Picture this – Luxury real estate agent Chinonso, eager to close a multimillion-naira deal, helps a foreign buyer purchase several high-end properties with funds wired from offshore accounts. Unknown to him, these funds have come through a series of shell companies. Chinonso, focused on commission and under pressure to close quickly, neglects to perform proper due diligence, which would have led him to question the complex ownership structure. Months later, authorities uncover that the properties were being used to launder proceeds from an international drug cartel. Despite claiming ignorance, Chinonso is prosecuted for willful blindness and failure to comply with AML obligations, facing fines, license revocation, and potential jail time.
Sounds like something straight out of a Hollywood movie, right? The truth is, several real estate agents may have unknowingly found themselves in a similar situation. The real estate sector is particularly vulnerable to money laundering.
Luxury Homes, Illicit Homes
According to the Financial Action Task Force (FATF) – An intergovernmental organization that sets international standards and promotes policies to combat money laundering, terrorist financing, and other threats to the global financial system, Real estate accounts for an estimated 20-30% of global money laundering activity. It’s a top choice for money launderers, due to:
- High Value Transactions: Real estate transactions often involve large sums of money, making them attractive to money launderers.
- Complex Ownership Structures: The use of shell companies and offshore entities can obscure the true ownership of properties and conceal the origins of illicit funds, complicating compliance efforts.
As the real estate sector becomes a prime target for money launderers, it has naturally attracted heightened regulatory scrutiny, leading to stricter AML requirements and the need for real estate companies to adopt comprehensive compliance measures.
Real Estate companies and professionals that operate across the entire value chain are now classified by regulatory agencies as DNFBPs, which stands for Designated Non-Financial Businesses and Professions. These are businesses and professions that are not traditionally part of the financial sector but are still susceptible to money laundering.
DNFBPs are subject to similar regulatory requirements as financial institutions aimed at preventing financial crimes. They can also be held liable in cases of money laundering or terrorist financing which can result in significant fines, operating license revocation and irreversible reputational damage.
It’s imperative that Real Estate firms and professionals conduct KYC, Customer Screening and Enhanced Due-Dilligence (CDD, EDD) checks on all customers (individuals and entities) they do business with, reporting suspicious transactions, and maintaining records for audit purposes.
Smart Solutions for Dirty Money
Remember our earlier story about Chinonso? This doesn’t have to be you, the good news is he had a way out, or at least a way to mitigate the risk. With advanced AML/CFT RegTech solutions, real estate professionals like Chinonso can proactively identify suspicious activity, ensuring compliance and protecting themselves from the dangers of financial crime.
Probe Compliance Africa Ltd. is a technology company specializing in compliance and Anti-Money Laundering/Counter-Financing of Terrorism (AML/CFT) regulation solutions. We provide specialized solutions to help real estate companies comply with AML regulations and mitigate the risks associated with financial crimes
Here’s how Probe Compliance helps:
- Enhanced AML & KYC Screening: Probe’s KYC screening tool helps real estate companies verify the identity of buyers, sellers, and other parties involved in transactions, ensuring compliance with AML regulations.
- Adverse Media Screening: Probe’s adverse media tool screens individuals and entities against negative news sources, reducing the risk of associating with those involved in financial crime.
- PEP and RCA Identification: Our AI-driven PEP and RCA (Relatives and Close Associates) identification tool helps real estate companies identify high-risk individuals, ensuring compliance with regulatory requirements.
- Sanctions Screening: Real estate companies can screen clients against global sanctions lists, ensuring they do not engage with sanctioned entities.
And the benefits of using our solutions:
- Regulatory Compliance: Ensures adherence to AML regulations, reducing the risk of penalties and reputational damage.
- Risk Mitigation: Advanced screening tools help identify and mitigate risks associated with money laundering and financial crimes.
- Operational Efficiency: Automates compliance processes, reducing manual intervention and saving time.
- Customer Trust: Rigorous compliance practices build trust with clients and stakeholders
Don’t end up like Chinonso – caught off guard and facing the consequences. Reach out to us today to learn how our AML/CFT RegTech solution can help you stay compliant, spot red flags early, and protect your business from financial crime.
Visit our website to learn more: https://probecompliance.com/
Schedule a demo: https://bit.ly/40JuonS