Money laundering is the process of investing a large amount of money obtained illegally into a legitimate source. Though there are many ways of money laundering, the most attractive is real estate. And why not? It comes with several benefits, such as property can be purchased with cash, ownership can be concealed, and much more.
Some commonly used money laundering techniques in real estate are:
1. Use of third parties
Criminals invest in real estate using a third party or family member (without a criminal record) as the owner. Offenders purchase property on behalf of a third party or deposit funds into their account to complete the purchase. In this way, criminals can not get directly mentioned in the deal.
2. Manipulation of property values
Criminals work with real estate agents to underestimate or exaggerate a property value.
Undervaluation
Proposing the contract sales value of property lower than its actual price is undervaluation. The difference between the price is paid secretly between the purchaser and the vendor. Through this, the buyer (criminal) claims that the contract amount was paid by his financial means. Many people use this method to save stamp duty. You can keep yourself safe by buying from the best Commercial Realtor in Surrey from Jas Oberoi Group.
Overvaluation
Evaluating the price of a property lower than its actual price is called overvaluation. Offenders overvalue property to get larger loans from a bank.
Increase rates
To confuse the audit trail, criminals can resell the properties in a row for higher values. They generally sell the property to a known third party or a company controlled by them. Criminals do this to show legitimate profits while maintaining total control over the sold property.
3. Use of loans and mortgages
Loans and mortgages provide another way for money laundering. In this, criminals give lump cash repayments to mix illicit funds with legitimate money.
4. Using rental income
Criminals can rent out a property and give funds to tenants to cover the rental payments. In this way- they adjust their money backdoor.
They purchase these properties in the name of a third party name and provide rent to the leaser. This way, they disguise their illegal funds.
5. Purchasing property for illegal activities
It doesn’t matter from where the offenders buy property- they start doing criminal activities as soon as they enter the property, such as drugs production, etc. The revenue from this illegal activity might be used to purchase additional real estate properties.
6. Renovation in the property
Offenders can use illegal means to renovate the property, which increases the property value. And then sell it at a higher price.
7. Structuring money in the banks
Offenders deposit money below the reporting threshold at different banks to avoid triggering transactions. It will help them obtain bank cheques to buy real estate properties.
Warning signs in a real estate transaction
Though all the above money laundering methods are likely to continue in the real estate sector, some warning signs can help you identify money laundering through the property market.
1. Someone who is hesitant to share information
If the customer/individual does not agree to share information, documents, or data you require is a big red flag. And you should avoid doing business with him.
2. Someone who pays only through cash
You might have remembered how you paid when you buy, your first property from the best commercial realtor in South Surrey - Read more. Obviously, you didn’t pay through cash. Cash-only payment is a sign of money laundering. You should avoid taking all money through cash for your property.
3. Someone offers your large cash lease payments
You own a commercial property, and someone pays the lease in huge cash beyond market rates. In this scenario, the person making the rent payments has a large amount of money. It can be a clear sign of a money laundering case. Do not rent out your property to anyone trying to invest money in real estate from criminal activity.
Conclusion
Before selling/purchasing your property, you should make yourself fully understand the warning signs of money laundering in real estate. It will solve the possible troubles that you will get in the future.
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