STUDY: ANTI-MONEY LAUNDERING IN LITHUANIAN REAL ESTATE IS NOT EFFECTIVE ENOUGH

Published October 23, 2020

Institutions responsible for the prevention of money laundering do not have sufficient capacity and information regarding the scale of the issue to ensure efficient prevention of money laundering (AML) in the Lithuanian real estate sector. In addition, specialists working in this sector lack adequate knowledge and tools necessary to identify cases of money laundering, shows research conducted by Transparency International Lithuania.

According to the experts who participated in the study, cash transactions when purchasing real estate are not properly supervised in Lithuania, and the actual extent of such settlements is not known. There is a lack of cooperation between AML institutions and the availability and quality of data available should be improved.

Lithuania still does not have the Beneficial Ownership Register that would allow supervisory authorities (e.g. Financial Crime Investigation Service (FCIS)) and other subjects responsible for AML (e.g. notaries, lawyers, developers, accountants, real estate agents) to better and faster identify possible cases of money laundering.

Interviewed experts point out  that representatives of professions working in the real estate sector often do not fulfil their obligations to report possible money laundering. They lack the knowledge and capacity to identify the origin of money, exercise due diligence and identify other risks associated with money laundering.

Respectively, although sanctions for money laundering are sufficient, their application is questionable: sanctions are not dissuasive enough, and those who commit crimes often avoid full punishment, as they usually get reduction in sentence. It is also unclear how supervisory institutions, such as the FCIS, identify greatest risks in the real estate sector, how priorities related to money laundering prevention are set and progress measured.

“Money laundering is an integral part of the conversation about grand corruption and money that is stolen from us. I would like to see business and business associations operating in the real estate sector pay more attention and take on more AML responsibilities in Lithuania”, said Sergejus Muravjovas, CEO of Transparency International Lithuania.

Based on the main risks identified by the experts, TI Lithuania suggests:

  • To create the Beneficial Ownership Register in an open data format, which would ensure more efficient money laundering prevention;
  • To promote better sharing of data between authorities responsible for the prevention of money laundering in the real estate sector and other entities in order to better understand the extent of money laundering, the risks associated with it, and to better manage them;
  • For business associations and enterprises to proactively take on more responsibilities, in order to ensure efficient money laundering prevention in the real estate sector;
  • To ensure adequate capacities of anti-money laundering institutions that would enable ensure adequate money laundering prevention in the real estate sector;
  • To set measurable, concrete and realistic objectives and performance indicators for money laundering prevention in the real estate sector, and to regularly conduct assessments to evaluate the progress.

While preparing the study, TI Lithuania conducted fifteen semi-structured interviews with institutions and individuals working in supervisory institutions, investigative journalists and others responsible for money laundering in the real estate sector.

In addition, seven official inquiries were submitted to different Lithuanian institutions and a public consultation was held in order to receive feedback and discuss both the main insights and recommendations of the study.

A short summary of the findings can be found here. The full study can be found here (in Lithuanian).

For more information:

Sergejus Muravjovas, sergejus@transparency.lt