Every business needs advanced identity verification solutions such as digital KYC, whether in the real estate or financial sector. Criminals keep on searching for new opportunities to transfer their funds illegally. Therefore, the unlawful flow of money is a major problem around the world.
The real estate industry has allowed criminals to participate in heinous crimes like money laundering and financial terrorism. Fraudsters try to take advantage of loopholes in real estate agencies and try to clean their ill-gotten money in various ways. As per recent studies, the real estate sector has reached criminal activities worth $1.6 trillion annually.
Digital KYC helps the real estate sector identify property sellers, buyers, and other relevant entities. Verifying the people involved in real estate is crucial since it reduces the risk of being affected by bad actors since they pass through strict verification parameters of digital KYC.
Individuals exploit the real estate industry to convert their illegal funds into white money. For instance, the Panama leaks are one of the recent cases that awoke the regulatory authorities and reminded them why the real estate market needs strict regulations to prevent such fiscal crimes.
How Does Money Laundering Happen in the Real Estate Sector?
Even with cutting-edge digital KYC techniques, money laundering remains a serious issue in the real estate sector. Here are some of the principal methods used in the real estate industry to launder money:
- Cash Payments
- Manipulation of Property Price
- Unclear and Vague Details of Ownership
Let’s dive deep into how criminals use the above-discussed methods to facilitate money laundering.
Keeping a record of cash payments through digital KYC is challenging since it’s a hands-on money transfer method. However, cash payment is a common money laundering method since fraudsters try to hide them in legitimate ways. Moreover, it’s nearly impossible to keep track of the origin of money and funds under the cash payment process.
Manipulation of Property Price
The manipulation of the property price is another method to conduct activities like money laundering. It is often accomplished by improvements that falsely increase real estate value. However, the main question that arises here is how does it work? When a house buyer applies for a loan, they increase the money required for house renovation. Fraudsters receive a huge amount of money by increasing the price of real estate properties.
Unclear and Vague Details of Ownership
Ownership details and structures reveal the owner of a particular company or property, the legal representative, and those responsible for any criminal acts. Digital KYC keeps the identity of individuals and conducts verification by strengthening AML and digital KYC controls hence detecting and preventing such financial fraud.
Understanding Digital KYC Verification in Real Estate
Digital KYC in the real estate sector involves leveraging advanced technology to ensure customers’ smooth identification and verification. This technology utilizes digital platforms, including online databases and AI algorithms. It is done to gather and verify customer information and ensure compliance with regulatory standards.
Advantages of Digital KYC Solutions in Real Estate
- Improved Efficiency
Digital KYC solutions in real estate companies significantly reduce the time and effort for customer onboarding. Automated and efficient data collection, document authentication, and integration with online databases enable real estate businesses to get rid of manual cash payment processes. Moreover, it helps real estate businesses to focus on core business activities.
- Enhanced Experience of Users
Customer visits to the offices are no longer necessary because of digital KYC. It facilitates the users to complete their verification process remotely, making it easier for customers to interact with real estate agencies.
Implementing Digital KYC Verification Solutions in Real Estate
- Choosing Right Solutions
Real estate companies must carefully evaluate all possible digital KYC verification solutions to pick the one that aligns with industry requirements. Scalability, ease of use, and compliance with standard regulations are important factors to consider.
- Data Collection & Verification
Digital KYC involves data collection, verification, and precise background checks. Integration with official databases, reporting agencies, and other reliable sources streamlines and guarantees the reliability of the verification procedure.
Money laundering is undoubtedly a significant challenge for the real estate industry. Fraudsters exploit industry weaknesses to turn their unlawful wealth into legal funds. Therefore, it’s crucial to understand the importance of digital KYC in the real estate sector. The advanced Know Your Customer procedures help to identify and verify property sellers, buyers, and other entities. However, money laundering persists due to strategies like cash payment, vague property ownership details, etc. Digital KYC solutions, therefore, help prevent financial fraud by implementing strong anti-money laundering regulations.