Illicit funds acquired through predicate crimes need to be cleaned before they can be enjoyed without raising suspicion. As we all know criminals have come up with many elaborate ways to “wash“ their dirty money, but real estate, in all its forms, is an especially attractive option towards the end of the money laundering cycle.
Property transactions can often involve large sums of money and despite Estate Agents being identified as Accountable Institutions by the Financial Intelligence Centre (FIC), are often subject to much less scrutiny than a similar valued transaction via a financial institution. This may go some way to contributing to the fact that purchasing property is a common way to integrate illicit money back into the legitimate financial system. Not only can it allow criminals to benefit from the proceeds of their crime personally, but it can also be a useful asset to be leveraged as an ongoing rental income-generating investment.
Ultimately what this means is that there are currently trillions of dollars being spent globally by criminals in property purchases and sales. This has far reaching consequences, from the social, economic and environmental impacts of the originating predicate crimes, to the distortion of property prices.
In the words of the FIC “Not only will you as an Estate Agent assist in the fight against crime but in the end, you are contributing to creating a safer and more stable business, economic and social environment, encouraging and improving domestic and foreign investor confidence and growing the economy.”
To reiterate the possible risks of Estate Agents being implicated in a money-laundering scheme, the FIC has released an Estate Agent toolkit for combating money laundering and terrorist financing.
This useful guidance issued by the FIC outlines, step by step, the process that Estate Agents should follow to mitigate their risk and comply with the FIC Act. In a nutshell, this guidance includes:
- Registering with the FIC.
- Applying a risk-based approach to identifying and verifying customers.
- Developing a risk management and compliance programme (RMCP) for managing money laundering and terrorist financing.
- Undertaking due diligence on their clients and transactions.
- Keeping records of transactions.
- Submitting regulatory reports to the FIC.
- Provide ongoing training to employees on FIC Act requirements.
- Appoint a compliance officer.