Financial Crime World

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Real Estate Agents Must Implement AML/CFT Measures to Mitigate Risk of Money Laundering and Terrorism Financing

Date: March 10, 2023

Kuala Lumpur, Malaysia - The Financial Intelligence Unit (FIU) has issued a statement emphasizing the importance for real estate agents in Malaysia to implement anti-money laundering (AML) and combating the financing of terrorism (CFT) measures to mitigate the risk of money laundering and terrorism financing.

Real estate agents are themselves subject to and regulated for a full range of AML/CFT requirements consistent with the Financial Action Task Force (FATF) Recommendations. This will aid in mitigating the risks associated with the provision of services related to specified activities.

Transaction Risk Factors

The statement highlights several transaction risk factors that real estate agents should consider when evaluating potential transactions, including:

  • Under- or over-valued properties
  • Use of large amounts of cash
  • Property purchases inconsistent with the individual’s occupation or income
  • Immediate resale of the property without a reasonable explanation
  • Speed of transaction without a reasonable explanation
  • Unusual source of funding
  • Purchases being made without viewing the property, no interest in the characteristics of the property

Measures to Mitigate Risks

To mitigate these risks, real estate agents should implement appropriate measures and controls to identify and detect relevant changes in client activity by reference to risk-based criteria. This includes:

  • Adequate training for staff on identifying and detecting suspicious behavior
  • Developing a sound risk management policy that outlines what customer information is required to facilitate a transaction
  • Setting out circumstances under which business should be declined

Customer Due Diligence (CDD)

The FIU also emphasized the importance of “know your customer” or CDD in the real estate industry. CDD measures should allow real estate agents to establish with reasonable certainty the true identity of each client and assess AML/CFT risk.

To effect CDD, real estate professionals are advised to:

  • Require prospective customers to be interviewed in person whenever possible
  • Verify customer identity using independent official or other reliable source documents, data or information
  • Accept only certified copies of original identification documents
  • Determine the extent and nature of information required to establish a relationship through a risk analysis

Reporting Unusual Activity

The FIU warned that there is no basis for a real estate agent to accept or be the conduit for funds in a transaction. Any unusual activity should be reported to the FIU.

Ongoing Compliance

Real estate agents are required to regularly review and update their AML/CFT policies and procedures to ensure compliance with regulations and mitigate the risk of money laundering and terrorism financing.