An Essential AML Compliance Guide for Real Estate Industry in the UAE
The real estate sector is a strong magnet for the money launderers who use the transactions in the industry for legitimising funds derived from illicit sources. A low degree of transparency and lack of awareness about AML / CFT laws have only contributed to increasing the risk of money laundering. Due to the increased risk factor, the sector is categorised as a Designated Non-Financial Business and Professions (DNFBP), which mandates the agents, brokers and other professionals in the sector to ensure AML compliance in the UAE.
Related: Hire Services of AML Consulting firm in the UAE
As a rule, the DNFBPs must register in the financial intelligence unit system called goAML before March 31, 2021. Apart from that, such businesses should ensure that they have implemented all the due diligence procedures set out by the UN, FATF and the UAE Ministry of Economy. This article will serve as a guideline for the Real Estate agents to ensure AML compliance in the UAE. Read ahead.
Does Real Estate Come Under AML / CFT Purview?
Yes. Real estate agents, brokers, companies and other professionals come under the purview of the AML / CFT obligations under the conditions laid in Article (3) of the AML-CFT Decision. The following conditions are applicable,
- Brokers and real estate agents should oblige with AML / CFT when they conclude operations for the benefit of their customers with respect to the purchase and sale of real estate
- Lawyers, notaries, other independent legal professionals and accountants must meet AML / CFT requirements while preparing, conducting or executing financial transactions for their customers in connection with the purchase or sale of real estate.
Common Methods of Money-Laundering in the Real Estate Sector
The methods used by criminals to launder money in the real estate sector are continually evolving. Therefore it is tough to keep track of the techniques used by the money-launderers. However, based on research conducted by the FATF and other organisations, the following methods have been identified,
- Hiding or disguising the identity of beneficial owner or owners
- Concealing or disguising the illegal origin of the funds
- Using the value extracted from the real estate for the benefit of the criminals
- Use of complex loans or credit finance
- Use of non-financial professionals (such as real estate and legal professionals
- Use of corporate vehicles
- Manipulation of the appraisal or valuation of a property
- Use of monetary instruments (including bearer negotiable instruments)
- Use of mortgage schemes (including fraudulent mortgage schemes)
- Use of investment schemes and financial institutions;
- Use of properties to conceal money generated by illegal activities
Key AML / CFT Obligations in the Real Estate Sector
Those who engage in activities related to the sale and purchase of real estate on behalf of customers are required to meet the AML / CFT obligations. This includes real estate agents, brokers, lawyers, notaries, and other independent legal professionals and independent accountants. Their obligations include,
- Identify and assess money laundering risk
- Make and update policies and procedures to reduce money laundering risk and document them
- Implement and maintain risk-based customer due diligence and ongoing monitoring procedures
- Identify and report suspicious transactions
- Establish a robust framework for AML/CFT, such as appointing a Compliance Officer
- Maintaining adequate records for all of the above
- Ensure compliance with the directives of Competent Authorities in the UAE in relation to the United Nations Security Council resolutions
- Designate an MLCO -Money Laundering Compliance Officer
Customer Due Diligence in Real Estate Sector
In general, professionals working in the real estate industry can ask for bank references or bank account information to verify customer identity. Apart from that, the real estate agents and brokers should be alert to the following due diligence measures,
- Ensure the customer’s profile is compatible with the specifics of the real estate transaction
- Increase identity check if legal structures such as trusts, foundations, personal investment companies, investment funds, or offshore companies are involved
- Verify whether the customer is involved with politically exposed persons (PEPs)
- Possible prior association between the parties to the transaction is a red flag
Ongoing Monitoring in the Real Estate Sector
The transactional nature of the real estate sector makes it tough for professionals to regularly monitor their customers’ activity. This is because the agents and brokers have limited access to the customers’ financial transactions in most cases. However, once a high-risk customer is identified, the professionals should make attempts to monitor their activity in relation to the properties involved.
The real estate agents and brokers could track the customer’s activity by doing the following checking off the land registry on a periodic basis to determine whether there have been any changes in the information or a quick succession of transactions in a relatively short time period. Consult with the best AML consultants in Dubai to know further about implementing due diligence measures.
Consult with the Best AML Consultants in Dubai, UAE
Due to the immense risk of money laundering, the players in the real estate sector in the UAE are required to comply with the AML / CFT laws. The transactions in the real estate industry such as sale, purchase, leasing and financing are prone to acts of money laundering and criminal activities. To navigate such risks and ensure AML compliance in the UAE, the professionals in the industry must implement a robust AML governance framework. AML / CFT law has a highly nuanced framework which means the real estate players need the assistance of experienced AML consultants in Dubai such as Jitendra Chartered Accountants (JCA). JCA can ensure the businesses are complying with AML by providing bespoke services such as the review of current AML policies, corporate AML training for staff, AML audit & reporting, implementation of due diligence frameworks etc.