Criminals are widening their means to launder ill-gotten gains around the globe. When there is an evolvement of money, fraudsters find them golden opportunities to convert embezzle funds into legal money. Real estate hence, is an industry in which money laundering cases are found the most. Unknowingly bad actors dodge the owners and even owners do not have any clue regarding the money they are gaining or to whom they are selling some property. It is not obvious whether the person buying or selling some property came from legal money or not. Even backtracking of money flow gets harder sometimes.
Panama paper leaks and similar money laundering incidences have wakened the regulatory authorities. Nations have acknowledged the economic loss due to money laundering and are continuously working on norms to cater to money laundering from financial institutions, real estate and innovations that are contributing to the rise of money laundering. For example, virtual currency and the transaction flow is many times vague for regulatory authorities. Money laundering through cryptocurrency is the point of attention for local regulators. European Union came up with it’s Sixth Anti Money laundering Directive (AMLD6) declaring stringent rules and regulations for industries and updated 22 predicate offenses list. Just like AMLD5, money laundering regulations came up in AMLD6 to combat bad money flow.
Real Estate to Combat Money Laundering
The pressure of adopting Anti-money laundering approaches are now extended to real estate on a serious note. Real estate firms and management companies need to regulate the screening processes to combat money laundering and terrorist financing. It is crucially important to monitor that no one is facilitated through your firm in any criminal activity. Also, to avoid harsh regulatory penalties, there is a need to take in place anti-money laundering measures to eliminate bad actors.
Know Your Customer: The very first thing for real estate is to do proper identity verification. Screening of clients against sanction lists and criminal records issued by law enforcement agencies is really important. This would make sure that interrelation with any entity is sound and is not intended to use your firm to transfer ill-gotten gains around the world.
AML Screening: AML screening should be done against the lists of Politically Exposed Persons (PEPs), money launderers, criminals and similar lists. This database should be updated to eliminate the risks of missing any illegal entity. This could be harmful to the business as well for the economy. AML screening is available which undergoes monitoring of entities against databases and verify if the entity is legal or not.
Monitoring of Entities: One-time screening is not enough. Identity verification and transaction monitoring should be done continuously in a regular manner. This is a risk assessment approach that helps reduce the chances of bad acting within an organization.
Anti-Money Laundering Sixth Directive and Legal Professionals
Member States are advised to take into account new regulation i.e. AMLD6. It enforces stringent regulations to reduce money laundering from various sectors. Legal professionals are under the spotlight of AMLD6. Any sector caught facilitating money laundering will be subjected to four years of imprisonment according to AMLD6. This punishment has increased as a result of rising criminal activities.
Among 22 predicate offenses, tax crimes, environmental crimes, and cybercrimes are highlighted. Legal persons are also extended to criminal liability if caught aiding any criminal activity.
To wrap up, AML screening has become vital at an industrial level. It is important to monitor the transactional activities of each entity continuously to avoid harsh penalties that are expected to rise even in the coming years.
