One of the most critical sectors of the global economy is the real estate industry. Intriguingly, its worldwide value increased from $9.5 Billion in 2021 to an anticipated $14.6 Billion by 2030. Scammers and other criminals sometimes engage in money laundering or sponsoring terrorists when they steal enormous sums of money. When it comes to preventing illegal funding in real estate and keeping the company safe, digital KYC is a game changer. The goal of Know Your Customer (KYC) is to avoid the use of untraceable or otherwise illicit funds.
To further improve the security and efficacy of KYC and AML procedures, a number of Intelligent Document Processing (IDP) alternatives have been developed. Savings in both time and money may be realized via the use of IDP systems for tasks such as data extraction, document verification, fraud detection, and data concealing.
This article discusses how real estate facilitates the transfer of funds and how digital KYC solutions may be used to prevent theft from occurring in commercial establishments.
Financial Theft & Money Laundering in the Real Estate Sector
In today’s age, the real estate industry is plagued by the issue of money laundering. Putting a number on money laundering is difficult since it is a criminal offense. However, the Financial Action Task Force (FATF) estimated that in 2021, $1.6 Trillion was laundered via real estate. Thus, over half of its total value may be traced back to dishonest means.
The potential for money laundering is high in the real estate industry. These three are the most common ways:
- Cash Settlements
- Real Estate Market Manipulation
- Entanglement of Ownership
Cash Settlements
Verifying the authenticity of monetary transactions is crucial. One of the most common ways money is laundered is via financial transactions since criminals may remain anonymous by using a legal payment method. Furthermore, it is difficult to track the origin of cash deposits and wire transfers. In reality, scammers deposit small amounts of money at several banks. In most cases, the amount is very little so as not to raise suspicion about its origin. As soon as money enters a genuine bank account, it is considered “clean” and “laundered.” The fraudster has several options once the funds are in the financial system, for instance, to buy a house, an apartment, or for other purposes related to the real estate sector.
Real Estate Market Manipulation
One further way to hide money is to artificially inflate the worth of a property. In most cases, this may be accomplished by implementing certain enhancements to the home. So that the borrower may get a bigger mortgage, the value of the property is artificially boosted.
The manipulation is subtle and difficult to predict. Manipulators ask for a higher home loan so they can launder more money by exaggerating the cost of improvements. This may be accomplished in a number of ways, including by using a previously issued invoice as a template for a new one or by working with bogus companies to issue fraudulent invoices. By inflating the market value of a property, fraudsters in the real estate industry benefit financially.
Entanglement of Ownership
When considering issues or investigations into a firm, its ownership structure is an invaluable asset. Criminals who commit fraud often set up a murky, complex ownership structure to conceal their true identity and divert attention from their criminal activities.
The list of cases of money laundering is also far from exhaustive. Authorities will be better able to detect and prevent this kind of fraud with digital KYC processes and Anti-Money Laundering rules implemented.
Key Function of Digital KYC Procedures in Real Estate
More advantages are opening up to real estate firms who use digital KYC. Using Know Your Customer (KYC) checks helps companies prevent fraud and identity theft and legalize real estate transactions. Strong digital KYC processes, locating consumers engaged in their transactions, and implementing targeted checks may keep real estate organizations and their clients safer while doing business. Therefore, digital KYC verification is a great tool for enhancing security and maintaining credibility in the real estate industry.
In A Nutshell
To quickly and easily assess whether an application is a suitable match, real estate firm owners need to implement a digital KYC verification procedure. It has the potential to develop an effective system that caters to the requirements of the real estate industry and the potential tenants. When onboarding new clients, real estate companies must take a number of compliance precautions, including verifying their clients’ identities and income, checking client names against watchlists, and more. Companies in the real estate industry may be fully equipped with digital KYC solutions to avoid financial crimes with some careful planning and a comprehensive strategy.
