BrokerageRegulations

19 red flags to detect money laundering

Protect yourself from being part of an illegal transaction

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A number of years ago, before I entered the real estate realm, I was licensed to sell life and health insurance. I worked for a large international insurance firm that required all its agents to pass a yearly anti-money laundering class by earning an 80 percent or better on the anti-money laundering exam.

The anti-money laundering class was instituted shortly after two of the company’s agents and their clients were caught, indicted and convicted of transforming the proceeds from drug sales into “legitimate” assets through the purchase and redemption of assorted financial products — another example of a corporation being reactive instead of proactive.

Because your elevator speech won’t do you any good in prison, keep your eyes open. If you observe any of the following activities, money laundering might be afoot.

Money laundering red flags:

  1. The client provides minimal, vague or fictitious information that cannot be readily verified.
  2. The buyer’s agent is especially guarded about his or her client.
  3. The client is in an undue hurry to complete the purchase.
  4. The purchase is made without anyone viewing the property; the buyer shows no interest in the features of the property.
  5. The sale price is abnormally high or low.
  6. The client has an unusual lack of concern regarding commissions or other transaction costs.
  7. A 100 percent cash deal. The buyer brings a paper bag full of cash to the closing.
  8. The property is purchased without a mortgage, and that behavior does not match the characteristics of the buyer.
  9. The client is not able to account for the source of payment from his or her income or assets.
  10. The client tells you that funds are coming from one source, and at the last minute the source changes.
  11. Payments arrive from a number of individuals or sources, and remember that payments made through the mainstream banking system are not guaranteed to be clean.
  12. The client makes payments using various monetary instruments. If those instruments are sequentially numbered or if their value falls just beneath the $10,000 reporting threshold, something is fishy.
  13. You discover, or suspect, that cash has changed hands directly between the seller and the buyer.
  14. The client requests an unusual or noncustomary way to handle the transaction.
  15. The client requests to settle the sale through means outside of a recognized clearing system.
  16. A residential property is titled in the name of a third party.
  17. The purchased property is immediately resold, and the resale entails a significant increase or decrease in the purchase price.
  18. The transaction involves a recently created legal entity, and in your estimation, the sale amount is large compared to new entity’s assets.
  19. Or if you witness any other weirdness. You’ve been in the business long enough to know what is considered usual and customary and what is not. Anything unusual is a red flag.

If you witness suspicious activity, you have the option of reporting the shenanigans to local law enforcement or the FBI. You might also file a suspicious activity report (SAR), which is sent to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN).

For further information or assistance regarding how to file an SAR, call FinCEN’s Regulatory Helpline: 1-800-949-2732.

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Constant vigilance.

David Redic has worked as a programmer, data analyst, website builder, tech writer, educational filmmaker and IT director. He is currently the webmaster at Berkshire Hathaway HomeServices – Kovack Realtors.

Email David Redic.