In recent years, the UAE has emerged as a global business hub, attracting investment across sectors such as real estate, finance, and trade. While this growth creates opportunities, it also increases the risk of money laundering (ML) and terrorist financing (TF). Businesses that fail to comply with Anti-Money Laundering (AML) regulations risk significant legal, financial, and reputational consequences.

For organizations aiming to strengthen compliance frameworks, advisory firms like Swenta provide audit, accounting, tax, and AML guidance tailored to the UAE market.

This article explores why certain sectors, particularly real estate, are at high risk, how a risk-based approach mitigates exposure, and the practical steps businesses can take to protect themselves and their clients.

Why Real Estate Is a High-Risk Sector for Money Laundering

The real estate industry is particularly attractive to individuals seeking to launder illicit funds. Several factors contribute to its vulnerability:

1. High-Value Transactions

Real estate deals often involve substantial sums. This allows criminals to move large amounts of money in a single transaction, disguising illicit funds as legitimate investments.

2. Lower Regulatory Oversight Compared to Banks

Unlike banks, which are subject to rigorous monitoring and reporting requirements, real estate transactions have historically faced less scrutiny. Criminals exploit this gap using shell companies, third-party buyers, or nominee accounts to obscure the true source of funds.

3. Funds Become Harder to Trace Once Invested

Once money is converted into property, tracing and recovering it becomes significantly more difficult. Illicit funds can blend into the real estate market, diminishing transparency.

4. Wider Social and Economic Consequences

Money laundering in real estate affects more than financial statements. It inflates property prices, making homes unaffordable for average citizens, disrupts communities, and undermines public trust in the legal system.

Understanding a Risk-Based Approach (RBA)

A risk-based approach (RBA) prioritizes resources where the likelihood of illicit activity is highest. Rather than applying the same procedures to every transaction, businesses and regulators focus enhanced monitoring and due diligence on higher-risk cases.

According to FATF (Financial Action Task Force) guidelines, all countries should ensure that real estate agents, brokers, and related professionals:

• Assess the level of money laundering or terrorist financing risk associated with their transactions.

• Apply enhanced due diligence (EDD) for high-risk clients or deals.

• Follow standard procedures for lower-risk transactions.

AML consultants in the UAE, such as those at Swenta, can assist businesses in implementing an effective RBA framework.

Key Steps for Businesses to Follow an RBA

To implement a risk-based approach effectively, real estate professionals and other businesses should adopt the following practices:

1. Know Your Customer (KYC)

• Verify the identities of all parties involved, including beneficial owners.

• Ensure transparency even when transactions are conducted through corporate structures or intermediaries.

2. Understand the Nature of the Transaction

• Evaluate the purpose and complexity of the deal.

• Look for red flags such as unusual pricing, complex ownership structures, or client indifference toward property features.

3. Trace the Source of Funds

• Investigate the origin of funds.

• Identify unusual cash payments or transfers from offshore accounts.

• Apply enhanced scrutiny when funds appear opaque or inconsistent with the client’s profile.

4. Continuous Monitoring

• Track ongoing client relationships for changes in behavior or transaction patterns.

• Update risk profiles regularly to reflect new information.

5. Engage AML Consultants

• Specialized advisory services help businesses interpret regulations, design monitoring systems, and ensure ongoing compliance.

The Role of Supervisors and Regulators

Businesses cannot ensure AML compliance alone. Regulatory oversight and guidance are crucial. In the UAE, the AMLD (Anti-Money Laundering and Combating the Financing of Terrorism Supervision Department), established under the Central Bank of the UAE (CBUAE), supervises AML/CFT compliance.

Since 2020, the AMLD has:

• Developed and enforced comprehensive AML/CFT regulations.

• Conducted training and awareness programs for businesses.

• Monitored high-risk sectors, including real estate, to prevent illicit activity.

Where markets are emerging or underdeveloped, regulators play a vital role in building capacity and ensuring professionals can meet their compliance responsibilities.

Special Focus on Emerging or Underdeveloped Markets

Some sectors or regions within the UAE real estate market are still evolving. These areas require extra attention to prevent them from becoming safe havens for criminals. Supervisors should monitor:

• Newly established agencies or professionals entering the market

• Businesses with limited AML/CFT knowledge

• Regions with historically weak enforcement

Such measures help maintain market integrity and protect the economy from financial crime.

Practical Steps for AML Implementation

Businesses can strengthen AML compliance by taking the following steps:

1. Develop Clear Due Diligence Checklists – Standardize processes to avoid omissions.

2. Leverage Technology – Use software to identify risky clients, unusual transactions, and high-risk geographies.

3. Conduct Regular Staff Training – Ensure employees are knowledgeable about regulations and reporting obligations.

4. Establish Escalation Procedures – Define how high-risk cases are handled and approved.

5. Monitor Transactions Continuously – Compliance should be ongoing, not a one-time effort.

6. Consult AML Specialists – Experts like Swenta help businesses stay compliant, efficient, and prepared for regulatory audits.