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How to Stop Money Laundering Through Real Estate

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In many places around the world, buying property is a favorite way for the corrupt to launder their ill-earned money.

Normally, corrupt officials who take massive bribes, embezzle funds or steal money from the people they are meant to serve will always try to find ways to clean up the mess. Property bought with dirty money can be sold to effectively hide the corrupt origins of the money.

In some places, it’s a no-brainer to hide the actual owner of a property. Anonymous companies may be used to buy property and that means even law enforcement won’t know the real owner of the house next door.

Rich nations are mostly the recipients of illegal investment. For instance, at least £4.4 billion (US$5.5 billion) worth of property in the UK has been purchased with illicit wealth. In Germany, around US$30 billion of money with unknown origins entered the real estate market in 2017 alone.

And in Canada, at least CAN$20 billion (approx. US$15 billion) looks to have entered the property market in the Greater Toronto region over the last ten years without inspection from anti-money laundering authorities.

Investigative journalists together with law enforcement investigations have exposed how corrupt individuals take advantage of loose regulation of the housing market.

Moving on to West Africa, there are some shocking examples. In 2017, Teodorín Obiang, the Vice-President of Equatorial Guinea, one of the African countries with the highest poverty rates, had his US$118 million mansion in Paris confiscated after he was found guilty by a court in France of embezzlement of funds and money laundering.

Teodorín’s father himself, president Obiang, currently hosts Yahya Jammeh, the exiled ex-president of The Gambia, who together with his associates stole around US$1 billion from state resources during his reign. Jammeh and Obiang owned luxury mansions next door to each other in Maryland, USA.

And in Nigeria, James Ibori, former governor of Delta State between 1999 and 2007, was sentenced to 13 years in prison after pledging guilty of fraud of almost US$66 million. The judge in the case said that this figure is unreasonably low and that the actual amount may be over another £200 million (US$245 million).

Ibori used shell corporations in several secretive jurisdictions to transfer the funds, which ended up in real estate and luxury goods around the world.

The glitzy overseas properties of presidents and high-ranking officials might make headlines too, but that’s not the whole story. In Zambia, an enigma surrounds the ownership of 48 apartments in the capital, Lusaka. There are allegations that they are being used as disguise of money stolen through corruption.

Be that as it may, there are some concrete measures that can make it extremely difficult for the corrupt to invest their dirty money in real estate.

Asset Declarations

More transparency about what government officials own makes it a lot difficult for them to secretly accumulate wealth in office through corrupt actions. At the very least, it allows the media and activists to ask, “How did you afford that mansion on your public salary?”
Public declarations of assets before officials join and after they leave office should be a universal practice. In Sri Lanka, for example, members of parliament have taken historic steps towards such disclosures becoming the norm.

Regulating Gatekeepers

Property transactions are rarely just between the purchaser and seller. Banks, brokers and agents all play their role, and have opportunities to stop dirty money entering the market. In James Ibori’s case, his London-based advocate helped him set up the company structures that allowed him to channel money out of the government coffers.

Money laundering through property is much more difficult when these professionals act with integrity and required to conduct checks on the source of funds and the real owner. They should carry out a proper KYC (Know Your Customer) and should they fail to flag suspicious transactions, they should face the consequences.

Land Registers

Last but not least, an online central register with details of people who own what property and where would help create greater accountability over the origins of cash in the market, especially when it includes the names of actual beneficiaries of the asset.

This would ease investigations by civil societies and journalists, as well as help law enforcement fill the gaps as they pursue cases.

Source Link: https://www.transparency.org/news/feature/three_ways_to_stop_money_laundering_through_real_estate

About the author

Ezra Ondara

Ezra Ondara

Ezra Ondara is a freelance writer and journalist with a keen interest digital marketing, finance, real estate and insurance. He has a nose for news in these key areas and is determined to keep online readers and enthusiasts up to date with real stories as they happen from all around the globe. When he’s not poking his nose into the business world, he will be watching the Premier League over the weekend or out of town with his family.

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