AML & Sanctions Compliance for Real Estate in Emerging Economies

When criminals exploit the property market, it can:

• Distort the Market: Illicit funds can artificially inflate property prices, pushing out legitimate buyers and creating unstable economic bubbles.
• Fuel Corruption & Crime: It provides a way for corrupt officials and criminals to legitimize and use the proceeds of their crimes.
• Damage International Reputation: The Financial Action Task Force (FATF) assesses countries' AML systems. A poor rating can lead to being placed on the "grey list," which acts as a warning to global investors and can make international trade and finance more expensive and difficult for the entire country.

Failure to comply with your country's AML laws can lead to:

• Severe Fines: Most jurisdictions empower their Financial Intelligence Unit (FIU) or other regulators to impose crippling fines on non-compliant businesses.
• Prison Sentences: AML laws typically include provisions for imprisoning individuals found to be complicit in money laundering.
• Loss of Licence & Reputation: A connection to a money laundering scandal can destroy your professional reputation and lead to your operating license being revoked.

As a real estate agent, you MUST:

1. Identify, assess, and understand your ML/TF risks.
2. Conduct Customer Due Diligence (CDD) and keep records.
3. Report suspicious transactions to your national Financial Intelligence Unit (FIU).
4. Implement an internal AML/CFT program, including policies, controls, and a designated compliance officer.
5. Screen all clients and transactions against relevant sanctions lists.

Not all clients or transactions are equal. The RBA allows you to apply simplified measures for low-risk clients while requiring you to apply Enhanced Due Diligence (EDD) for high-risk situations.

High-Risk Factors can include:

• Clients from high-risk jurisdictions.
• Politically Exposed Persons (PEPs).
• Unusually complex company structures with no clear business reason.
• Large cash transactions.

Your AML program must be designed to identify and manage these higher risks effectively.

Identification Data to Collect:

• Full Legal Name and any other names used
• Date and Place of Birth
• Nationality
• Permanent Physical Address
• Official personal identification number (e.g., National ID number, Passport number)

Verification: You must verify this information using a reliable, independent source document, such as a valid government-issued photo ID. Always see the original where possible, or use certified copies.

Key Steps:

• Verify the Company: Obtain official documents from your country's business registry to prove the company legally exists and to see its list of directors.
• Identify the UBO: The Ultimate Beneficial Owner (UBO) is the real person(s) who ultimately owns or controls the company. You must identify any individual who owns or controls 10-25% (depending on your national law) or more of the company.
• Verify the UBO: Once you have identified the UBOs, you must verify their identities as if they were your individual clients.

Never accept a corporate client without understanding who the UBOs are.

Source of Funds (SOF): Where are the specific funds for *this* transaction coming from? (e.g., bank loan, sale of another asset). You should get evidence for this.

Source of Wealth (SOW): How did the client accumulate their overall wealth? (e.g., through their business, inheritance). This is especially important for high-risk clients, such as Politically Exposed Persons (PEPs).

• The Consolidated United Nations Security Council Sanctions List: This is the mandatory global minimum for all countries.
• Your Country's National Sanctions List: Many countries have their own lists targeting specific local threats, such as terrorism. You must comply with this.
• Major International Lists (OFAC, UK, EU): It is global best practice to also screen against the major lists from the US (OFAC), UK, and EU. A transaction with a party on these lists, even if not on the UN list, can create huge risks for your business if it touches the international financial system.

Screening:

Use the free, official online search tools provided by the UN and other bodies. Screen the names of your client, the UBOs, and any other relevant parties. Always document your search by saving a screenshot or PDF of the result (even if "no match") and placing it in the client file.

If You Find a True Match:

1. Freeze: Immediately halt the transaction. Do not transfer any funds or property.
2. Block & Don't Tip Off: Do not alert the client or anyone else about the sanctions match. Tipping off is a serious criminal offense.
3. Report: Immediately report the match to your designated MLRO, who must then urgently report it to your country's FIU and any other relevant authorities as required by your national law.

• Unusual Payments: Use of large amounts of physical cash; payments from multiple, seemingly unrelated third parties; use of complex wire transfers from high-risk jurisdictions.
• Client Secrecy & Urgency: The client is overly secretive about their identity or source of funds; they use intermediaries to hide their identity; they are unusually urgent to close the deal for no good reason.
• Transaction Structure: The client buys and quickly sells a property with no clear economic purpose ("flipping"); the stated price is significantly above or below the fair market value.
• Client Behaviour: The buyer shows little interest in the property itself; the client is a known Politically Exposed Person (PEP) from a high-corruption country.

You must report your suspicion internally to your agency's designated compliance officer (MLRO). The MLRO will assess it and, if the suspicion is valid, file a Suspicious Transaction Report (STR) with your country's FIU, often through a secure online portal.

A good STR answers the question: "Why am I suspicious?"

• Who: Details of your client.
• What: Details of the transaction.
• When: Dates of the activity.
• Why: A clear explanation of the red flags you observed that made you suspicious.

Your job is to report suspicion, not to prove a crime. That is the FIU's job.

1. AML/CFT Policy Document: A high-level document approved by senior management showing your commitment to compliance.
2. Risk Assessment: Your documented analysis of your agency's specific ML/TF risks.
3. CDD/KYC Procedures: A step-by-step guide for staff on how to onboard and verify clients.
4. Reporting Procedures: A clear, confidential process for staff to report suspicions internally to the MLRO.
5. Record Keeping Policy: Instructions on what to keep, how to store it, and for how long (typically 5-7 years).
6. Staff Training Program: A plan for initial and regular, ongoing training for all relevant staff.

This must be a person with sufficient seniority and resources to be effective. Their key responsibilities include:

• Acting as the main point of contact with your country's FIU and regulators.
• Receiving and assessing internal suspicious activity reports from staff.
• Making the final decision on whether to file an STR with the FIU.
• Overseeing the AML program and ensuring it is kept up-to-date.
• Organizing and tracking staff training.