Money laundering in the real estate sector
Money launderers are attracted to the real estate industry because of its profitability, large transaction size, and the many parties involved in any real estate transaction that provide an opportunity to hide within shell companies.
If one of your investors uses illicit funds to invest in your real estate company, that creates legal and potential supervisory risk. It also implies high reputational risk, which will limit your attractiveness to future investors, and affect your ability to secure bank financing, since banks are increasingly pushing KYC (Know Your Customer) responsibility onto treasurers and CFOs.
One must also remember that money laundering is not a victimless crime; it often finances some of the worst criminal activities, such as drug dealing, human trafficking, and illegal arms trading.
Regulators looking at the real estate sector
The EU believes that the majority of money laundering in the real estate industry is not identified and reported yet, and an EU parliamentary briefing supports this view.
“Reporting of suspicious transactions in real estate is limited, leaving ample room for improvement”, the EU parliamentary briefing says. Other regulatory agencies are also looking at the relationship between real estate and money laundering and FATF, OECD, and the FinCEN have all published papers describing the popularity of the industry among criminals.
Regulators are expected to increase focus on the real estate industry over the coming years — searching to find and set the examples for the rest of the industry to learn from.
How you can lower your risk?
The high risk within the industry and increasing KYC requirements mean that the real estate industry is experiencing complex equity- and debt-financing processes and an avalanche of KYC requests.
To lower your risk, an efficient and centralized process is key, including your KYC documentation and information quality. This will ensure that your ease of doing business is maximized, while being compliant and supporting the fight against financial crime.
Avallone can help
At Avallone, we are ready to support our customers in getting their KYC processes automated, structured, and secure. Beyond the increased efficiency in your processes, you also get a
significantly higher quality in your KYC packages.
The Avallone platform automatically identifies beneficial owners by determining who has significant ownership or control percentage of your company. This enables companies to use the Avallone platform to request the required information and documentation from the beneficial owners and other company officers.
Furthermore, the platform enables users to upload any required corporate documents for each legal entity and define questions and answers only once to the always time-consuming KYC questionnaires.
The complete KYC package is shared in a GDPR compliant and secure way with any 3rd party.
It’s time to empower companies and change the way we work with KYC.
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