Tips for Spotting Global Money Laundering Schemes

The business of global real estate is changing every day as overseas investments continue to grow and political tides rise and fall. Savvy investors do their best to stay ahead of the game and purchase properties in economies with the most potential for appreciation, while politicians are left playing catch up to enforce rules that make these transactions legal and safe. Unfortunately, while they do the best they can to address these issues; there is still room for those who engage in illegal money-making shortcuts. Even when rules and laws seem to cover all bases, there will always be those willing to break them. What responsibility do you have, as a REALTOR®, for identifying and reporting fraudulent activity in a real estate transaction?

Although real estate regulations vary per country, it is always in your best interest to educate yourself on the warning signs of these schemes, and reporting them when necessary. Since money laundering schemes could be used to hide criminal activity, including terrorism, it’s important for REALTORS® to stay vigilant and know how to spot red flags.

Red flags include:

• Is the customer and/or the source of funds located in a jurisdiction with weak anti-money laundering regimes, supports or funds terrorism, or has a high degree of political corruption?
• Is there a large unexplained geographic distance between the location of the property and the buyer?
• Is there unusual involvement by third parties?
• Will residential title be held by a corporation that obscures the owner’s identity, without a legitimate business explanation?
• Does the purchase involve high-ranking foreign political officials or their family?
• Is the owner selling for significantly less than the purchase price, or seems disinterested in obtaining a better price?
• Is the buyer bringing actual cash to closing?
• Is the purchase without a mortgage and inconsistent with the buyer’s occupation or income?
• Is the buyer interested in immediate resale, especially at a substantially higher or lower price, without reasonable explanation?
• Is the buyer purchasing property without viewing it, or with no interest in its characteristics?
• Are there any other activities that appear suspicious and do not make professional or commercial sense?

Keep in mind that whenever a buyer makes a purchase outside of their country, complications can arise. For instance, a possible red flag is whether or not the home is being paid for in cash. However, according to NAR’s 2016 Profile of International Buying Activity in U.S. Residential Real Estate, 50 percent of all the international transactions last year were all-cash purchases. With that said, it’s important to be aware that the presence of one, or even multiple factors, does not necessarily mean the purchaser or seller is engaging in money laundering activities. Just because something is suspicious or out of the norm does not automatically make it illegal. The questions listed above exist simply as general guidelines. U.S. real estate professionals should refer to NAR’s Anti-Money Laundering Guidelines for Real Estate Professionals and consult with their managing broker and attorney before proceeding.

If you are interested in more tips or information on money laundering or other legal and policy developments impacting global real estate, click here for our feature in Global Perspectives.