Real estate transactions are a popular choice for those looking to launder money. Keep reading to learn more about what to do to protect yourself as a real estate professional. 

The Connection Between Money Laundering and Real Estate 

Money laundering and real estate have long been attached throughout the history of our country. Real estate lends itself to money laundering because a large amount of money can be “washed” in one transaction. By ingratiating illicit funds into a legitimate financial system (real estate), those laundering funds complete a relatively “safe” cycle of crime. 

Once criminals have used illegal funds to purchase real estate, they can rent out the property, renovate the property and sell it, or cash in on the appreciation of the property after some time. All of these actions work to cover up the original source of the money and return “clean” money to the person or organization laundering the money. Many times real estate professionals become involved in the process by under- or over-valuing property, or accepting bribes to look the other way during these types of transactions. 

Real estate pros play an important role in fighting against money laundering by knowing what red flags to look for, understanding the methods used in money laundering, conducting thorough Know Your Customer (KYC) processes, and reporting unusual transactions to the appropriate authorities. 

Protecting Yourself as a Real Estate Professional 

Ideally, safeguarding your interests before a money laundering investigation is launched should be the goal of any real estate professional. Implementing routines for doing business and possessing the knowledge necessary to complete legal transactions are the minimum requirements for protecting your reputation and career. 

Some key ways to guard against becoming an accomplice to money laundering through real estate include: 

• Knowing Your Customer (KYC): Verify the identities of all buyers and sellers, especially those operating within an LLC, trust, or shell company. 
• Watching for Red Flags: All cash purchases, large checks from unusual sources, and purchasing the property without seeing it are all suspicious ways to complete a real estate transaction. 

• Setting Up Compliance Programs: Within the real estate company you work for, or if you own your own company, make sure to implement regular and clear procedures for completing transactions, especially high-risk transactions. Keep records of all of your transactions for at least five years. 

• Reporting Problems: If you suspect something, say something. File a Suspicious Activity Report (SAR) with the Financial Crimes Enforcement Network (FinCEN) if you believe something illegal is underway. By doing this, you protect your interests moving forward. 

Preventing money laundering from happening should be the norm in any real estate transaction, however there may be a time when a transaction you are a part of is put under investigation. It is important to know what to do if you’re ever put in that position. 

What To Do During a Money Laundering Investigation 

If a real estate professional is under investigation for money laundering, or part of a transaction that is put under investigation, the most important thing to do is protect your livelihood. In order to do that, you must hire a specialized attorney with experience in real estate law and white collar criminal defense. 

Some main actions to take if you are under investigation include: 

Secure Representation: Obtaining the help of a knowledgeable real estate defense attorney is the first step you should take. Once they are hired, they should be your main form of communication with investigators. 

Gather Documents: Anti-Money Laundering (AML) regulations require a lot of documentation, so spending time getting everything in order from the transaction being investigated is time well spent. 

Check for Compliance: Review the real estate transaction in question to make sure you and your team followed the KYC procedures, and that all red flags, if there were any, were addressed. 

Understand Possible Outcomes: Discuss with your lawyer the possible outcomes of the investigation and be prepared to provide more information if necessary. 

While the involvement of financial institutions in a real estate transaction often mitigates the risk of money laundering, it can still happen. It is important to understand all of the compliance factors put in place to protect real estate professionals from becoming part of a shady deal. If you do find yourself under investigation, hiring a strong, experienced lawyer, like those at the Law Offices of Robert J. DeGroot is imperative to defending yourself. 

Reach out to the Law Offices of Robert J. DeGroot today!