Real Estate Brokers and AML Compliance: Tips for Building a Strong Compliance Program in the UAE
Anti-Money Laundering compliance is a legal obligation for real estate brokers in the UAE, which has some of the most stringent AML regulations in the world. In the dynamic and ever-evolving UAE property market, real estate brokers play a pivotal role in driving economic growth in the country. However, the industry’s rapid expansion and high-value transactions have made it vulnerable to money laundering and terrorist financing activities. Recognizing this risk, it is imperative for real estate brokers to prioritize anti-money laundering (AML) compliance and develop robust programs to mitigate these threats.
This blog aims to provide valuable insights and practical advice for building a strong AML compliance program, specifically tailored for real estate brokers in the UAE. By implementing these strategies, brokers can adhere to regulatory requirements, minimize risks, and safeguard their businesses from reputational damage and financial loss. A strong AML compliance program not only protects brokers but also contributes to the security of the UAE property market and economy against money laundering and terrorist financing.
Following are the most important aspects that must be covered in a strong AML compliance program for real estate brokers in the UAE:
Establish and Execute AML Policies and Procedures
Real estate brokers should formulate and implement policies and procedures that align with the UAE’s AML laws and regulations, and regularly review and update them to ensure their ongoing effectiveness and relevance. This is one of the most important requirements from the inspection team of the regulator should your company be shortlisted for the review and inspection.
Know Your Customer (KYC) and Due diligence
A cornerstone of an effective AML compliance program for real estate brokers is the implementation of know your customer (KYC) and due diligence procedures. Real estate brokers must verify their customers’ identities, sources of funds, and transaction purposes. In addition, conducting due diligence on customers to gather information on their backgrounds and financial profiles is essential.
Sanctions Screening Implementation
The practice of sanctions screening involves verifying the parties in a real estate transaction against lists maintained by various regulatory authorities. These lists contain individuals and organizations that have faced sanctions from governments or international bodies for reasons such as money laundering, terrorism, or other financial crimes.
Adhering to AML regulations, real estate companies must conduct sanctions screening to prevent transactions with individuals or entities prohibited from doing business. By employing a thorough screening process, brokers can be certain they are not unintentionally dealing with sanctioned parties or those barred from business due to illicit activities.
Furthermore, sanctions screening serves as a vital component of risk management within the real estate sector. It enables brokers to pinpoint potential risks and implement appropriate measures to minimize them. Compliance with sanctions screening requirements not only safeguards brokers’ businesses from reputational and financial harm but also ensures they meet their regulatory responsibilities.
Brokers must keep accurate records of all transactions, including customer identification documents, transaction specifics, and funding sources. These records must be retained for at least five years after the transaction date and made available to relevant authorities when requested. Though the physical records are sufficient but the best way to properly secure the records is to also keep them on the cloud. The person securing the records must also be trained for AML so that he/she knows the importance of the record-keeping when it comes to AML.
Employee Training and Awareness
Education of employees on AML regulations, their legal obligations, and the consequences of non-compliance are crucial. Providing employees with a copy of the company’s AML policy enables them to refer back to it when needed. Regular training sessions ensure that employees comprehend the risks and steps necessary to alleviate them. Real estate brokers must ensure their staff understands their responsibility to report any ambiguous activity related to AML in the company. Moreover, the training must cover real life examples so that brokers can properly understand the implications of AML regulations and their responsibilities in that regard.
Business Risk Assessment
Risk assessment is crucial in determining the most appropriate controls for your business. Real estate companies should perform a risk assessment to identify potential AML risks and devise appropriate mitigation measures. It can help brokers to identify areas that could be exposed to financial crime risks or regulatory non-compliance by looking at the activities conducted within the organization. The goal is to ensure that they have appropriate policies and procedures in place so that employees know what they should do if they suspect money laundering or terrorist financing activity within their department or team.
Regulations Concerning Virtual Assets on Real Estate Transactions
There has been an increasing focus on regulating virtual assets through the development of authorities such as VARA (Virtual Assets Regulatory Authority), however the transactions involving virtual assets still pose a threat and the Compliance Officer must be well equipped to perform due diligence required on transactions involving virtual assets.
Reporting of Transactions Involving Cash or Virtual Assets
The real estate brokers in the UAE are now required to submit a report to the FIU (Financial Intelligence Unit) for transactions involving receipt of cash or virtual assets amounting to AED 55,000 or more, for the sale or purchase of real estate properties in the UAE. The MLRO appointed for the real estate brokerage company must have adequate knowledge on this reporting mechanism and the details / information that is required to be submitted in the reports of such transactions. This important requirement must be explicitly and repeatedly communicated to your brokers. Moreover and very importantly, your real estate accountant must also ensure that he/she keeps any cash/virtual assets receipt as a reconciling item until a report in the FIU is submitted.
GoAML Platform for Several Types of Instances Reporting
It has been made compulsory for the real estate brokers to register on the GoAML platform otherwise there are heavy fines for not registering and non-compliance. Registration is not the end though, the MLRO should have adequate knowledge for identifying hundreds of instances suspected of money laundering and then submit relevant report on the GoAML platform.
Suspicious activity is any action that could be construed as illegal or against your company’s policies. Procedures for identifying, evaluating, and promptly reporting suspicious transactions should be in place. It’s important to know what suspicious activity looks like so you can identify it and report it if necessary. Brokers must swiftly report any suspicious activity to the relevant authorities such as someone tries to buy a property with false identification documents such as passport from another country. This may indicate money laundering or financing.
In the realm of UAE real estate transactions, the following sample instances may raise red flags for suspicious activity:
- A purchaser opts to use cash for acquiring a high-priced property.
- The individual buying the property is either a politically exposed person (PEP) or has a criminal history.
- There is ambiguity or doubt surrounding the origin of the buyer’s finances, or they refuse to disclose information about their funding sources.
Third-Party Due Diligence
Real estate brokers may interact with third-party service providers, such as attorneys, accountants, and consultants, who could pose AML risks. As a result, it is vital to conduct due diligence on these providers to ensure they are not involved in activities that could lead to money laundering or terrorist financing
Compliance Officer Appointment
Appointing a compliance officer responsible for overseeing the AML program’s implementation is recommended. This officer should possess adequate training, experience in AML regulations, and sufficient authority to enforce compliance measures. The role of the AML compliance officer is to ensure that all aspects of your organization’s anti-money laundering efforts are managed effectively and to ensure that all regulatory obligations are met.
Use of Technology for Due Diligence and AML Screening
Continuous monitoring of customers and transactions is necessary for real estate brokers to detect suspicious activity that could indicate money laundering or terrorist financing. Technology has brought many improvements in many fields, similar improvements have been made in AML sanctions screening by way of introducing software which are capable of keeping the real estate brokerage company up to date on AML screening for all of it’s clients and thus protect from any non-compliance.
Independent Internal AML Audits
The internal AML auditor should be independent. The auditor should have no conflicts of interest, and there should be no connection between the real estate company and its owners or shareholders. The auditor must also make sure that all employees are trained on AML compliance regulations for real estate brokers in the UAE. Audits help pinpoint areas for improvement and verify compliance with applicable regulations. The independent audit will help you ensure that your company is following all AML compliance rules set by regulators within the United Arab Emirates (UAE).
How Can We Help?
In the UAE, safeguarding real estate businesses from money laundering and terrorist financing is crucial. As a result, AML compliance has become an essential duty for real estate brokers. At Push Digits Chartered Accountants, we specialize in AML compliance services, empowering businesses to thrive economically. Our AML services are invaluable in supporting real estate companies to maintain compliance with anti-money laundering regulations. We offer expert guidance and assistance, benefiting brokers in a multitude of ways. Our team is highly trained and knowledgeable about AML laws and regulations specific to the real estate industry. To cater to our clients’ needs, we perform in-depth risk assessments, KYC through technology, continuous monitoring, and proper record keeping. Partner with us to shield your business from the looming threat of financial crime.