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Financial Action Task Force reveals guidance on AML risks in real estate

Tuesday 6 September 2022 15:08 CET | News

The Financial Action Task Force (FATF) has revealed new guidance on anti-money laundering (AML) risks in the real-estate sector.

 

The Financial Action Task Force (FATF) is an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the proliferation of weapons of mass destruction.

The AML risk publication follows a consultation in March and April 2022, in which contributors asked for better clarity for property professionals on the risks associated with money laundering. They also asked the FATF to match its requirements so that the sector can operate with greater certainty in cross-border property transactions.

Some contributors asked for FATF's recommendations to be extended in order to cover areas such as property development and leasing, which are not directly targeted by the standards.

While assessing the industry, the FATF found that there is a poor level of understanding of AML risks and how to mitigate them. The sector is most vulnerable when it comes to exploitation by politically exposed persons, the use of anonymous companies, the purchase of luxury properties, and the use of virtual assets.

According to the Task Force, agricultural and commercial properties are also vulnerable to money laundering.

 

The Financial Action Task Force (FATF) has revealed new guidance on anti-money laundering (AML) risks in the real-estate sector.

 

Application of the FATF recommendations in the real estate sector

According to the official document, when it comes to the implementation of internal controls, the FATF recommends the adoption of enhanced due diligence measures when working with higher-risk countries, as well as the reporting of suspicious transactions.

These actions should help mitigate the gaps that arise from an incomplete implementation of due diligence, and the inability of obliged entities to adequately apply the RBA to AML/CFT efforts.

The document also makes it clear that customer due diligence and record-keeping measures, as well as measures on politically exposed persons, new technologies and reliance on third parties, apply to all Designated Non-Financial Business and Professions (DNFBPs). This recommendation is aimed at real estate agents, lawyers, notaries, and other independent legal professionals and accountants in the context of buying and selling real estate.

Moreover, real estate professionals should always comply with their due diligence obligations with respect to both the buyers and sellers of the property under transaction.

Other FATF developments in 2022

In August 2022, the Financial Action Task Force had a close look at Germany’s efforts and reforms over the last five years and gave it a mixed review. According to the intergovernmental body, the country has been slow to implement these reforms and should prioritise their implementation at the operational level.

As far as freezing terrorist assets is concerned, the FATF concluded that Germany could stand to be more proactive in the use of targeted financial sanctions as a preventive measure.


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Keywords: money laundering, risk management, fraud management, fraud detection
Categories: Fraud & Financial Crime
Companies: Financial Action Task Force
Countries: France
This article is part of category

Fraud & Financial Crime

Financial Action Task Force

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