Voluntary anti-money laundering guidelines are available to real estate professionals to increase knowledge, awareness, and understanding one of the many potential risks in the real estate profession. These guidelines will also help mitigate the risks associated with money laundering.
So, what is money laundering? Well, this is a process that criminals use to cover up the illegal origin of their money. We all know that there are many criminal activities that generate a significant amount of money and assets as profit and/or proceeds. Money laundering is a three-step process that initially involves introducing the illegal proceeds into the financial system by breaking up large amounts of money into small deposits or even money orders. The second step is called ‘layering’ and this involves covering up the initial source of the funds through layers of financial transactions. The final step involves returning the illegal funds back to the original source from what appears to be a legitimate source and this is called ‘integration’.
What are the signs of money laundering in the real estate profession? Well, there are many signs, but first and foremost as a real estate professional you must be very familiar with the ‘normal course of business’. This will help you identify when something illegal may be going on. Below are some risks during the transaction that one should be aware of:
Use of large amounts of cash.
If the buyer brings large amount of cash to pay for the closing or if the transaction doesn’t match the buyer, such as purchasing a property without a mortgage. Both of these are potential red flags.
Speed of transaction
If the speed of the transaction is pushed forward hastily without any reasonable explanation this is also a red flag.
Buying Sight Unseen
If the buyer is purchasing a property without seeing the property and furthermore, has no interest in the characteristics of the property this is also a potential risk.
What is the course of action if you suspect money laundering? Increasing the levels of Customer Due Diligence (CDD) should be one of the first steps taken. This can include obtaining more information about the buyer such as driver’s license, passport, anything to verify the customers true identity. The final step that should be taken is to file a suspicious activity report with the U.S. Treasury.