CALL FOR EXPRESSION OF INTEREST
Towards Effective Compliance: Understanding and Mitigating Anti Money Laundering Risks in the Real Estate Sector
Money laundering is estimated to have reached $1.6 trillion a year – equivalent to 3% of the world’s GDP. As banks and financial institutions increase their controls to combat financial crime, money launderers are looking for new targets.
For instance, the Panama Papers revealed how real estate gatekeepers, like the secretive law firm Mossack Fonseca, were utilized to create offshore shell companies for the rich and powerful. The Miami Herald revealed over 215,000 legal entities were established by the law firm for over14,000 clients in 21 offshore havens
There are growing concerns in many cities around the world that high-value residential real estates have become vulnerable to criminals using shell or offshore companies to conceal their identity. Real estate has long been a secret way for criminals to conceal and hide their assets. It has been ignored by relevant authorities due to the difficult and complex nature of the transactions and the level of anonymity permitted.
According to the Financial Action Task Force (FATF), real estate accounted for a third of criminal assets confiscated worldwide between 2011 and 2013. Two FATF documents, the report on money laundering and terrorist financing through the real estate sector and the Guidance on the risk-based approach for real estate agents, issued in 2007 and 2008 respectively, address the real estate sectors vulnerability to money laundering.
In Nigeria, the sector has become an attractive target for those looking to conceal the proceeds of crime. Large sums of money can be laundered in a single transaction and the estate sector is believed to have notoriously lax controls around money laundering.
Several characteristics of real estate increase the risks of money laundering in this sector. Real estate provides a means to launder and conceal ill-gotten gains while providing a layer of anonymity to individuals. The ease of access into the market make real estate attractive not only to the wealthy but also to money launderers.
Criminals invest in real estate because they are legitimate assets that appreciate over time while providing a means to generate income and possibly obscure source of funds. In addition, fluctuations in real estate market values vary by region and numerous factors impact property values making it easier to manipulate and difficult to monitor criminal mischief. The culture of real estate lacks AML regulation and awareness; driven by sales, commissions and closing times make it ripe for illicit actors to take full advantage. In Nigeria and most parts of Africa, the sector is riddled with black market operations through which audit trails are lost.
Common feature of money laundering through real estates in Nigeria include:
- Discrepancy between the usual income and wealth of the owner and the property: in some cases, the most expensive properties in the city are owned by individuals with no income or wealth that allow them to purchase such property;
- An anonymous owner, as a result of recourse either to a third party or to companies, trust or similar arrangement.
- A property underestimated or overvalued price.
In recent years, a significant percentage of SARs filed with FinCEN have reported suspected fraud schemes involving real estate lenders, brokers, agents, appraisers, and other businesses associated with real estate finance and settlements. FinCEN studies also have shown the connection between businesses involved in mortgage fraud and other suspected financial crimes.
Section 25 of the ML (P) Act defines DNFIs as dealers in jewellery, cars and luxury goods, Precious stones and metals, Real estate, Estate developers, Estate surveyors and Valuers, Estate Agents, Chartered accountants, Non-Governmental Organizations (NGOs) or such other businesses as the Federal Ministry of Trade and Investment or appropriate regulatory authorities may from time to time designate. This classification of the real estate sector brings it directly under the scrutiny of anti-money laundering regulations spearheaded by the Special Control Unit against Money laundering and a host of other regulators. Thus, real estate retailers are mandated by the law to report transactions that exceed thresholds to the authorities and also keep records that highlight trails and demonstrate effective Know your customer processes in their transactions. However, little or no results can be demonstrated to have come from effective implementation and monitoring.
In major Nigerian cities like Abuja, Lagos and Port Harcourt, money laundering through estate retailing is common sight as empty and unattended properties litter the landscape bearing evidence of the lax tax laws, lack of political will and loopholes in the money laundering legislations in the sector.
Until now, governments around the world have focused their regulatory efforts to tackle money laundering on the banking sector and have given ample opportunities for a full-fledged money laundering market to flourish in the real estate sector.
Objectives and outcomes
- Assess and understand the money laundering Risk prevalent in the real estate sector in Nigeria
- Review the effectiveness of compliance measures in the sector in combating money laundering especially as it concerns implementation: documenting successes, identifying gaps and making recommendations.
- Review the existing investigation and prosecution capacity to tackle money laundering through real estates in the law enforcement agencies, anti-corruption institution and other relevant state-actors.
- Document and analyse the trend of money laundering in the sector with emphasis on case studies from Nigeria.
- Proffer recommendations for strengthening anti-money laundering mechanisms to effectively prevent and sanction money laundering activities in the sector.
Scope of Work
The consultant will specifically deliver:
- A draft of the methodology for field work for the collection of primary and secondary data;
- Secondary data literature review within the scope of the consultancy;
- Detailed assessment of the risks of money laundering in Nigeria;
- Recommendations on mitigating and managing money laundering in the real estate sector .
The consultant(s) will work in close collaboration with CISLAC’s programme manager of the anti-corruption department and with appointed staff. No field work is expected to be conducted by the consultant(s). The consultancy is desk-based and conducted via available communication channels.
The consultancy will start on the 1st August,2019 and all deliverables must be completed by the 25th of August, 2019. It is envisaged that the consultancy will consist of 15 working days only.
This call falls within the project framework being assisted by Transparency International and European Union and seeks to contribute to strengthening the anti-money laundering mechanisms to effectively prevent, detect, report and sanction money laundering in Nigeria.
The successful consultant(s) will amongst other things:
- Possess a minimum of seven (7) years demonstrable track record of working in Anti-corruption and humanitarian sectors.
- Have deep and incisive analytical skills
- Show evidence of completion of similar tasks in the last two (2) years.
- Have adequate knowledge of the workings of the real estate sector, Anti-money laundering regime in Nigeria, and the mechanisms applicable in the country.
Interested candidates are by this Call requested to submit in a single mail with the subject as Expression of Interest (EoI) not later than 28th of July 2019. The EoI shall include a Cover Letter stating relevant qualification desirable for award of the Consultancy, an updated CV (including evidence of completion of similar tasks) and other relevant supporting documents.
Electronic copies of the documentation, including a scanned copy of the Covering Letter should be sent to email@example.com. For further information and/or clarification(s) kindly contact: Gloria firstname.lastname@example.org 08101275098.
All applications received will be reviewed by a Panel with a final selection being based on principles of objectivity, impartiality and neutrality. Female candidates are strongly advised to apply.
Thank you for your interest in CISLAC.
Auwal Ibrahim Musa (Rafsanjani)