As the UK begins targeting real estate as a pass-through for money launderers, some interesting questions and outcomes are certain to arise throughout the real estate and financial industries...
- How will financial institutions adjust their risk perspectives for real estate firms?
- How long until the United States and other countries with strong financial ties adopt similar stances?
- What due diligence controls can/will/should real estate firms undertake?
- If the public register uncovers property attained through corruption or money laundering, what happens to that property, and what fines may be imposed on the parties to the transaction?
- Will these real estate transparency concepts eventually apply to commercial leasing in order to target illicit predicate offenses (front companies, trafficking, etc.)?
The basic principles of knowing your customers, identifying legitimate business purpose, and conducting due diligence before the transaction don't just apply to financial institutions anymore. As regulatory and legal initiatives grow to incorporate more facets of the financial crimes process, solid compliance programs will become a higher priority for real estate, trade and retail organizations seeking to avoid punitive action.
The U.K. is trying to free its real-estate market of those who use it as a vehicle to launder proceeds of corruption. Property has a “particular appeal to high-end money launderers” who wish to conceal large amounts of money using only a few transactions, according to a national risk assessment of money laundering and terrorism financing released last year. The push for transparency on beneficial ownership is part of a broad effort by the government to stamp out corruption in the U.K. Transparency International found in 2015 that 75% of properties whose owners were under investigation for corruption involved companies registered overseas.