Real estate and KYC compliance: a study of burden.

The situation

I stared in disbelief, my mouth slightly ajar at what I was hearing. How many times have I trained them on this? "I didn’t verify the vendor,'' our top agent repeated. 

“It was between us and Osprey’s Real Estate, I had to move fast or they would have got the listing. Anyway, the fines are less than the money we’ll make, what does it matter?”

As I continued to stare, my mouth opening and closing but nothing coming out, he added, “If it makes you feel any better, I spoke to his lawyer and he texted me his ID. He looks fine.”

How did we ever get here?

This is normal 

I like to think that I’m not alone in this situation. In fact, I know I’m not. Speaking to colleagues here and across the globe, their real estate agencies frequently have compliance crises like this; the moment when compliance takes a back seat to commercial interests. 

“Oh yea, we had one just recently,” my friend and colleague in Bath laughed when I asked her. “We went back and got the verifications for some of the shareholders. But I’m not too worried. Since the Ukrainian situation the auditors don’t have time to go deep.”

I’ve noticed this too. There are so many more news articles about money laundering through property. In July 2022, eight properties were seized in Canberra, Australia, ‘Londongrad’ is renowned for being a laundromat for oligarchs and even the smallest of countries are being affected; recently New Zealand police arrested money launderers using property. 

It’s fine

Our compliance program is fine. I thought the EIV (Electronic Identity Verification) tool would ease the burden, evidently though, it’s not helping our top agent.

To be fair, it is a lot of work for them. They’re trying to close deals and get more listings, but we’re also asking them to be field compliance officers; verifying IDs and collecting documentation. It would be easy if only people would stop using trusts and companies to buy property!

The burden

I didn’t become a compliance officer to chase documents or nag agents. I took on this role so I could use my analytical skills, dig deeper when things don’t seem right and make sure criminals aren’t using us to their advantage. But so often, it falls on me and my team to chase the vendors, upload the documents, run the PEP and sanctions checks and intervene when the EIV checks fail.

I didn’t become a compliance officer to chase documents or nag agents.

Not to mention the complex entity structures. Creating them takes forever and finding the Ultimate Beneficial Owners (UBOs) is near impossible when they’re using multi-country shell companies.

Honestly, I’m exhausted. And I feel like the bad guy for constantly reminding the agents on the importance of AML and ‘holding up’ the deals. We need to find a better way to do this.

It’s a global problem, with a local solution.

Here at First AML, we have seen this exact scenario play out countless times. From multinationals to local agencies; commercial to residential; leasing to selling agents.  

It’s always the exact. same. problems:

• Manual document collection by agents
• Endless vendor chasing
• Paper-to-digital document conversion and checking
• Multiple subscriptions
  • document storage 
  • EIV tools
  • PEP and sanctions lists
• Opaque and labyrinthine entity structures
• The friction between listings made vs. compliance completed
• Lack of time for in-depth entity analysis
• Short term financial rewards vs. long term reputational risks
• Overt pressure for quick KYC for complex, and usually lucrative, customers (trusts, businesses and foreign nationals) 
• Open exceptions that never get closed

There's a better way

No to complexity

“The biggest complaint from commercial real estate agencies is the time it takes to complete KYC on complex entities; trusts, businesses, non profits etc.” Explains Jessie Mao, Chief Compliance Advisor, First AML “They are often high net worth individuals that cost a lot to service due to the white-gloved approach they expect. They also represent a disproportionate level of risk due to the cross border trusts and shell companies they favour for tax efficiencies.”

“While for residential real estate agencies, their biggest concern is ensuring a smooth process for the vendor. When the market’s hot, and time is of the essence, just having the conversation about AML can seem detrimental to the listing. Then when the agent needs to collect documentation, get selfies and follow up it makes them anxious that the vendor will feel intruded upon and they’ll lose the listing.” 

“The second biggest complaint is the time it takes to undertake the actual KYC checks. There are a number of tools for high-volume straight-through verifications, but compliance teams still have to collate results, intervene when checks fail, collect documentation, create entity structures and run the PEP and sanction checks.

They’re spending the majority of their day on low value tasks, instead of conducting focused investigations, or quality assurance audits that will protect their company and society at large.” 

KYC Passport

Here’s how we help both multinationals and local agencies address the cost and burden of compliance with minimal business impact. 

The First AML KYC Passport is a global repository of pre-verified complex entities (companies, trusts, charities etc) and individuals. Providing quicker time to listings for agents, a better experience for customers and at-a-glance results for better informed compliance decisions.

Each Passport includes: 

• Digitised company information
• Visualised entity structure trees 
• Shareholders, UBOs and other related individuals
• Source of wealth / funds including a nuanced approach to traditional and new sources such as crypto. 
• EIV biometrics (face match, liveness detection and spoofing detection)
• PEP, sanctions and adverse media screening alerts for possible or confirmed matches.
• Instant audit mode allowing read-only access to the sampled cases.Verified entities share their KYC credentials in a privacy-centric, consent-driven way, significantly reducing service friction and operating cost.

Supporting the Passport are smart automations and optimised AML workflows, providing operational support while ensuring fast listings.