Unpacking AML & CFT Regulations in Real Estate

As a real estate agent or a property buyer, you may have encountered the abbreviations AML/CFT and wondered about their significance. AML/CFT stands for Anti-Money Laundering and Combating Financing of Terrorism, a critical framework prioritized by regulators to safeguard financial markets, including the real estate sector.

What is AML/CFT?

Definitions:

Anti-Money Laundering (AML):

A set of policies, procedures, and technologies designed to prevent money laundering.
Monitors and mitigates fraudulent activities within financial institutions and government systems.

Combating Financing of Terrorism (CFT):

Focuses on detecting and preventing funds used for illegal political purposes or terrorism, regardless of whether the money originates from lawful or illicit sources.

Origins:

Introduced by the Financial Action Task Force (FATF) to establish international standards for preventing money laundering and terrorism financing globally.

AML/CFT in Zimbabwe

Oversight and Implementation:

Key Regulators:

• Financial Intelligence Unit (FIU): Oversees compliance with AML/CFT laws.
• Reserve Bank of Zimbabwe (RBZ): Monitors financial institutions.
• Estate Agents Council of Zimbabwe (EACZ): Regulates real estate agents.
• Law Society of Zimbabwe: Supervises legal professionals.

Legislation:

The Money Laundering and Proceeds of Crime (MLPC) Act outlines obligations for designated institutions.

Designated Institutions:

• Defined as financial institutions or businesses, including estate agencies, that must comply with AML/CFT regulations.
• Registered entities in the real estate sector under the Estate Agents Act [Chapter 27:17] are subject to these rules.

AML/CFT Obligations for Real Estate Agents

Due Diligence:

• Agents must conduct due diligence on both buyers and sellers, considering the risks of money laundering and terrorism financing.

Reporting Suspicious Transactions:

Suspicious Transaction Reports (STRs):

Required under the MLPC Act.Must be submitted to the FIU if:

• A transaction involves proceeds of crime.
• There is suspicion of terrorism financing.

Why AML/CFT Matters in Real Estate

Goals of AML/CFT:

1. Prevent Criminal Economic Activities:

• Mitigate the effects of money laundering and terrorist financing.

2. Promote Integrity and Stability:

• Protect financial and real estate markets from misuse.

Implications for Real Estate:

• Real estate transactions involve significant sums of money, making the sector vulnerable to money laundering.
• Ensuring compliance protects agents, buyers, and sellers from potential legal and financial risks.

How to Ensure Compliance

1. Understand Regulations:

• Familiarize yourself with AML/CFT laws and the MLPC Act.

2. Implement Due Diligence:

• Verify the identities of buyers and sellers.
• Assess the legitimacy of funds used in transactions.

3. Report Suspicious Activities:

• Submit STRs promptly when required.

4. Stay Updated:

• Follow guidance from the FIU and sectoral regulators.

Conclusion

AML/CFT regulations are essential in safeguarding the integrity of financial markets, including the real estate sector. By understanding and complying with these measures, real estate agents and businesses can contribute to a secure, transparent, and stable market while protecting themselves and their clients from legal and financial risks.