Money laundering through the real estate market is under further scrutiny and regulation with new rules from the government taking effect on June 26th.
The Institute of Public Markets for Real Estate and Construction (IMPIC) will have access to information from the Treasury for better control of the private purchase and sale of real estate.
In June, new rules put the real estate and agencies in the sights of the police and other national authorities, according to the ordinance published in the Diário da República.
Tightening regulations will affect real estate agents, already overburdened with red tape and often senseless forms, taxes and obligations.
The scope of the activity of IMPIC is extended to all financial entities that are involved in the purchase and sale, and rental, of real estate.
But nearly a third of all transactions are not handles by estate agents – a share of the market of around €9 billion-a-year. This is the area that the regulations aim to tackle.
Before the entry into force of the new rules, the IMPIC is running a road-show all about the new regulations for the prevention and combat of money laundering and the financing of terrorism.
Also, a protocol is being finalised between the IMPIC and the Ministry of Finance, so that the regulator can have access to data from the Tax Authority on non-brokered real estate transactions.
“The goal is to have greater control of operations,” according to Antônio Pires de Andrade, president of IMPIC, “More than 30% of the sector is not regulated.”
Pedro Subtil, a fraud investigator at consultancy EY, views real estate as a “high-risk money laundering sector,” referring to many transactions being, “made in cash” in Portugal.
For Subtil, it is mainly the smaller mediators who are less able to report suspicious transactions, “They have one or two people and are focused on listings and selling,” he explains.
EY has just released the first study carried out in Portugal, in partnership with the Judiciary Police, on money laundering. The reporting of suspicious transactions soared 148% between 2012 and 2016, and almost half relates to tax fraud, even though the reports on real estate have been residual.
“There is practically no report of suspected money laundering in real estate in Portugal, so there is no crime, we do not believe that,” argues Pedro Subtil.
According to APEMIP estimates, about a third of the country’s real estate business is outside the control of the IMPIC. The estate agency association president, Luís Lima, says that the Portuguese real estate market is worth almost €30 billion euros, but that “more than 30% is not regulated,” as many deals that are made between individuals or brokered by lawyers, consultants, architects and builders.