How comprehensive due diligence protects your real estate business

Before doing business with a new client or customer, you’re legally obliged to understand their intentions. Are they buying or selling real estate for legitimate reasons? Or are they looking to launder money or park illicit gains into safe, long-term assets?

To answer that question, you turn to a KYC firm or buy screening software. You enter a name and search anti-money laundering, sanctions, and other watchlists for a match. If none is found, is that enough to safely do business with that customer?

The short answer is no, KYC screening alone is not always enough to protect your business from the risks of transacting with bad actors (whether individuals or entities). And even if it was, it’s what you do with the results that regulators care about most. 

True KYC goes beyond initial screening to a deep and ongoing analysis of customer profiles. When buying and selling real estate, you’re dealing in big numbers – sometimes in the millions of dollars. And big opportunities present big risks. 

Read on to learn why you must go beyond KYC screening to protect your revenue and safeguard your business from regulatory penalties.

Just how bad is money laundering in real estate?

Europol reports 68 percent of criminal organisations in the EU use the real estate market to launder illicit funds. Big-ticket items like villas on the Costa Del Sol are havens for the criminal upper class, who dress their ill-gotten funds in sun-kissed terraces and infinity pools. 

The Spanish real estate market continues to grow despite challenging economic conditions. Euro Weekly News reports that “a significant portion of the demand is from highly qualified individuals with substantial resources, reducing their reliance on financing.” Curious, right?

As a result, the Spanish government is cracking down on real estate firms who don’t do their due diligence. Your firm, no matter how small, will fall under its scrutiny. Failure to comply with KYC and AML regulations increases your risk of participating in an illegal transaction. The ethical implications are bad enough, but you might also suffer financial penalties, reputation loss, criminal proceedings, and sanctioning. 

Screening alone isn’t always enough to catch the most sophisticated criminals. You need to dig a little deeper for the peace of mind to onboard legitimate customers and the confidence to reject those who’re high-risk. Here’s how to do it.

Why go deeper than KYC screening

KYC isn't a one-time check-in, but an ongoing commitment to understanding your customers' true intentions. That's where due diligence comes into play. Gather financial history, business dealings, and any other relevant data to paint a complete picture of the customer's background and potential involvement in illicit activities. Then ask us to help you evaluate each case. 

Monitor movements, detect deception

Once you've established a baseline of customer information, put it to work. Continuously monitor customer transactions, and identify patterns and anomalies that could signal suspicious activity. Ask us to help you spot potential issues before they escalate.

Suspicion isn't negligence, it's vigilance

When red flags emerge, act swiftly. Don’t be afraid to ask your potential customers to verify and validate their claims. Turning a blind eye to save your commission could cost you your entire business later if you don’t report any suspicious activities to the relevant authorities. 

KYC is an ongoing journey, not a casual check

KYC is an ever-evolving dance with evolving risks. Regularly review your KYC procedures, ensuring they remain effective in the face of changing regulatory landscapes and evolving fraud tactics. Partner with a firm like ours and let our experts do much of the hard work for you.

KYC is a frontline defence against financial crime

By embracing KYC's full potential, you safeguard your business from the dangers of money laundering and terrorist financing, fostering a more secure and trustworthy financial ecosystem. When criminals win, everyone loses. Become a beacon for your industry with our help. 

Your reputation depends on it

Your legitimate customers want to do business with a secure, ethical, and trustworthy firm. By embracing KYC as more than just a screening exercise, you demonstrate to your customers that you’re a guardian of financial integrity – and for the industry as a whole. That’s one easy way to rise above your competitors and smash your revenue goals. 

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Disclaimer: This article is for informational purposes only and does not constitute legal, financial, or regulatory advice. While KYC For Europe SL provides expert AML/KYC compliance support, compliance decisions remain the reader’s responsibility. For tailored guidance on Spanish and EU regulations, contact us to discuss how we can help your business meet its compliance obligations.