Question 1: As per the guidance, leasing is subject to AML/CFT requirements, similar to buy-sell brokerage services for real estate brokers. In this context, do short-term leasing, holiday homes, sub-leasing, hotel leasing, and property management also fall under AML/CFT and TFS requirements?
Question 2: Is it necessary to conduct due diligence (including KYC collection, screening, and risk checks) for all parties involved in the real estate transaction, such as the buyer, seller, developer, tenant, landlord, other brokers, their clients, mortgage bank, POA holders, and conveyancers?
Answer 1: Under AML regulations, real estate agents are required to apply adequate AML measures on the transactions related to the purchase/sale of real estate property. Further, by virtue of the clarificatory note mentioned in the Supplemental Guidance issued by the MOE for the real estate sector, the leasing of real estate property is also be considered as subject to AML compliance, given the nature of nature of the real estate leasing, which is at par with sale/purchase in the UAE.
The intention here is to curb potential money laundering activities routed through the UAE’s real estate sector and therefore short term leasing should be treated as a covered activity and accordingly, the agent must take adequate CDD measures.
Further, for property management, which not in nature or purchase/sell or leasing, the same will not be subject to AML compliance.
Answer 2: Identifying the parties to the real estate purchase and sell is very crucial. Since the possibility of money laundering lies primarily between buyer and seller, it is important that buyer, seller/developer, tenant and landlord is subject to adequate CDD – covering KYC, screening and risk profiling.
Apart from this, the real estate agent must determine if there is any other undisclosed party to the transaction, for example – the buyer is a housewife and the payment towards the property is coming from her spouse’s account, then adequate CDD measures must be applied to such third party who is funding the transactions.
CDD measures are also to be applied to the POA holder or any other person acting on behalf of the disclosed buyer/seller.
The other parties like conveyancer, or other broker are not directly engaged in the purchase/sell and are merely facilitating the transaction. Hence, it is fine it CDD measures are not applied to them.