FIAU Thematic Review for Notaries & Real Estate Agents: What to look out for & where to improve

The purpose of the thematic review was to assess compliance by notaries and real estate agents with the obligations emanating from Regulation 7(8) of the PMLFTR, when providing services relating to the buying and selling of immovable property. As the most significant ML/FT risks in the real estate sector arises from the potential use of dirty money to buy property, the FIAU selected occasional transactions which varied in financing methods; that is, financed through own funds, third party funds and bank loans.

The FIAU findings highlight areas where notaries and real estate agents demonstrated their effectiveness in applying the risk-based approach. 

However, the thematic review uncovered areas where notaries and real estate agents were deemed to have a limited understanding of the requirements in place, and areas where improvement is needed. The FIAU findings highlight the following:

1. Policies and procedures examined were sometimes noted to be too generic and did not clearly explain the measures, policies, controls and procedures to be implemented to address the risks identified in the Business Risk Assessment (BRA).
2. 40% of risk assessment procedures reviewed failed to determine at which stage the notary or real estate agent should carry out the Customer Risk Assessment (CRA).
3. In 14% of occasional transactions tested, the subject persons did not conduct a CRA or the CRA was conducted after the deed of sale was concluded.
4. 18% of CRAs were found to be assigned an inappropriate risk rating, mainly due to a lower risk rating being assigned notwithstanding higher risk factors being present. 
5. 25% of the written procedures pertaining to the examined subject persons did not include provisions on the requirement to implement additional identity verification measures for occasional transactions with higher risk elements concerning the customer’s identity.
6. Only 60% of subject persons had written procedures in place to apply specific measures in relation to PEPs to mitigate the risk arising from their involvement in the transaction.

The FIAU publication offers an insight into situations where in practice, the documentation collected was either insufficient, irrelevant or did not satisfy the requirements emanating from the law, given that the ML/FT risk was not mitigated.  

It is evident that notaries and real estate agents may require expert guidance in developing a holistic AML CFT framework focusing on the detection of ML/FT risks and typologies in the real estate sector, how to recognise red flags present in an occasional transaction and what commensurate CDD measures are to be applied to mitigate the ML/FT risks identified.
 

How can BDO Malta help?

BDO Malta’s Risk & Compliance Advisory team can help notaries and real estate agents to review their procedures, assess whether any of the above-mentioned findings are present and provide practical guidance on how to implement measures to address any recommended areas for improvement.

For more information, read our articles: AML CFT Compliance for Notaries & Real Estate Agents & AML in the real estate sector: the cost of non-compliance

We are equipped to provide a vast array of tailored services that include:
 

•  AML CFT Compliance Review
•  Business Risk Assessments
•  Customer Risk Assessments
• AML CFT Ongoing Compliance Support
• AML CFT Policies and Procedures

Want to learn more?

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