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"Fake Chinese income" mortgages fuel Toronto real estate bubble: HSBC bank leaks

462 points by eswat 3y ago

mass_and_energy 3y ago
How many of our financial system's rules are we willing to let the Hong-Kong Shanghai Banking Corporation walk all over before we stand up for ourselves and expel them from the western financial markets?
causi 3y ago
It's quite bizarre any jurisdiction would allow someone to buy housing there when they can't legally live in it.
- slavboj 3y ago
  Approximately anyone can buy a US-based REIT, even if they're ineligible to enter the country.
  - bdcravens 3y ago
    This is less of an issue than owning the home, since in an REIT, you aren't controlling tenant access.
- alchemist1e9 3y ago
  Why? Should we restrict other investments with similar logic? For example should non-residents not be allowed to purchase vacation properties and lease them? The impulse to enlist the government to regulate private property and investments is not productive and results in endless encroachment of individual liberties and rights to governments.
  - Fauntleroy 3y ago
    There's a little too much "housing is way too incredibly expensive for the citizens of the country" going on here for us to really care about "fairness of the open market"
  - stormfather 3y ago
    Something drastic has to be done about the cost of housing if we're to leave a functional society to the next generation.
    - gsk22 3y ago
      Sure, but the high cost of housing has little to do with non-resident investors, and everything to do with lack of supply.
      - bdcravens 3y ago
        Resident investors are a big part of the problem, however.
        alchemist1e9 3y ago
        Off with their heads! /s
    - Fauntleroy 3y ago
      Or if we don't want to watch it collapse during ours.
    - alchemist1e9 3y ago
      Blaming foreign investors for a housing crisis is a smokescreen. It's not the demand from investors that's the issue; it's the government's stifling regulations that choke new construction. The mess is because of state failure, not market failure. When sellers freely sell their homes to foreign buyers, they're making choices that benefit them. Why should we deny them that right? The real absurdity is ignoring the elephant in the room: a bureaucratic quagmire that prevents building enough homes to meet demand. Instead of scapegoating investors, slash the red tape and let the market work.
      - function_seven 3y ago
        Yup. The Power of Pricing is a thing that exists whether you want it to or not. Smart policy uses it to great advantage. Dumb policy redirects this to hurt those it intends to help. Rent control, restrictions on production, byzantine zoning and construction rules... all contribute to distorting the market in ways that push back on the original (or at least, stated) intentions. You want housing to be cheaper? Increase supply. That's it. You don't want foreign investment in your properties? Don't make them so damn attractive as pure investment vehicles. How? Increase supply. There's always a boogeyman to be blamed when markets are so broken like this.
  - soggybread 3y ago
    >For example should non-residents not be allowed to purchase vacation properties and lease them? AirB&B has been a terrible experience, so many people buying up houses just to lease them out for a weekend has definitely contributed to rising housing costs and over-all cost of living
    - bdcravens 3y ago
      That's an issue absolutely, but it doesn't answer the question of whether non-residents should be allowed to do what residents can.
      - JumpCrisscross 3y ago
        > it doesn't answer the question of whether non-residents should be allowed to do what residents can Raise that fence too high and you turn landlords into the community's gatekeepers. (How else could a non-resident become a resident?)
        alchemist1e9 3y ago
        Don’t worry the HN crowd seems to be so far gone from reality and understanding free markets that I’ve encountered numerous discussions where landlords are categorically evil, which is overwhelmingly empirically understood to be extremely beneficial to housing and communities to have landlords invest in them! Of course given the trend has been to remove all education of market fundamentals and inject eduction systems with endless collectivist propaganda we should not be surprised.
  - tslocum 3y ago
    Yes. Restricting foreigners from owning domestic assets is the beginning. Next comes restricting / heavily taxing domestic owners that own more than one home. Sooner or later, housing gets closer to being what it's supposed to be (shelter and space for people who need it) rather than a financial vehicle.
    - alchemist1e9 3y ago
      This proposal is a slippery slope to economic disaster. First, restricting ownership rights—foreign or domestic—distorts the market, disincentivizes investment, and ultimately harms those it claims to help by reducing the supply of housing. Second, treating homes purely as shelter ignores the reality that property is also an investment and a key component of individual wealth and economic freedom. Imposing heavy taxes on those owning more than one home would not only penalize success but also discourage rental market contributions, exacerbating the housing shortage. The real solution lies in encouraging development and reducing bureaucratic barriers to increase housing supply, not in draconian measures that trample on property rights and stifle economic growth. Let’s not replace a market-driven approach with a command economy that history has repeatedly shown to fail.
      - IncreasePosts 3y ago
        How about an ultimatum? Either people can only own one house without huge tax consequences, OR we open up restrictions on building so we can build a lot more housing stock than we currently do.
      - denton-scratch 3y ago
        > treating homes purely as shelter ignores the reality that property is also an investment But that's the problem, isn't it? The basic necessities of life shouldn't become a vehicle for speculation. FTR, all of my wealth is in two homes.
        alchemist1e9 3y ago
        Asserting that housing—or any basic necessity—shouldn’t be an investment is a dangerously naive stance that flies in the face of economic reality and human history. Consider food, water, healthcare—all necessities, yet all benefit from private investment and innovation. The collectivist dream to strip away the investment aspect of housing is a recipe for disaster, leading to shortages, degradation, and inefficiency. Your stance isn’t just misguided; it’s empirically proven to fail, fostering misery under the guise of equality. Housing, like any resource, flourishes under conditions of freedom, not under the heavy hand of state control. To suggest otherwise is to ignore the lessons of history and to jeopardize the very foundations of prosperity and freedom.
- StopTheTechies 3y ago
  [dead]
- JumpCrisscross 3y ago
  > bizarre any jurisdiction would allow someone to buy housing there when they can't legally live in it Foreign-owned homes are a problem for asset acquirers. Vacant homes are a problem for anyone who needs housing. The former seems to get a lot of visibilty when concerns around the latter get raised.
  - alchemist1e9 3y ago
    > Vacant homes are a problem for anyone who needs housing. But they pay taxes without demanding any services and the seller assessed they had better use of the capital, they could buy or build a more suitable home. If I lived in a location with 50% vacant homes all paying property taxes then wouldn’t my schools and streets and all local government services be extremely well funded?
    - JumpCrisscross 3y ago
      > If I lived in a location with 50% vacant homes all paying property taxes then wouldn’t my schools and streets and all local government services be extremely well funded If the polity is smart, yes. It looks like British Columbia gets about 15% of its revenue from property taxes and transfers [1]. So you'd need adjustments to make up for the personal, corporate, sales, fuel, carbon, tobacco and insurance premium (?) revenues the vacant homeowner isn't paying. [1] https://www2.gov.bc.ca/assets/gov/british-columbians-our-governments/government-finances/financial-economic-review/financial-economic-review-2022.pdf https://www2.gov.bc.ca/assets/gov/british-columbians-our-gov... Table 2.3
      - wasimanitoba 3y ago
        Assuming the drop in social program expenditure doesn't already compensate for the drop in tax revenue.
    - causi 3y ago
      Kind of by definition you can't pay more in taxes than you contribute to the economy, therefore unoccupied housing is a drain on the local economy.
- caseysoftware 3y ago
  In the US, banks issue mortgages to illegal immigrants all the time. Last fall, the Biden Administration went as far as threatening banks who had refused. > “This guidance reminds lenders that denying someone access to credit based solely on their actual or perceived immigrant status may violate federal law.” Ref: https://www.justice.gov/opa/pr/justice-department-and-consumer-financial-protection-bureau-issue-joint-statement-cautioning https://www.justice.gov/opa/pr/justice-department-and-consum...
- mytailorisrich 3y ago
  Most governments would do anything for foreign direct investment. From many points of view, having foreign investors buy property without immigrating is a best case scenario for governments.
  - ericmcer 3y ago
    In the long run (30+ years from now)? Or just for the few years they are in office?
    - mytailorisrich 3y ago
      I think probably in the long run because, all in all, net inbound capital into the economy is positive in the long run. What can cause problems is bubbles and 'over-heating', meaning too much over a too short period, which is when 'less' inbound capital may be sought. But overall best to keep the flow positive.
  - againdot 3y ago
    Then that's fantastic! Since housing has come so unaffordable in Canada I'm looking at moving to Japan. I'm seeing detached houses 60m transit from Tokyo for less than a down payment on a condo 60m from Vancouver. So if I buy a place there and move, it's win/win for everyone!
- toast0 3y ago
  It seems like a waste of limited government ability to act to try to deny this when it's quite simple for an interested foreign investor to form or invest in a domestic corporation that buys housing it doesn't live in, or find a domestic partner to make straw purchases of housing the partner doesn't live in.
- ericmcer 3y ago
  It feels like selling the next generations future for cash now.
- michael1999 3y ago
  The historical Canadian project, like all anglo settler projects, is structurally about early arrivals to the frontier making money selling to later arrivals. The idea that housing is primarily for locals is a newer idea.
- asah 3y ago
  There's "housing" and then there's $5+MM manhattan apartments, which are so inflated above their value as functional housing as to effectively be NFTs. People whine about the pencil shaped buildings but they shutup fast when they see that it causes zero inflation to lower-end housing prices and a big help to city budgets. Also, strategically, having powerful people own expensive real estate influences them to visit and maybe not bomb it... at least, it's better than them never having stepped foot there. The famous example is Kyoto not being nuked because an American leader had seen it firsthand[1]. The Nazis spared Paris was apparently spared for similar reasons[2]. The counterexample is NYC which everybody loves to crap on (Gerald Ford "drop dead", 1993 bombing, 9/11, and lots of failed terrorist attacks since), presumably as a symbol of American greed and excess, but also as a symbol of urban chaos, rot and violence. [1] https://collider.com/oppenheimer-improvised-line-kyoto/ https://collider.com/oppenheimer-improvised-line-kyoto/ [2] https://www.google.com/search?q=Nazis+spared+Paris https://www.google.com/search?q=Nazis+spared+Paris
Terr_ 3y ago
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] [0] https://www.reuters.com/business/finance/us-fed-terminates-enforcement-action-against-hsbc-2022-09-02/ https://www.reuters.com/business/finance/us-fed-terminates-e...
- seanmcdirmid 3y ago
  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.
  - Terr_ 3y ago
    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.
    - seanmcdirmid 3y ago
      The article states more cases than that. One of the examples the mortgage payments aren’t being made via Chinese wires, they are being paid locally and the Chinese income doesn’t exist at all. They could be making round trips with Chinese banks but I don’t see why. You can transfer funds from China into your account before your monthly mortgage was due, the mortgage provider would never know. You can also put dollars into a Chinese bank account and do wires in demand, since it isn’t R!B there are no controls on it.
downrightmike 3y ago
HSBC DOING SHADY SHIT? Business as usual, remember when they took in all that drug cartel money? They shouldn't exist.
- cjbgkagh 3y ago
  HSBC was created to deal with opium money following the opium wars because other banks would not.
  - hef19898 3y ago
    At least they value tradition, values and mission. Sounds like a stable bank in more than one sense. Agree so, there shoupd have been a bunch of jail sentences for laundering cartel money. But then financial crimes at that scale rarely get punished.
neilv 3y ago
> But more than a year later, D.M. was so dissatisfied with the bank’s response that I only recognize the HSBC name from scandals in the news: https://en.wikipedia.org/wiki/HSBC#Controversies https://en.wikipedia.org/wiki/HSBC#Controversies
- saiya-jin 3y ago
  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.
  - JumpCrisscross 3y ago
    > HSBC ain't worse or better than others Money laundering does seem to be their choice in poisons.
    - emmanuel_1234 3y ago
      That's because they are one of the most global bank, therefore a prime choice when it comes to moving money from countries to countries. Most bank have a much smaller global footprint and can't be used as such. Banks don't benefit from their customer laundering money just like landlords don't benefit from drug trafficking in their building: it's a hindrance and it costs a lot to do anything about it. Source: I work on AML in a global bank.
      - JumpCrisscross 3y ago
        > they are one of the most global bank By what metric? I’d argue the driving factor is their proximity to dirty money. Same with Russian banks. Then other people notice you’re used to looking the other way and you get word-of-mouth network effects. With money launderers.
darth_avocado 3y ago
> 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?
- readthenotes1 3y ago
  Your fingers aren't required, only the whistleblower's: "and possibly some employees benefited from the fraud, financially pocketing thousands of dollars, which I call the proceeds of crime."
inSenCite 3y ago
HSBC soon to be RBC. This is not very surprising, a lot of this also gets facilitated by the independent mortgage brokers who get ppl through the system with some 'creative coaching'.
- fakedang 3y ago
  Lol no. HSBC has always had a much worse reputation than RBC, or any other bank for that matter. HSBC and Standard Chartered are amongst the worst international offenders when it comes to fraud and money laundering.
  - wisemang 3y ago
    Probably referring to the fact RBC is set to acquire HSBC’s Canadian business.
    - fallat 3y ago
      Brings to question: did RBC know? How did they not know?
      - emmanuel_1234 3y ago
        RBC probably indulges in this as well. HSBC just has way more ties to Hong Kong and China than RBC does.
  - deleted 3y ago
    [deleted]
  - peterleiser 3y ago
    Exactly. HSBC was laundering money for Mexican and Colombian drug cartels and fined $1.9 billion by the US government, which is one of the largest penalties ever imposed on a bank for breaking U.S. law. Deutsche Bank fires pretty high on the fraud meter as well.
contingencies 3y ago
Not only Canada. 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.
- donavanm 3y ago
  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.
secondcoming 3y ago
> “Bank statements can be verified directly with the foreign banks or use a reputable third party to verify,” he suggested. Is that even possible with Chinese bank accounts? Anyway, the presence of Chinese Funny Money in property has been known about for years, not just in Canada either.
maxglute 3y ago
>The whistleblower, whomThe 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 mean it's real Chinese income backed by fake paperwork. There's PRC capital controls, rich PRC national who buy RE abroad are going to do it via laundering services and has been for decade+. Banks are fine with this and have dedicated branches in diasphora area to handle because the money is good and reliable. Sometimes rich Chinese immigrants also do odd jobs to fill time, bored aunties with multi million dollar mansions in Richmond working shifts at River Rock Casino. It's a bizarre world.
- seanmcdirmid 3y ago
  It could be real Chinese income backed by fake paper work (money laundering) or fake income backed by fake paper work (fraud). You can take out $50k per year, a lot more via exemptions, so you don’t need money laundering to get money out of china into the USA (I had to move a few hundred K before, all the paper work was legit).
  - maxglute 3y ago
    I presume you were foreign national with more options. Options for diasphora Chinese, many who illegally hold dual citizenship and relies on PRC nationality to do transactions/capital flight in PRC is different. I highlighted the original quote where branch is mostly Chinese-Canadian for context. Aurora is 20% Chinese, it's a big diasphora neighbourhood. There isn't some big "fake chinese income" conspiracy, it's the entire (proven) business plan (money laundering) with occasional fraud. I think pretty much everyone knew Chinese are buying million+ propertiers with laundered money, and it fuels the bubble as much as any other foreign buyer.
    - seanmcdirmid 3y ago
      Ya, foreign nationals are allowed to export their earnings. But even Chinese citizens can also pool those $50k yearly allocations, it doesn’t take a lot of friends and family to do that. I’m not really sure what is happening among the rich, but among the middle class, it isn’t so much money laundering but having lots of savings with no good investment options, or just wanting to make money while someone else takes on the risk. They don’t have access to money that needs laundering.
jacquesm 3y ago
HSBC has been part of plenty of scandals. Here is one example: https://www.investopedia.com/stock-analysis/2013/investing-news-for-jan-29-hsbcs-money-laundering-scandal-hbc-scbff-ing-cs-rbs0129.aspx https://www.investopedia.com/stock-analysis/2013/investing-n...
dade_ 3y ago
HSBC Canada is in the process of being sold to RBC. As employees will no longer work for HSBC in March and possibly unemployed through the new found efficiencies by RBC, this creates an interesting situation for virtually no risk whistle-blowing. I hadn't thought of this possibility when the exit was announced.
- eswat 3y ago
  > this creates an interesting situation for virtually no risk whistle-blowing Not so risk-free unfortunately > A June 2023 email from the bank’s personnel department says “we hereby demand that you [the whistleblower] immediately and permanently delete any and all HSBC information on any personal email accounts.” > “If you do not comply with these obligations,” the email warns, “HSBC also reserves the right to bring this matter to the attention of relevant law enforcement agencies.”
ThisIsMyAltAcct 3y ago
> 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.” Sounds like that branch is compromised
- radicaldreamer 3y ago
  Are US banks just a lot more strict about source of income than Canadian banks?
  - mistrial9 3y ago
    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
hnthrowaway0328 3y ago
I think I know a bit about these stuffs, just a bit. These loans are fraudulent probably, but they are safer than most other mortgage loans.
- ugh123 3y ago
  Such is money laundering
  - hnthrowaway0328 3y ago
    Yep, greedy bank managers are willing to take any business they can grab. Many loan officers earn like 500k and up.
user3939382 3y ago
HSBC funneled $1B (that we know about) for cartels, it came out as 100% knowingly committed, and no one went to jail. Basically the government asked for their cut. Why wouldn't do they this again and again? They are above the law, they are the law.
- soco 3y ago
  Credit Suisse finally sunk because of such business and more, so there is (very very little, I know) hope.
- realusername 3y ago
  It's HSBC being HSBC, I can't say that I'm surprised. Drug cartels and money laundering are at the core of their brand value.
  - eYrKEC2 3y ago
    Hopefully Canadian citizens are the "lender of last resort", just like we Americans are the "lender of last resort". The bankers must be made whole -- nothing else matters.
  - thriftwy 3y ago
    "The reason we can say space pirates does not exist is that HSBC does not have a subdivision dedicated to catering to such clients"
  - opportune 3y ago
    Ignorant American here. Isn’t Hong Kong supposed to be the HQ/money exit point for Chinese organized crime? And HSBC is the main bank there, but headquartered in the UK? If I had to guess they are heavily involved with spooks and foreign assets operating in China (and if so, why not use them for non-Chinese intelligence-financial shenanigans?) and a lot of their “illegal” activity is unofficially blessed by foreign intelligence.
    - realusername 3y ago
beiller 3y ago
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 :)
- cm2187 3y ago
  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.
  - empath-nirvana 3y ago
    No, they won't. It's money laundering. They'll pay the mortgages.
- oldgradstudent 3y ago
  - "A rolling loan gathers no loss." 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.
- timr 3y ago
  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.
forinti 3y ago
Just the other day I read that "to shanghai" is to kidnap or trick someone into working for you. I immediately thought of HSBC.
- denton-scratch 3y ago
  > kidnap or trick I thought it meant kidnap, specifically to kidnap a sailor in port and make him work aboard ship; as in "press gang", "pressed man".
nobodydot 3y ago
I was an SDE2 at AWS and I got denied a mortgage on a small apartment in Vancouver. I was deemed too high risk. Reading stuff like this is demoralizing.
whoswho 3y ago
Yes. Downtown Toronto is full of store-fronts.
SunlightEdge 3y ago
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.
- silent_cal 3y ago
  It's still fraud
  - jabbany 3y ago
    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...
    - deleted 3y ago
      [deleted]
    - ak217 3y ago
      It's not that difficult. You just appoint an auditor and make the bank pay progressively higher fines until they figure it out. American banks learned to be much better at it after 2008. And given 2008 and the MBS balance sheets at central banks and the municipal budgets propped up by property values and national mortgage programs intended to encourage homeownership, this is by no means just a matter between the bank and its clients, even if you put aside the money laundering angle. Mortgage fraud destabilizes economies.
    - topspin 3y ago
      > if both the lender and borrower are willing participants Eventually this behavior goes overboard and everything crashes. In the meantime, law-abiding people are screwed by the bubble. Then they are made to pay for the clean up. Fraud is costly, and rationalizing it contributes to the problem.
ilrwbwrkhv 3y ago
I have said this over and over again: Canada is the most overrated of all the developed countries. The whole country is a gigantic house of cards propped up by real estate, with horrible service quality, terrible healthcare, no jobs, ZERO innovation, risk taking and entrepreneurship. Having lived and travelled extensively, most Canadians want a house somewhere in the woods instead of doing something meaningful with their lives or try and innovate to build something. All of this is propped up by rampant levels of immigration from China and India. Where US got the best talent from India, Canada got the worst, the ones who scam their way here and take the lowest level jobs. Now all of this is coming home to roost. The next decade will be Canada's worst and if they do not learn that risk taking and entrepreneurship is the only way out of the mess they find themselves in, they will become a third world country in another decade.
- LegitShady 3y ago
  as a canadian, you're not wrong.
- hnarn 3y ago
  > The whole country is a gigantic house of cards propped up by real estate That’s quite the statement, I assume you have quite the source for it. The price-to-rent ratio isn’t that far off from the US, for example.
  - hnav 3y ago
    but incomes are generally much lower
    - lifeisgood99 3y ago
      That's tech bias. The pay for random office jobs or trade jobs are similar.
  - ysofunny 3y ago
    there's a tiktoker that compares real states prices in Canada and in various parts of Europe it's funny to see dozens of examples of european castles (buildings with tens of rooms and bathrooms, plus huge gardens) whose cost is in the same ballpark as 2 or 3 bedroom houses in random (but well [sub]urbanized) parts of Canada
Finnucane 3y ago
"HSBC is at the forefront of efforts to identify, prevent and deter financial crime … We will not do business with individuals or entities we believe are engaged in illicit conduct.” Much Lol.
29athrowaway 3y ago
Thanks to fractional reserve banking, most money is already fake anyways.
gnatman 3y ago
Sounds familiar! https://www.nytimes.com/2015/02/13/upshot/how-mortgage-fraud-made-the-financial-crisis-worse.html https://www.nytimes.com/2015/02/13/upshot/how-mortgage-fraud... https://www.justice.gov/opa/pr/wells-fargo-agrees-pay-209-billion-penalty-allegedly-misrepresenting-quality-loans-used https://www.justice.gov/opa/pr/wells-fargo-agrees-pay-209-bi...
m3kw9 3y ago
All you need to know “ The official noted that other nations require tax agencies to verify incomes for mortgages, which isn’t the case in Canada.”
rafaelero 3y ago
If only there was a better store-of-value asset in the world than real-estate. The pressure over rents and houses would be much improved.
deleted 3y ago
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frozenport 3y ago
Those banks effectively issued sub-prime mortgages, in part due to obvious fraud. Will Canadians let them fail?
- deleted 3y ago
  [deleted]
Ericson2314 3y ago
Canada needs more housing supply. Blaming foreigners' mortgage applications, sketchy or otherwise, is just cope.
- cbsmith 3y ago
  Canada does need more housing supply, and ironically an influx of fraudulent real estate money like this helps to fuel more growth in the supply. Still, fraud is fraud. Stopping it won't fix Canada's housing problems, but that's not a reason to stand idly by.
  - Ericson2314 3y ago
    I would say land value tax makes mortgage fraud a lot less enticing ;) Sapping demand for the crime is the most effective enforcement! (Like Semaglutide is probably the best silver bullet yet to "win the drug war"...)
- AllegedAlec 3y ago
  If you disallow foreigners to buy up whatever little housing there is on the market you solve part of the issue though.
  - Ericson2314 3y ago
    Foreigners that don't live their will probably rent it out, no? If so, they are not contributing to housing scarcity.
stainablesteel 3y ago
real estate in canada is so expensive that i think it will ironically cause the jobs to become worthless, and this is the only comeuppance that will bring the housing prices back down is when people give up on living there
cloudedcordial 3y ago
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. Smh...
- al_borland 3y ago
  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.
  - noobermin 3y ago
    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.)
    - cloudedcordial 3y ago
      Lumping together "Asian" as a group is definitely annoying. The different nations and countries from East Asia alone could be unique culturally and politically. In addition, many ethnic Chinese have been living around the world for generations.
- billy99k 3y ago
  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.
  - khzw8yyy 3y ago
    A Tesla is not an expensive car anymore, it's the new Toyota Camry.
bonestamp2 3y ago
> during the Covid-19 pandemic, because Canadian casinos were closed, Chinese underground banking schemes evolved Hang on, what... I want to hear more about the Chinese underground casino stuff.
- dddddaviddddd 3y ago
  https://betterdwelling.com/vancouver-laundering-model-that-inflated-home-prices-moves-to-toronto/ https://betterdwelling.com/vancouver-laundering-model-that-i...
- jfil 3y ago
  https://torontolife.com/city/inside-the-markham-casino-fiasco/ https://torontolife.com/city/inside-the-markham-casino-fiasc...
msie 3y ago
Sam Cooper makes a living with China xenophobia. He was fired from his stint at Global for accusing a Canadian MP of colluding with China according to “sources”. That MP sued Global who fired Cooper. So I take his articles with a huge grain of salt.
- canadiantim 3y ago
  Well atleast we know where you stand tho
- noobermin 3y ago
  Are there more details here? Accusing one of "colluding with China" which is a state does not imply xenophobia.
catchnear4321 3y ago
> The Hongkong and Shanghai Banking Corporation Limited opened in Hong Kong on 3 March 1865 and in Shanghai one month later. pesky acronyms.
Jefferyhanson 3y ago
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deleted 3y ago
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punkbit 3y ago
Could this happen in other parts of the world like London or Lisbon? What’s the point of working hard and playing by the rules…
Jemm 3y ago
Canada has bee fuelled by money laundering and asset hiding for decades.
nojvek 3y ago
Could someone explain why Canada with their 40M population (almost 10x smaller than US) is running into highly overpriced homes? Canada is one of the largest countries on the planet. Why can’t Canada build more homes? Also why can’t we ban foreigners from owning homes? Same issue applies to US as well.
- routerl 3y ago
  > Canada is one of the largest countries on the planet. So is the USA but it's still very expensive to live in NYC or SF. This isn't a Canada problem, it's a Toronto/Vancouver/Montreal problem (and their wider metropolitan areas), which together account for more than a third of the country's population. > Why can’t Canada build more homes? Partly due to idiotic zoning laws, partly due to the "missing middle" layer of the housing market, but mostly due to "investment properties" that sit empty and may as well not have been built at all. > why can’t we ban foreigners from owning homes? We sure could! Or just tax the hell out of it. But it wouldn't sit well with real estate developers and the politicians they've purchased.
  - ashconnor 3y ago
    We did ban foreigners owning homes. It's just been extended for 2 more years. It isn't just a Toronto/Vancover/Montreal problem. People in Halifax have seen rents and property prices soar.
- msie 3y ago
  Canada did ban foreigners from owning homes. But that ban didn’t extend to Canadians and Canadian companies from investing in RE. Foreigners are not the majority of RE owners and unfairly focused upon.

462 points by eswat 3y ago

How many of our financial system's rules are we willing to let the Hong-Kong Shanghai Banking Corporation walk all over before we stand up for ourselves and expel them from the western financial markets?

causi 3y ago

It's quite bizarre any jurisdiction would allow someone to buy housing there when they can't legally live in it.

slavboj 3y ago
Approximately anyone can buy a US-based REIT, even if they're ineligible to enter the country.
- bdcravens 3y ago
  This is less of an issue than owning the home, since in an REIT, you aren't controlling tenant access.
alchemist1e9 3y ago
Why? Should we restrict other investments with similar logic? For example should non-residents not be allowed to purchase vacation properties and lease them? The impulse to enlist the government to regulate private property and investments is not productive and results in endless encroachment of individual liberties and rights to governments.
- Fauntleroy 3y ago
  There's a little too much "housing is way too incredibly expensive for the citizens of the country" going on here for us to really care about "fairness of the open market"
- stormfather 3y ago
  Something drastic has to be done about the cost of housing if we're to leave a functional society to the next generation.
  - gsk22 3y ago
    Sure, but the high cost of housing has little to do with non-resident investors, and everything to do with lack of supply.
    - bdcravens 3y ago
      Resident investors are a big part of the problem, however.
      - alchemist1e9 3y ago
        Off with their heads! /s
  - Fauntleroy 3y ago
    Or if we don't want to watch it collapse during ours.
  - alchemist1e9 3y ago
    Blaming foreign investors for a housing crisis is a smokescreen. It's not the demand from investors that's the issue; it's the government's stifling regulations that choke new construction. The mess is because of state failure, not market failure. When sellers freely sell their homes to foreign buyers, they're making choices that benefit them. Why should we deny them that right? The real absurdity is ignoring the elephant in the room: a bureaucratic quagmire that prevents building enough homes to meet demand. Instead of scapegoating investors, slash the red tape and let the market work.
    - function_seven 3y ago
      Yup. The Power of Pricing is a thing that exists whether you want it to or not. Smart policy uses it to great advantage. Dumb policy redirects this to hurt those it intends to help. Rent control, restrictions on production, byzantine zoning and construction rules... all contribute to distorting the market in ways that push back on the original (or at least, stated) intentions. You want housing to be cheaper? Increase supply. That's it. You don't want foreign investment in your properties? Don't make them so damn attractive as pure investment vehicles. How? Increase supply. There's always a boogeyman to be blamed when markets are so broken like this.
- soggybread 3y ago
  >For example should non-residents not be allowed to purchase vacation properties and lease them? AirB&B has been a terrible experience, so many people buying up houses just to lease them out for a weekend has definitely contributed to rising housing costs and over-all cost of living
  - bdcravens 3y ago
    That's an issue absolutely, but it doesn't answer the question of whether non-residents should be allowed to do what residents can.
    - JumpCrisscross 3y ago
      > it doesn't answer the question of whether non-residents should be allowed to do what residents can Raise that fence too high and you turn landlords into the community's gatekeepers. (How else could a non-resident become a resident?)
      - alchemist1e9 3y ago
        Don’t worry the HN crowd seems to be so far gone from reality and understanding free markets that I’ve encountered numerous discussions where landlords are categorically evil, which is overwhelmingly empirically understood to be extremely beneficial to housing and communities to have landlords invest in them! Of course given the trend has been to remove all education of market fundamentals and inject eduction systems with endless collectivist propaganda we should not be surprised.
- tslocum 3y ago
  Yes. Restricting foreigners from owning domestic assets is the beginning. Next comes restricting / heavily taxing domestic owners that own more than one home. Sooner or later, housing gets closer to being what it's supposed to be (shelter and space for people who need it) rather than a financial vehicle.
  - alchemist1e9 3y ago
    This proposal is a slippery slope to economic disaster. First, restricting ownership rights—foreign or domestic—distorts the market, disincentivizes investment, and ultimately harms those it claims to help by reducing the supply of housing. Second, treating homes purely as shelter ignores the reality that property is also an investment and a key component of individual wealth and economic freedom. Imposing heavy taxes on those owning more than one home would not only penalize success but also discourage rental market contributions, exacerbating the housing shortage. The real solution lies in encouraging development and reducing bureaucratic barriers to increase housing supply, not in draconian measures that trample on property rights and stifle economic growth. Let’s not replace a market-driven approach with a command economy that history has repeatedly shown to fail.
    - IncreasePosts 3y ago
      How about an ultimatum? Either people can only own one house without huge tax consequences, OR we open up restrictions on building so we can build a lot more housing stock than we currently do.
    - denton-scratch 3y ago
      > treating homes purely as shelter ignores the reality that property is also an investment But that's the problem, isn't it? The basic necessities of life shouldn't become a vehicle for speculation. FTR, all of my wealth is in two homes.
      - alchemist1e9 3y ago
        Asserting that housing—or any basic necessity—shouldn’t be an investment is a dangerously naive stance that flies in the face of economic reality and human history. Consider food, water, healthcare—all necessities, yet all benefit from private investment and innovation. The collectivist dream to strip away the investment aspect of housing is a recipe for disaster, leading to shortages, degradation, and inefficiency. Your stance isn’t just misguided; it’s empirically proven to fail, fostering misery under the guise of equality. Housing, like any resource, flourishes under conditions of freedom, not under the heavy hand of state control. To suggest otherwise is to ignore the lessons of history and to jeopardize the very foundations of prosperity and freedom.
StopTheTechies 3y ago
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JumpCrisscross 3y ago
> bizarre any jurisdiction would allow someone to buy housing there when they can't legally live in it Foreign-owned homes are a problem for asset acquirers. Vacant homes are a problem for anyone who needs housing. The former seems to get a lot of visibilty when concerns around the latter get raised.
- alchemist1e9 3y ago
  > Vacant homes are a problem for anyone who needs housing. But they pay taxes without demanding any services and the seller assessed they had better use of the capital, they could buy or build a more suitable home. If I lived in a location with 50% vacant homes all paying property taxes then wouldn’t my schools and streets and all local government services be extremely well funded?
  - JumpCrisscross 3y ago
    > If I lived in a location with 50% vacant homes all paying property taxes then wouldn’t my schools and streets and all local government services be extremely well funded If the polity is smart, yes. It looks like British Columbia gets about 15% of its revenue from property taxes and transfers [1]. So you'd need adjustments to make up for the personal, corporate, sales, fuel, carbon, tobacco and insurance premium (?) revenues the vacant homeowner isn't paying. [1] https://www2.gov.bc.ca/assets/gov/british-columbians-our-governments/government-finances/financial-economic-review/financial-economic-review-2022.pdf https://www2.gov.bc.ca/assets/gov/british-columbians-our-gov... Table 2.3
    - wasimanitoba 3y ago
      Assuming the drop in social program expenditure doesn't already compensate for the drop in tax revenue.
  - causi 3y ago
    Kind of by definition you can't pay more in taxes than you contribute to the economy, therefore unoccupied housing is a drain on the local economy.
caseysoftware 3y ago
In the US, banks issue mortgages to illegal immigrants all the time. Last fall, the Biden Administration went as far as threatening banks who had refused. > “This guidance reminds lenders that denying someone access to credit based solely on their actual or perceived immigrant status may violate federal law.” Ref: https://www.justice.gov/opa/pr/justice-department-and-consumer-financial-protection-bureau-issue-joint-statement-cautioning https://www.justice.gov/opa/pr/justice-department-and-consum...
mytailorisrich 3y ago
Most governments would do anything for foreign direct investment. From many points of view, having foreign investors buy property without immigrating is a best case scenario for governments.
- ericmcer 3y ago
  In the long run (30+ years from now)? Or just for the few years they are in office?
  - mytailorisrich 3y ago
    I think probably in the long run because, all in all, net inbound capital into the economy is positive in the long run. What can cause problems is bubbles and 'over-heating', meaning too much over a too short period, which is when 'less' inbound capital may be sought. But overall best to keep the flow positive.
- againdot 3y ago
  Then that's fantastic! Since housing has come so unaffordable in Canada I'm looking at moving to Japan. I'm seeing detached houses 60m transit from Tokyo for less than a down payment on a condo 60m from Vancouver. So if I buy a place there and move, it's win/win for everyone!
toast0 3y ago
It seems like a waste of limited government ability to act to try to deny this when it's quite simple for an interested foreign investor to form or invest in a domestic corporation that buys housing it doesn't live in, or find a domestic partner to make straw purchases of housing the partner doesn't live in.
ericmcer 3y ago
It feels like selling the next generations future for cash now.
michael1999 3y ago
The historical Canadian project, like all anglo settler projects, is structurally about early arrivals to the frontier making money selling to later arrivals. The idea that housing is primarily for locals is a newer idea.
asah 3y ago
There's "housing" and then there's $5+MM manhattan apartments, which are so inflated above their value as functional housing as to effectively be NFTs. People whine about the pencil shaped buildings but they shutup fast when they see that it causes zero inflation to lower-end housing prices and a big help to city budgets. Also, strategically, having powerful people own expensive real estate influences them to visit and maybe not bomb it... at least, it's better than them never having stepped foot there. The famous example is Kyoto not being nuked because an American leader had seen it firsthand[1]. The Nazis spared Paris was apparently spared for similar reasons[2]. The counterexample is NYC which everybody loves to crap on (Gerald Ford "drop dead", 1993 bombing, 9/11, and lots of failed terrorist attacks since), presumably as a symbol of American greed and excess, but also as a symbol of urban chaos, rot and violence. [1] https://collider.com/oppenheimer-improvised-line-kyoto/ https://collider.com/oppenheimer-improvised-line-kyoto/ [2] https://www.google.com/search?q=Nazis+spared+Paris https://www.google.com/search?q=Nazis+spared+Paris

Terr_ 3y ago

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] [0] https://www.reuters.com/business/finance/us-fed-terminates-enforcement-action-against-hsbc-2022-09-02/ https://www.reuters.com/business/finance/us-fed-terminates-e...

seanmcdirmid 3y ago
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.
- Terr_ 3y ago
  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.
  - seanmcdirmid 3y ago
    The article states more cases than that. One of the examples the mortgage payments aren’t being made via Chinese wires, they are being paid locally and the Chinese income doesn’t exist at all. They could be making round trips with Chinese banks but I don’t see why. You can transfer funds from China into your account before your monthly mortgage was due, the mortgage provider would never know. You can also put dollars into a Chinese bank account and do wires in demand, since it isn’t R!B there are no controls on it.

downrightmike 3y ago

HSBC DOING SHADY SHIT? Business as usual, remember when they took in all that drug cartel money? They shouldn't exist.

cjbgkagh 3y ago
HSBC was created to deal with opium money following the opium wars because other banks would not.
- hef19898 3y ago
  At least they value tradition, values and mission. Sounds like a stable bank in more than one sense. Agree so, there shoupd have been a bunch of jail sentences for laundering cartel money. But then financial crimes at that scale rarely get punished.

neilv 3y ago

> But more than a year later, D.M. was so dissatisfied with the bank’s response that I only recognize the HSBC name from scandals in the news: https://en.wikipedia.org/wiki/HSBC#Controversies https://en.wikipedia.org/wiki/HSBC#Controversies

saiya-jin 3y ago
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.
- JumpCrisscross 3y ago
  > HSBC ain't worse or better than others Money laundering does seem to be their choice in poisons.
  - emmanuel_1234 3y ago
    That's because they are one of the most global bank, therefore a prime choice when it comes to moving money from countries to countries. Most bank have a much smaller global footprint and can't be used as such. Banks don't benefit from their customer laundering money just like landlords don't benefit from drug trafficking in their building: it's a hindrance and it costs a lot to do anything about it. Source: I work on AML in a global bank.
    - JumpCrisscross 3y ago
      > they are one of the most global bank By what metric? I’d argue the driving factor is their proximity to dirty money. Same with Russian banks. Then other people notice you’re used to looking the other way and you get word-of-mouth network effects. With money launderers.

darth_avocado 3y ago

> 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?

readthenotes1 3y ago
Your fingers aren't required, only the whistleblower's: "and possibly some employees benefited from the fraud, financially pocketing thousands of dollars, which I call the proceeds of crime."

inSenCite 3y ago

HSBC soon to be RBC. This is not very surprising, a lot of this also gets facilitated by the independent mortgage brokers who get ppl through the system with some 'creative coaching'.

fakedang 3y ago
Lol no. HSBC has always had a much worse reputation than RBC, or any other bank for that matter. HSBC and Standard Chartered are amongst the worst international offenders when it comes to fraud and money laundering.
- wisemang 3y ago
  Probably referring to the fact RBC is set to acquire HSBC’s Canadian business.
  - fallat 3y ago
    Brings to question: did RBC know? How did they not know?
    - emmanuel_1234 3y ago
      RBC probably indulges in this as well. HSBC just has way more ties to Hong Kong and China than RBC does.
- deleted 3y ago
  [deleted]
- peterleiser 3y ago
  Exactly. HSBC was laundering money for Mexican and Colombian drug cartels and fined $1.9 billion by the US government, which is one of the largest penalties ever imposed on a bank for breaking U.S. law. Deutsche Bank fires pretty high on the fraud meter as well.

contingencies 3y ago

Not only Canada. 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.

donavanm 3y ago
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.

secondcoming 3y ago

> “Bank statements can be verified directly with the foreign banks or use a reputable third party to verify,” he suggested. Is that even possible with Chinese bank accounts? Anyway, the presence of Chinese Funny Money in property has been known about for years, not just in Canada either.

maxglute 3y ago

>The whistleblower, whomThe 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 mean it's real Chinese income backed by fake paperwork. There's PRC capital controls, rich PRC national who buy RE abroad are going to do it via laundering services and has been for decade+. Banks are fine with this and have dedicated branches in diasphora area to handle because the money is good and reliable. Sometimes rich Chinese immigrants also do odd jobs to fill time, bored aunties with multi million dollar mansions in Richmond working shifts at River Rock Casino. It's a bizarre world.

seanmcdirmid 3y ago
It could be real Chinese income backed by fake paper work (money laundering) or fake income backed by fake paper work (fraud). You can take out $50k per year, a lot more via exemptions, so you don’t need money laundering to get money out of china into the USA (I had to move a few hundred K before, all the paper work was legit).
- maxglute 3y ago
  I presume you were foreign national with more options. Options for diasphora Chinese, many who illegally hold dual citizenship and relies on PRC nationality to do transactions/capital flight in PRC is different. I highlighted the original quote where branch is mostly Chinese-Canadian for context. Aurora is 20% Chinese, it's a big diasphora neighbourhood. There isn't some big "fake chinese income" conspiracy, it's the entire (proven) business plan (money laundering) with occasional fraud. I think pretty much everyone knew Chinese are buying million+ propertiers with laundered money, and it fuels the bubble as much as any other foreign buyer.
  - seanmcdirmid 3y ago
    Ya, foreign nationals are allowed to export their earnings. But even Chinese citizens can also pool those $50k yearly allocations, it doesn’t take a lot of friends and family to do that. I’m not really sure what is happening among the rich, but among the middle class, it isn’t so much money laundering but having lots of savings with no good investment options, or just wanting to make money while someone else takes on the risk. They don’t have access to money that needs laundering.

jacquesm 3y ago

HSBC has been part of plenty of scandals. Here is one example: https://www.investopedia.com/stock-analysis/2013/investing-news-for-jan-29-hsbcs-money-laundering-scandal-hbc-scbff-ing-cs-rbs0129.aspx https://www.investopedia.com/stock-analysis/2013/investing-n...

dade_ 3y ago

HSBC Canada is in the process of being sold to RBC. As employees will no longer work for HSBC in March and possibly unemployed through the new found efficiencies by RBC, this creates an interesting situation for virtually no risk whistle-blowing. I hadn't thought of this possibility when the exit was announced.

eswat 3y ago
> this creates an interesting situation for virtually no risk whistle-blowing Not so risk-free unfortunately > A June 2023 email from the bank’s personnel department says “we hereby demand that you [the whistleblower] immediately and permanently delete any and all HSBC information on any personal email accounts.” > “If you do not comply with these obligations,” the email warns, “HSBC also reserves the right to bring this matter to the attention of relevant law enforcement agencies.”

ThisIsMyAltAcct 3y ago

> 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.” Sounds like that branch is compromised

radicaldreamer 3y ago
Are US banks just a lot more strict about source of income than Canadian banks?
- mistrial9 3y ago
  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

hnthrowaway0328 3y ago

I think I know a bit about these stuffs, just a bit. These loans are fraudulent probably, but they are safer than most other mortgage loans.

ugh123 3y ago
Such is money laundering
- hnthrowaway0328 3y ago
  Yep, greedy bank managers are willing to take any business they can grab. Many loan officers earn like 500k and up.

user3939382 3y ago

HSBC funneled $1B (that we know about) for cartels, it came out as 100% knowingly committed, and no one went to jail. Basically the government asked for their cut. Why wouldn't do they this again and again? They are above the law, they are the law.

soco 3y ago
Credit Suisse finally sunk because of such business and more, so there is (very very little, I know) hope.
realusername 3y ago
It's HSBC being HSBC, I can't say that I'm surprised. Drug cartels and money laundering are at the core of their brand value.
- eYrKEC2 3y ago
  Hopefully Canadian citizens are the "lender of last resort", just like we Americans are the "lender of last resort". The bankers must be made whole -- nothing else matters.
- thriftwy 3y ago
  "The reason we can say space pirates does not exist is that HSBC does not have a subdivision dedicated to catering to such clients"
- opportune 3y ago
  Ignorant American here. Isn’t Hong Kong supposed to be the HQ/money exit point for Chinese organized crime? And HSBC is the main bank there, but headquartered in the UK? If I had to guess they are heavily involved with spooks and foreign assets operating in China (and if so, why not use them for non-Chinese intelligence-financial shenanigans?) and a lot of their “illegal” activity is unofficially blessed by foreign intelligence.
  - realusername 3y ago

beiller 3y ago

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 :)

cm2187 3y ago
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.
- empath-nirvana 3y ago
  No, they won't. It's money laundering. They'll pay the mortgages.
oldgradstudent 3y ago
- "A rolling loan gathers no loss." 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.
timr 3y ago
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.

forinti 3y ago

Just the other day I read that "to shanghai" is to kidnap or trick someone into working for you. I immediately thought of HSBC.

denton-scratch 3y ago
> kidnap or trick I thought it meant kidnap, specifically to kidnap a sailor in port and make him work aboard ship; as in "press gang", "pressed man".

nobodydot 3y ago

I was an SDE2 at AWS and I got denied a mortgage on a small apartment in Vancouver. I was deemed too high risk. Reading stuff like this is demoralizing.

whoswho 3y ago

Yes. Downtown Toronto is full of store-fronts.

SunlightEdge 3y ago

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.

silent_cal 3y ago
It's still fraud
- jabbany 3y ago
  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...
  - deleted 3y ago
    [deleted]
  - ak217 3y ago
    It's not that difficult. You just appoint an auditor and make the bank pay progressively higher fines until they figure it out. American banks learned to be much better at it after 2008. And given 2008 and the MBS balance sheets at central banks and the municipal budgets propped up by property values and national mortgage programs intended to encourage homeownership, this is by no means just a matter between the bank and its clients, even if you put aside the money laundering angle. Mortgage fraud destabilizes economies.
  - topspin 3y ago
    > if both the lender and borrower are willing participants Eventually this behavior goes overboard and everything crashes. In the meantime, law-abiding people are screwed by the bubble. Then they are made to pay for the clean up. Fraud is costly, and rationalizing it contributes to the problem.

ilrwbwrkhv 3y ago

I have said this over and over again: Canada is the most overrated of all the developed countries. The whole country is a gigantic house of cards propped up by real estate, with horrible service quality, terrible healthcare, no jobs, ZERO innovation, risk taking and entrepreneurship. Having lived and travelled extensively, most Canadians want a house somewhere in the woods instead of doing something meaningful with their lives or try and innovate to build something. All of this is propped up by rampant levels of immigration from China and India. Where US got the best talent from India, Canada got the worst, the ones who scam their way here and take the lowest level jobs. Now all of this is coming home to roost. The next decade will be Canada's worst and if they do not learn that risk taking and entrepreneurship is the only way out of the mess they find themselves in, they will become a third world country in another decade.

LegitShady 3y ago
as a canadian, you're not wrong.
hnarn 3y ago
> The whole country is a gigantic house of cards propped up by real estate That’s quite the statement, I assume you have quite the source for it. The price-to-rent ratio isn’t that far off from the US, for example.
- hnav 3y ago
  but incomes are generally much lower
  - lifeisgood99 3y ago
    That's tech bias. The pay for random office jobs or trade jobs are similar.
- ysofunny 3y ago
  there's a tiktoker that compares real states prices in Canada and in various parts of Europe it's funny to see dozens of examples of european castles (buildings with tens of rooms and bathrooms, plus huge gardens) whose cost is in the same ballpark as 2 or 3 bedroom houses in random (but well [sub]urbanized) parts of Canada

Finnucane 3y ago

"HSBC is at the forefront of efforts to identify, prevent and deter financial crime … We will not do business with individuals or entities we believe are engaged in illicit conduct.” Much Lol.

29athrowaway 3y ago

Thanks to fractional reserve banking, most money is already fake anyways.

gnatman 3y ago

Sounds familiar! https://www.nytimes.com/2015/02/13/upshot/how-mortgage-fraud-made-the-financial-crisis-worse.html https://www.nytimes.com/2015/02/13/upshot/how-mortgage-fraud... https://www.justice.gov/opa/pr/wells-fargo-agrees-pay-209-billion-penalty-allegedly-misrepresenting-quality-loans-used https://www.justice.gov/opa/pr/wells-fargo-agrees-pay-209-bi...

m3kw9 3y ago

All you need to know “ The official noted that other nations require tax agencies to verify incomes for mortgages, which isn’t the case in Canada.”

rafaelero 3y ago

If only there was a better store-of-value asset in the world than real-estate. The pressure over rents and houses would be much improved.

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frozenport 3y ago

Those banks effectively issued sub-prime mortgages, in part due to obvious fraud. Will Canadians let them fail?

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Ericson2314 3y ago

Canada needs more housing supply. Blaming foreigners' mortgage applications, sketchy or otherwise, is just cope.

cbsmith 3y ago
Canada does need more housing supply, and ironically an influx of fraudulent real estate money like this helps to fuel more growth in the supply. Still, fraud is fraud. Stopping it won't fix Canada's housing problems, but that's not a reason to stand idly by.
- Ericson2314 3y ago
  I would say land value tax makes mortgage fraud a lot less enticing ;) Sapping demand for the crime is the most effective enforcement! (Like Semaglutide is probably the best silver bullet yet to "win the drug war"...)
AllegedAlec 3y ago
If you disallow foreigners to buy up whatever little housing there is on the market you solve part of the issue though.
- Ericson2314 3y ago
  Foreigners that don't live their will probably rent it out, no? If so, they are not contributing to housing scarcity.

stainablesteel 3y ago

real estate in canada is so expensive that i think it will ironically cause the jobs to become worthless, and this is the only comeuppance that will bring the housing prices back down is when people give up on living there

cloudedcordial 3y ago

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. Smh...

al_borland 3y ago
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.
- noobermin 3y ago
  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.)
  - cloudedcordial 3y ago
    Lumping together "Asian" as a group is definitely annoying. The different nations and countries from East Asia alone could be unique culturally and politically. In addition, many ethnic Chinese have been living around the world for generations.
billy99k 3y ago
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.
- khzw8yyy 3y ago
  A Tesla is not an expensive car anymore, it's the new Toyota Camry.

bonestamp2 3y ago

> during the Covid-19 pandemic, because Canadian casinos were closed, Chinese underground banking schemes evolved Hang on, what... I want to hear more about the Chinese underground casino stuff.

dddddaviddddd 3y ago
https://betterdwelling.com/vancouver-laundering-model-that-inflated-home-prices-moves-to-toronto/ https://betterdwelling.com/vancouver-laundering-model-that-i...
jfil 3y ago
https://torontolife.com/city/inside-the-markham-casino-fiasco/ https://torontolife.com/city/inside-the-markham-casino-fiasc...

msie 3y ago

Sam Cooper makes a living with China xenophobia. He was fired from his stint at Global for accusing a Canadian MP of colluding with China according to “sources”. That MP sued Global who fired Cooper. So I take his articles with a huge grain of salt.

canadiantim 3y ago
Well atleast we know where you stand tho
noobermin 3y ago
Are there more details here? Accusing one of "colluding with China" which is a state does not imply xenophobia.

catchnear4321 3y ago

> The Hongkong and Shanghai Banking Corporation Limited opened in Hong Kong on 3 March 1865 and in Shanghai one month later. pesky acronyms.

Jefferyhanson 3y ago

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punkbit 3y ago

Could this happen in other parts of the world like London or Lisbon? What’s the point of working hard and playing by the rules…

Jemm 3y ago

Canada has bee fuelled by money laundering and asset hiding for decades.

nojvek 3y ago

Could someone explain why Canada with their 40M population (almost 10x smaller than US) is running into highly overpriced homes? Canada is one of the largest countries on the planet. Why can’t Canada build more homes? Also why can’t we ban foreigners from owning homes? Same issue applies to US as well.

routerl 3y ago
> Canada is one of the largest countries on the planet. So is the USA but it's still very expensive to live in NYC or SF. This isn't a Canada problem, it's a Toronto/Vancouver/Montreal problem (and their wider metropolitan areas), which together account for more than a third of the country's population. > Why can’t Canada build more homes? Partly due to idiotic zoning laws, partly due to the "missing middle" layer of the housing market, but mostly due to "investment properties" that sit empty and may as well not have been built at all. > why can’t we ban foreigners from owning homes? We sure could! Or just tax the hell out of it. But it wouldn't sit well with real estate developers and the politicians they've purchased.
- ashconnor 3y ago
  We did ban foreigners owning homes. It's just been extended for 2 more years. It isn't just a Toronto/Vancover/Montreal problem. People in Halifax have seen rents and property prices soar.
msie 3y ago
Canada did ban foreigners from owning homes. But that ban didn’t extend to Canadians and Canadian companies from investing in RE. Foreigners are not the majority of RE owners and unfairly focused upon.