Growing need for AML and Financial Crime prevention in the Real Estate Sector.

In 2008 the financial crisis sparked a revolution in the financial services sector, the
increasing need for regulation and in particurlary legislation and policies that would have
control mechansims in place to prevent money laundering and to combat financial crime.

Over the years banks are still being fined, criminal sentences and charges are being
conducted, and regulation is getting tougher.

On the other hand AML and KYC compliance checks is becoming a burden for financial
institutions. Banks have invested in technology to help mitigate these risks, to streamline
onboarding processes and utlise effective AI and transaction monotiring tools to mitigate
iregularaties in flow of funds, and detect red flags and triggers.

However there is a gap in the market allowing and enabling illicit funds to channel in, the
pandora papers sparked and pointed eyes to the global real estate market and in particular
the United Kingdom lucrative prime property sector.

Real Estate falls under the third element of money laundering “integration”. Usually a
criminal would have placed funds and layered transactions through complex webs, and now
found a way to legitimise those proceeds of crime by converting them into assets that can
be used to source legitmite income through rents, purchases and sales. This is effectively
the most common way to launder money. But why is this the case?

Oligarchs, Politically Exposed individuals and members of Royal families are well known,
they have the means to create companies acting as private investment veichles through use
of Trusts and Nominee araangments, in secretly obtaining and purchasing lucrative property
in London’s super prime property areas, in some cases there is risk that such funds could be
linked to corruption or bribery.

The real estate sector has challenges which has increased the evergrowing need to hire
more AML professionals

- Land Registry transparency on ownership requires improvement, hence the need to

use public domain and third party sources to establish ownership of property and
companies.
- HMRC is granted supervisory powers to regulate AML prevention in regulated real
estate in 2017.
- Pandora Papers in 2021 revealed the UK Real Estate Market as well as law firms as a
prime suspect of enabling money laundering and tax avoidance and in some cases
evasion.
- Sanctions imposed on oligarchs close to Vladimir Putin Regime in russiain 2022,and
the UK Golden Visa scheme is withdrawn and criticed for allowing real estate to be
acquired by officials close the putting regime.
- Real Estate by nature is the considered the weak link in money laundering,
transaction monitoring is difficult to conduct once a property has been purchased or
sold by a criminal.
Sources

https://www.ft.com/video/d3bafb94-9dbd-4c1e-8016-8cd8331960f1?playlist-
name=section-9261403f-453d-4e4d-be10-c2439191663b&playlist-offset=2

https://www.ft.com/video/d3bafb94-9dbd-4c1e-8016-8cd8331960f1?playlist-
name=section-9261403f-453d-4e4d-be10-c2439191663b&playlist-offset=2