– Intensify Effort to Mitigate Vulnerabilities

The Financial Intelligence Agency of Liberia (FIA) recently conducted a 2-day interactive awareness and sensitization workshop with stakeholders and professionals in the real estate sector, as part of ongoing Money Laundering and    Terrorist Financing (ML/TF) risk assessment. The assessment workshop was necessitated by different reports, findings, and recommendations from Liberia’s National ML/TF Risk Assessment (NRA) and Liberia’s second round of Mutual Evaluation (MER-2) by national and regional AML/CFT bodies. These findings showed, inter alia, that the real estate sector lacks AML/CFT regulators and is therefore extremely vulnerable to money laundering and terrorist financing (ML/TF). The findings further noted the absence of a legal AML/CFT framework to regulate the real estate sector, informal financial transaction, uncoordinated real estate professionals, etc – spotlighting Liberia’s 2019 National Risk Assessment report and second mutual evaluation report (MER-2), which identified several deficiencies in the country’s real estate sector; punctuating the need to remedy these pitfalls in order to facilitate a robust AML/CFT compliance regime in Liberia. 

Delivering an overview of the risk assessment workshop, FIA Corporate Affairs Manager, Mr. Cooper Leamah II, noted that some of the major deficiencies identified in the real estate sector included the absence of a dedicated AML/CFT authority, and lack of an AML/CFT legal framework to regulate, and to enforce AML/CFT compliance in the real estate sector.

Leamah said additional steps are being taken for FIA to develop and sign a memorandum of understanding (MOU) with real estate stakeholders, to strengthen CDD measures and prioritize record-keeping of beneficial ownership information (BOI).

In her presentation as facilitator during the workshop, the Supervisor of FIA Risk & Strategic Analysis Section, Miss Tanneh Sonpon, frowned at the informal nature of financial transactions within the real estate sector – without applying Customer Due Diligence (CDD) measures to properly identify beneficial owners, as well as the disorganized and unregulated way agents operate in the real estate sector – making it inherently vulnerable to abuse by criminals.

Miss Sonpon re-echoed the need to provide continuous training for real estate professionals and strengthen stakeholders’ collaboration, coordination, and cooperation as part of effort to bridge these gaps.

She also recounted key achievements in Liberia’s AML/CFT regime, including passage of the FIA Act of 2021, the AML/CFT Act of 2021, and several AML/CFT draft regulations, pending adoption.

In a brief welcome remark, FIA’s Officer-in-Charge (OIC), Mohammed A. Nasser, thanked participants of the workshop, and reiterated the critical role of the real estate sector in fighting money laundering and combating the financing of terrorist in Liberia.

Mr. Nasser described the real estate sector as “a lucrative sector, but susceptible and fertile ground for money laundering”.

He underscored the need for the real estate sector to embrace the culture of compliance to AML/CFT regulations, and to enhance enforcement of lawful compliance measures.

Nasser stated that this was possible through regular training and routine inspection of real estate professionals (covering agents, brokers, property managers, etc.)  in the real estate sector.

He expressed FIA’s unwavering commitment to fostering collaboration and coordination with real estate businesses and sector regulators, to thoroughly mitigate the risk of launderers exploiting the real estate sector.

The FIA OIC used the real estate sector to illustrate how money obtained illegally (“dirty money”) could be cleaned through a process of “placement, layering, and integrating” laundered money into the economy. “So, knowing the beneficial owners in the real estate sector is key to fighting money laundering” – the OIC concluded.

During the interactive session, participants at the workshop recommended an interconnecting facility to enable information and knowledge sharing between regulatory authorities and stakeholders in the real estate sector.

Participants also articulated the need for stakeholders to give inputs to draft AML/CFT regulations before adoption, and they recommended the creation of a database to capture all stakeholders in the real estate sector – describing this move as the “surest way” of monitoring the sector’s AML/CFT compliance.

Also making a presentation on behalf of his fellow stakeholders, the Secretary General of the Association of Liberian Construction Contractors (ALCC), Mr. James Smith, listed challenges confronting the real estate sector to include lack of transparency, unidentified participation and domination of foreign companies, and unregulated development of the real estate sector in Liberia.

Mr. Smith recommended, as way forward, “improved network and collaboration with stakeholders, regular public-private dialogue (PPD), improved regulatory framework, tracking ownership of real estate and associated construction activities; and increased participation of ALCC in real estate development.”

He said membership of the ALCC includes Liberian-owned construction companies, foreign-owned construction companies, tradespersons, women-owned construction companies – in the categories of principal and associate members, respectively.

Mr. Smith also outlined categories of works in the real estate sector, as residential, encompassing constructing & renovating small family homes; commercial, inclusive of construction of larger structures for business or industrial use (hospitals, office buildings, etc.); industrial (including factories, warehouses, power plants, etc.), and infrastructure – such as bridges, roads, power lines, public sewer systems, airports, amongst others. 

Following Mr. Smith’s presentation, stakeholders unanimously agreed that the real estate sector was extremely vulnerable to money laundering, with the domination of foreign companies, lack of AML/CFT regulations, and limited or no enforcement of AML/CFT compliance.

Hence, they pointed out the overarching need to enhance legal framework, increase collaboration, and provide continuous training and awareness, and reinforce measures to ensure AML/CFT compliance in the real estate sector.

The workshop ended with the distribution of customised risk-assessment questionnaires among participants. Once filled out, the questionnaires will shortly be returned to FIA. Data collected from the questionnaires will properly inform regulators – especially the FIA – on the level of ML/TF risk in the real estate sector and lessons learned will be incorporated into the overall National Risk Assessment Report for Liberia. Such information will also be very useful in determining the necessary mitigation measures. 

Participants of the risk assessment workshop were drawn from various public and private institutions – including the Liberia Land Authority (LLA), Liberia Revenue Authority (LRA), Ministry of Public Works (MPW), Liberia Real Estate Union (LREU), Law firms, Probate courts, Notary Publics, Liberia Anti-Corruption Commission (LACC), Liberia National Bar Association (LNBA), Ministry of Justice (MOJ), Association of Liberian Construction Contractors (ALCC), Liberia Business Registry (LBR), Nation Builders,  Ducor Engineers, LRDC, KWARECOM, Pierre Tweh,  staff of the FIA, etc.

The second phase of the risk assessment process (Face-to-face engagement) is expected to commence soon in Grand Bassa, Nimba, Margibi, Bong, and parts of Montserrado counties. 

Meanwhile, risk assessment is a cardinal and routine activity of Financial Intelligence Units (FIUs) across countries in fighting money laundering and countering the financing of terrorism (AML/CFT). The Financial Action Taskforce (FATF), a global AML/CFT standard-setting body, requires countries to “identify, assess, and understand the money laundering and terrorist financing risk” and “take action…aimed at ensuring the risk is mitigated effectively.” FATF also requires countries to ensure that financial institutions and designated non-financial businesses and professions (DNFBPs) “identify, assess, and take effective action to mitigate their money laundering and terrorist financing and proliferation financing risks.” – FATF Recommendation (R) -1.