AML Guide for the Real Estate Industry
AML Guide for the Real Estate Industry
You may be wondering why real estate agents have to comply with anti-money laundering regulations. Theyโre not a bank, right?ย
In fact, real estate transactions are one of the most common methods that criminals use to launder money and move around illicit funds. Estate agents are required to comply with AML regulations to prevent illegally obtained funds from being passed through them.
Here's why the real estate industry is a prime AML target:
Here are some of the AML risk areas relating to real estate:
Cash-only transactions
Since companies, trusts, and other third parties can purchase real estate, there is a risk that money launderers can use them to distance themselves from the transaction.
Manipulating valuations
Criminals could partner with a real estate agent who overestimates – or underestimates – the value of a property so that the difference can be settled in cash.
Falsified leases
Another money laundering scheme in real estate involves leasing a property to a tenant who pays the “rent” with the illicit funds that were provided to them. This would then make those funds look like legitimate rental income.
A criminal can take out a mortgage on a home to make the transaction appear legitimate, only to then pay off the loan with illicit cash sometime later.
AML requirements for Real Estate companies
As you can see, real estate companies play an important role in detecting and preventing money laundering. As a result, they are subject to AML requirements and are regulated by the HMRC. This means that they must follow their guidance on how to prevent financial crimes and comply with the rules that they set forth. Failure to do so can result in significant fines and penalties.
These requirements include:
As we mentioned above, real estate transactions are appealing to money launderers because they can remain anonymous or distance themselves from the entity making the purchase.
To prevent this, real estate firms are required to have customer due diligence measures in place that will allow them to confirm the identity of all individuals who will have significant control over the property transaction.
If somebody is selling, buying, or leasing a property, all buyers, vendors, lessors, and lessees need to be properly identified. Companies can do so by obtaining information like their names, addresses, and legal documents that prove their identities.
Once the real estate company has identified these individuals, they must perform sanction screenings and PEP checks to determine the risk level associated with doing business with them. If they appear on one of these lists, the real estate transaction has inherently greater risk – and the firm should have proper procedures in place for dealing with this.
All companies in the real estate industry are required to employ a money laundering reporting officer. This person is responsible for ensuring the firm complies with AML regulations and that their procedures are up to date with industry best practices.
Similarly, this person can lead training sessions for the rest of the employees to ensure that they are also aware of which type of real estate transactions are at a higher risk of being used for money laundering.
As a real estate agent, if you believe that a real estate transaction is being used for money laundering or other illicit purposes, you must complete a suspicious activity report and send it to the applicable agency.
Applications for the real estate industry
The increase in money laundering that has occurred the real estate transactions means that AML regulations will continue to be imposed on the real estate industry. Companies must work to ensure that they meet all of the standards that apply to them so that they can avoid costly fines and penalties.
It is essential to set up the appropriate processes and procedures in place to prevent money laundering and terrorist financing, so investing in the right tools and technology early on will set you up for success in the future.
The Sanctions & Crime Data API for the Real Estate Industry
Sanctions lists
PEP data
Our Politically Exposed Persons (PEP) database covers about 1million records from every country worldwide. Lists also include family members and close associates of PEPs.
Crime Watchlists
Adverse media
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For a detailed guide on how AML Sanctions Screening applies to your industry, click the relevant icon below.
Global Sanctions Lists
The sanctions lists below are included in every sanctions data subscription. Additional sanctions lists can be included on request, please contact support for more information.
United States
Office of Foreign Asset Control (OFAC)
Specially Designated Nationals (SDN), Consolidated Sanctions List (Non-SDN) and various additional sanctions lists (MBS, CCMC, CMIC, CAPTA, FSE, PLC, SSI).
Canada
Global Affairs Canada
Consolidated Canadian Autonomous Sanctions List incl. Special Economic Measures Act (SEMA) and the Justice for Victims of Corrupt Foreign Officials Act.
United States
Department of State (DoS)
ITAR Debarred (ITAR), Nonproliferation Sanctions (ISN), Cuba Restricted List.
United States
Bureau of Industry and Security (BIS)
Entity List (EL), Denied Persons List (DPL), Military End User List (MEU), Unverified List (UVL).
United States
Financial Crimes Enforcement Network (FinCEN)
311 Special Measures.
United States
Department of Homeland Security (DHS)
Uyghur Forced Labor Prevention Act Entity List (UFLPA).
United States
U.S. Customs and Border Protection
Withhold Release Orders.
Argentina
Ministry of Justice
Public Registry of Persons and Entities Linked to Acts of Terrorism and Financing (RePET).
Brazil
Brazil Central Bank
Register of persons disqualified from senior roles, and Entities Prohibited from Offering Auditing Services.
Brazil
Brazil Federal Government
Empresas Inidรดneas e Suspensas (Disreputable and Suspended Companies).
Brazil
Brazil Tribunal de Contas da Uniรฃo (TCU)
List of individuals disqualified from public service and debarred bidders.
* Additional sanctions lists can be added on demand. Just reach out to our Customer Success Team.
Politically Exposed Persons
What are Politically Exposed Persons (PEPs)?
Domestic Politically Exposed Person (DPEP)
These are individuals who hold prominent public positions within their own country.
This includes:
- Heads of state or government
- Senior politicians, government ministers, and judiciary officials
- Senior executives of state-owned corporations
- High-ranking military officials.They are classified as DPEPs due to their potential access to public resources, which could make them vulnerable to corruption or abuse of power.
Foreign Politically Exposed Person (FPEP)
These are individuals who hold, or have held, similar high-level roles in foreign countries. FPEPs are foreign officials or their associates who might also be in a position to abuse their influence for personal or financial gain.
Examples include:
- Foreign heads of state or government officials
- Senior politicians or diplomats from foreign governments
- Foreign judges or military leaders
Domestic Politically Influenceable Person (DPIP) - Family Members
These are close relatives of Domestic PEPs (DPEPs).
Family members can include:
- Spouses or partners
- Children and their spouses or partners
- Parents, siblings, or other close relatives. Due to their relationship with a politically exposed person, they may have access to privileged information or influence, which makes them susceptible to exploitation or corruption.
- Close associates are individuals who are closely connected to a PEP, either socially or professionally.
Foreign Politically Influenceable Person (FPIP) - Close Associates
These are individuals who maintain close business or personal relationships with Foreign PEPs (FPEPs).
A close associate could be:
- Business partners
- Close friends or advisers
- Legal representatives or those with significant control over a PEPโs assets FPIPs are often involved in business dealings or transactions that may raise concerns about conflicts of interest or the misuse of political connections.
- Close associates are individuals who are closely connected to a PEP, either socially or professionally.
Each of these classifications is used in anti-money laundering (AML) and know-your-customer (KYC) processes to identify and mitigate risks associated with potential corruption or financial crimes. Identifying these individuals helps institutions flag potentially suspicious activities that may be linked to political influence.
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FBI and Interpol Data
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FBI and Interpol Watchlists
FBI's Most Wanted & Fugitives
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Why AML compliance is important
For businesses to actively prevent financial loss and reputational damage, it's crucial that comprehensive due diligence processes are carried out.
Datanamix’s due diligence product suite includes AML (anti-money laundering) sanctions screening, PEP (PIP) data, Adverse Media and Crime data – all customisable depending on your specific industry, and unique business needs.
Datanamix offers a suite of AML Sanction Screening products to enable the right level of risk mitigation for every class of business – from accountable institutions bound by the FIC Act, to SMEs simply looking to protect their interests.
Adverse Media
Adverse Media Screening is the process of monitoring public sources, like news and social media, to detect negative information about individuals or organisations. It helps businesses identify risks such as criminal activity, fraud, or regulatory violations, which could harm their reputation or legal standing. Used for risk assessment and compliance (e.g., anti-money laundering or Know Your Customer regulations), adverse media screening is often automated to handle large volumes of data and provide real-time alerts. It's a key part of due diligence and risk management strategies.