For the first few weeks after watching the Netflix series Ozark, I believed myself to be something of an expert on spotting a money-laundering operation. Every little shop that never seemed to have any customers but yet was still open had to be laundering money, I surmised.
In reality, purchasing real estate is a major way that those involved in organized crime and drug cartels can turn their ill-gotten, "dirty" money into "clean" money by processing it through normal banking operations. This became such an issue in Europe that anti-money laundering procedures became a requirement for every individual involved in a transaction, including the real estate agent.
Mark Hayward, CEO of NAEA Propertymark, the professional organization for real estate in the UK, spoke about these anti-money laundering measures at the Business Issues Policy Committee.
Agents there (as well as attorneys and lenders) can be found liable and subject to unlimited financial penalties simply for not completing the required due diligence. Even those who were unaware and did not participate personally in a laundering operation could face significant fines.
Some of the anti-money laundering checks include verifying with photo ID the identity of the seller when taking a listing, and keeping that verification in the file along with copies of utility bills and proof of ownership from the national land and title registry. Similar processes are required for verifying the identity of a buyer for a piece of property.
There are requirements to complete an "unexpected wealth order" if there are questions about the origins or ability of an individual to complete a transaction of significant size. For example, two employees of a foreign government whose combined salaries were under $50,000 and who lived in a 11.5 million pound flat would raise a red flag.
Prevention of money laundering is critically important, but the rules and requirements for agents need to be reasonable and measured. It is likely that additional reform and requirements will emerge in the United States with regard to money laundering and real estate.
The work that NAR does in D.C. goes beyond the legislative branch to include the regulatory bodies within the executive branch. As new rules are formed and passed, it will be important for members and our staff in Washington to keep a close eye on what it being proposed and make sure that any requirements or liability placed on REALTORS® are reasonable and within the scope of our role in the transaction.