Real estate assets, due to the dynamism of the sector in which they are positioned and the amounts generated by their transactions, must be particularly vigilant in terms of the potential risks of being involved in a money laundering process.
In this context, real estate professionals have a key role to play. Concerned by recent provisions, in particular related to Sapin 2, GDPR or MIFID 2, they had to be agile and review their organization to comply with a new framework. At the same time, the 4th Directive has also had a major impact on the sector, especially in view of the heterogeneous nature of its methods of application at European level.
Real estate professionals have been subject to the anti-money laundering and terrorist financing system (LAB/FT) since 1998. But it was only in 2009, when the 3rd Directive was transposed in France, that they were directly impacted by the establishment of controls by their supervisory authorities.
These controls dedicated to real estate professionals have made it possible to raise awareness and mobilize the profession: although still low, the number of suspicious declarations made to the body of the Ministry of Economy and Finance, Tracfin, is increasing (89 in 2016, 35 in 2015) .However, this volume is insufficient compared to the total of declarations made by all the professionals subject to it. Thus, in its report submitted in May 2018, the National Sanctions Commission notes that some real estate professionals need to be better aware of and suggests ways forward.
Les enjeux et impacts de la 4e directive
However, the implementation of the regulations is made complex by the heterogeneity of the application of current texts at European level: all countries have not yet transposed this 4th directive into national law (Ireland...) and real estate activities are not uniformly subject to taxation in all countries. Thus, in France, renting is subject while it is not in the Czech Republic or Germany...; conversely, property management falls within the scope of local regulations in Belgium, but not in France...
The transposition of the 4th Directive into French law requires clarifying the newly subject activities. With regard to the activity of condominium trustee, subject since the Alur law of 2014, it is difficult to understand how a professional in charge of managing the maintenance of the common areas of a building whose ownership is shared can identify any illicit activity. If answering simple questions (Who is my customer? What is his profession? How does the financial package for its acquisition work? Does it have a contribution? Where do the funds come from?) is understandable in the context of a real estate transaction, it is more complicated to perceive its meaning in the context of the activity of trustee. Moreover, Belgium recently excluded this activity from the scope of the texts.
The time difficulty associated with the concept of entering into a relationship makes the process complicated in terms of collecting information, even though only a portion of the mandates will lead to an operation and therefore a financial flow to the agent.
Une mobilisation des acteurs
Faced with these developments, which are sometimes difficult to understand as real estate activity is multifaceted and often far removed from the financial activities for which the texts were designed, the initiatives of real estate professionals deserve to be noted.
The obligations of real estate professionals in the fight against money laundering are little known to the public. Real estate professionals are therefore often considered illegitimate in their request for information and documents necessary to carry out KYC procedures.
The international consultation launched by the RICS in May 2018 offers its affiliates (10,000 companies and 125,000 qualified professionals) professional standards and the publication of a new specific code of conduct relating to the fight against corruption, money laundering and the financing of terrorism. And the RICS in France has just sponsored a small book to raise awareness on the subject (real estate in the face of money laundering and the financing of terrorism, by Maurice Feferman and Yehudi Pelosi, preface by Bruno Dalles, director of Tracfin, Éditions PC, 2017).
The implementation of obligations at the operational level also requires strong support (procedure, training, control, etc.) for internal teams, justifying the support of qualified experts: compliance officers.
Indeed, the compliance function is being strengthened among major real estate players, catching up with the global evolution of the market. The financial crisis of 2008 and the successive regulations led the entire financial sector but also the real estate industry to strengthen their internal control systems. The compliance function has therefore grown significantly.
The quality of the system requires both an effort to educate real estate players and through a strong harmonization of practices between colleagues (which still needs to be strengthened in a European logic). It must also involve clarifying the legislator's expectations concerning certain well-defined situations.
More and more, in the context of tenders, the establishment of a quality LAB-FT system within structures is becoming one of the criteria contributing to the choice. It also responds to a logic of developing lasting relationships based on professionalism, and the highest standards of quality and service. This selection criterion thus testifies to the sharing of values of exemplarity and integrity.
Compliance thus improves the transparency of practices. It is also key because it goes beyond regulatory risk, and contributes to the protection of reputational risk. Customer knowledge makes it possible to offer a framework that protects the company, its customers and its employees against the risks of money laundering and terrorist financing.