Why do Real Estate need AML/CFT ?

Real estate deals are made in cash and/or through a financial institution as loans or withdrawals. This intersects the regulated AML/CTF sector of financial institutions that monitor the potential of money laundering through real estate.
As a registered agent, you need to put anti-money laundering/counter terrorism financing (AML/CFT) measures in place if you

RISK EXPOSURE

Real estate deals involve huge cash transactions that conceal information of ownership and source of funds. This allows shell companies and proceeds of crime to be laundered through real estate, exposing agents to risks of being exploited. Various types of transactions involving third parties, deals above market value; or business relationships with clients based overseas or in a sanctioned country; are some issues the real estate sector deals with.

COMPLIANCE REQUIREMENTS

By following requirements of KYC, and enhanced due diligence of “know your buyer” and “ultimate beneficial owner”, real estate agents can remain compliant. Scrutiny of high-cash transactions, investigation of deals that are attempted but not completed, and declaration of the source of funds, are other ways agents can avert being used as conduits for money laundering/terrorism financing (ML/TF).

GAPS IN COMPLIANCE

The ability to buy real estate using cash, allows illicit funds to be integrated into the legitimate economy. Other factors like artificially enhancing real estate value with renovations, and lack of transparency in transactions and ownership structures, makes the real estate sector vulnerable to ML/TF. By addressing these gaps, the real estate sector can avert money laundering, identity frauds, scams, and abnormal inflation of the property.