DCI report: real estate sector “attractive to money launderers” Loop Cayman Islands

The content originally appeared on: Cayman Compass

A report of the Department of Commerce & Investment (DCI) for the period from January 2021 to December 2021 confirms that 42 per cent of real estate agents/ brokers, real estate & property development sector participants and dealers in precious metals and precious stones inspected by DCI were issued with enforcement notices in connection with deficiencies in compliance with Cayman’s anti-money laundering and anti-terrorist financing regime.

Details of deficiencies found on inspections

Regarding deficiencies found in the anti-money laundering and anti-terrorist financing programmes of providers of services in the real estate and property development sectors, the DCI report outlined instances of non-compliance as follows:

DCI inspection findings

The presence of the above, wide range of non-compliant areas, however, does not necessarily mean that there is a poor attitude towards compliance. Instead, it may indicate that, perhaps, more ongoing education and training is needed (over and above what DCI encourages) to help those in the real estate sector identify, understand and deal with risks inherent to real estate sales and customers.

The inherent risks

Regarding inherent risks, the DCI report indicated that, although improvements were made from the previous year in terms of educational awareness of anti-money laundering and anti-terrorist financing issues, professional services provided by the real estate sector remain attractive to money launders. The report outlined the reasons for this as follows:

They are widely available, and they can give the impression of respectability, legitimacy, or normalityThey can create additional steps in the money laundering / terrorist financing chain to hinder detection and investigationOffenders can move large amounts of illicit funds in a single transaction without raising suspicionThe duration of the relationship with a real estate agent is also often short-lived

To understand the details of these inherent risks of money laundering and terrorist financing in the real estate sector, the report provided an analysis and breakdown of the risk assessment focusing on the nature, size, and complexity of business, types of products and services, method of delivery or products and services, types of customers and geographical risks.

In relation to the nature, size, and complexity of business, DCI said that there was an inherently high risk, with medium high risks being assessed by DCI for types of products and services, method of delivery or products and services, types of customers and geographical risks.

As a result of DCI’s review of various areas, the overall assessment of the inherent risks of money laundering and terrorist financing in the real estate sector were stated to be medium-high. While this assessment is medium-high rather than high, the report emphasized that real estate is a very high-value commodity that is “attractive for both money laundering and the investment of criminal proceeds.”

Real estate agent involvement can obscure the identity of the person(s) behind the criminal dealings and effectively cleans illicit funds when the property investments are later realized.

The DCI report continued.

Outcome of increased vigilance

By being more vigilant, the ultimate outcome sought for Cayman is to remain compliant with the anti-money laundering and anti-terrorist financing obligations issued by international organisations like the Financial Action Task Force and stakeholders like the European Union. Such compliance will, hopefully, lessen the number of negative, public remarks about the jurisdiction in relation to compliance with the local and international anti-money laundering and anti-terrorist financing regimes.