Money laundering is a process that involves hiding sources of illegally obtained money. You can convert dirty money into legal funds through a series of transactions.

However, when you think of money laundering, your mind immediately shifts to the drug and arms trafficking trade. What if we told you that money laundering in real estate is also a thing and is rather huge? 

It may sound a bit far-fetched but stay with us for a minute. 

Real estate and money laundering are no strangers to each other. According to estimates, $1.6 trillion is laundered through the real estate industry annually.

This post will explain money laundering in real estate and how to comply with and detect money laundering in real estate for better understanding.

Why Is The Real Estate Sector Vulnerable To Money Laundering?

The real estate sector is a popular field for money laundering because it is easy to disguise and hard to trace. The industry has been a popular place for money laundering over the years. The reasons behind this are twofold: it is easy to disguise cash transactions as legitimate ones, and it isn’t easy to trace the money back to its source. While there are laws in place that govern such illegal financial transactions, they can circumvent you easily.

A criminal wishing to launder his money does not need much more than some basic knowledge of the law and the ability to find an agent willing to participate in this illegal activity. The law states that transactions over $10,000 must be reported by both parties involved. 

But if these agents collude with criminals, they can keep track of their earnings and report fictitious amounts on their tax forms instead of writing them as income from money launder real estate activities.

The following are some of the reasons why real estate attracts money laundering:

1. It’s easy to hide income from tax authorities. The most common way of doing this is by underreporting income or using different methods to conceal profits, such as offshore accounts or shell companies.
2. Real estate offers anonymity and privacy, making it possible to conceal ownership and control over assets. Money launder real estate examples include transactions without records being kept on paper, making it hard for law enforcement agencies to track down criminals if they want to sell their property later.
3. Real estate is an attractive investment option for criminals. It offers high returns compared to other investment vehicles like stocks and bonds, which carry high risks but low returns compared with real estate investments with lower risks and higher rates of return on investments over time.

Why Do Real Estate Businesses need To Adopt AML Procedures?

Anti-money laundering in real estate procedures are becoming more and more stringent. AML is a series of policies and procedures to prevent criminals from using money gained through illegal activities, such as money laundering.

The risks associated with money laundering in real estate are pretty severe; it can lead to financial institutions being charged with aiding and abetting criminal activity. The only way to avoid these charges is to implement effective AML policies and procedures in your company.

So why do real estate businesses need to adopt AML procedures? Here are a few reasons:

1. To avoid fines and penalties from the IRS
2. To protect the reputation of your business
3. To protect your employees from being accused of fraud

How To Comply With Anti-Money Laundering Standards?

Money laundering regulations are designed to prevent criminals from disguising the trustworthy source of their money.

However, it is not uncommon for businesses to inadvertently break the law by failing to comply with these regulations.

Here are some steps you can take to reduce the risk of falling foul of money laundering regulations:

• Know what you’re doing: If you’re in any doubt about how to comply with money laundering regulations, talk to your accountant or lawyer. They can advise you on how best to abide by the rules and avoid breaking them.
• Know your customers: Make sure you know who is behind each transaction and where the funds come from. It will help to ensure that you do not accept suspicious transactions or accounts which may link to criminal activity.
• Keep records: Keep detailed records of every transaction made by your business so that you have evidence if there is ever an investigation by authorities into your business activities.

How To Spot Money Laundering In Real Estate

Only 0.1% of illegal funds recovered through anti-money laundering efforts are ultimately returned to victims. However, the crucial step in detecting money launder real estate is to be aware of common warning signs.

The following list of symptoms of money laundering in real estate may help you to identify suspicious activity:

• The property owner has no visible means of income or legitimate reason for owning such a valuable property.
• There is no mortgage on the property.
• The owner(s) are not the registered owner(s) on title or lease documents.
• The property is purchased with cash or by a company that appears to have little or no substance, i.e.; it is registered with very little information. It could also include offshore companies, which are more challenging to track than domestic ones.
• The sale price is significantly below market value or above what would typically be expected for the location and type of property sold.

From: https://www.hyperverge.co/blog/how-to-prevent-money-laundering-through-real-estate