AML Compliance - Identifying The True Beneficial Owners Of Businesses

Money launderers legalize their money after investing in real estate to avoid KYC/AML security. According to Shufti Pro funding, real estate faces a loss of $1.6 trillion each year due to money laundering. When the prices start to touch the sky, money launderers see it as an opportunity to launder money.

Not only that, but real estate is a sector that provides a secure investment potential that is later dealt with for even more money. Art, antiques, and real estate are not subject to the same level of scrutiny as banking sector organizations, which benefits money launderers.

Real Estate – A Loophole for Money Launderers

Disguising the source of unlawfully obtained funds in the real estate industry is quite simple. The criminal entity may simply invest in real estate and then sell it to obtain legal funds. Money launderers utilize a variety of methods to launder illicit gains through real estate. It includes high-priced purchases and the creation of dummy corporations. To avoid verification, criminals purchase a home in the name of a family member.

In February 2021, a Russian guy was a proprietor of real estate worth more than (about $59 million) as per Shufti Pro News. Sergey Toni did not have enough sales to make the real estate transactions, according to the investigation conducted through the OCCRP, a group of journalists. The man’s money is most likely derived from his father’s earnings from the Russian Railways. It is one of the world’s largest transportation networks. Toni used shell businesses to make the acquisitions, adding to the other red flags.

The Importance of AML Screening in Real Estate

All organizations associated with the real estate industry have to legally comply with AML standards worldwide. Due to their involvement in a money-laundering operation, real estate brokers are always at risk of getting penalized or imprisoned. Real estate companies’ identity verification processes are one of the main entry points for any form of money laundering scam. When a money launderer hides behind a shell company, real estate brokers are liable to regulatory punishment. Global banking regulators urge real estate agencies to use KYC measures to verify their customers’ identities.

Businesses have to evaluate illicit activities that have affected their various industries in recent times during the onboarding stage. Shell corporations and third parties are the most prevalent tactics real estate firms use. To prevent money launderers from using shell corporations, real estate firms must first authenticate the Ultimate Beneficial Owners of a company.

To do so, real estate brokers must demand that the company disclose its UBOs and check if they have a list of the relevant jurisdiction’s beneficial ownership records. Next, the real estate company must check consumers against a list of (PEPs) to see if the acquisition involves any corrupt officials. When clients’ affiliations to political units have to go through the verification process. It further shows a few instances when the source of funding is the only red signal. As a result, realtors should conduct AML monitoring to learn about previous transactions and the origins of funds used to buy real estate.

Property Dealers Facing Sanctions if They Do Not Comply With AML Verification

According to the AMLC, all newly formed businesses must register in order to comply with anti-dirty money and mitigate funding regulations. The council’s registration portal is accessible only to registered entities and businesses.

The Philippine government is working to enhance AML legislation as a result of an increase in incidents of financial crimes such as money laundering and terrorism financing. Since the FATF placed the country on its “grey list” due to deficiencies in the AML and CTF framework, real estate developers and brokers are required to screen customers’ transactions. It will help them identify the property buyers’ authentic identities under AML Council monitoring and registration guidelines.

Wrapping it Up

The real estate market provides viable investment opportunities and rising costs for money launderers seeking to legalize their filthy money. Real estate enterprises are in danger of regulatory action as criminal entities try to exploit regulatory loopholes.

Anti-Money Laundering (AML) continually assesses real estate companies to comply with regulatory requirements while also preventing money laundering. AML systems technology is working through thousands of AI algorithms. It further checks consumers against worldwide watchlists in less than a second and with 98.67 percent accuracy.