Guidance for risk-based approach : Real estate sector

Executive summary

In June 2021, the FATF agreed that the FATF Risk-Based Guidance to the Real Estate sector (henceforth, the sector) should be updated as a matter of priority to reflect the evolution of money laundering and terrorist financing (ML/TF) and to ensure that the sector remains well-placed to counter such activity. 

This Guidance was primarily developed to outline the principles and benefits of adopting a risk-based approach to tackling ML/TF. It is designed to be read alongside the FATF Recommendations (2012) and provides real estate professionals involved in real estate transactions, with the requisite tools and examples to support the implementation of FATF standards enabling the implementation of a risk-based approach to anti-money laundering and countering the financing of terrorism (AML/CFT). Such an approach is considered to be the
foundation of a country’s AML/CFT framework, which must reflect the characteristics of legal, regulatory and financial frameworks.

The success of a risk-based approach (RBA) is dependent on a comprehensive understanding, assessment and management of ML/TF risks, and on taking appropriate measures to mitigate these risks effectively. This Guidance is split into three main sections including an overview of the FATF’s RBA, including the general
risks and challenges that real estate professionals might be exposed to and how these can be effectively mitigated and managed.

The following section sets out the primary risk categories that the sector might be exposed to and makes recommendations on the types of mitigation policies that should be devised, implemented, and reviewed, including ensuring customer due diligence (CDD) and identifying beneficial ownership measures are undertaken.

This Guidance emphasises the need for training and awareness that real estate professionals should have to effectively implement AML/CFT requirements.

The final section provides guidance for supervisors and self-regulatory bodies (SRBs) and highlights the need for adequate powers to enable such bodies to perform their functions effectively. This includes powers to monitor activity and impose appropriate sanctions where necessary. Further recommendations are
provided to enable effective supervision, including on the allocation of resources based on the degree of ML/TF risk and assessment of the effectiveness and suitability of controls implemented by real estate professionals.