Fined €48,000 for not verifying passport-buyer’s source of funds on €2m home

A real estate agent has been fined €48,000 by Malta’s Financial Intelligence Analysis Unit for having failed to verify the source of wealth of a golden passport holder who acquired a €2 million property.

In 35% of the sample of files reviewed by the FIAU, several buyers carried a high risk of money laundering due to high-value acquisitions or use of own funds for the purchase. The real estate company was found to have failed to provide enhanced due diligence on such property buys.

An example was the purchase of two properties by a client who had acquired Maltese nationality through Malta’s citizenship scheme. The properties, purchased in one of the island’s special designated areas for real estate, had a combined value of over €2 million, both purchases occurring in less than a year.

While the realtor was said to have collected detailed information on the purchaser’s source of wealth, including details on the business owned within a non-EEA jurisdiction and also a copy of the financial statements of a local company the purchaser owned, this was considered insufficient for the following reasons.

“It was not sufficient for the company to simply collect the source of wealth information, as the company was then expected to verify the veracity of such information against documentation, this particularly in view of the risks pertaining to the two files. This could have been done by performing open source or internet checks on the purchaser to verify the information on the purchaser's wealth, occupation, and business activities, which could have served to further corroborate the declared source of wealth,” the FIAU said.

The financial statements also showed that the client company was not profitable and suffered year-on-year losses. “The fact that the client was able to inject around €200,000 as a shareholder’s loan does not provide sufficient justification to account for the source of funds behind an accumulated purchase of property worth of €2 million.”

In another file, a married couple who financed a €2 million property through the ‘use of own funds’ declared that the wife was ‘homemaker’ while the husband ‘owned an established company which he had just sold but remains CEO’. Open-source information showed that the company had been sold and was worth over €200 million. However, there was no evidence that the husband was the owner of the company which was sold and that he indeed benefitted from such sale. Instead, the real estate company said it was its understanding that the company “(…) was owned (or partly owned) by the (family of the purchaser) and that the sale of the company generated substantial income to the (said) family.”

“Even so, being CEO of the company does not entail that the customer benefited from the sale of the company,” the FIAU said. “Hence the actions taken by the company do not mitigate the sector-specific high-risk factors.”

The €48,000 administrative penalty is not yet final and may be appealed before the Court of Appeal.