FRAUDSTERS BUYING GROW-OP PROPERTIES

FICOM boss says investigations involving money laundering and the financing
of drug operations are "up dramatically"

Provincial investigators have their hands full with a growing number of
fraud schemes in which criminals use real estate agents and mortgage
brokers to buy homes for marijuana grow operations.

Ken Fraser is the executive director of investigations for the Financial
Institutions Commission, or FICOM, which regulates B.C. credit unions,
trust companies, real estate agents, mortgage brokers and insurance agencies.

While the overall number of cases opened in the last year dipped slightly
from the previous year, he said they're becoming increasingly complex,
particularly the grow-op scams.

"Our larger investigations are involving issues surrounding money
laundering, grow-ops and the financing of grow-ops," said Fraser. "They are
up dramatically."

In 2003/2004, FICOM had 224 new cases, down slightly from 242 the previous
year but up sharply from 209 the year before that.

"The issue is that we are spending more time on each case and the amount of
time being spent on mortgage brokers and real estate is more significant
than it has been in the past," said Fraser.

Fraser said FICOM's investigations, led by a 13-member team, are "taking on
a different flavour" in recent years as the grow-op and other frauds become
increasingly well organized and well executed.

"Certain organized crime elements are using realtors and mortgage brokers
to finance the grow-ops," Fraser said. "In the vast majority, properties
are being financed unbeknownst to the industry professionals."

Often, the mortgage brokers and realtors have no idea they're working for a
criminal organization that plans to use the house to grow pot.

Other times, however, the brokers are part of the scheme. Fraser said if
that's the case investigators dig deep to uncover proof that they forged
documents about the buyer's employer or income and then passed those
documents off to the lender.

Investigators can also act if the broker was aware he or she was submitting
documents with false information, Fraser said.

"A lot of borrowers involved in grow-ops don't have the employment
requirements to get mortgages," he said. "Someone would have to falsify the
mortgage document."

Colin Dreyer, who owned a mortgage broker business in Vancouver for 14
years and is now the president of the Canadian Institute of Mortgage
Brokers and Lenders, said the association's professional standards
committee is drafting new rules it hopes will help solidify the
responsibility of all parties - the realtor, broker, lender and insurer.

Brokers and lenders have a responsibility to verify documents, such as
employment and income statements that look suspicious.

But that still remains largely a judgment call, he said.

Clear rules about who must verify what could increase due diligence and
decrease fraud, Dreyer added.

Fraser said grow-op cases are tough because solving them usually requires
the co-operation of the borrower, who in the case of a grow-op is often a
member of an organized crime ring.

Cases usually come to FICOM's attention when the lender notices something
is amiss or when police are investigating a property.