EFCC clamps down on real estate investors over money laundering – Guardian Nigeria

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EFCC has continued to ensure estate surveying and valuation firms subscribe to an alert system and conduct screening before on-boarding customers as part of the ongoing due diligence to curb money laundering. The scrutiny is affecting transactions in the commercial real estate market, CHINEDUM UWAEGBULAM reports.

• Prospective investors shy away from investments
• Scrutiny dampens transactions for high-end properties

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Rising security agency’s scrutiny may have dented the momentum of demand in the real estate market in major cities, lowering investments in high-end properties.

The situation reached its peak recently, when the Economic and Financial Crimes Commission (EFCC) wrote to the president, Nigerian Institution of Estate Surveyors and Valuers (NIESV), alerting the profession on the commencement of the enforcement of the regulation for the implementation of targeted financial sanction on terrorism, terrorism financing and other related measures in the real estate sector. This is for failure to implement targeted financial sanction requirements as prescribed by the Terrorism and Prevention and Prohibition Act, 2022.

The letter signed by SCUML Director, Daniel Isei, titled: ‘Enforcement of the Regulation for the Implementation of Targeted Financial Sanctions on Terrorism, Terrorism Financing and Other Related Measures, 2022, in the Real Estate Sector’, recalled that the Terrorism (prevention and prohibition) Act, 2022 imposed the obligations on Designated Non-Financial Business and Profession (DNFBP) to implement targeted financial sanctions related to terrorism and terrorism financing.

“This requires that all estate surveying and valuation firms subscribe to the Nigeria Sanction Committee alert system and conduct sanction screening before on-boarding prospective customers, as part of the ongoing customer due diligence for existing customers using the UN consolidated list, Nigeria sanction list, list of the designated persons or entities under United Nations Security Council Resolution (UNSCR) 1373 forwarded by a third party, International organisation or foreign country to Nigeria or such other list as directed by the Nigeria sanction Committee,” he said

Also recently, EFCC Acting Director, Lagos Zonal Command, Michael Wetkas, said that “Registration with SCUML has become necessary as a way of monitoring and reducing the risk of subversive use of the real estate operators by money launderers and terrorism financiers.”

Wetkas urged DNFBPs to conduct due diligence and adhere to the Know Your Customers (KYC) principle before consummating any transaction.

The Act provides for an effective, extensive legal and institutional framework to support the fight against money laundering and terrorism financing in Nigeria.

The key objectives of the law are to strengthen the existing system for combating money laundering and related offences, make adequate provisions to prohibit money laundering, expand the scope of money laundering offences and provide appropriate penalties and establish a special control unit against money laundering EFCC.

The Guardian learnt that current supervisory action in the market by the EFCC Special Control Unit Against Money Laundering (SCUML) has created a lull, as prospective investors and Nigerians living abroad avoid unnecessary encounters with the economic watchdog.

Months after the Nigerian government reached an accord with the United Arab Emirates (UAE), on looted funds, a new report released recently alleged that war profiteers, terror financiers and drug traffickers sanctioned by the U.S. in recent years have used Dubai’s real-estate market as a haven for their assets.

The report by the Washington-based Centre for Advanced Defence Studies (C4ADS), relying on leaked property data from the city-state, offers evidence to support the long-whispered rumours about Dubai’s real-estate boom.

It identifies some $100 million in suspicious purchases of apartments and villas across the city of skyscrapers in the United Arab Emirates, where foreign ownership fuels construction that now outpaces local demand.

The Guardian learnt that over 800 properties worth $400 million in Dubai, United Arab Emirates (UAE) have been traced to Politically Exposed Persons (PEPs) in Nigeria.

An associate fellow, Chatham House, Matthew Page, said this while delivering a paper titled: ‘Illicit Financial Flows (IFFs) in Real Estate and Education Sector’, adding that former state governors have acquired a total of 69 properties; former five presidency staff members were controlling 13 properties, while former 16 lawmakers have 45 properties.

According to the findings, former 15 ministers have 25 properties, 158 suspected politicians’ proxies are in control of 226 properties, 14 security sector leaders 71, 50 PEP-linked business persons 91, 13 Known Nigerian law enforcement agency suspects 216, 16 heads of department and agency 25, 11 NNPC officials 19, a judge has one.

Page, who blamed the lack of transparency, huge financial flows and inadequate international safeguards for the development further disclosed that Nigerian politicians are spending over $30 million yearly on UK education, which he said was beyond their yearly earnings.

He urged investigators to compare these payments to their known assets and incomes, examine third-party payments, request forex data, review media for PEP schooling and probe MDAs that provide scholarships.

A report by Civil Society Legislative Advocacy Centre, (CISLAC) alleged high-level money laundering in the real estate sector, revealing how corrupt Nigerians use estate firms to conceal illicit funds.

The document titled, “Nigeria’s Dirty Money and Real Estate: How Money Laundering through Real Estate Impacts Nigeria’s Fight against Corruption” was signed by CISLAC’s Executive Director, Auwal Musa Rafsanjani.

The report noted that the real estate sector is populated with informal agents, who control over 95 per cent of the market.

According to the report, whereas some real estate agencies that operate in the sector are registered in foreign jurisdictions, many of them also reside in tax havens. It disclosed that there is a consolidation of dirty deals in the sector, a development that is taking a negative toll on the government’s mass housing policy.

The report said that many choice properties litter major cities in Nigeria, without anybody occupying them, saying it was high time the government devised means of collecting property taxes on them.

It said, Nigeria’s cities like Abuja, Lagos, and Port-Harcourt have become flashpoints where high-level capital flights take place, while media and court reports point to the involvement of criminals running fraud syndicates and drug trafficking in buying up or developing properties.

The impact of these investments, the report revealed is evident in the high cost of houses in both urban and suburban areas, and the development of shelters in only selected areas.

The report stated: “Nigerian real estate sector has long provided an opportunity for persons and companies to launder illegally acquired funds. The share of the real estate services to the nominal Gross Domestic Product (GDP) is estimated at around seven per cent per annum. It is a significant contributor to the economy and can fast-track the growth of the nation’s economy, if adequately structured.

“However, corrupt money channelled into the economy through the real estate sector can distort the market and inflate real property prices. Lagos is the most expensive city in Africa. In the affluent suburb of Ikoyi, the average price of three-bedroom apartments was N140 million ($388,906) in 2018 while five-bedroom apartments are sold for an average price of N350 million ($972,266).

“This affluence is in contrast to about 70 per cent of the total population of Lagos, currently living in informal housing and slums. The housing deficit in Lagos is estimated to be around 2.5 million units. In major centres such as Lagos, Abuja, Ibadan and Kano housing demand is growing at about 20 per cent per year. Inflated prices are, at least in part, driven by corruption proceeds laundered through the real estate market.

“The Nigerian real estate sector is the second most vulnerable to money laundering, next to the Bureau De Change operators. Nigerian law enforcement authorities, especially the anti-corruption agencies, are improving their responses to money laundering, especially non-conviction based approaches to asset seizures, which have yielded significant results in the effort to recover corrupt assets.”

However, the document said reliable data is scarce, while detecting suspicious transactions has been steadily increasing, for example in 2018, 10,346 reports were filed compared to only 937 in 2014, it is not clear if any real estate transactions were involved, let alone investigated and confiscated.

The report explained that money launderers and criminals use third parties, professionals, family members and close associates to acquire high-value real estate as well as use pseudonyms to open accounts frequently through which illegal funds were diverted into high-value real estate acquisitions.

“The laundering of the proceeds of crime through the purchase of high-value real estate preferably abroad, majority of the cases reviewed involved politically exposed persons and their associates, who channel almost in all cases parts of a substantial volume of illegal proceeds into real estate in Nigeria and abroad. Transfers of illicit funds through offshore bank accounts are very frequent, while purchasing real estate properties and laundering of illicit funds through real estate come frequently with the aim of funding of political parties or political endeavours.”

It noted that reforms to close loopholes leading to these gaps had been very difficult to address, as real estate agents were still largely unregulated and rarely reported any suspicious transactions involving unexplained wealth when facilitating real estate transactions.

Estate surveyors and valuers said EFCC oversight functions and monitoring have affected the sector. Chairman, Lagos branch, Nigerian Institution of Estate Surveyors and Valuers (NIESV), Mr Gbenga Ismail, told The Guardian that “EFCC has been around for a while and their scrutiny of all transactions has indeed impacted on real estate transactions.

“Obviously, the segment most affected is high-priced real estate assets. Therefore, most investment-related transactions have been affected. The commercial real estate market is also not too deep, so, the overall effect may not be too impacting as majority of the volume of real estate transactions is largely residential real estate and mid-level family/single dwellings transactions,” he said.

President, International Real Estate Federation (FIABCI) for Africa and Near East Region, Mr Adeniji Adele, an estate surveyor, said “The scrutiny might increase the transparency and deter illegal activities in the real estate sector, potentially leading to more cautious transactions. “It could also encourage compliance with regulations, which might temporarily slow down deals but could ultimately improve the sector’s credibility and stability in the long run.

According to Adele, “The luxury and high-end property segment might feel a more pronounced impact due to increased scrutiny. These segments often involve larger transactions and might have a higher tendency for irregularities or questionable practices, making them more susceptible to regulatory attention. It may also lead to declining transactions in this sector as investors might be scared because of the bureaucracy in our system.”

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