AML in real estate: regulations, red flags, and best practices
- azakaw
- Jun 1
- 13 min read
Updated: 11 hours ago
Real estate money laundering is one of the primary focuses for anti-money laundering (AML) efforts worldwide due to high-value transactions and complex ownership structures create fertile ground for illicit financial activity.
In this context, the AML real estate compliance must be adopted to meet legal requirements and to protect the business, clients, and reputation.
This guide offers a comprehensive overview of AML compliance in real estate, covering regulatory frameworks, practical obligations, risk indicators, best practices, and an explanation of how money laundering works to help you operate confidently in today’s compliance landscape.
AML in Real Estate Key Takeaways |
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What is AML compliance in real estate?
Anti-Money Laundering (AML) compliance in real estate refers to the set of legal obligations and best practices aimed at preventing the misuse of property transactions for laundering criminal proceeds.
Given the high value and relative stability of property assets, real estate is a frequent target for financial crime.
AML in the context of property transactions
Anti-Money Laundering compliance in real estate includes:
verifying the identities of buyers and sellers;
understanding the source of their funds;
monitoring transactions;
reporting suspicious activity to authorities.
Real estate’s role in global AML frameworks
International frameworks like the Financial Action Task Force (FATF) recommendations consider real estate a Designated Non-Financial Business and Profession (DNFBP), meaning it's subject to specific due diligence and reporting standards.
Who is required to comply with AML in real estate?
AML responsibilities often apply to estate agents, developers, brokers, lawyers, and notaries involved in the transaction process.
Anyone handling funds or legal ownership must ensure compliance.
Why is real estate a target for money laundering?
Real estate remains one of the most attractive channels for money laundering because it allows criminals to move large amounts of illicit funds into assets that appear legitimate.
In practice, property deals combine high values, international flows of capital, and often limited transparency over beneficial ownership.
These conditions create opportunities to disguise the origin of money.
Key factors include:
High-value transactions that absorb large sums quickly.
Cross-border property purchases complicate monitoring.
Opaque structures such as shell companies or nominee owners.
Manipulated valuations — properties bought above or below market value to transfer funds.
“Cleaning” illicit money through resale, rentals, or refinancing.
Gaps in regulatory oversight, particularly in markets with fragmented real estate supervision.
In our experience advising institutions across the GCC and European markets, real estate is consistently highlighted as high-risk in FATF mutual evaluations and local audits.
Regulators now expect firms to apply enhanced due diligence and report suspicious activity, making robust monitoring in this sector not just good practice but a legal necessity.
Why Anti-Money Laundering compliance is critical in real estate?
Compliance in real estate has never been more important. In 2025, regulators are tightening oversight, illicit flows through property remain a global concern, and clients expect greater transparency.
The risks are no longer abstract — fines, reputational damage, and even asset seizures are happening across markets. Here’s why AML matters from different perspectives:
For real estate companies
Regulators are watching more closely. In the EU, 6AMLD extends criminal liability to individuals, while in the UAE, the Central Bank has already suspended firms for failing to register on the goAML platform.
The cost of non-compliance is rising. We’ve seen firms fined millions or temporarily closed, sometimes for issues as simple as missing documentation or weak due diligence.
Reputation is hard to rebuild. Once a regulator names a firm publicly, clients and investors hesitate — and regaining trust can take years.
For buyers and sellers
Transactions need trust. When KYC and source-of-funds checks are done properly, both sides can be confident they are not linked to criminal activity.
Legal risks are real. Buyers have had properties seized years after purchase because the funds were later proven to be illicit. Sellers, too, can face penalties if they ignore red flags.
A healthier market. Compliance reduces the distortion caused by illicit money inflating property values, making the market more stable and fair for genuine buyers.
For the financial sector
Banks share the exposure. If a property deal involves laundered funds, lenders and payment providers are pulled into the investigation. FinCEN in the US has fined institutions for weak monitoring in real estate transactions.
Global access depends on strong AML. Weak compliance can threaten correspondent banking relationships — something we’ve seen regulators highlight repeatedly in FATF mutual evaluations.
Reassurance for regulators and investors. When the real estate sector applies strict AML controls, it strengthens confidence across the wider financial system.
How money laundering works in real estate
Money laundering in real estate typically follows the classic placement–layering–integration cycle, but adapted to property transactions.
Criminals introduce illicit funds into the market, disguise their origin through complex structures, and then convert them into seemingly legitimate assets.
Common methods used to launder money through property deals
In practice, we see the following methods most often:
Use of shell companies or trusts: properties purchased through opaque corporate vehicles to conceal the ultimate beneficial owner.
Over or under valuation of property: inflating or discounting prices to transfer value without raising immediate suspicion.
Mortgage and refinancing schemes: taking out loans against property to generate “clean” funds, while using illicit money to service repayments.
Rapid buying and selling (property flipping): layering illicit funds through multiple transactions in short periods
Cross-border purchases: exploiting gaps between jurisdictions, particularly where beneficial ownership rules are weaker.
In our compliance work, especially across GCC and EU jurisdictions, regulators increasingly scrutinise real estate transactions for these typologies.
For example, luxury property in markets like Dubai, London, or southern Europe often attracts illicit capital precisely because oversight is fragmented across free zones, offshore entities, and local registries.
Ultimately, the real estate sector provides criminals with a unique mix of high-value assets, liquidity potential, and opportunities to obscure ownership.
This combination explains why FATF and local authorities consistently classify it as high-risk, and why firms involved in property transactions are now required to apply enhanced due diligence and report suspicious activity.
What are the red flags for real estate money laundering?
Red flags for real estate money laundering often include large cash payments, multiple transactions in a short period, multiple intermediaries and/or anonymous companies, urgent requests to close the documentation, etc.
Real estate professionals must be aware of the common signs of money laundering in real estate to prevent financial criminal activity and protect their business.
The signs of money laundering in real estate include:
Large cash payments,
Purchase far above or below the market value,
Unusually complex financing arrangements,
Multiple transactions in a short period.
Use of multiple intermediaries or anonymous companies,
Frequent changes in ownership within a short time.
Reluctance to provide ID or source of funds,
Evasive or inconsistent answers during the onboarding process,
Urgent requests to close without proper documentation.
AML regulations affecting real estate
Around the world, regulators view the real estate sector as one of the highest-risk industries for money laundering.
In our work with clients across Europe, the GCC, and the US, we consistently see regulators demanding not only written AML frameworks but also evidence that compliance measures are applied in day-to-day property transactions.
FATF recommendations
The Financial Action Task Force (FATF) sets the global baseline. Its recommendations call for a risk-based approach and robust Customer Due Diligence (CDD) across all real estate transactions.
The updated 2022 guidance places stronger emphasis on identifying the ultimate beneficial owner (UBO) and applying enhanced due diligence (EDD) where transactions involve high-risk clients, politically exposed persons (PEPs), or offshore jurisdictions.
In practice, regulators now expect property professionals (lawyers, brokers, and developers) to be able to demonstrate transparent ownership checks and to document why risk ratings were assigned.
European Union: 6AMLD obligations
The EU’s 6th Anti-Money Laundering Directive (6AMLD) is one of the most far-reaching AML regimes. It extends criminal liability to individuals and entities that fail to meet AML obligations, with penalties ranging from significant fines to imprisonment.
Real estate professionals must:
Identify beneficial owners,
File Suspicious Activity Reports (SARs),
Apply EDD for non-EU or high-risk clients,
Retain records for at least five years.
Our compliance reviews across EU jurisdictions show that supervisors increasingly test firms on evidence of implementation.
For example, inspectors often ask for recent SAR filings or audit trails of high-value property sales, not just AML policies.
United States: FinCEN’s Geographic Targeting Orders (GTOs)
In the US, the Financial Crimes Enforcement Network (FinCEN) has targeted all-cash real estate deals, long recognised as a money laundering channel.
Under Geographic Targeting Orders (GTOs), title insurance companies must report all-cash purchases of residential property above certain thresholds (as low as $300,000 in some cities).
Jurisdictions include Miami, New York, Los Angeles, and others.
FinCEN has also proposed expanding these requirements nationwide and covering commercial real estate, a move we expect will significantly tighten reporting obligations.
In our US-facing work, the biggest challenge is ensuring ownership transparency when layered entities or trusts are used to purchase property.
United Kingdom
The UK’s AML framework is governed by the Money Laundering Regulations 2017, updated post-Brexit.
Property professionals must:
register with HMRC or a supervisory authority (e.g., The Law Society),
conduct risk assessments,
screen clients for PEPs and high-risk jurisdictions,
maintain records and submit SARs.
More recently, the Economic Crime (Transparency and Enforcement) Act created a public register of overseas entities owning UK property. This has had a major impact in practice, as firms are now required to identify and disclose the beneficial owners of foreign-held assets.
Regulators in the UK place heavy emphasis on documentation and expect firms to prove that AML risk assessments were both carried out and acted upon.
UAE: AML obligations for real estate professionals
The Central Bank of the UAE and the Ministry of Economy have introduced some of the most robust real estate AML controls in the region.
Real estate brokers, developers, and agents must:
register with the goAML platform,
verify customers’ identities and sources of funds,
report high-risk or cash-based transactions.
In our UAE projects, we have seen an increase in on-site inspections where regulators focus not only on whether firms filed reports, but also on the quality and timeliness of those reports.
Non-compliance can result in heavy fines, suspension, or even closure of businesses.
The message from regulators is clear: proactive monitoring and transparent reporting are now the minimum standard.
Related content: Anti-Money Laundering regulations in the UAE
What are the AML requirements for real estate professionals?
The AML requirements for real estate professionals are:
Know Your Customer (KYC),
Customer Due Diligence (CDD),
Enhanced Due Diligence (EDD),
Screening for Politically Exposed Persons (PEPs) and sanctions lists,
Verifying beneficial ownership and legal title,
Checking the source of funds,
Recordkeeping and reporting,
Internal AML policies, training, and audits.
Regulators such as FATF, FinCEN (US), the EU (6AMLD), HMRC (UK), and the Central Bank of the UAE all treat real estate as high-risk, so expectations are strict.
Know Your Customer (KYC) and Customer Due Diligence (CDD)
Verifying client identities and collecting supporting documentation is the first line of defence. Real estate firms must retain records and confirm the legitimacy of funds.
TIP: Read our guide to master Customer Due Diligence (CDD)
Enhanced Due Diligence (EDD)
EDD applies to higher-risk clients or transactions. This may involve verifying the source of wealth, conducting media checks, or requiring additional documentation.
Identifying Politically Exposed Persons (PEPs)
PEPs pose greater AML risk due to their potential access to state resources.
Real estate professionals must screen clients for PEP status and apply EDD where relevant.
Read also: How the PEP screen works
Verifying legal title and beneficial ownership
Uncovering the true owners of a property is critical. This includes understanding complex structures such as trusts or layered entities.
Recordkeeping and reporting requirements
AML regulations typically require firms to retain customer and transaction records for at least five years.
Suspicious Activity Reports (SARs) must be filed where red flags are detected.
Internal AML controls and audits
Effective AML programs rely on internal policies, staff training, and independent audits. These measures ensure ongoing compliance and readiness for regulatory inspections.
What are the consequences of non-compliance with AML in real estate?
Failing to comply with AML obligations in real estate is never a “technicality”; it comes with real and often painful consequences, namely:
Financial penalties: fines that range from manageable amounts in minor cases to millions where systemic failures are found. In the EU under 6AMLD, for example, liability can extend to individuals as well as firms.
Criminal exposure: directors and compliance officers can face prosecution, not only the company itself. We’ve seen cases in the UK where failure to file suspicious activity reports led to personal liability.
Business restrictions: licences suspended, accounts frozen, or, in extreme cases, entire brokerages shut down. In the UAE, the Ministry of Economy has ordered temporary closures for firms failing to register on the goAML platform.
Reputational damage: once a regulator names a firm publicly, the loss of client and investor trust can last far longer than the fine itself. We’ve worked with firms that needed years to rebuild credibility after an enforcement notice.
Closer supervision: regulators rarely give a second chance. Non-compliant firms often move to a “high-risk” category, meaning more inspections, heavier reporting, and higher costs of doing business.
These sanctions are enabled by laws and regulators worldwide, from FinCEN’s Geographic Targeting Orders in the US, to the UK’s Money Laundering Regulations, the EU’s 6AMLD, and the UAE Central Bank and Ministry of Economy rules.
All are grounded in the FATF framework, which classifies real estate as high-risk.
The message is consistent: firms that treat AML as optional end up paying the price, both financially and reputationally.
TIP: If you're operating in UAE, read our guide about money laundering charges in the UAE.
Best practices to ensure AML compliance in real estate
AML compliance in real estate is not just a regulatory checkbox; when implemented effectively, it can be your competitive advantage.
In our compliance projects across the EU, UK, and GCC, we consistently see that the firms with the strongest reputation are those that integrate compliance into everyday operations rather than treating it as an afterthought.
Start with a risk-based approach
Not every transaction carries the same risk. A domestic residential purchase is very different from a cross-border acquisition through an offshore entity.
Regulators, following FATF’s risk-based approach, expect firms to adjust checks depending on geography, transaction value, and ownership structures.
In recent supervisory inspections in the EU, one of the most common questions has been: Why was this client classified as low or high risk? If the answer is not clear, the compliance framework is seen as insufficient.
Don’t cut corners on due diligence
Before closing any deal, verify the source of funds, the client’s background, and the ultimate beneficial owner (UBO).
We often encounter ownership chains involving multiple jurisdictions, where one missing link can expose a firm to enforcement action.
In one UAE case, we saw that regulators fined a brokerage because documentation proving the source of funds was missing, despite the client being a long-standing one.
Thorough AML checks may delay transactions slightly, but they are the best insurance against liability and reputational damage.
Make technology work for you
Technology is now central to compliance. AML software for real estate such as azakaw help firms automate sanctions and PEP screening, transaction monitoring, and audit trails.
Automation reduces human error, creates consistent records, and demonstrates to regulators that controls are embedded, not improvised.
In a recent audit we supported in the UK, the deciding factor for a positive outcome was that the firm could show automated monitoring logs for every high-value property sale.
Back it up with clear policies and training
Policies only work if people understand and apply them. Real estate agents, brokers, and support staff should know when to escalate concerns and how to file a Suspicious Activity Report (SAR).
Short, role-specific training is more effective than generic seminars.
Regulators like HMRC in the UK or the Ministry of Economy in the UAE now regularly check training logs during inspections.
Internal audits should also be carried out to test whether policies work in practice and to close gaps before authorities identify them.
Related content: AML training for employees
Real estate AML in action: case study
Real-world cases can highlight how money laundering occurs and why robust compliance measures matter.
A real-life example of a money laundering scheme
In December 2024, the Financial Conduct Authority (FCA) secured convictions in a major money laundering case involving WealthTek, a UK wealth‑management firm.
While the fraud was primarily corporate, funds totalling £806,500 and £3.9 million were transferred into UK residential and commercial property purchases as part of illicit transactions.
Key compliance failures included poor verification of the source of funds, insufficient scrutiny of ultimate ownership structures, and a lack of proactive transaction monitoring.
This case demonstrates how high‑value property transfers can become vehicles for laundering criminal proceeds without rigorous AML controls.
Lessons learned from this case:
Strong source-of-funds validation is essential, even when clients appear reputable.
Always identify beneficial ownership, especially with layered or opaque entities.
Implement robust transaction monitoring and escalate anomalies promptly.
Train staff to recognise and question patterns that may signal suspicious activity
FAQs about AML in real estate
What does AML mean in real estate?
AML in real estate refers to the legal and procedural measures designed to prevent criminals from disguising illicit funds through property transactions.
Who is responsible for AML compliance in property transactions?
Responsibility often lies with real estate agents, developers, lawyers, brokers, and notaries; basically, anyone involved in the transaction who handles funds or ownership.
How do real estate agents verify client identities?
Through KYC and CDD processes, including requesting official identification, verifying addresses, and checking the source of funds.
Are all-cash property purchases a red flag?
Yes, particularly when they exceed certain thresholds or involve anonymous entities. All-cash purchases are often used to avoid scrutiny.
Read also: Signs of money laundering
What is AML in mortgage?
AML in mortgage refers to anti-money laundering checks conducted by lenders and brokers during mortgage applications to prevent the use of illicit funds.
Do estate agents need to do AML checks?
Yes. Estate agents are required to perform due diligence, report suspicious activity, and retain records following local AML laws.
What is beneficial ownership in real estate?
Beneficial ownership refers to the person(s) who ultimately own or control a property, even if it is registered under another name or entity.
How long must real estate firms retain AML records?
Typically, AML records must be retained for at least five years after the end of the client relationship or the completion of a transaction.
What is considered a suspicious transaction in real estate?
Transactions that appear inconsistent with a client’s profile, involve complex ownership structures, lack transparency, or are unusually rushed or high in value.
Are there AML software tools for real estate professionals?
Yes. Tools like azakaw automate screening, document checks, and transaction monitoring to help firms stay compliant and reduce manual work.
Conclusion
Firms that embed AML into their culture and operations stay on the right side of the law and gain a competitive edge.
By prioritising transparency, due diligence, and proactive risk management, real estate professionals can: meet global AML obligations, prevent financial crime, and protect their business from fines, reputational damage, and legal risk.
Real estate professionals must act now to strengthen their AML frameworks. Stay informed, review your internal controls, and leverage technology to ensure your business remains compliant and resilient in the face of evolving regulatory expectations.
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