When buying a home, new development in nueva andalucia the buyer must justify the origin of the money to avoid money laundering. To this end, since 2010, when Law 10/2010 on the prevention of money laundering was approved, it is mandatory to sign the money laundering document when buying a home. Real estate developers, real estate agents, notaries and registrars, among other subjects, are obliged to control the origin of funds to avoid money laundering from illegal activities and terrorism through the sale and purchase operations of housing and report if they detect something illegal. How is the control carried out by the agencies and promoters?

The money laundering document serves to control the origin of the money. The buyer must indicate the origin of the funds, if it is their own or third-party financing

The latest report of the SEPBLAC (Executive Service of the Commission for the Prevention of Money Laundering and Monetary Offenses of Spain) indicates that in 2017 44 communications were received from real estate developers, agencies and other commission and intermediation companies, plus 158 from the registrars of property, related to money laundering activities. However, the SEPBLAC recognizes that the communications of the real estate sector are based on objective data, such as the high amount and nationality of the intervening parties, but that they continue to suffer from a lack of knowledge of the client and an inadequate analysis to prove the lawful origin of funds used in operations.

The control of the origin of the money that developers and agencies must carry out is carried out through the money laundering document that the buyer must sign when acquiring a home. To prove the origin of the money, this document includes all the buyer's data, their economic and professional situation and the origin of the funds, whether they come from their own or third-party financing. "The real estate agency has the obligation to verify and verify the origin of the funds, if they come from a current account of a bank in our country or if it is from abroad that its origin is justified and that it comes from a legal activity if there is any suspicion, You have to notify the tax agency ", says Juan José Aguilera, director of institutional relations at COAPI in Barcelona.

All professionals involved in the sale of a home must comply with their obligations regarding the prevention of money laundering

The agencies acknowledge that buyers are aware of the obligation to sign the money laundering document to buy a home "especially clients with a professional profile," says Mireia Albiol, lawyer at Engel & Völkers. In fact, this document must be signed when the client makes the offer on the property, that is, it is a prerequisite to the signing of the purchase deed at the notary. "Sometimes the client can raise something that cannot be done, due to ignorance of the rules, but we understand that most of the time it is not done out of bad faith," says Aguilera.

All the agents involved in the operation are legally bound subjects and, therefore, "regardless of the procedures applied by any agent who intervened in the first place, they all have the obligation to identify themselves," says Angela García, head of BPO. and Compliance of CompliOfficer. Within the real estate sector, developers, real estate agents (APIS), commission agents, intermediaries in the sale and real estate consultants are required. In other words, although the bank and the promoter have fulfilled their obligations, the notary must again fulfill, before signing, their own diligence obligations.

What checks does the agency carry out and by what means? There are regulatory compliance programs that facilitate verification and remove the risk of illegal activities

In reality, although it only talks about the signing of the money laundering document, the agency must carry out other steps to verify the origin of the funds. "First, the client is asked to state in writing what percentage of own funds and / or bank financing that he will use in the purchase," explains Albiol. Afterwards, the client has to provide the documentation that effectively proves the origin of said funds. "In addition to the normal diligence measures, in certain cases reinforced diligence measures are also applied, when there is a risk factor due to the client's profile or the characteristics of the operation."

To carry out the checks, real estate agencies and developers must have compliance programs to verify the origin of the funds used in a real estate transaction. "In addition to the Know Your Costumer (KYC) forms to collect customer information, there are additional tools that help clarify and determine whether or not there are indications of illegal activity," says Laura Viloria, director of legal affairs Lucas Fox If the buyer is a foreigner, depending on the country of origin, further checks must be made. "If it is included in the lists of non-cooperating countries or tax havens, caution must be maximum," Viloria emphasizes. To carry out the control, they consult international databases of people with a high-risk background or profiles.

If there are suspicions, it is communicated to the tax agency. Fines for not doing so can reach 10 million euros. In addition, disqualification penalties may be imposed

In the case of finding evidence of a crime, including an attempt, it must be communicated to the SEPBLAC because, in case of not doing so, the real estate agency may be sanctioned. "Not only the promoter faces both administrative and economic sanctions, its administrators and directors can also be sanctioned," García points out. The fines set by law can range from 150,000 euros to 10,000,000 euros. Furthermore, the management or management positions responsible for the offense may be fined and disqualified from holding management or management positions for a maximum period of ten years.

The regulation also establishes the obligation for companies to have complaint channels enabled. Failure to do so can result in a fine of up to 60,000 euros, the suspension of activity, disqualification of positions and even "the prohibition of participating in public competitions", points out García. If in addition, the authorities verify that the operation concealed a money laundering scheme, "the agency could be convicted as an accomplice in a crime of money laundering in its reckless modality, provided for in article 301.3 of the Penal Code," Albiol declares.

Are agencies prepared to detect fraudulent operations? The big promoters yes, but in the smaller businesses it depends, since a certain investment is required

The SEPBLAC has pointed out the real estate sector for the deficiencies detected in its internal controls for the identification of the legal origin of the funds, highlighting the lack of internal reporting channels in the companies. However, the situation is very unequal in the sector, large promoters and agencies have these channels established, while small companies have more difficulties in complying with this requirement, since their implementation requires good technological support, which requires a investment.