The Financial Investigations Division’s (FID) Principal Director of Investigations Keith Darien is cautioning property buyers to avoid doing business with newly established developers who are using real estate as a way to launder proceeds of crime. He stressed, however, that while it is an issue that needs to be addressed, it is not a major problem that requires additional resources, and Jamaica is seeing fewer cases than other countries.

“Be careful of developers who ask you to pay cash for property; that’s one of the biggest red flags. Secondly, be extremely careful of a quick, low-priced deal. It might be a tell-tale sign that it’s dirty money he used and he’s just willing to make a small profit in order to launder the proceeds of crime. Those two are the major tell-tale signs,” Darien told the Jamaica Observer.

“The purchaser is actually committing an offence by paying in cash over $1 million. That is prohibited under law, but [unscrupulous developers] do encourage them to do this, so that they will get the price of the property much cheaper. Pay cash, pay early; [that’s] very, very, very, very risky,” he warned.

The FID investigator stressed that while there is no issue with reputable developers, the law enforcement agency is concerned with some of the more recent entrants to the market.

“The majority of the large, established developers are very legitimate in their activities that they do. Where we have concerns are the newbies, where we have doubt about the source of funds that they’re using for these projects. Those that we have suspicion around, we continue to do our investigation with the hope that we can get sufficient evidence to put them before the courts to determine if they are guilty of money laundering,” said Darien.

He explained that construction is attractive because the cash-intensive nature of the business makes it one of the easiest ways to launder money. A developer who pays dirty cash for material and labour may attract a buyer who then legitimately applies for a mortgage.

“This washes the dirty money. Once you get the proceeds from the mortgage, it is in a bank account and it seems to be from ‘legitimate activities’. So it is one of the concerns that we have,” Darien told the Sunday Observer.

In other cases, he said, individuals involved in crime bypass real estate dealers or brokers and purchase property directly from developers who are legitimate but have no legal obligation to determine the source of buyers’ funds.

“The legitimate developer is not going to tell them, ‘I’m not going to do business with you’ or, ‘I am required to conduct customer due diligence on you’. They will just accept the money that they are paying for the property and the money gets washed in that way as well,” said Darien.

While real estate salesmen and realtors are trained, registered, and licensed by the Real Estate Board (REB) and are legally bound to take clearly outlined steps to prevent money laundering within the industry, developers only need to be registered. And registration is required only if they are building more than five units, or if they are putting up an additional development (no matter the size and whether the previous one has been completed or not) within another 24 months.

At last year’s FID conference, then manager of the inspectorate of the REB/Commission of Strata Corporations Akeil Pladley described this as a “huge loophole” that needs to be addressed.

“The board is currently not authorised to monitor real estate developers… And the reason for that is the wording of the Designation Orders indicates practitioners that are licensed… Real estate developers are not granted licences; they are registered. As a result, they are not considered reporting entities,” he told his audience in a February 2023 speech at Jamaica Pegasus hotel.

He then explained that the REB and the FID were working on a fix.

“We are now taking steps to make some recommendations for legislative amendment… Sometime probably throughout 2023, you will be hearing about a merger of the Real Estate Board, the Commission of Strata Corporation and they are now working on shared communities. So we’ll have the Real Estate Authority of Jamaica (REAJ) coming out. That one body covers all real estate entities. In looking at that legislation, the gaps that exist, where AML/CFT (anti-money laundering/counter financing of terrorism) monitoring of developers is concerned, it is being considered,” said Pladley.

Last week, Darien was unable to provide any update on those efforts and Pladley is no longer with the REB. Efforts to get an update from his successor were not successful up to press time. However, it appears, from job listings made by the REB, that efforts to establish the REAJ are underway.

While Darien repeatedly stressed that there is no cause for alarm because of the existing loophole that allows developers to operate without being restrained by rules set out for other industry players, he conceded that the amount of wealth they accumulate is sizeable. In March, Minister of Finance and the Public Service Dr Nigel Clarke — under whose ministry the FID falls — announced that they would be asking realtors to help sell $2 billion worth of property seized from players engaged in illegal activity. According to Darien, they have since seized more.

“Since then, we have identified several others that are subject to investigation, some of which we have restrained as well. These are properties owned by lottery scammers,” he told the Sunday Observer last week.

But even as the FID works with other State agencies to curb money laundering within the real estate sector, there is an acknowledgement that care has to be taken not to strangle what, for many legitimate players, is a lucrative market.

“The industry is generating a lot of growth and development in Jamaica and you don’t want to over regulate it. It is just like a country being developed and having to be concerned about the damage to the environment, it is that delicate balance,” said Darien.

“From that standpoint, a proper assessment needs to be done of the industry; a formal assessment, probably by the Real Estate Board or some consultants, to see its impact — if any — and the extent of that impact and then look at possible measures to rectify it,” he added.