Developers vulnerable to money laundering

| 26/03/2019 | 83 Comments
Cayman News Service

Seven Mile Beach, Grand Cayman

(CNS): Developers who are selling their expensive properties directly to customers are not subject to any oversight, which the Caribbean Financial Action Task Force has said leaves them vulnerable to money laundering and terrorist financing. In the recently published mutual evaluation report for the Cayman Islands that outlined some of the threats this jurisdiction faces from international financial crime, the authors raised concerns about developers, “given the significant amount of real estate sold directly by property developers” and the lack of action to address this vulnerability.

Many of the more expensive condos, especially those located on Seven Mile Beach, are sold to high net worth individuals, companies and investors directly by the people who developed them, and a significant amount of real estate in Cayman is sold without the involvement of real estate agents and is not subject to any oversight by a supervisory authority.

“In the case of property developers who are not real estate agents, although they are required to implement AML/CFT (anti-money laundering and counter-terrorism financing) measures, there is no AML/CFT supervisory authority responsible for their licensing and oversight,” the report stated. “This is considered a notable vulnerability …it is uncertain whether this risk is adequately mitigated by the requirement for property developers to either engage the services of a real estate agent or obtain a licence to sell property.”

The authors stated that because these entities are not subject to oversight and there is no in-depth understanding of the risks posed by them, it is a gap in Cayman’s anti-money laundering and financial crime framework.

The review found that real estate agents registered with CIREBA do have an understanding of the risks associated with the sale of property regarding terrorist financing or money laundering, and even noted that some agents were “risk averse”. However, the report was concerned about the non-registered agents as well as developers and lawyers dealing directly with purchasers.

The report found that around a quarter of real estate agents were not subject to any oversight before March 2017, when the Department of Commerce and Investment (DCI) was appointed as the supervisory body for the sector, despite the high net worth and wide geographic range of clients and cross-border activities of the people buying properties.

The task force recommended that the DCI should complete the registration of all real estate agents and “continue its outreach to sensitise them …and supervise the implementation of systems and controls” to mitigate risks.

The  sector has also failed to make any significant number of suspicious activity reports (SARs), with just 24 reports from the property sector  in four years, compared to hundreds from the financial industry. The report said that number of SARs reported by the real estate industry “have been consistently low”.

The Financial Reporting Authority also indicated that there are deficiencies with the quality of the SARs filed by the real estate sector, and further guidance is being provided on the broad area of suspicious activity identification, preparation and filing of SARs.

See the CFATF report in the CNS Library

Tags: , , , , , ,

Category: Business, Financial Services, Real Estate

Comments (83)

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  1. Anonymous says:

    can we start a referendum to have cireba disbanded or at the least have govt impose limits on real estate commissions and insist that all buyers are shown private and non-cireba properties as well as cireba ones?

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    • Anonymous says:

      Why should buyers be shown private listings by a CIREBA member?
      I’m not a fan of CIREBA, at all, but just don’t understand why you think there should be a divide?

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    • Anonymous says:

      The referendum should also state that government should be the entity that issues licenses to become an agent. It is almost impossible for a Caymanian to get a license to sell real estate in our own country. That needs to stop ASAP and the only way it will is if CIREBA are disallowed to issue these licenses. The way they collude against letting one of us in is scandalous. Minister Hew how about thst??

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      • Anonymous says:

        Anyone can become a real estate agent…CIREBA doesn’t issue any licenses..Companies like, Savills, Evron, Tessa Hydes, and Rhulens are all non-Cireba agencies and they work together with CIREBA. CIREBA is just an organization that you join and they have rules and regulations that you must abide be to be a member but nothing says you can’t have your own agency and do your own thing..

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        • Anonymous says:

          What amazes me is that people from the UK, the U.S. and Canada can come to Cayman with absolutely zero backrground or experience in their home countries in real estate and immediately get a work permit.

          Don’t know what to do in Cayman? Become a real estate agent work
          permit guaranteed.

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      • Anonymous says:

        You just apply for a T&B licence?

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    • Anonymous says:

      I am a CIREBA member and I show non-CIREBA properties all the time and they show ours..We have a reciprocal agreement. The only difference between us is that we have to undergo continuous real estate training and AML training. My company is a franchise and we also have to undergo franchise training separately..

  2. Anonymous says:

    No s***! This has been going on for longer than I care to think about. There have also been many cases where land has been repeatedly sold and re-sold for ‘development’ but nothing has ever been built on it – there’s no easier way to hide money than in a piece of empty real estate is there?

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    • Anonymous says:

      Whacky private sector again. Don’t worry CIG to the rescue. At this rate we are going to need 5000 civil servants to keep the private sector in check.

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      • Anonymous says:

        Money launderers around the world hate governments. They want free reign to
        launder their money. Assume you have no problem with that 9:19.

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    • Anonymous says:

      Oh the woes of new infracture and development! Anyone watched the news on 27 last evening? I did and and saw the horror the elderly couple living in the area of the new roun-about behind The Mango Tree will be living through. I can’t imagine them getting a minute of rest and sleep any longer. I also cannot imagine any government being so callous and uncaring. Something similar happened to me and my family about 10 years ago with the road that was created through our neighborhood. Luckily for us as welll as other families, we were able to sell it out and got out before the road was completed. But sadly we had to leave a place that was so familiar, and safe, a place where our children could explore the woods, pick mangoes, guineps ,and guavas, hunt for crabs, play marbles, cricket,, ride bicycles and all the fun things that kids should still be doing. What a sad story!!

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    • Anony says:

      If the real estate transaction is completed at the attorneys offices, is the firm of attorneys not expected/obligated to follow KYC and money laundering laws? The attorneys must have a MLO who is responsible for the activities.

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      • Anonymous says:

        The better question would be how many transactions are completed in attorney’s offices? I’ve put through two transactions in the Cayman Islands, I didn’t use a lawyer once. The Realtor just wanted to get their greedy paws on my money, there was no due diligence by them, at all. It’s a lot of flowery writing, that means absolutely nothing. Someone should do an audit on all of the real estate firms on island, I bet you’d be astounded.

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      • Anonymous says:

        8:02 Grow up! Lawyer firms are employed to find ways round the law not enforce it. Why do think they charge so much for their services? A cousin of mine trained as a solicitor in the UK. After finding that their private sector partners were bigger crooks than their clients they moved to the public sector and became a legislation specialist.

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  3. Anonymous says:

    this is news?….this whole place is built and run on dirty money…

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  4. James says:

    I worked with DCI on this project as a private sector representative they are a very dedicated bunch of civil servants. Property Developers are currently covered under the DCI remit. The report identified it as a gap but they failed to state that it’s not a requirement under the current FATF methodology. DCI was proactive and included Property Developers.

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  5. Anonymous says:

    Funny how this comes at a time when there is very little built stock available but plenty of developments coming out of the ground which the developers are selling themselves. A CIREBA cartel sponsored message along the lines of ‘we want our 7%’

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    • Anonymous says:

      It’s a CATF report. Somehow I don’t think making stuff up to benefit a small clique of real estate agents in one country is at the top of their agenda. You can hate CIREBA for any number of reasons, but trashing the report that we have a huge whole in our money laundering defences simply because it makes CIREBA look good because unlike developers they are regulated on the issue is just nuts

  6. Anonymous says:

    For as long as 25 years or so AML conferences harped on the fact that real estate businesses could knowingly or unknowingly be major players in money laundering as it was unregulated. Better late than never.

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    • Anonymous says:

      Cayman Islands real estate since late 1970s has been the depository of choice for many bad guys. Why do you think the Cabinet is so gung ho for a 50 story tower?!?

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      • Anonymous says:

        Bad hombres

      • Anonymous says:

        Right. Ugland House is too tiny and too old.

        We need some glitz and glam!!

        Show the world what kind of money the Cayman Islands is made of!

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        • Anonymous says:

          Well Maples and Calder can certainly afford a better dump than Ugland House. Come on guys take some of those massive profits and get a new HQ. You can certainly afford it.

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  7. Anonymous says:

    Oh come on – did CIREBA write this crap themselves?

    Anyone who uses a bank for any of these transactions is subject to AML scrutiny.

    If anyone has to get a mortgage to buy, or is paying off a mortgage when they sell (maybe not so for the super-rich), they have the banks lawyers looking after their own and their customers investment and, of course, AML scrutiny.

    CIREBA would have most buyers and sellers believing that Land Registry in Cayman is not “safe enough” and you need an agent to “look out for you”. And, yes, that is from personal experience, not rumour, not lies, it’s a fact!

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    • Anonymous says:

      Exactly, it’s the super-rich money launderers they are trying to catch….the very ones that will be avoiding the banks and will not be subject to scrutiny.

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    • Anonymous says:

      The heaven-sent “all-cash buyer” just wires from one bought lawyer trust account to another and they pay to acquire the asset from developer on behalf of whomever is pretending to be the client. Everyone gets paid. There’s no AML for lawyers, and why do you think that is? Billions are laundered globally this way every year. So easy even Webb and his FIFA buddies did this.

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    • Anonymous says:

      @1.33 As if banks AML know what they are doing. I remember they locked my friend’s bank account for a very long time while they were investigating. She is a hardworking woman always holding two jobs and her brother from Canada had sent her some money. Not even a thousand $.

  8. Anonymous says:

    LMAO!!! Let’s have some MORE government regulation!!! Coz lord knows they know what they’re doing and need more fees…

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  9. SSM345 says:

    There’s a group of people here (ex-bar servers etc) who seem to have purchased well over 10 restaurants in the last 4yrs along SMB – WB and have now moved into real estate…..wonder where they have been getting all that money from…..anyone bothered to check?

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    • Anonymous says:

      Hi-Ho Hi-Ho, it’s off to work we go!

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    • Anonymous says:

      jealous?

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    • Anonymous says:

      Um. This is the industry that Caymanians have been missing out on. They make a decent wage if they are any good. Do you think because you work F&B that you don’t have a brain??? Can’t get on the property ladder? Most servers I know that have been here before Ivan have been on the property ladder for quite some time.

      Your comment, SSM345, show how much you DON’T know.
      Count me as one of those ex-bar servers (still am) that has been on that ladder for 15 years now.

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      • SSM345 says:

        I am merely making an observation; don’t think there’s anyone on planet earth who owns that many restaurants concurrently, that’s all. Just seems a bit fishy given the locations and period of time taken to acquire these businesses as its clearly not a cheap venture; costs are in the millions. Must have been epic being a bartender to be able to do that as your next job.

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    • Anonymous says:

      Bullet

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    • Anonymous says:

      Or how about the ex waiters and bartenders turned real estate agents who in less than 5 years of career switch somehow own million dollar homes and a fleet of Audis in the driveway….not suspicious at all.

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    • Anonymous says:

      12:41 EE needs major checking too.

  10. Caveat Emptor says:

    The Real Estate mafia developer class, big four law firms control most government policies.

    The only thing more powerful than that group who facilitate the shady business in real estate are Dart and Banking plus Insurance cartels look at the owners and board of directors. Connect the dots…

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  11. Anonymous says:

    CIREBA needs to governed by oversight, a cartel in plain sight if ever there was one.

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    • Anonymous says:

      A cartel with some of most unethical and immoral professionals going. Some of this lot would sell their grandmother for a quick buck. Most of the worst practices are from the most senior agents.

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    • Anonymous says:

      Price fixing? Anti-competition? Misdescriptions? Guilty of them all.

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    • Anonymous says:

      your note is one shared by so many, and heard so often, how come Govt never step in here? where else are brokers getting 5/6/7% on sales and so blatantly refusing to show non-cireba properties? as to the brokers themselves, we all know which of them have questionable morals…i’m sure one or 2 are nice!

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      • Anonymous says:

        It always makes me laugh when the Cayman branch of an international realtor franchise heads to an internal awards ceremony in the United States and cleans up all the awards. Erm, it’s because they are a self-governing, price fixing cartel. The other realtors from the same company in the States must hate them!

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      • Anonymous says:

        I’m not sure that you are correct there. The home I just bought was through a CIREBA agent but was not one of their listings but from another non-CIREBA company..I think it works both ways..

  12. Anonymous says:

    Ever wondered how pre-construction units are 90% sold before they officially hit the market?

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  13. Anonymous says:

    Yeah like realtors should be gate keepers..least eithical “profession” ever.

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  14. SKEPTICAL says:

    What about the Duty Free shops – you can convert very large amounts of dirty money into highly re-sellable jewelry, watches etc to hide its origin. As for Realtors, who checks their high value transactions to see if they have conducted Due Diligence/KYC on foreign buyers.

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    • Alejandro says:

      Duty free is regulated by government, inventory against sale tickets. they can audit you at anytime and the penalties for small mistakes are hefty. That is the law, what individual customs officer may or may not do is anther story. One thing i can tell you, no one mess with the crown’s money easily.

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      • Anonymous says:

        6:17 But that only works if the vendors play by the rules and they don’t. Two sets of books, creative accounting and the inevitable greasing of the wheels means high value goods move in and out of these islands with very little actual control. If customs did an honest 100% stock audit of some of the GT duty free shops it’s a pretty safe bet that there’d be no valid import documentation for quite a number of the goods they were selling. At the end of the day with no taxation system in place you have very little control over what goes on here. Despite the token $10K reporting requirement for travelers we don’t have the kind of cash sales restrictions you find elsewhere – you can still hand over a suitcase full of cash (and I know someone who has just done it) to buy a condo without raising any alarm flags.

    • Anonymous says:

      They probably will start auditing once they have this system set up. Just like when auditors come to audit a bank. They do not go through every drawer and read every piece of paper in the office. They have guidelines and notes from previous years to work from. I suppose the DCI will initially ask for enough information to be able to register each company then going forward it will not be too cumbersome to conduct the audit. There should not be any reason why this should not be done. You do realise that every time we receive a letter from an audit company concerning our account at a particular bank that we are being audited. We simply give them the information requested, truthfully I might add, because they already know the answer. It is not rocket science, it is just an audit.

  15. Anonymous says:

    Duh! Stating the obvious.

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  16. Anonymous says:

    Well a simple solution to this would be to have Land registry require due diligence for all sales before the block and parcel are transferred. There is no need to require an agent.

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    • Anonymous says:

      It is easy enough to sell your own property. Just get an update valuation. Get some very nice detailed photos, print off some and ask your friends to allow you to pin them up in their office or business If you have a mortgage let the lending institution know that you intend to sell. List your house on EK trade and your Facebook and voila. My next door neighbor did that and her house sold within 3 months. No agent fees!

  17. Anonymous says:

    The Cartel is driving this message. Resist!

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  18. WhaYaSay! says:

    Private real estate sales are about to go under the hammer. I bet the real estate companies are just chomping at the bit at this new development (ALL real estate sales will now have to go through them=more commissions).

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  19. Anonymous says:

    In terms of sophistication and aptitude, the DCI can barely order their own lunch.

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  20. Anonymous says:

    lol…developers are the money launderers…duh

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  21. Anonymous says:

    Concerned about money laundering? Investigate New York City!

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    • Rule Britannia says:

      LONDON

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      • Anonymous says:

        12:39, London only started clamping down on Russian money launderers there, after the KGB sent their boys to England to kill Russian dissidents.

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    • Anonymous says:

      Just investigate Trump Tower on Fifth Avenue and the properties in NYC of the Jared Kushner Group, The President’s Son in Law. Laundered money from China, Russia and Saudi Arabia.

      As laundered money has been coming into Cayman for at least the past ten years from both Russians and Chinese interests, delighted that somebody has caught onto what is going on here. The OECD, The EU and London all know what is going on in Cayman so we need to address this money laundering problem soon.

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    • Anonymous says:

      Bingo!

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    • Anonymous says:

      Trump Tower!

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      • Anonymous says:

        4:38 EE!

      • Anonymous says:

        500+ subpoenas later on the Trump investigation. Zilch, zero, nada. You may want to check the news every now and then before you spew your loony leftist conspiracies.

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        • Anonymous says:

          You stupid or what? 6 people convicted and 35 people indicted. All 35 involved in the Trump campaign and all had associations with Russians. By the way, just in case you don’t know, Russia is an adversary not our ally.

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        • Anonymous says:

          So 9:22, Why have more than 40 people lied and perjured themselves in relation to actions related to Russia and the Trump campaign? You might want to look more closely at the basic factsad open your mind to the facts before you start saying it is a loony leftist conspiracy related to Trump and Russia.

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          • Anonymous says:

            Just because people dont like Trump doesnt mean they are leftist. Open YOUR mind and realize that people dont judt follow a LOONEY just because he claims to be Republican. Even a lot of Republicans dont like or agree with him. Does that now make them leftist?

  22. Anonymous says:

    There is a point where regulation becomes an unreasonable burden upon the law-abiding without providing any real benefit. This is one of those times.

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    • Anonymous says:

      Yes 10:36, but remember the law abiding are directly impacted when there is a terrorist attack in London or NYC. It is important to note that there is often a direct link between money launderers and terrorists. When one’s family or loved ones are killed in a terrorist attack, not in Cayman, but abroad, when does it become an unreasonable burden if the money laundered funds for the attack came through Cayman?

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