AML solutions

Hunting Down Real-Estate Crimes and Meeting Compliance with AML Solutions 

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The real estate sector is becoming increasingly popular worldwide due to emerging investment trends, digitization of property trading, and remote dealings. Simultaneously, regulatory concerns are also facing a surge as with high-value transactions comes a more significant risk of money laundering. After handling $2.3 billion worth of illicit transactions in 2021, property agents are trying to identify vulnerabilities that attract criminals. 

Insufficient Anti-Money Laundering (AML) controls create loopholes that trigger the flow of illicit funds. Furthermore, cybersecurity threats are also increasing due to remote property trading and digital payments. Therefore, the real-estate sector should improve its AML verification systems to detect suspicious activities. 

This article outlines regulations and how AML solutions help property trading companies prevent legal repercussions. 

The Real-Estate Sector – Reasons Behind its Increasing Vulnerability 

The real estate sector is growing exponentially and is projected to top $4,923.3 billion by 203. Considering the increase in property trading and business giants, adopting this trend for additional revenue generation is also attracting criminals. Dumping money into high-value building plans, buying luxurious mansions, and rapid sale/purchase of expensive lands are some of the most prominent ways they use to hide illicit funds. 

Profitability in real-estate trading does not seem to slow down. Hence fraudsters see this sector as their easy way to escape AML compliance and convert their dirty money. Furthermore, rapid purchasing of high-value lands and selling the properties in less time for other returns leaves no time for sources of income validation. This helps offenders a great deal in concealing proceeds of crimes. 

In April 2022, criminals spent over $300,000 in illicit high-priced property trading. While fraudsters see the real-estate sector as offering tangible lands with increasing capital and profits, insufficient AML security checks clear the way for them.

Russian Invasion of Ukraine – Another Reason for Real-Estate Exploitation 

After the war started in 2014, Russia invaded and took over Ukraine completely by the end of February 2022. This massive conquering escalation brought property trading to light. After the majority of the countries imposed sanctions on Russian oligarchs, they started finding ways to move their illicit funds. In this regard, the real estate sector became a major breakthrough for them to hide anti-money laundering scrutiny. Sanctioned tycoons were then investing in international properties. As a result, property trading companies are facing a huge increase in AML compliance risks.

AML Security Regulations and Increasing Scrutiny for Property Trading

Real estate trading opens various spheres to high revenue generation for both potential investors and criminals alike. Fraudsters often use hard cash for hefty payments to escape online AML monitoring and evade thresholds. In the case of digital payments, they use multiple accounts to hide the trail of money laundering. The use of shell companies, trusts, third-party brokers, and insurance coverage are other ways criminals deploy to hide illicit funds.

Considering the increase in malicious trading, regulatory watchdogs are toughening AML compliance and putting forth the following stringent requirements:

Fifth and Sixth Anti Money Laundering Directive (5/6AMLD)

The European Union (EU) put forth the Fifth Anti-Money Laundering Directive (AMLD) in  April 2018 with a special section dedicated to AML screening for real estate trading. It outlined obligations such as business legitimacy verification, Ultimate Beneficial Owners (UBOs) identification, and third-party payment authentication. Similarly, in 2020’s 6AMLD, the EU made risk assessment another mandatory standard with hefty penalties for non-compliance. 

Financial Crimes Enforcement Network (FinCEN)’s Stance

In April 2022, FinCEN renewed its Geographic Targeting Orders (GTOs) to counter money laundering through property trading. It also extended AML compliance for international investments, especially ones coming from high-risk regions. Furthermore, property trading firms and insurance companies should also validate business owners along with high-profile investors.

Guidelines by the Joe Biden’s Congress 

Joe Biden’s administration identified inadequate AML security standards in real estate companies that were the baseline for money laundering. To fill in loopholes, it formulated a new anti-money laundering regime with a dedicated focus on cash and digital payments. Congress also rolled out stringent penalties for non-compliance.

Automated AML Systems – Preventing Real Estate Money Laundering

AI-powered AML solutions are the game changers for property trading as they efficiently counter criminal intentions and stay aware of future money laundering threats. With automated real-time transaction monitoring, risk profiling, source of income checks across global financial records, screening against sanctions/watchlists, due diligence, and suspiciousness detection, agents can restrict the digital onboarding of fraudsters.

In Summation

Due to a dramatic increase in illicit property trading, the anti-money laundering regulatory framework continues to evolve. While criminals use sophisticated ways such as multiple accounts for transactions, cash dealings, and obscuring income sources,  automated AML tools identify their suspicious intentions. Hence, real estate companies can clamp down on fraud risks efficiently. Ultimately, AML solutions also pave the way to compliance.

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