Anti-money laundering and counter-funding of terrorism (AML CFT) regulations specify that real estate agents are subject persons, including when acting as intermediaries in relation to the letting of immovable property where the monthly rent amounts to ten thousand euro (€10,000) or more.
A notary’s involvement in the buying and selling of real property is considered to be relevant activity, and therefore, notaries are also subject to AML CFT regulations in this case. As subject persons, notaries and real estate agents are obliged to understand the money laundering and funding of terrorism (ML FT) risks they are exposed to, and to adopt AML CFT measures, controls and procedures which are varied depending on the level and nature of the different risks.
AML CFT framework (policies, procedures and appointed officer)
Notaries and real estate agents must have in place and implement measures, policies, controls and procedures to address the risks identified as a result of the Business Risk Assessment (BRA). These measures, policies, controls and procedures should include:
- customer due diligence, record-keeping procedures and reporting procedures; and
- risk management measures, including customer acceptance policies, customer risk assessment procedures, internal control, compliance management, communications, and employee screening policies and procedures.
These documented policies and procedures will enable the subject person to properly identify and mitigate ML FT risks and further complement the role of the Money Laundering Reporting Officer (MLRO); having the primary function to report knowledge or suspicion of ML FT or of a person’s connection with ML FT to the FIAU and to respond promptly to any request for information made by the FIAU.
Risk Assessments
For a proper risk identification exercise, the subject person must refer to those situations or sources from which risk may manifest itself, taking into consideration the sector and business profile. As a minimum, the four (4) categories that must be assessed are:
- Customer risk
- Geographical risk
- Product, service and transaction risk
- Delivery channel risk
Risk factors and red flags
Factors that may increase the ML FT risk require a commensurate, and therefore enhanced, level of mitigation to ensure the identified risk or red flag is sufficiently addressed prior to effecting a transaction. Heightened risk factors and red flags associated with the property sector may include:
- significant use of cash without an apparent reason;
- repeated notary changes;
- lack of clarity on the source of funds used for property purchase; and
- the purchase of multiple properties by the same individual with use of own funds.
In all cases, where the mitigating measures do not sufficiently address the risk or red flag identified, subject persons should consider the need to file a suspicious transaction report.
How can BDO help you comply with your AML CFT obligations?
BDO Malta is equipped with a team of experts in the area who may assist notaries and real estate agents with the:
- Setting up of the required AML CFT and Customer Acceptance Policies and Procedures
- Delivery of AML CFT training
- Delivery of specific training for MLROs
- Provision of customer screening solutions
- Provision of compliance support
BDO Malta’s Risk Advisory Team may also assist real estate agents and notaries in:
- Developing the Business Risk Assessment (BRA) methodology
- Developing the Customer Risk Assessment (CRA) methodology
- Assisting with the completion and/or revision of the BRA on an annual basis
- Assisting with the completion of the annual Risk Evaluation Questionnaire (REQ)
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