Author: Assunta Di Capua
Committee: Real Estate Committee
Date: 22/05/2024
The real estate sector represents one of the main areas of interest in the global economic landscape. However, behind the allure of real estate transactions lies a significant challenge: money laundering.
Recently, the Financial Intelligence Assessment Unit (FIAU) of Malta published a report highlighting the potential scope of this illicit activity in the Maltese real estate market. The document, prepared in collaboration with law enforcement representatives, underscores the complexity and implications of money laundering through real estate investments in the country. Taking a closer look at the conclusions and recommendations from this report, in 2021, the value of real estate assets frozen in Malta during criminal proceedings related to financial crimes was estimated at 44.6 million euros. The report identifies the real estate sector as an opportunity for criminals to conceal the proceeds of their illegal activities, as it allows them to launder large sums of money through real estate transactions. Additionally, criminals can invest in properties to renovate and resell at higher prices to disguise their illicit income. 1
The aforementioned case is just one of the countless instances of money laundering plaguing the real estate sector, which is increasingly emerging as a preferred investment choice for organized crime. It is legitimate to wonder, why does this sector have so much popularity in the realm of money laundering? Firstly, the flexibility offered by the real estate sector allows criminal investors to deploy significant amounts of money, including those obtained illegally and even in cash, without arousing excessive suspicion or requiring particularly stringent traceability of financial transactions. Furthermore, the inherently complex and diversified nature of the real estate market offers a range of opportunities for money laundering. In addition to purchasing properties themselves, criminals can exploit the sector to launder money through financing real estate projects, property management, or construction interventions. A fundamental aspect that makes the real estate sector particularly attractive for money laundering is the primary objective of real estate transactions, which often involves using the assets in question concretely, rather than concealing the illicit origin of the funds. This approach allows criminals to give an appearance of legitimacy to their activities, making money laundering through the real estate sector an enticing and seemingly less risky option.
It is evident, therefore, that the real estate sector represents a crucial node in money laundering networks, requiring careful oversight and strengthened control measures to mitigate this threat and preserve the integrity of financial markets.
In this regard, what measures can be taken to effectively counter this growing threat to the integrity of European financial systems?
This is where we talk about EPPO. The European Public Prosecutor’s Office (EPPO) is an independent body of the European Union responsible for identifying, prosecuting, and bringing to justice crimes that harm the financial interests of the EU, including money laundering. In the context outlined above, the European Public Prosecutor’s Office assumes fundamental importance in ensuring greater transparency and reducing the incidence of financial crimes, including those related to money laundering in the real estate sector. Its transnational competence enables it to coordinate investigations and legal actions among EU member states, facilitating the fight against illicit financial flows crossing national borders. In the real estate sector, the presence of the European Public Prosecutor’s Office is particularly significant. Given the complexities and challenges associated with large-scale real estate transactions, the Prosecutor’s Office can play a decisive role in identifying and prosecuting cases of money laundering through real estate investments that harm the financial interests of the EU. Through its investigative and judicial actions, it can contribute to ensuring greater oversight and adopting punitive measures against those who abuse the real estate sector for illicit purposes. The presence and action of EPPO are crucial to ensuring a more transparent, secure, and resilient economic and financial environment.
Regarding the importance and the increasingly pressing issue of money laundering, the European Parliament also spoke out. On April 24th, it definitively adopted the package of reforms (AMLA package) concerning European regulations to combat money laundering and terrorist financing. The approved laws include measures of “due diligence” and stricter checks on customer identities. Under these regulations, so-called “obligated entities” (such as banks, asset managers, cryptocurrencies, real estate agents, and virtual ones) will be required to report suspicious activities to FIUs and other competent authorities. 2
In conclusion, considering the above, the phenomenon of money laundering, particularly in the real estate sector, represents a significant challenge to the stability and integrity of European financial markets. However, there is reason to hope in the adoption of recent legislative reforms by the European Parliament to actively counteract this phenomenon. Furthermore, the crucial role played by the European Public Prosecutor’s Office cannot be underestimated. Therefore, we can look with confidence to the new legislative reforms and the formidable work of the European Public Prosecutor’s Office as crucial turning points for effectively addressing and combating this challenge.
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1 fiaip.it – Federazione italiana agenti immobiliari professionali