The real estate sector has a medium risk for money laundering and terrorism financing (ML/TF), according to the Anti-Money Laundering Council’s (AMLC) latest assessment.
“The overall threat of the real estate sector is rated medium as the sector is exposed to illegal drugs, corruption, fraud, and terrorism threats,” the AMLC emphasized in the report assessing the sector’s exposure to ML/TF/proliferation financing, released on Tuesday.
The real estate sector is more vulnerable to illegal drugs, corruption, and fraud, including violations of the Securities Regulation Code (SRC), based on the suspicious transaction reports (STRs), ML investigations, and cases.
“Criminals potentially facilitate movement and hide illegal proceeds through the purchase of or investment in real properties,” the country’s financial intelligence unit explained. Assets are frequently used as clandestine hideaways for illegal activities.
In the context of terrorism and TF, AMLC highlighted that, based on TF cases it handled, properties were purportedly used to train recruits for terrorist-related actions.
“TF-related STRs, albeit limited, may suggest financing of terrorism activities through transactions posing as real estate investments,” the paper concluded.
AMLC also revealed that cash transactions expose the business to the risk of money laundering because typologies suggest that utilizing cash obscures the true nature of the funds.
“Given the anonymous character of cash, authorities face difficulties in tracing the source of funds associated with criminal activities,” it added.
AMLC has suggested measures for reducing potential threats and vulnerabilities in the real estate sector that should be studied or implemented.
Among the methods proposed are the need to enhance the understanding on money laundering/terrorism financing risks; enhance supervision and regulatory controls, and compliance function; and promote effective coordination mechanisms and enhance enforcement actions.
AMLC added that continued interaction with the real estate sector would boost risk understanding, reporting responsibilities, and know-your-customer/customer due diligence/enhanced due diligence procedures.
“The AMLC should issue a report on typologies and list of ML/TF indicators, involving the sector for the guidance of covered persons and the public,” it continued.
BY MEYNARD DELA CERNA
