What private sellers absolutely must consider when selling without a real estate agent due to the Anti-Money Laundering Act

What private sellers absolutely must consider when selling without a real estate agent due to the Anti-Money Laundering Act

Just because you do not have a broker does not automatically mean that you can sell your property to whomever you want. As a private property seller, you cannot ignore legal regulations in the context of anti-money laundering prevention. Otherwise, you could run into serious trouble with government authorities. Our article deals with the requirements of the German Money Laundering Act (GwG) for private sellers and the measures you must explicitly take to fulfill your due diligence obligations in the framework of money laundering prevention. In particular, it addresses the identity verification of interested parties and contracting parties, the documentation of the real estate transaction, and compliance with reporting obligations in suspected cases.

Private real estate sellers must comply with the Anti-Money Laundering Act

Unfortunately, many private real estate sellers are unaware that they must comply with legal requirements for money laundering prevention. The Anti-Money Laundering Act (GwG) defines measures that you have to take just as much as a real estate company. The primary goal of the AMLA is to protect the real estate industry from abuse by fraudsters and money launderers and to combat terrorist financing (CTF). In suspected cases, you must inform the Federal Criminal Police Office (BKA). If you fail to comply with the legal requirements, you face very high financial penalties, among other consequences.

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How real estate sellers can comply with anti-money laundering laws

Once you have found a prospective buyer who is more closely interested in your property, you should verify their identity. This is done by requesting and copying their identity card or passport. The photocopies of the ID must be kept in a safe place. Also during the viewing of the property, you should make sure that the prospective buyer appears in person and identifies themselves.

• Also ensure that there is no gross disproportion between the financial circumstances of the interested party and the underlying real estate transaction.
• You should also be cautious if, among other things, the prospective buyer of your property does not want to purchase it for their own purposes, but rather for an unspecified person (straw man).
• Furthermore, caution is advised if the prospective buyer wants to pay the purchase price in cash.
• When initiating a real estate transaction from abroad, additional investigations and inquiries are necessary to prevent potential money laundering. Another important measure in the context of money laundering prevention is the documentation of real estate transactions. This includes the retention of documents such as purchase agreements and proof of financing. Should you suspect that a real estate transaction is being used for money laundering, you are obligated to submit a suspicious transaction report to the Financial Intelligence Unit at the Federal Criminal Police Office (BKA).

To be able to optimally fulfill your due diligence obligations in the context of anti-money laundering, it is recommended to conduct a risk analysis.

Among other things, this should take into account the risk factors of the clientele and the real estate transactions, as well as the risks of the real estate sector as a whole. Based on this analysis, you can then take appropriate security measures to minimize the risk of money laundering.

Security measures that you can take as a private real estate seller include, for example, the introduction of procedures for identifying interested parties and contracting parties.

To this end, you can use the transparency register in particular, which contains information on the beneficial owners of companies. This can help you verify the identity of buyers and help prevent money laundering. Checking proof of capital from buyers can also help minimize the risk of money laundering.

48-hour rule after reporting a suspicion of money laundering

If you submit a suspicious activity report to the competent authorities, you must not continue with the business initiation within the first 48 hours after this suspicion report. If you are not contacted by the public prosecutor's office within 48 hours, you can resume work in the context of the real estate sale.

It is important that you, as a private real estate seller, take your due diligence obligations regarding anti-money laundering seriously and implement the aforementioned measures comprehensively and precisely. Ultimately, the Anti-Money Laundering Act makes the detection of illegal activities easier, but it also requires greater caution from private sellers than in past years.

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