Real estate is an easy target for financial fraud as properties only appreciate over time. Besides, their ownership is not subject to high scrutiny in most global jurisdictions. Further, real estate investments add a cover of respectability and legitimacy for criminals. So, for the compliance officials, such high-value transactions that take place frequently have “valid” reasons. Fraudsters use several techniques to cover their own identities, and illicitly source funds used to purchase property—shell companies, cash, and trusts.
AML-TRACE is an automated, one-time installation software that facilitates anti money laundering in the real estate sector by accurately identifying the erring parties or patterns of transactional behavior. Company auditors and officials can access the data from the software’s dashboard to sift out such violators and take corrective action. This involves halting professional relationships with the client(s) and reporting such criminals to the regulatory authorities.
In certain situations, the real estate buyer does not need lender financing. Besides, no regulated financial institutions are involved. Here, the associated money laundering risk further increases. With AML-TRACE, you can keep track of all client activity with the organization at all times.
Upon the sale of property, it is easy for money launderers to integrate the “legitimate” proceeds of crime into the financial system. As such, these get distanced from the original illicit sources–shell companies and trusts. Criminals may even reinvest the proceeds in other properties, securities, luxury goods. These are eventually cashed out as clean funds and so go unnoticed by the compliance officials. Through AML-TRACE, such sources are easily identified.
Sometimes, criminals make the title deed in someone else’s name when buying properties. The person is generally a family member who has no criminal record. So as the property is bought on their behalf, the crime proceeds are also deposited into their (family members’) accounts.
Some violators use credit and mortgage as collateral for laundering crime proceeds. Then, refunds are used to mix legitimate funds with illegitimate funds.
To avoid triggering Suspicious Transaction Reports, criminals deposit cash much below the reporting threshold across various banks. They then use these funds to obtain bank checks for purchasing real estate.
The erring parties may partner with third parties such as real estate agents to understate or exaggerate a property's value. The first process is called undervaluation–evaluating the property value lower than the actual purchase price in a sales contract. The second process–overvaluation–is followed by criminals in order to get the maximum loan amount from a lender. The bigger the loan, the more the quantum of illegal funds laundered.
For legitimizing illegal funds, criminals rent their properties. They then provide illegal funds to tenants to cover rent payments. In certain cases, they can buy properties even on behalf of a third party and then pay rent to that person using illegitimate funds.
These are properties owned in the name of shell companies that are established abroad. In this way, the criminals move away from the properties.
Violators pay for the renovation costs using illegal funds. This leads to a rise in the property's value. The property is then sold at a price that is higher than before.
A client may offer to pay you a huge cash amount–beyond the market rate–for your property as part of the lease-to-own agreement. The chances are that in such a scenario, there will be some property damage that can’t be undone. Thus an AML software for real estate agents–AML-TRACE–is absolutely crucial.
Someone may loan you money so they can use your credit for getting a mortgage. Here, the individual buyer purchases a property using his credit rating. This money is used by the criminals to make their down payments, mortgage payments, and incur closing costs. Real estate purchases are used to put the crime proceeds into the system. As the property’s real beneficial owner is hidden, the criminals’ identities are protected.
If you own a business property, someone may offer to enter into a lease for holding the commercial space. Here, large amounts of cash can be accessed by the person making rent payments. He/she tries to put as much money as possible from criminal activities into the system via rent payments.
AML-TRACE consolidates internal and external customer data for company officials and auditors to take regulatory action against bad actors. No longer do you need manual intervention to screen client KYC data or monitor their transactions. Thus, achieving AML compliance with AML-TRACE is a breeze. Once and for all, do away with high volumes of false positives. Configure the risk parameters as per your business needs and never miss broader risk indicators anymore!
As such, mitigate risk exposure in real estate transactions and achieve anti-money laundering in real estate. In one click, gain deep insights into all customer data and transactions. AML-TRACE gives you real context about why a real estate transaction may be suspicious. Use the software to easily collect, maintain and analyze customer KYC data. Moreover, easily manage risk, client onboarding, and workflow automation while maintaining a robust AML compliance setup.
Save your employees’ time and energy, which was earlier spent gathering data and carrying out time-intensive manual research. Help them channel their energies towards focusing on and mitigating real risk. Use AML-TRACE to automatically piece together internal Know Your Customer data and do away with the hassle of addressing false positives.