New anti-money laundering regulation for real estate brokers

Scope of application

a. Mediators and Site Stewards

The scope of application of the provisions of this new anti-money laundering regulation for real estate brokers is limited. It targets mediators and site stewards. Mediators are those who provide crucial assistance for and on behalf of third parties with the intention of concluding a contract for the sale, purchase, leasing, exchange, or transfer of real estate, real property rights, or business premises. In addition, site stewards are those who develop, for and on behalf of third parties, business activities concerning the management of real estate or real property rights but not those as a syndic. Syndics are registered with the association of real estate brokers (or on the list of trainees) or the association of land surveyors (or the list of surveyors).

 

b. Clients

The provisions of the 2017 Anti-money Laundering Act and the 2022 Anti-money Laundering Regulation that concern clients apply to the following types of persons: (i) those with whom the real estate broker has concluded a contract and the contract has any of these as objects: mediation for the purpose of selling, purchasing, exchanging, leasing out, or transferring real estate or real property rights or business premises; and (ii) those who did not contract with a real estate broker but who concluded a contract through such mediation and the contract relates to one of the abovementioned purposes.

 

Anti-money laundering obligations

If a real estate broker appropriately uses one of the procedures made available to him or her by the professional trade association of real estate brokers, he or she is presumed to have fulfilled the obligations in Articles 7 to 35 and Articles 37 to 46 of the Anti-money Laundering Act. Examples of these are the general duties to exercise vigilance, vigilance towards clients, risk assessment obligations, and increased vigilance.

 

c. Duties to exercise vigilance

The anti-money laundering regulation goes further in depth regarding several aspects relating to the duties to exercise vigilance. One example of this is how the timing of identification and verification of clients must be understood precisely. It also stipulates that the broker in question takes on the duties to exercise vigilance before entering into the contract with other persons. Regarding  the contracting parties and the contemplated transactions, the real estate broker will have to take on these duties to exercise vigilance before any acts under law are carried out that make it possible for the transaction concerned to achieve completion. The legislature specifies this by giving a few examples, such as compromise or a promise to sell or buy. If the real estate broker cannot undertake these obligations or if the clients, appointees, ultimate beneficiaries appear on the FPS Finance’s list of persons or entities to which asset-freezing measures apply, then the contemplated transaction must not continue with that person. In addition, the real estate broker considers whether there is a reason to inform the CFI (cell for financial information processing). Furthermore, we also see in the same section that when several real estate broker are call upon to be involved in the same transaction, they can freely decide between them that one of them will perform all or part of the duties to exercise vigilance on behalf of the others.

 

d. High-risk factors relating to the client

Moreover, the regulation also indicates what high-risk factors to look out for in clients, whether they are natural persons or companies. Regarding natural persons and companies, the legislature refers to the risk factors described in Annex 3 of the Act of 18 September 2017 on the prevention of money laundering and terrorist financing and restricting the use of cash. It even cited high-risk factors:

• If the client, its appointee, or ultimate beneficiary is based in a country mentioned on the FPS Finance’s list of high-risk countries or mentioned in Article 179 of the Belgian Income Tax Code 1992;
• If the client, its appointee, or ultimate beneficiary is an ultimate beneficiary that is generally known as a suspect, such as someone who is implicated in one or more bankruptcies or other dubious transactions or is generally known to be a delinquent;
• If the client, its appointee, or ultimate beneficiary is physically incapable of carrying out any act;
• If the identification of the client, its appointee, or ultimate beneficiary took place at a distance and a photo copy of documentary evidence was used;
• If the client, its appointee, or ultimate beneficiary is a politically exposed person, as defined in Article 4, 28° and 29° of the Act of 18 September 2017 on the prevention of money laundering and terrorist financing and restricting the use of cash;
• If there is a geographic distance between the client’s residence or the real property in question, on one hand, and the real estate broker he chose, on the other hand;
• The fact that the client is a non-resident;
• The fact that the client is active in a sector that is susceptible to money laundering or terrorist financing;
• The fact that the client exhibits unusual conduct or characteristics in the presence of the real estate broker.

Regarding legal entities, the legislature provided the following points in particular:

• The ultimate beneficiaries are persons whose birth place and birth date could not be identified or persons on whom no relevant information on their address could be gathered;
• The fact that the client is a company whose significant share capital is represented by bearer shares, which means the share owner can change easily without the real estate broker’s knowledge of it;
• The fact that the client is a trust, a factual association, or other legal entity type whereby learning more about it requires a more in-depth analysis (for example, a structure that is complex or that transcends national boundaries for other companies than those of a public limited liability type or similar;
• The fact that the client is a company that is in the process of being incorporated;
• The client has been incorporated for less than 12 months;
• The business operator or the majority of the directors have held their office for less than 12 months;
• The client is a company with unlimited liability or is a Limited;
• The fact that the client is an association or an overseas non-profit organization;
• The authorized representatives or partners are clearly straw men (e.g., they are obviously physically incapable of managing a business, they have no knowledge of business jargon, their mandate is limited to the conclusion of contracts, …);
• The client’s business activity is not clear or do not correspond to those described in the Crossroads Bank for Enterprises or in the company’s articles of association;
• The business operators or the directors change frequently.

Furthermore, the legislature details the high-risk factors relating to—atypical—transactions. It again sets out several points that must be considered as high-risk factors for all transactions. These stem from the application of Article 34 of the Act of 18 September 2017 on the prevention of money laundering and terrorist financing and restricting the use of cash.

• The risk factors referred to in Annex III of the Act of 18 September 2017 on the prevention of money laundering and terrorist financing and restricting the use of cash;
• Transactions with an imbalance between the real estate transaction carried out and the client’s social-economic situation;
• Payments that the real estate broker makes on behalf of the client through a financial institution based in a country or a territory that the FATF qualifies as a country or territory that does not cooperate in the fight against anti-money laundering or that the FATF[1] recommends countermeasures or exercising a higher level of vigilance;
• Transactions for which the client intends to pay in cash, except for the types of payments permitted by Articles 66 or 67 of the Act.

The following, among others, must also be considered as high-risk factors for sales, which should be considered in application of Article 34 of the Act of 18 September 2017 on the prevention of money laundering and terrorist financing and restricting the use of cash:

• The sale or purchase of real estate at a price that is significantly lower or higher than the sales value;
• Transactions involving legal entities whose asset value is lower than the purchase price of the property.

In conclusion, the legislative text cites the restriction on the use of cash for payments and suggests explicitly that the codes of conduct, procedures, and internal verification possibilities do not have to provide for an independent audit role.

 

*With Stijn Van Herck’s participation and co-authorship

 

KB 1 april 2022 tot goedkeuring van het reglement vastgesteld krachtens de wet van 18 september 2017 tot voorkoming van het witwassen van geld en de financiering van terrorisme en de beperking van het gebruik van contanten, betreffende vastgoedmakelaars, BS 02 mei 2022, 40.133.

[Royal Decree of 1 April 2022 approving the real estate regulation under the Act of 18 September 2017 on the prevention of money laundering and terrorist financing and restricting the use of cash, in relation to real estate brokers, Belgian Official Journal 02 May 2022, 40.133.]

KB van 30 juli 2013 tot goedkeuring van het reglement ter uitvoering van de wet van 11 januari 1993 tot voorkoming van het gebruik van het financiële stelsel voor het witwassen van geld en de financiering van terrorisme, aangaande vastgoedmakelaars, BS 20 augustus 2013, 55.444.

[Royal Decree of 30 July 2013 approving the rules implementing the Act of 11 January 1993 on the prevention of money laundering and terrorist financing in relation to real estate brokers, Belgian Official Journal 20 August 2013, 55.444.]

 

[1] Finacial Action Task Force.