Impossible to control money laundering in real estate transactions

In order to prevent money laundering activities, the Ministry of Construction, and the Departments of Construction in all provinces and cities have issued a regulation that requires real estate companies and real estate brokerage services to report all real estate transactions that are more than VND300mn.

With the current apartment value of up to billions VND, if a transaction from 300 million must be put into questionable and report to the government, it will be unfeasible, unrealistic. Photo: LONG THANH

With the current apartment value of up to billions VND, if a transaction from 300 million must be put into questionable and report to the government, it will be unfeasible, unrealistic. Photo: LONG THANH

Will this regulation prove feasible? Sai Gon Investment had a discussion with Lawyer Tran Duc Phuong to further clarify this issue.

JOURNALIST: - In your opinion, is the requirement that asks real estate companies and other real estate brokerage services to report all transactions of cash amount above VND 300mn feasible?

Lawyer TRAN DUC PHUONG: - According to 2012 Law of Money Laundering Prevention, and Decree 116/2013/ND-CP, the financial institutions and other related non-financial institutions have to implement the requirements of this law and decree and report all dubious transactions of high denomination.

The real estate companies and other real estate brokerage services have to obey these requirements. However, the developers are not required to report the transactions in accordance with this law and regulation.

According to Decision 20/3013/QD-TTG dated 18 April 2013, the transactions will be called high value transactions if the amount of cash, gold, foreign currency is above VND 300mn. The Ministry of Construction requires real estate brokerage companies to follow the requirements of 2012 Law of Money Laundering Prevention and Decree 116/2013/ND-CP.

However, so far there have been many comments that the requirements of this law and regulation are unfeasible and ineffective as abiding by this law and regulation will be a waste of time and effort of companies to complete the report.  Currently, the government authorities are amending Decree 116/2013/ND-CP and collecting ideas from experts.

- So it means there is a way for real estate brokerage service companies to ignore the call to report dubious transactions?

- Brokerage services are playing as middle men to process transactions for buyers and sellers, lessee and lessor. Hence, they have solutions for clients to not settle the cash amount of above VND 300mn/day, then, they will not have to present the report.

Hence, based on requirements of 2012 Law of Money Laundering Prevention, brokerage companies do not have many transactions to report. However, they have to prepare the processes, procedures, documents and systems to not violate the requirement. These steps cost real estate service companies huge amounts of money.

So far there have been many comments that the requirements of this law and regulations are unfeasible and ineffective.
I have asked some real estate brokerage service companies about the implementation of the above law and regulations but they said that they are not the subject of these legalities. This mean that there is a difference in understanding this law and regulations, hence, the enforcement and implementation of this law and regulations will not be effective.

- Do you see inconsistency and ineffectiveness in implementation of this law?

- When a legal framework is unfeasible, the effort to implement it will not bring effectiveness. The subjects or companies which have to obey this requirement will do as the process asks them to do without caring about the effectiveness.

The 2012 Law of Money Laundering Prevention requires many parties to be involved. However, the enforcement of it is poor. For example, all real estate service companies have to make the report while other companies like law companies, companies which supply services to establish new business for clients do not have to report.

- In your opinion, will the administrative reports on the real estate companies prevent money laundering activities?

- People who do money laundering activities must study deeply the law and regulations before doing it. They must be well prepared and money laundering activities must be done through many middle steps. Hence, it is not easy to find out about these transactions. It needs investigation by authorities to gather information to clarify. Hence, administrative reports will not help much.

Minh Tuan

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