Money laundering data bureau to check major real estate firms

The money laundering data bureau is inspecting real estate brokers as real estate is one way to launder criminal proceeds, head of the bureau Madis Reimand said. Member of the board of Domus Kinnisvara Ingver Allekand said those who really want to launder money are unlikely to use real estate firms.

Head of the Central Criminal Police's Money Laundering Data Bureau (RAB) Madis Reimand told ERR that real estate is used to launder money both internationally and in Estonia.

The data bureau exercises state supervision over compliance with anti-money laundering and terrorism funding legislation of a lot of service providers that could all find themselves subject to supervision proceedings, Reimand said. Checks are ordered based on risk analysis for supervision to be maximally effective in all sectors.

"This does not mean, of course, that we anticipate every company we inspect of having major money laundering or terrorism funding problems," he added.

Anti-money laundering and terrorism funding legislation also requires real estate brokers to have systems of compliance and manage relevant risks, including identifying true beneficiaries. The law also obligates companies to report transactions regarding which there are suspicions of money laundering. Supervision proceedings are meant to check whether firms comply with all of these requirements.

"Recent proceedings have come across several shortcomings, while we will not provide a general assessment of the sector's compliance at this time as several proceedings are outstanding," Reimand said.

Real estate firms want free access to true beneficiaries information

Member of the board of Domus Kinnisvara Ingver Allekand said that inspectors have visited their bureau and, to the best of his knowledge, all other major firms.

"It is perhaps necessary in the sense that decent bureaus want there to be order. Complaints would make everyone's life difficult. On the other hand, the impression I'm left with is that /.../ their (RAB's — ed.) expectations are somewhat out of proportion, they are overestimating their chances of catching violators. At least they started with major expectations, and I believe they will not amount to much — money launderers can read legislation and will not be coming to us," he said.

Allekand noted that the law lays down relatively specific criteria that should send alarm bells ringing and that the bar is set very low in places, meaning ordinary people could find themselves flagged.

"I believe that those who really want to launder money do not use real estate bureaus," he said.

Allekand said it is a problem that brokers are required to check their clients as thoroughly as banks or notaries, while they have not been given access to necessary tools. He said that all brokers Google their clients, while using the business register to identify true beneficiaries is a paid service.

"Basically, the state has told us that we need to identify beneficiaries but has not given us the tools. In other words, we are expected to pay for something we are required to do — basically, it's hidden taxation," the bureau's representative said.

He said the association of real estate firms has written to the justice chancellor, and brokers should have the right to identify true beneficiaries using the register for free. Allekand said that licensed valuators of the Land Board can access transaction details to do their job as experts cannot provide their assessment without statistics. The same applies to brokers — professional brokers should have access to relevant information.

"If the state wants these checks, it is going to have to give us the tools," he added.

Suspicious real estate transactions spotted every year

Madis Reimand said that real estate is typically used in the final, or third stage of money laundering.

"Major suspicious cash flow that moved through Estonia some years ago generally used our financial system in the second, or layering phase of money laundering, with most of the money moving out of Estonia again. That is why cases involving Estonian real estate have not been highlighted in this context," he said.

According to Reimand, that does not mean that real estate is not a tempting field for money launderers or that combating it in the sector is unimportant .

Reimand mentioned the so-called ghost click case as the most extensive example of real estate-related money laundering in Estonia. The case saw RAB lay down restrictions on transfer on over 100 immovables, with courts seizing a notable part of the real estate later.

"The data bureau has not had to take such extensive measures in any other single case, while it detects several suspicious real estate transactions every year, in which connection we have laid down restrictions and called on criminal proceedings," the head of RAB said.

The money laundering data bureau will provide a full overview of its efforts in its annual report.

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Editor: Marcus Turovski

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