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The Legal Landscape: Understanding Anti-Money Laundering Regula

• Publicado por Belal Mahmoud 16 de fevereiro de 2024 - Arquivado em Negócios - #Anti-Money Laundering Regulations  - 2 visualizações

  Criminals are not the only ones who understand that it is easy to misuse real estate for financial crimes. This also applies to regulators. In 2022, the Financial Action Task Force (FATF), an intergovernmental body coordinating Anti-Money Laundering checks and practices. They also updated its guidelines for the use of risk-based AML procedures in the real estate sector. According to Reuters, between 2015 and 2020, $2.3 billion was laundered through U.S. real estate.

  KYC AML guide is a research-based consultancy that can help real estate firms choose the best KYC solution.

  Red flags of money laundering in real estate include:

  • Investors who use multiple banks should stay under-reporting
  • Cash and no mortgage involved sales such as 60% of real estate transactions worth more than $ 2 million are made by international investors in places like Miami and Manhattan are cash transactions 
  • The big difference is between the buyer's income and the home's value of property
  • The sales where the ultimate beneficial owner (UBO) is unclear
  • When the property is purchased by a third party such as the nominee purchaser
  • A large distance between the investor's current location and the location where the property was purchased
  • The property is purchased through a loan back in an offshore bank account that is borrowed by a shell company, whose owner is the person who controls the offshore bank account.
  • If the property is used as a physical basis for other crimes
  • Other suspicious signs include sales among known criminals, ex-criminals, members of crime families, and politically exposed persons (PEPs).

  What effect does Money Laundering have on the Real Estate Markets?

  Some examples of the impact of money laundering on the real estate market are as follows

  • Housing prices are distorted, making it impossible for many people to buy a home including rentals or commercial property.
  • Instability in the real estate market
  • Corruption
  • Unfair competition
  • Drug trafficking,
  • Human trafficking,
  • Terrorism and organized crime continue

  What impact will Anti-money laundering checks have on the retail industry?

  The first country to develop AML regulations was the US with the passing of the Bank Secrecy Act in 1970. Although subsequent laws, regulations, rules, and guidelines have shaped the regulatory structure, the law remains the basis of the AML framework. Many professionals such as lawyers, brokers, agents, surveyors, and surveyors working in the real estate sector are exempt from AML requirements to run customer identification programs (CIPs) or file suspicious activity reports (SARs) and financial transaction reports (FTRs).  However, real estate transactions may be subject to AML rules and voluntary guidelines:

  • To both bank and non-bank lenders the BSA AML program applies
  • Reports cash payments of more than $10,000 and certain financial instruments, such as checks or money orders by form 8300 fillings
  • Report across-the-border movements of cash over $10,000 and certain financial instruments by Currency and monetary instrument report (CMIR) or Form 105 filings.
  • U.S. insurance companies must set CTRs for certain legal entities and their beneficial owners for unfinanced homebuyers in certain areas, such as New York, San Francisco, California; and Cook County by geographic targeting orders (GTOs). This report is usually only required if the property is worth at least $300,000.
  • The new beneficial ownership law went into effect on January 1, 2024, and has consequences for companies and individuals purchasing real estate. They require domestic and foreign business entities that are registered to do business in the US to register with FinCEN and provide identifying information to the ultimate owners of those companies.

  Voluntary Guidelines for Real Estate Professionals: 

  FinCEN and the National Association of Realtors (NAR) have collaborated to develop voluntary guidelines for real estate professionals. This helps provide employees with money laundering information and red flags that may prompt them to file a SAR if they suspect activity. In December 2021, FinCEN also released a comprehensive regulatory proposal to gather information on the application of other BSA requirements in the real estate sector. 

  AML requirements and compliance vary widely around the world. In August 2021 a report entitled Acres of Money Laundering, the Money Laundering Alliance outlines how AML rules are developing across the G7 – Canada, France, Germany, Italy, Japan, the UK, the US, and the EU. 

  How do anti-money laundering checks help prevent money laundering?

  It is important to understand how AML checks can detect and prevent money laundering. AML programs identify individuals and businesses when they first open an account or initiate a transaction, and to a lesser extent through ongoing monitoring of customer transactions, such as KYC identity verification. In real estate, transaction monitoring levels may include SAR reports, CMIR reports, and Form 8300.

  The initial identification process may include several screening tests that are performed when you take on a new customer or close a contract. This typically applies to Know Your Customer (KYC) individuals or a Know Your Business (KYB) program for corporations and may include:

  • Source of funds 
  • Customer identification program (CIP)
  • Customer due diligence (CDD)
  • Enhanced due diligence (EDD) ‍

  KYC and AML checks can be complex, yet great anti-money laundering checks play a significant part in identifying and forestalling money laundering. As a result, price distortions in local real estate markets and funding for other forms of criminal activity can both be prevented.