Falling real estate prices. Falling interest rates. Falling inflation. Today, we draw a line through a thick period of economic milestones - and spotlight a new measure called “unexplained wealth orders,” which allow law enforcement to seize properties and require owners to prove they bought them on the level. But first:
In the news
Brookfield eyes fund for Canadian investments: Brookfield Asset Management Ltd. has floated an exploratory proposal to launch a fund worth as much as $50-billion that would seek to raise money from major Canadian pension funds and from Ottawa to invest in Canadian assets, James Bradshaw reports. But the idea has been met with tepid interest from the pension funds, which haven’t been keen on it from the start.
Supply chains put to the test: Tariffs are rising around the world and Donald Trump could trigger a global trade war if he is elected U.S. president in November. But Denmark’s AP Moller-Maersk, the world’s second-biggest container ship company, says supply chains have shown a remarkable ability to adapt to sudden shocks.
Students running out of time More than 200,000 international students in Canada will see their work permits expire by the end of 2025, new data obtained by The Globe and Mail show. Many of them might not successfully obtain permanent resident status in that time frame because of recent changes in immigration policy.
Happening today
- U.S. Federal Reserve chair Jerome Powell is expected announce a cut in the central bank’s overnight lending rate at 2 p.m. ET.
- The Bank of Canada releases a summary of its deliberations from its last meeting.
- Britain and the eurozone report their year-over-year consumer price indexes for August.
Economy
Falling inflation brings focus to Canada’s fall outlook
All eyes on the fall.Adrian Wyld/The Canadian Press
Canada’s annual inflation rate cooled to 2 per cent in August, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth, Matt Lundy reports. Inflation reached the lowest level since February, 2021.
- The easing of price pressures was primarily helped by a drop in prices of gasoline, telephone services, clothing and footwear.
What’s next
We find out this afternoon whether Powell will cut the key lending rate by a quarter-point or a half-point.
- Bank of Canada Governor Tiff Macklem has until Oct. 23 to decide whether he’ll follow in Powell’s footsteps.
- But he has more to mull from a Canadian perspective: He’ll have another inflation report, and the Labour Force Survey for September.
- The unemployment rate has risen to 6.6 per cent, and Macklem said this month that he’d be open to making a larger half-point move if necessary.
What’s next (real-estate edition)
New measures announced by Ottawa this week will ease access to pricey homes, and allow first-time buyers to stretch out their payments over 30 years, up from a previous maximum of 25.
- In the short term: A combination of Ottawa’s measures (which kick in on Dec. 15), falling interest rates and falling housing prices might finally shake loose Canada’s housing market.
- In the long term: Homebuyers who opt to pay interest over a longer period will end up paying more in total.
- Homes might become more accessible, but let’s remember to check back in on Canada’s world-leading household debt-to-disposable-income ratio in 30 years.
In focus
Unexplained wealth orders target crime but draw ethical concerns
Authorities seized this house on British Columbia’s Salt Spring Island. It was bought for $1-million in cash by the former spouse of a man accused of having ties to a global pump-and-dump stock scheme.Chad Hipolito/The Globe and Mail
The crackdown
Law enforcement officials in British Columbia are seizing assets using a new legal tool known as unexplained wealth orders, Alexandra Posadzki reports.
The orders require the owner of properties and other assets to prove they acquired them through legal means, or risk having them confiscated. B.C. and Manitoba have both put the new measure in place, but Manitoba has yet to use it.
There are currently four cases winding their way through B.C.’s court system, and experts expect legal challenges will need to be cleared. If those hurdles are cleared, other provinces are expected to follow suit.
The debate
Proponents of unexplained wealth orders argue that they allow law enforcement to disrupt the operations of organized crime groups.
- Officials say sophisticated money-laundering techniques make it extremely challenging for investigators to follow the money.
Opponents argue the orders infringe on the Canadian Charter of Rights and Freedoms.
- Reversing the burden of proof amounts to removing the presumption of innocence, critics say. That puts the onus on owners to prove they haven’t committed a crime
You can read more on the measures in Posadzki’s piece, but I had a few questions for her while I rushed to find the paperwork for my house.
Why are these measures being put into effect in B.C. and Manitoba, of all the provinces?
B.C. has made a lot of headlines about money laundering over the years, particularly through its casinos and real estate market – so much so that B.C. struck the Cullen Commission several years ago to conduct an inquiry. In Manitoba, the Winnipeg Sun once called the city a “hub” for organized crime. So you can see why those two provinces would be keen to get a handle on the issue.
And other parts of Canada?
Money laundering definitely happens in other provinces as well, so it’s hard to say whether it’s more prevalent in those two particular provinces.
How do authorities ID potentially ill-gotten gains and assets?
There are different ways in which they can do this. The first two unexplained wealth orders in B.C. both stem from high-profile global pump-and-dump stock cases in which authorities say they were able to trace the proceeds of those crimes into Canada. In another case, police apparently discovered an illegal marijuana grow operation while they were responding to a shooting.
How do unexplained wealth orders work in the world of civil forfeiture? Are they different things?
Unexplained wealth orders are one tool under a civil forfeiture regime. With either an unexplained wealth order or a standard civil forfeiture case, the state is able to seize assets without a criminal conviction.
Civil forfeiture depends on authorities demonstrating that there are reasonable grounds to believe that the property came from unlawful activity.
The civil forfeiture office still must still meet a burden of proof to obtain an unexplained wealth order. But if the order is obtained, it then introduces a reverse onus: The owner of the asset now has to prove that they obtained that asset lawfully or they risk losing it.
Do we have a sense of timing around the cases in B.C.? I’m just trying figure out what happens next. Does a ruling on one case affect the others?
I can’t definitely tell you whether the first case filed would be the first one to receive a ruling, or whether an appeal would leave other cases in limbo. But I can say that legal experts I spoke to all expect to see an appeal, maybe even all the way up to the Supreme Court of Canada, since this is a new legal tool.
Charted
Buy the dip and ride the rails
Canadian National Railway Co. delivered some disappointing news this week, David Berman writes. But investors can be forgiven for smiling at the buying opportunity recent developments have created.
Morning markets
Global markets were mixed in nervous trading ahead of the U.S. Federal Reserve’s policy announcement this afternoon. Wall Street futures pointed higher amid the jitters while TSX futures were lower as crude prices sank.
Overseas, the pan-European STOXX 600 was down 0.47 per cent in morning trading. Britain’s FTSE 100 declined 0.58 per cent, Germany’s DAX slid 0.1 per cent and France’s CAC 40 gave back 0.45 per cent.
In Asia, Japan’s Nikkei closed 0.49 per cent higher, while Hong Kong’s Hang Seng rose 1.37 per cent.
The Canadian dollar traded at 73.61 U.S. cents