The Opacity in Real Estate Ownership Index Exposes Key Loopholes in AML Frameworks

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The real estate sector across the globe continues to be a significant avenue for laundering illicit funds. Unfortunately, many of the world’s leading economies and financial hubs still have weaknesses in their frameworks that allow criminals, corrupt officials, and their enablers to exploit gaps and conceal their dirty money in real estate. This is despite growing awareness of the issue and calls for reform. According to the first edition of the Opacity in Real Estate Ownership (OREO) Index, compiled by the Anti-Corruption Data Collective (ACDC) and Transparency International, property markets remain highly vulnerable to abuse because of insufficient regulations, lack of transparency, and gaps in anti-money laundering (AML) frameworks.

Understanding the OREO Index

The OREO Index ranks 24 jurisdictions, including all G20 countries and select guest countries like Spain, Norway, Hong Kong, Panama, Singapore, and the UAE. It provides a comprehensive assessment based on two key metrics: the availability and transparency of real estate data and the robustness of anti-money laundering regulations specifically targeting real estate transactions.

What the OREO Index makes clear is that while some countries are taking steps toward reform, no jurisdiction has fully addressed the problem. The index reveals that 10 countries scored poorly, with rankings below five out of a possible 10 points. This indicates that many countries have a long way to go before their real estate sectors are free from the risks of money laundering and corruption.

Top Performers and Key Challenges

Among the countries assessed, South Africa stands out as the best performer in the OREO Index. The country has made strides in collecting real estate transaction data and implementing stringent anti-money laundering regulations. However, even South Africa faces challenges, including cumbersome processes for accessing data, particularly for foreign nationals. Moreover, some of South Africa’s anti-money laundering regulations are relatively new, having been adopted in response to its designation as a country with strategic deficiencies by the Financial Action Task Force (FATF). The effectiveness of these measures is still uncertain, and it will take time to assess their full impact.

Australia, South Korea, and the United States, on the other hand, scored poorly on the OREO Index. This is primarily due to a lack of anti-money laundering regulations for real estate professionals. Although Australia has passed new legislation to extend AML obligations to real estate professionals, these regulations will not come into effect until 2026. As a result, the country’s real estate market remains highly susceptible to abuse in the interim.

Lack of Third-Party Control and Anonymity in Transactions

One of the most concerning findings of the OREO Index is the lack of third-party control in real estate transactions in certain jurisdictions. In countries like Australia, China, England & Wales, Japan, Turkey, and the UAE, real estate transactions can occur without the involvement of a real estate agent or notary. This creates a significant gap in the AML process, as there is no one to scrutinize the parties involved or the source of their funds. Worse still, in Russia and the UAE, cash transactions for real estate are allowed, bypassing any potential scrutiny that would come from bank transactions.

The absence of proper checks and balances in these countries means that real estate transactions can proceed without any due diligence being conducted. This opens the door for money laundering and other financial crimes, where illicit wealth can be funneled into the property market with little risk of detection.

Anonymous Ownership: A Major Vulnerability

Another issue highlighted in the OREO Index is the ability for individuals to anonymously own property in many of the assessed jurisdictions. One of the primary methods for concealing ownership is through the use of companies. When companies register properties, they often do not have to disclose the identity of their true owners. Even when domestic companies are required to disclose their beneficial owners through public registers, foreign companies can still maintain anonymity, allowing illicit wealth to flow into the real estate sector without detection.

This is a significant problem, as anonymous ownership makes it nearly impossible for authorities to track illicit money flowing into the real estate market. It also limits the ability of journalists, academics, and civil society to conduct meaningful investigations into property transactions and identify properties purchased with dirty money. Fortunately, the European Union has recently adopted new regulations that will force countries like France and Spain to close this loophole. These reforms are a positive step forward in making real estate markets more transparent and less vulnerable to abuse.

The Importance of Open Data and Transparency

The OREO Index strongly advocates for greater access to public data on real estate transactions. Transparent, open data is crucial for allowing authorities, researchers, and civil society to identify suspicious activities and monitor the effectiveness of anti-money laundering measures. The availability of reference datasets, such as corporate ownership records, land registries, and beneficial ownership information, is critical for detecting money laundering and corruption.

However, the OREO Index reveals that most of the jurisdictions assessed fall short of the ideal standard for data accessibility. While some countries, like England & Wales and France, perform well on the data pillar of the index, these jurisdictions are the exception rather than the rule. The OREO Index emphasizes the need for global standards to ensure that real estate markets are protected from illicit financial flows.

The Role of International Organizations and Policymakers

The OREO Index also calls for greater involvement from international organizations, such as the Financial Action Task Force (FATF), the G20, and other global forums, to address the gaps in anti-money laundering frameworks. While there has been some progress in recent years, the index demonstrates that more work is needed to close the loopholes that allow for money laundering in real estate. The report suggests that international policymakers need to develop new policies and guidelines to help countries tackle these challenges effectively.

Maira Martini, CEO of Transparency International, stated: “We have known for a long time that real estate is a magnet for dirty money. And yet, the OREO Index shows that countries, including those that have recently reformed their systems, still have major gaps in their systems. It is no wonder that real estate markets are bursting with dirty cash, making cities around the world unaffordable.”

David Szakonyi, co-founder of ACDC, emphasized the importance of public-interest data: “England & Wales and France score the highest on the data pillar of the OREO Index. It is no coincidence that these are also the places where academics and civil society have been able to conduct in-depth data analyses, generating insights for policymakers and leads for journalists and authorities to pinpoint homes bought with illicit wealth.”

Conclusion: Closing the Gaps in Real Estate Transparency

The OREO Index serves as a critical tool for identifying weaknesses in the global real estate market that allow for money laundering and corruption. Although some countries have made strides toward greater transparency, many still have significant gaps in their frameworks that need to be addressed. Real estate remains a highly vulnerable sector, where illicit money can be easily hidden and moved without detection. As the report highlights, closing these gaps requires a combination of stronger anti-money laundering regulations, greater access to public data, and increased international cooperation.

By adopting the recommendations of the OREO Index, countries can take meaningful steps toward making their real estate markets more transparent and secure. This will not only help prevent financial crime but also ensure that property markets are more affordable and accessible to ordinary citizens.