The real estate market is enticing to more than just new homeowners or investors. Financial criminals have used the industry to clean their illicit funds for years. The limited regulation around the real estate industry has made it especially easy for these bad actors to cycle their dirty money into the financial system using this avenue.
Few changes have been made in the regulatory environment in almost 20 years. Ever since 2002, when real estate professionals were granted an exemption from anti-money laundering (AML) requirements, there has been an ongoing struggle to apply more AML regulations to the real estate sector. In 2016 when the Panama Papers exposed an international network of offshore entities involved in tax evasion, fraud, and sanction evasion, some of which included real estate holdings, regulations began to change.
Even today with more regulations, there are real AML risks involved in real estate, and it is part of a Bank Secrecy Act (BSA) professional’s job to help identify and prevent them.