Purchasing a home is a significant financial investment and a long-held dream for many people. However, it is critical to understand the risks that can arise in the business, particularly the growing concern about fraud and money laundering. KYC real estate verification should be included in this process to protect your investment and ensure a secure purchase. This guest post will give you helpful advice and insight into how KYC verification can help protect you from real estate fraud, and AML checks when buying a house ensuring a safe home-buying experience.
What are Anti-Money Laundering Checks When Buying a House?
According to recent figures, the United Nations estimates that between 2% and 5% of the global GDP is lost to money laundering worldwide and unfortunately, around 90% of this amount is still undetected today. Various parties involved in a residential property purchase conduct AML checks when buying a house, including the seller’s estate agent, mortgage lender, anti-money laundering attorney, and conveyancing solicitor. Customer Due Diligence (CDD), Enhanced Due Diligence (EDD), and Transaction Monitoring are standard AML checks when purchasing a home.
Identity proof is required to establish the true identity of the buyer for estate agents to comply with AML checks. Passports, driver’s licenses, utility bills, bank statements, and tax notifications are all acceptable documents.
Proof of funds may be requested several times, and it is necessary to demonstrate the funds’ availability and legitimacy. Bank statements displaying the required deposit or the total asking price, a gifted deposit letter, or proof of property sale are all acceptable methods.
The source of funds must be verified to demonstrate how the funds used for the property deposit were obtained. Property sales, financial assistance, investment sales, retirement lump sums, and inheritances are all common sources of funds.
KYC Verification in Real Estate
KYC verification entails gathering and verifying customer information to confirm their identity and assess potential risks. Conducting KYC real estate sector helps ensure that the parties involved are legitimate and comply with AML regulations. This system aids in the prevention of fraudulent activity and increases the transparency of real estate transactions. KYC requirements in real estate vary by country, but they all aim to verify the identity of potential buyers. This is critical given the industry’s specific money laundering risks, such as the use of anonymous entities and third parties.
Here are some important guidelines to follow to prevent fraud and ensure compliance with KYC regulations:
Identity Verification:
To combat fraud in the real estate industry, an online identity verification service appears to be the ideal solution. The company must verify the identity and credentials of the two parties involved in the transaction. Lenders must also verify the identity of prospective tenants, and tenants must go through an approval process before renting a property. A reputable KYC company provider can effectively validate a user’s identity. KYC real estate verification can be aided by ID verification services such as
- Transaction processing
- Property Location
- Preventing identity fraud
- In-depth customer due diligence
- Complying with regulatory requirements
Document Verification:
Real estate agents must thoroughly examine and verify the accuracy of the property documents provided by the seller to ensure that there are no errors or misrepresentations.
Conduct Sanction Screening:
Compliance Officers compare customer data to government sanctions or watch lists to identify any matches. If a match is discovered, additional research and due diligence may be required before proceeding with the business relationship.
Screening for Politically Exposed Persons (PEPs):
Politically Exposed Persons (PEPs) are people who hold significant public office or have influence in government organizations. Screening PEPs assists in identifying individuals who may be more vulnerable to corruption or other illicit activities due to their political status and access to power and resources.
Check Adverse Media:
To identify any involvement in illegal activities, real estate companies should screen potential clients or business partners for negative news articles, public records, and other open-source information. This reduces reputational risk and helps to prevent financial crime.
Identifying Beneficiaries:
If the property buyer is a company, it is critical to confirm the company’s Final Beneficiaries (UBOs). Individuals with significant control over a company or who own more than 25% of its shares are considered UBOs. This check ensures that the ownership structure is transparent and accountable.
Bottom Line
Protecting your investment and ensuring a secure transaction should be top priorities when purchasing a home. Implementing robust KYC real estate verification and AML checks when buying a house, as well as leveraging technology such as AI-powered identity verification tools, document authentication systems, and transaction monitoring can help to reduce the risks of real estate fraud and money laundering. These measures promote transparency, protect all parties involved, and help to make the real estate market safer and more trustworthy.