Real Estate and Money Laundering
Money laundering is a crime that involves hiding illegally obtained money through seemingly legitimate transactions. One of the most common ways to launder money is through real estate purchases. Criminals prefer this method because it involves large sums of money, complex transactions, and little oversight.
In Australia, for example, Chinese interests alone laundered over $1 billion through real estate in 2020, while the Australian Federal Police seized $116 million in real estate assets in 2021. Real estate agents must be aware of the most common ways criminals use, so they can help prevent money laundering and comply with laws and regulations aimed at stopping it.
Money laundering typically involves three stages: placement, layering, and integration. Each stage involves different methods of hiding and disguising the origin of illegally obtained funds. Here are the five most common ways criminals use real estate to launder money, which can be seen as examples of these three stages:
Third-party purchases: This involves using a third party to buy property, either by using their bank account to deposit and withdraw illicit funds or using a third party to transact on their behalf. This distances the criminal from the illicit funds and disguises ownership, which reduces the risk of authorities flagging the purchase for investigation. This is an example of the placement stage.
Money laundering through loans: Money launderers use loans or mortgages to layer and integrate illicit funds into high-value assets such as real estate. For example, criminals will buy property using legitimate funds for the deposit, then take out a mortgage on the remainder. The mortgage is then paid with funds from criminal activities, allowing illicit funds to be blended with legitimate funds. This is an example of the layering stage.
Property price manipulation: This involves collusion between buyers, sellers, and/or third parties to under- or overestimate the value of a property. The difference between the actual and stated price is then settled with undisclosed cash payments. This is an example of the placement and layering stages.
Buyer collusion: This involves multiple buyers conspiring to bid against each other to gain an unfair market advantage. This gives them the best chance of securing the highest bid for the illegally obtained funds to be transacted. This is an example of the placement stage.
Successive on-selling at higher value: Criminals buy and sell properties in quick succession to muddy the waters and confuse auditors, making it hard to track illegal activities. This involves switching ownership and recording profit to legitimise large sums of money, making it harder to trace back to an illegal source. This is an example of the integration stage.
In Italy real estate agencies are required to comply with anti-money laundering regulations known as “Antiriciclaggio” obligations.
Under Italian law, real estate agencies must verify the identity of their clients and conduct due diligence on any suspicious transactions. This includes collecting and verifying identifying information such as name, address, and tax identification number, as well as keeping records of all transactions and related documents.
Real estate agencies are also required to report any suspicious transactions to the relevant authorities, such as the Financial Intelligence Unit (FIU) or the Anti-Mafia Investigation Directorate (DIA). Failure to comply with these obligations can result in severe penalties, including fines, imprisonment, and revocation of the agency’s license.
Marina Immobiliare Real Estate is committed to ethical and legal business practices, and ensures compliance with Antiriciclaggio regulations through internal policies and procedures. We have our own compliance officer, and we provide regular training to all employees. These measures help to create a culture of compliance and ensure that all employees are aware of their responsibilities and the consequences of non-compliance. Our database consists of loyal clients, and we strive to maintain a transparent and trustworthy relationship with them.
If you have further questions about our Antiriciclaggio system, please contact us here: https://www.marinaimmobiliare.eu/en/contact-us/