Money laundering is a global issue that impacts multiple industries, including the real estate sector. Real estate is particularly vulnerable to money laundering as it offers a high level of anonymity and a large number of transactions that can easily hide the origin of illicit funds. In response, the UAE government introduced Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) regulations to combat the risk of financial crimes.
Here are some examples of suspicious transactions that could raise concerns regarding money laundering in the real estate sector:
1. Cash payments for the entire value of the property Paying for the property in cash can raise suspicion as it is an easy way to hide the source of funds.
2. Complex loan structures or credit finance Using complex loan structures to finance a property purchase can be a way to launder money. The repayment of the loan then forces the illicit money into the legitimate financial system.
3. Undervaluation or overvaluation of property Valuing a property either too low or too high can be a way to launder money. Overvaluing a property increases the value of the illicit funds, while undervaluing a property can help to hide the actual value of the funds.
4. Frequent renovations and improvements Frequently renovating and improving a property can be a sign of investment of illicit money.
5. Use of unknown third parties to hide identity Using unknown third parties with a clean criminal record can help to hide the true identity of the buyer or seller of the property.
6. Hiding ownership using trust and company structures Hiding the ownership of a property using trust and company structures can help to keep the true owner anonymous.
7. Multiple purchases or sales of property Multiple purchases or sales of property can be a sign of money laundering, especially if there is no clear commercial or professional reason for the transactions.
8. Unusual nature of property ownership Unusual ownership of a property, such as a mortgage with an unidentified lender, can be a sign of money laundering activity.
9. Purchase by Political Exposed Persons (PEPs) Purchasing property by PEPs or individuals with sanctions can be a way to launder money and hide assets from their own country’s lawmakers.
10. Using property for criminal activities Using purchased property to carry out criminal activities, such as drug production, is a way to launder money and invest illicit funds.
The UAE government has implemented various AML/CFT regulations and directives to control the real estate sector’s compliance. The regulations include identifying and verifying customers’ identities, monitoring transactions, and reporting suspicious activities to the authorities.