from Hacker News

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

by eswat on 2/6/24, 5:52 PM with 395 comments

  • by ThisIsMyAltAcct on 2/6/24, 6:30 PM

    > 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

  • by SunlightEdge on 2/6/24, 7:23 PM

    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.

  • by contingencies on 2/6/24, 6:22 PM

    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.

  • by neilv on 2/6/24, 6:18 PM

    > 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

  • by Terr_ on 2/6/24, 6:11 PM

    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-e...

  • by cloudedcordial on 2/6/24, 8:53 PM

    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...

  • by beiller on 2/6/24, 6:55 PM

    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 :)

  • by darth_avocado on 2/6/24, 6:20 PM

    > 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?

  • by inSenCite on 2/6/24, 6:22 PM

    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'.

  • by dade_ on 2/6/24, 6:28 PM

    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.

  • by causi on 2/6/24, 6:12 PM

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

  • by jacquesm on 2/6/24, 6:28 PM

    HSBC has been part of plenty of scandals. Here is one example:

    https://www.investopedia.com/stock-analysis/2013/investing-n...

  • by forinti on 2/6/24, 6:57 PM

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

  • by gnatman on 2/6/24, 7:55 PM

  • by Finnucane on 2/6/24, 7:39 PM

    "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.

  • by stainablesteel on 2/6/24, 8:50 PM

    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

  • by m3kw9 on 2/6/24, 7:59 PM

    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.”

  • by nojvek on 2/7/24, 1:23 PM

    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.

  • by maxglute on 2/6/24, 6:27 PM

    >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.

  • by Ericson2314 on 2/6/24, 8:42 PM

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

  • by heldrida on 2/7/24, 8:35 AM

    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…

  • by secondcoming on 2/6/24, 6:23 PM

    > “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.

  • by bonestamp2 on 2/6/24, 9:37 PM

    > 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.

  • by nobodydot on 2/6/24, 7:03 PM

    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.

  • by catchnear4321 on 2/6/24, 11:05 PM

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

    pesky acronyms.

  • by user3939382 on 2/6/24, 6:42 PM

    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.

  • by frozenport on 2/6/24, 8:18 PM

    Those banks effectively issued sub-prime mortgages, in part due to obvious fraud.

    Will Canadians let them fail?

  • by Jemm on 2/7/24, 12:09 PM

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

  • by msie on 2/6/24, 10:54 PM

    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.

  • by mass_and_energy on 2/6/24, 11:12 PM

    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?

  • by whoswho on 2/6/24, 7:12 PM

    Yes. Downtown Toronto is full of store-fronts.

  • by downrightmike on 2/6/24, 6:15 PM

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

  • by rafaelero on 2/6/24, 8:07 PM

    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.

  • by ilrwbwrkhv on 2/6/24, 7:36 PM

    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.

  • by 29athrowaway on 2/6/24, 7:43 PM

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

  • by hnthrowaway0328 on 2/6/24, 6:41 PM

    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.