. They have no income or assets to go after. So if the housing market crashes, the banks have no recourse.
It's the same as taking out a mortgage and instead of buying a house, you go to the casino and bet double or nothing. Sure, the intention to pay back is there. But it is contingent on the investment performing, and the bank is taking on unknown risks.
There is probably an unlimited number of people in China would would like to own Canada real estate. As long as you don't block those sales it can continue forever.
Mortgages in Canada are different than mortgages in the US in that they are full recourse. If the sale price during foreclosure doesn’t cover the costs, the banks can go after you personally for the balance. So you’d have to either a) leave the country, or b) declare bankruptcy. So, not exactly a risk-free option.
It's not a matter of if they get paid, it's the unfair advantage this gives in an already competitive market. 2/3 of these properties are probably rented out at inflated prices and the two probably pay the mortgage of the third owners live in. This is a free money glitch, aka fraud.
Tangentially related, there was an undercover Vice News report on the connections between Chinese Triads and the Mexico/US fentanyl trade a couple months ago [1]. I also wouldn't be surprised if there were underground networks of capital in Canada that were related to these mortgages.
> think the Canadian mortgages linked to Chinese accounts will likely all be paid
Out of curiosity, why? China's stock market is melting down in the midst of persistent deflation. A lot of people who thought they had liquidity may not anymore. Beijing could open the taps, but then that puts pressure on the currency.
> Out of curiosity, why? China's stock market is melting down in the midst of persistent deflation. A lot of people who thought they had liquidity may not anymore. Beijing could open the taps, but then that puts pressure on the currency.
The whole point of the money laundering operation is to get the money out of the country. China going to pot only accelerates it.
You can label it however you want, if both the lender and borrower are willing participants, it will be difficult to prevent this from happening.
Like mentioned in the article, often times the material is very obviously suspicious and banks probably know this and still turn a blind eye to it because these borrowers are low risk and much less sensitive to the high/rising interest rates of today...
I won't throw a stone at anyone trying to circumvent chinese capital controls. Though Canada isn't the place I would go to escape financial repression.
In Australia this became pervasive across all banks for the last 25 years. It got to the point where, around 5-10 years ago, new national rules were mandated that foreign income could only be assessed at some minor percentage of its evidenced volume under the epithet "loan serviceability criteria". At the face of it, these rules appear to have the public's best interests at heart. But in reality, they simply lock out anyone that isn't a locally registered card-carrying commuter wageslave (eg. cross-border entrepreneurs, immigrants, etc.).
So the new scam - from multiple independent sources - is apparently people from Singapore taking out loans in Chinese Yuan Reminbi denominations for Australian property against Singapore or Hong Kong banks, then coming to the Australian banks and having them "transferred" (internationally, and across currencies!) which allegedly sidesteps the local restrictions. The fact that I know this simply from talking to bank staff as a stranger shows how extremely pervasive these sorts of things are.
A “fun fact” for another Australian. As of this month at least one if the big four is doing serviceability assessments based on the PAYG gross income.
WRT your other foreign income/asset comments its much less nefarious. The local banks are focused on AU income and assets because it is directly tied to serviceability and recovery. You can do loans based on foreign income/assets but youll pay a few percentage points for the risk and conversion problems. The international loan outfits are usually smaller, though HSBC is a big one IIRC.
Look at any wiki article on any major global bank, the chapter about 'controversies and legal issues' is always a thick list, HSBC ain't worse or better than others.
There are no good guys there, that's not why the business was set up and corresponding folks were/are hired. If you want more controls, enforce more regulations, they do work if well defined.
HSBC seems worse than many others. When I moved to Canada my immigration lawyer explicitly advised to stay away from HSBC, this was in 2000 or so and they already had a pretty bad rep. The various scandals since then haven't improved that reputation. TD, CT and RB have their own problems but none of them have received even close to the total fines that HSBC has (to the best of my knowledge).
I agree there are no good guys here, but there are shades.
IANAFinancialInvestigator, but skimming through it sounds like:
1. Fraudulent applicants come to the bank with crazy stories to ask for enormous loans/mortgages toward a Toronto house, allegedly to turn hyper-suspicious big piles of cash into a more reputable-looking asset.
2. HSBC goes along with that because they want to suckle on the sweet regular payments of suspicious cash, even though they ought to damn well know that these customers are just a front for an organized crime ring.
3. As a bonus, this locally-concentrated money-laundering/speculative-investment thing screws up the property market for Torontonians. The local multimillionaire babysitter is willing to buy at almost any price because their secret financial goals are very different than yours.
While looking for other articles, I notice it's been ~16 months after the end of HSBC 10-year tangle with US regulators over their business with Mexican and Columbian drug cartels. [0]
A lot of it doesn’t even sound like money laundering, just fraud. You say you have a job paying you lots of money from China, verification is loose, you get the loans, and then try to make mortgage payments via Airbnb. The risk is mostly with the bank, and if it doesn’t blow up you make all the money.
While that may happen too, the article alleges the mortgage payments are being made with funds wired from China.
If the borrowers are making the mortgage via rent/Airbnb of the properties... then they are somehow keeping it secret within Canada and also sending it on an international round-trip, which seems like a strange stretch for any small-time "lie on the loan application" crook.
Banks these days often don’t hold on to those mortgages though. They can repackage them as securities like MBS and sell them to entities like pension funds. This type of thing is exactly how the GFC started
There used to be a thing called a “down payment” that was supposed to cover things like this. It would force you to have a modicum of equity in the house and give the bank a 20% buffer on the price to break even after a short sale.
This is not really news, this is certainly not exclusive to one bank or another
I remember some years ago I saw a comment somewhere that, for real estate purchases "proceeds from a certain country were subject to AML regulations... but not from China"
Really. I can imagine a Canadian banker saying that with a straight face.
This doesn't necessarily even need to have a laundering angle. I have a different take:
1. They come with some money, enough for whatever minimum down payment is required (but notably, the issuing bank will also lower down payment requirements for clients with high income or assets, which are faked anyway)
2. HSBC is incentivized to issue mortgages, yes, that's their business. But the actual fraud here sounds more like cash kickbacks from the fraud buyer to the issuing agent themselves.
3. Home prices are made on the marginal sale, so a small amount of this activity can have a large upward pressure on prices. This leads to typical bubble scenarios, and you can keep rolling over or refinancing mortgages as prices keep rising (or even just sell). To get a sense of this, over the past few years, the average Canadian house gained in price something like double the average Canadian income.
So in summary, a lot of this could be explain by plain fraud, enabling foreign buyers to both perpetuate, and participate, in a giant housing bubble. If that's true, and it all comes crashing down, then god help us all.
People have been waiting for decades for the Canadian housing market to tumble.
There are so many Canadians waiting on the sidelines with their down payment ready to be deployed and are out competed year after year.
The pent up demand for housing is enormous. Even with the high interest rates.
Hell, with the rumors of interest rates going down, there is a frenzy to BUY now, suck up the high interest and get a relief in a few years, because people are afraid that if the rates go down, more people will qualify for a mortgage and it will bring more pressure, so better to buy now if you can.
I am convinced it will not go down in my life time ever. Too much demand, not enough supply.
The issue is not new. I am of East Asian heritage and live in Canada. Several people asked me causally why I went to school and had a regular job. They explained that with the "Chinese money" I should not compete for jobs with folks who really needed the money.
I get that they shouldn't be stereotyping, but I frequently travel to Markham, and see lots of young Chinese kids with expensive cars. I think the last time I was there, I counted 40 Teslas.
Can you explain what they are implying? Is there a belief that China hands out blank checks to anyone who happens to be Asian? This sounds insane to me.
Read the article. It's not china giving blank checks, it is the set of rich folks China's stellar rise has created who are property rich and have capital from China they can live off of. There's no blank checks.
The stereotyping is lumping the parent post with this group on the basis of North American racial categories ("Asian" as a group, as if that's a thing.)
All sounds very plausible, but where are the effects of this? We should be seeing many people holding mortgages at HSBC not able to pay. Are there no public stats showing how many lack of payments being made to HSBC? Is HSBC going to hold on to these properties taking massive losses? For how long? It has definitely helped the run up of prices here. It will also help the collapse of prices as well, either that or the collapse of HSBC. Maybe the effects take a very long time to manifest. Lets hope it's not too long :)
The article suggests this is money laundering. It would make sense to have fake borrowers with fake incomes as part of a layering operation.
Someone wants to get $large_sum out of China. They can't do this without raising lots of flags in both countries. So they set up an army of fake borrowers, have them take out fraudulent mortgages on real properties in Canada, pay down the mortgages, and sell the property to obtain clean money on the other end.
All the better if the property rises in value in the meantime due to enormous fraud.
Not Canada, but before the pandemic caused rural housing prices to go up, there was a crime syndicate buying houses for marijuana grow operations and having the house pay for itself essentially until they got caught. https://www.cbsnews.com/losangeles/news/doj-raid-marijuana-g...
The article doesn't seem to suggest that the mortgage holders are actually straw purchasers, but the facts seem to suggest this is at least sometimes true. How can a hairdresser service several mortgages without "income" from China?
Makes sense I wasn't thinking about the full on laundering aspects. But even so, if the real estate is used in laundering, it will eventually have to be sold to get back clean money. This should still run up prices at the start, and run them down in the end. So I think the majority of the point still stands: there should be an uptick in sales (which there is not). They could be speculating on top of laundering, in which case they are taking some losses. We are -20% from peak. The time will come when they (the launderers) will need liquidity and sell which has not come. Will it ever come?
As long as real estate prices continue to rise, you won't see large scale missed payments because they will be able to sell the assets, refinance the loan, or even successfully rent it out.
We've seen this dynamic in 2008 and in the S&L crisis before. Bad loans drive the bubble, the expanding bubble hides the bad loans, but when the bubble stops, there is a massive large scale loan failure.
Assuming these mortgages are insured through CMHC, would HSBC be on the hook or the insurance system when some of these mortgages fail?
Canadians are certainly paying for social services used by folks who earn income abroad and pay little to no income tax in Canada, and folks who want to buy their first house are harmed by inflated housing prices.
My currently overseas landlord for some reason needed to travel to Canada to give birth, and was very eager to get their health card / banking documents sent to our rental despite it being rented out for several years prior to us arriving...
CMHC doesn't insure mortgages where the property value is equal to greater than $1 million, which in the Greater Toronto Area essentially limits it to condo purchases.
I think that's what a lot of people here are not realising (or perhaps they haven't read the article). In this case the main victim is HSBC if these loans were made to individuals who are speculating on foreign real estate without the income to cover the loan. This doesn't look like originate and distribute, i.e. HSBC shareholders will bear the losses.
> making him a minority among mostly Chinese-Canadian co-workers at the Aurora branch.
Not trying to point fingers on whether the branch workers were in on the whole thing, but maybe it was easier to perpetuate the fraud because of cultural familiarity?
Readit News
> “I am going to reveal potential mortgage fraud at HSBC Bank Canada and possibly some employees benefited from the fraud, financially pocketing thousands of dollars, which I call the proceeds of crime.”
> FINTRAC’s study doesn’t say that Canadian banks knowingly issued fake-income mortgages to Chinese diaspora buyers in Toronto. But in an interview, D.M. said banking staff are trained to guard against fraud, and the loan application packages he reviewed in Aurora beggared belief.
> The Bureau’s review of HSBC Canada emails and D.M.’s text messages, shows he came to believe numerous employees at the Aurora branch had direct knowledge of faked Chinese income mortgages, and a veteran manager with oversight of more than 10 Greater Toronto branches knew about broad and questionable mortgage lending for Chinese diaspora clients.
> Pointing to specific examples, D.M. claimed that another branch colleague had admitted processing numerous loan applications without meeting his clients, because a branch manager delivered her subordinates foreign income client applications so “they did not have to get sales themselves.”
> “She said yes, she knows specially in Mainland China there is a team who would even answer emails and phone calls verifying [Chinese income] but it’s a sophisticated and well organised scam,” D.M. 's email to HSBC Canada managers says. [...] “When I asked for such a serious issue if she raised a HSBC confidential [complaint] or not she evaded my question,” D.M. wrote. “Now we all love numbers, but I don't think the bank will like these kinds of numbers achieved through this way.”
Sounds like that branch is compromised
"Since 2015, the whistleblower concluded, more than 10 Toronto-area HSBC branches had issued at least $500-million"
It's not a branch. It's the whole bank. And you can safely infer it's not the only bank.
We found a random mortgage specialist (a Chinese lady) at RBC. Without knowing the full picture of my brother's income situation, she immediately suggested that she could get the mortgage approved regardless, just needed to fake some documents.
It was astonishing how she went straight to the point so quickly to someone she met the first time.
She also said a lot of people has non-taxed income and needed a way to get a mortgage before the real estate price becomes out of reach.
So definitely not just HSBC.
I don't know if it's a legal requirement, but I sure know I had to hand over all of _our_tax information to the bank to validate income when getting a mortgage in the US. You have to sign a form saying the bank is allowed to pul your data from the IRS; you're not just handing over paperwork and promising that it's legit.
1. It is very common in Canada for a person with wealth acquired outside the country to apply for a home loan. At the time I was approved as a guarantor for a home loan for over half a million CAD, I had only been in the country for 2 years, and had no credit history with any Canadian institution (out of laziness I just was added to my wife's accounts as a signer and cardholder when I moved). They accepted copies of my American credit history and bank statements, but had no real way to verify their truth. In the US, I don't think that (relatively) wealthy immigrants wanting a home loan are nearly as common. Richmond, BC is a great example of this: avg home price is 1.5mm and 60% of the residents are immigrants.
2. Canadian mortgages are refinanced every five years, traditionally (it is possible to get a longer term, but very uncommon). Combine this with the fact that Canadian real estate has ALWAYS gone up (until now), and financing a home really wasn't a risky thing. If a bank didn't like a customer, they could refuse to refinance after 5 years. If a bank foreclosed, they were basically guaranteed to be made whole.
American financial regulators are much more comfortable letting banks fail than their Canadian or European counterparts. (In part this is because of the sheer diversity of banks we have.) Being fined out of existence is a real possibility for an American bank. That shapes behavior.
The irony is the US talks a lot about financial transparency for other countries, but the US itself is the preferred place if you're looking to launder money.
The USA Federal system of mortgage loan gurantees has been gamed seriously, over and over since the 80s. It is a whack-a-mole for enforcement. All the parties close to the transactions have exactly the wrong incentives, most of the time. One of the defendants in a recent "pay cash to get your kid into elite school via fake sports" scandal was a mortgage broker in San Diego County. The Judge after reviewing evidence, reportedly told the man on the record "you are a thief." etc
Deleted Comment
By all accounts it seems the whole country is.
it's not like they're claiming these people are unable to pay.
This is a "heads, I win", "tails, you lose" type of scam. The mortgage holders are all judgement proof. They have no income or assets to go after. So if the housing market crashes, the banks have no recourse.
It's the same as taking out a mortgage and instead of buying a house, you go to the casino and bet double or nothing. Sure, the intention to pay back is there. But it is contingent on the investment performing, and the bank is taking on unknown risks.
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The housing market must first crash before the problem is tangible, and there's no sign of that happening.
[1] https://www.youtube.com/watch?v=E8wEGVIPJ_4
Out of curiosity, why? China's stock market is melting down in the midst of persistent deflation. A lot of people who thought they had liquidity may not anymore. Beijing could open the taps, but then that puts pressure on the currency.
The whole point of the money laundering operation is to get the money out of the country. China going to pot only accelerates it.
Deleted Comment
Like mentioned in the article, often times the material is very obviously suspicious and banks probably know this and still turn a blind eye to it because these borrowers are low risk and much less sensitive to the high/rising interest rates of today...
Deleted Comment
If Canadian banks agree with this risk assessment, they have little incentive to actually verify income in these cases.
Deleted Comment
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In Australia this became pervasive across all banks for the last 25 years. It got to the point where, around 5-10 years ago, new national rules were mandated that foreign income could only be assessed at some minor percentage of its evidenced volume under the epithet "loan serviceability criteria". At the face of it, these rules appear to have the public's best interests at heart. But in reality, they simply lock out anyone that isn't a locally registered card-carrying commuter wageslave (eg. cross-border entrepreneurs, immigrants, etc.).
So the new scam - from multiple independent sources - is apparently people from Singapore taking out loans in Chinese Yuan Reminbi denominations for Australian property against Singapore or Hong Kong banks, then coming to the Australian banks and having them "transferred" (internationally, and across currencies!) which allegedly sidesteps the local restrictions. The fact that I know this simply from talking to bank staff as a stranger shows how extremely pervasive these sorts of things are.
WRT your other foreign income/asset comments its much less nefarious. The local banks are focused on AU income and assets because it is directly tied to serviceability and recovery. You can do loans based on foreign income/assets but youll pay a few percentage points for the risk and conversion problems. The international loan outfits are usually smaller, though HSBC is a big one IIRC.
I only recognize the HSBC name from scandals in the news: https://en.wikipedia.org/wiki/HSBC#Controversies
There are no good guys there, that's not why the business was set up and corresponding folks were/are hired. If you want more controls, enforce more regulations, they do work if well defined.
I agree there are no good guys here, but there are shades.
Money laundering does seem to be their choice in poisons.
1. Fraudulent applicants come to the bank with crazy stories to ask for enormous loans/mortgages toward a Toronto house, allegedly to turn hyper-suspicious big piles of cash into a more reputable-looking asset.
2. HSBC goes along with that because they want to suckle on the sweet regular payments of suspicious cash, even though they ought to damn well know that these customers are just a front for an organized crime ring.
3. As a bonus, this locally-concentrated money-laundering/speculative-investment thing screws up the property market for Torontonians. The local multimillionaire babysitter is willing to buy at almost any price because their secret financial goals are very different than yours.
While looking for other articles, I notice it's been ~16 months after the end of HSBC 10-year tangle with US regulators over their business with Mexican and Columbian drug cartels. [0]
[0] https://www.reuters.com/business/finance/us-fed-terminates-e...
If the borrowers are making the mortgage via rent/Airbnb of the properties... then they are somehow keeping it secret within Canada and also sending it on an international round-trip, which seems like a strange stretch for any small-time "lie on the loan application" crook.
I remember some years ago I saw a comment somewhere that, for real estate purchases "proceeds from a certain country were subject to AML regulations... but not from China"
Really. I can imagine a Canadian banker saying that with a straight face.
1. They come with some money, enough for whatever minimum down payment is required (but notably, the issuing bank will also lower down payment requirements for clients with high income or assets, which are faked anyway)
2. HSBC is incentivized to issue mortgages, yes, that's their business. But the actual fraud here sounds more like cash kickbacks from the fraud buyer to the issuing agent themselves.
3. Home prices are made on the marginal sale, so a small amount of this activity can have a large upward pressure on prices. This leads to typical bubble scenarios, and you can keep rolling over or refinancing mortgages as prices keep rising (or even just sell). To get a sense of this, over the past few years, the average Canadian house gained in price something like double the average Canadian income.
So in summary, a lot of this could be explain by plain fraud, enabling foreign buyers to both perpetuate, and participate, in a giant housing bubble. If that's true, and it all comes crashing down, then god help us all.
There are so many Canadians waiting on the sidelines with their down payment ready to be deployed and are out competed year after year.
The pent up demand for housing is enormous. Even with the high interest rates.
Hell, with the rumors of interest rates going down, there is a frenzy to BUY now, suck up the high interest and get a relief in a few years, because people are afraid that if the rates go down, more people will qualify for a mortgage and it will bring more pressure, so better to buy now if you can.
I am convinced it will not go down in my life time ever. Too much demand, not enough supply.
Smh...
The stereotyping is lumping the parent post with this group on the basis of North American racial categories ("Asian" as a group, as if that's a thing.)
Someone wants to get $large_sum out of China. They can't do this without raising lots of flags in both countries. So they set up an army of fake borrowers, have them take out fraudulent mortgages on real properties in Canada, pay down the mortgages, and sell the property to obtain clean money on the other end.
All the better if the property rises in value in the meantime due to enormous fraud.
Not really. Lying about the source of cashflow doesn't mean the cashflow isn't real.
The end objective for a lot of these frauds isn't to sink the bank with fake loans. It's to launder money.
As long as real estate prices continue to rise, you won't see large scale missed payments because they will be able to sell the assets, refinance the loan, or even successfully rent it out.
We've seen this dynamic in 2008 and in the S&L crisis before. Bad loans drive the bubble, the expanding bubble hides the bad loans, but when the bubble stops, there is a massive large scale loan failure.
Canadians are certainly paying for social services used by folks who earn income abroad and pay little to no income tax in Canada, and folks who want to buy their first house are harmed by inflated housing prices.
My currently overseas landlord for some reason needed to travel to Canada to give birth, and was very eager to get their health card / banking documents sent to our rental despite it being rented out for several years prior to us arriving...
Not trying to point fingers on whether the branch workers were in on the whole thing, but maybe it was easier to perpetuate the fraud because of cultural familiarity?
"and possibly some employees benefited from the fraud, financially pocketing thousands of dollars, which I call the proceeds of crime."