And your assessment of the CF's background checks and their utility is based on your vast experience with CF security protocols gained where? The recruiting centre? It's probably best not to comment on things about which you know little and encouraging a potential applicant to find people willing to lie for him is probably not the best course of action is it?
To the OP: the provision of references is more than just a tick in the box. Not only are they looking for people who can comment on your character and your suitability for the program to which you are applying, it can also form the basis of the work required to grant you a security clearance. The most important thing to do is tell the truth. If you don't know five people, you don't know five people. Tell them that. It is better to leave a line blank (with an explanation) than to lie. It's even worse if you get someone to lie for you as good investigators will see right through that and you won't come out looking good. The fact that you haven't seen your neighbour for the last few years and have only become reacquainted is not a problem. He still knows you and has known you in the past. If he is contacted, the conversation will cover this. On a final note, make sure you talk to anyone you list as a reference before you submit the form. A subordinate of mine once put me down as a reference, but didn't tell me first. When his prospective new employer called me, I gave his a very honest and fair assessment of my subordinate. He didn't get the job...