UGANDA, Kampala | Real Muloodi News | The Sentry, an investigative and policy team that follows the dirty money connected to African criminal and transactional war profiteers, published an advisory detailing how kleptocrats and their networks have increasingly been using African real estate to launder the proceeds of corruption.
With a focus on Sub- Saharan Africa: the investigative report examines Kenya, Uganda, Namibia, and South Africa. The governments and banks of these countries have the money laundering risks in real estate which deserves attention. The laxity thereof has acted as a buffer, thereby creating a growing opportunity for corrupt actors to exploit the African real estate sector.
According to Guidelines To All Accountable Persons Under The Anti-Money Laundering Act, 2013, With Respect To Identifying Suspicious Transactions: A suspicious transaction is defined in Section 1 of the Anti-Money Laundering Act, 2013, as a transaction which is inconsistent with a customer’s known legitimate business or personal activities or with the normal business for that type of account or business relationship, or a complex and unusual transaction or complex and unusual pattern of transaction.
The advisory, “Looted Funds Used to Buy Real Estate,” focuses largely on the real estate sectors of Uganda, Kenya, Namibia, and South Africa, which provide the comparative political and monetary stability coveted by corrupt actors laundering their ill-gotten gains.
It describes several methods used by politically exposed persons (PEPs) to purchase real estate in these countries and details related red flags, including the purchase of real estate by family members and associates, the use of shell companies and trusts to purchase property, the purchase of properties in foreign countries by individuals subject to international sanctions, and the use of unexplained wealth to purchase properties.
These red flags, drawn from public reporting and The Sentry’s investigative findings, align with the risk categories highlighted by the Financial Action Task Force (FATF), an intergovernmental standard-setting body to combat money laundering and terrorist financing.
Furthermore, several regulatory bottlenecks are prevalent in the four countries, and as a result impeding the efforts to fight financial crime in the African real estate sector. These include low prosecution levels, insufficient oversight, a lack of awareness of reporting requirements, and limited reporting on suspicious behaviour from relevant actors like real estate agents (Real estate agents are listed as accountable persons according to the second schedule of the AntiMoney Laundering Act, 2013 of Uganda).
Steps Taken to Avert Money Laundering in African Real Estate
The Sentry Advisory further recommends the various steps that can be taken to address the challenges above and mitigate the risks of money laundering in the African real estate sector. This includes increased information sharing and cooperation among regulators in Eastern and Southern Africa (ESAAMLG), the United States, and Europe.
It further suggests that the Geographic Targeting Orders (GTO) issued by the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) are an innovative mechanism whose limited but crucial success can be replicated in the Sub-Saharan region.
It suggests that actions by all necessary stakeholders like banks, governments, and relevant actors (accountable persons) are crucial in controlling money laundering through real estate in eastern and southern Africa. This can put pressure on kleptocrats and their facilitators, and combat profiteering from corruption and violence elsewhere on the continent.
The Sentry’s advisory was modelled on those issues to boost reporting by financial institutions on suspicious behaviour and help gather intelligence that can inform efforts to fight financial crime.
This real estate advisory forms only the first money laundering risk advisory from The Sentry. However, moving forward, The Sentry will be publishing advisories that focus on specific sectors associated with grand corruption in sub-Saharan Africa whose aim is to raise awareness and provide insight on sector-specific risks to financial institutions and relevant authorities.
Click here to read the advisory, including the red flags and recommendations.
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