Flagging money laundering in real estate

The recent amendments to the Anti-Money Laundering Act (AMLA) have put both buyers and sellers of real property on their toes. Real estate developers and brokers are now required to register and report covered and suspicious transactions—which necessarily include data about their clients or customers—to the Anti-Money Laundering Council (AMLC).

In a nutshell, the new rules require sellers to flag covered and suspicious transactions in their business and to look more closely into the nature of the transactions, as well as the profiles of their clients. On their end, buyers as clients are urged to exercise complete and honest disclosure of information that goes into their good faith and the legitimacy of the transaction.

As a background, the AMLA penalizes the act of making the proceeds or money from an unlawful activity appear to have originated from legitimate sources and involves financial and property transactions. To monitor or detect these transactions, covered institutions or persons are required to report transactions that meet a minimum threshold amount or those considered suspicious to the AMLC.

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A covered transaction refers to a single cash transaction involving an amount in excess of P7.5 million or its equivalent in any other currency. On the other hand, suspicious transactions are those with no underlying justification, perceived to be structured to avoid being reported or are related to any unlawful activity, and include those where the client is not properly identified. For this, the amount involved is not commensurate to the client’s financial capacity or involves any circumstance that deviates from the client’s profile or past transactions.

Under a subsequent Regulatory Issuance by the AMLA, all covered and suspicious transactions must be reported to the AMLC within five days from occurrence. For suspicious transactions, “occurrence” is the date of determination of the suspicious nature of the transaction, which shall be made not more than 10 days from date of transaction.

In 2013, the AMLA was further amended to consider the failure to report covered or suspicious transactions a money laundering offense. Early this year, the AMLA was again amended to include real estate developers and brokers in its covered persons, which means that they are now required to report covered and suspicious transactions to the AMLC. The inclusion of real estate developers and brokers comes at the advent of the AMLC’s revelation last year that real estate transactions are also being used by criminals to launder dirty money in the Philippines.

Registration with the AMLC

The AMLC set March 16, 2021 as the deadline for registration of all new covered persons. Failure to register would mean failure to electronically file covered and suspicious transaction reports with the AMLC.

Company policies

Apart from registration with the AMLC, real estate developers and brokers must apply the following principles in their businesses: (a) conformity with high ethical standards and observance of good corporate governance; (b) know sufficiently their customers and clients; (c) adopt and effectively implement an appropriate Anti-Money Laundering and/or Countering the Financing of Terrorism risk management system; (d) comply fully with existing Anti-Money Laundering and Terrorist Financing laws and regulations; and (e) full cooperation with the AMLC.

Additional measures have likewise been set in place in the amended AMLA pertaining to monitoring and compliance, such as the designation of a Compliance Officer and/or Office, adoption of customer due diligence including the maintenance of records of the customer’s transactions and documents, and implementation of programs and written procedures to prevent money laundering.

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 Indeed, the new requirements under the amended AMLA entail full disclosure on the part of buyers and strict adherence to compliance protocols on the part of real estate developers and brokers as sellers, all in faithful cooperation with the government in curbing money laundering in real estate. While they appear drastic and tedious to comply with, these are necessary steps to protect the country’s flourishing real estate industry from unscrupulous and dubious activities that may impede its rapid growth. 

(Atty. Monica Leonila B. Siron is a Senior Associate of Villaraza & Angangco.

This article is intended for informational purposes only and should not be construed as legal advice.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of Villaraza & Angangco. For comments or inquiries, please e-mail mb.siron@thefirmva.com.)

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Article and Photo originally posted by Property Report Ph last March 26, 2021 and written by Atty. Monica Leonila B. Siron.

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