Large transactions, complex financing structures, intermediaries and huge money-laundering risks – this is why you need AML in property sales
It’s hard to ignore the pressure of increased financial regulation in Southern Africa today – with South Africa greylisted until 2025 as well as Namibia’s recent FATF greylisting and virtually all other countries either warned, under observation or recently de-listed like Zimbabwe, one thing is for sure: global powers are putting huge pressure on our regulators to enforce Anti Money-Laundering (AML) compliance throughout the region.
It’s because our financial tools and systems are being exploited by criminals and terrorists (for proof, see the gold mafia saga and all the illicit financial flows in our countries).
One industry in particular is at huge risk: Property. And regulators all over Southern Africa are pushing so hard to get estate agents AML compliant.
Here’s why…
8 Reasons Why Our Countries Need AML in Property Sales
1. Large Transactions as Money Laundering Vehicles
The property sector is particularly vulnerable due to the high-value transactions that are commonplace. Criminals view real estate as an effective means to launder large amounts of money in a single transaction, blending illicit funds with legitimate property dealings. Estate agents need to be vigilant in scrutinizing transactions for any signs that funds are not derived from legitimate sources.
2. Complex Financing Structures Mask Beneficial Ownership
Real estate transactions can involve intricate layers of ownership through trusts, shell companies, and other legal entities. These structures can obscure the true owners of funds, complicating the task of due diligence. Estate agents must employ enhanced due diligence procedures to penetrate these layers and identify the beneficial owners, ensuring compliance with AML regulations.
3. International Transactions Invite Cross-border Money Laundering
Global real estate markets are attractive for laundering money internationally. Estate agents dealing with foreign buyers or sellers must navigate additional legal complexities and ensure compliance with not only local AML laws but also those of the countries involved in the transaction. This includes understanding and implementing the Financial Action Task Force (FATF) recommendations on international cooperation.
4. Use of Intermediaries Increases Complexity and Risk
The involvement of multiple intermediaries, such as lawyers, accountants, and financial advisors, can add layers of separation between the money and its origin. Each intermediary represents a potential point of failure in the AML compliance chain. Estate agents need to collaborate closely with all parties, ensuring that each is conducting their own due diligence and sharing relevant information.
5. Cash Transactions Are Harder to Trace
Despite a move towards digitalization, cash transactions in the property market remain a significant risk for money laundering due to their anonymity and difficulty to trace. Estate agents should be particularly cautious of deals involving substantial cash payments, implementing stringent policies for cash handling and reporting.
6. Value Manipulation Facilitates Money Laundering
ver or under-valuing property can be a tactic to legitimize the movement of large sums of money. This manipulation not only distorts the real estate market but also facilitates the laundering of money. Estate agents should ensure property valuations are conducted independently and scrutinize transactions that appear to deviate significantly from market norms.
7. Regulatory Compliance Protects Against Legal Repercussions
Non-compliance with AML laws can result in severe penalties, including fines, revocation of licenses, and even criminal charges. Estate agents must maintain rigorous compliance programs, conduct regular training, and keep abreast of legal developments to mitigate these risks.
8. Reputation Risk from Money Laundering Involvement
The reputational damage of being associated with money laundering can be catastrophic for businesses. Clients and partners are likely to sever ties with any firm caught in money laundering scandals, leading to a loss of business and trust. Maintaining strict AML controls is thus essential not only for legal compliance but also for preserving business integrity and client confidence.
What Is AML Compliance for Estate Agents?
AML compliance involves implementing a set of procedures and checks designed to detect, report, and prevent suspicious activities that might indicate money laundering. For this, you use a tool called sanction screening.
For estate agent AML compliance, this means rigorous client verification, monitoring transactions for red flags, and understanding the origin of funds used in property transactions, which is best automated with a world-class sanction screening tool.
How Estate Agents Can Get AML Compliance in Property Sales
ZenDetect offers a locally tailored solution for estate agents looking to elevate their AML compliance. This sanction screening tool is designed specifically for the Southern African property market, providing comprehensive checks at a fraction of the cost of international alternatives – see how it’s up to 90% more affordable sanction screening.
Simply follow these steps to get your property sales AML compliant in minutes:
STEP 1: Schedule a demo to see ZenDetect in action. We'll cover operational aspects, technical details, and how it integrates with your administrative systems.
STEP 2: Our experts will guide your developer through the ZenDetect integration process or assist in finding a suitable developer to do it for you.
STEP 3: Upon integration, you can upload your client database for immediate screening. The system conducts ongoing, automated checks, alerting you to any updates in sanction lists or potential issues.
