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CAMS · Question #618

A student contacts a real estate broker to view a home but cancels last minute due to illness. The student wants to quickly buy the 800,000 USD home, which is overvalued, despite the broker's…

The correct answer is C. Value E. Inconsistency F. Transaction speed. The broker should identify red flags related to the property's inflated value, the buyer's inconsistent financial profile as a student, and the unusual urgency to complete the transaction.

Risks and Methods of Money Laundering and Terrorist Financing

Question

A student contacts a real estate broker to view a home but cancels last minute due to illness. The student wants to quickly buy the 800,000 USD home, which is overvalued, despite the broker's objections to the asking price. Which real estate red flags should the broker identify? (Select Three.)

Options

  • AAnonymity
  • BStructuring
  • CValue
  • DFlow through
  • EInconsistency
  • FTransaction speed

How the community answered

(33 responses)
  • A
    3% (1)
  • B
    6% (2)
  • C
    82% (27)
  • D
    9% (3)

Why each option

The broker should identify red flags related to the property's inflated value, the buyer's inconsistent financial profile as a student, and the unusual urgency to complete the transaction.

AAnonymity

Anonymity as a red flag applies when a buyer attempts to conceal their identity or uses shell companies; there is no indication in the scenario that the student is hiding their identity from the broker.

BStructuring

Structuring refers to breaking up financial transactions to avoid currency reporting thresholds and is not applicable to this scenario, which involves a single high-value property purchase.

CValueCorrect

The property being overvalued despite the broker's objections is a classic real estate money laundering red flag, as deliberate over- or under-valuation of property is a common technique used to transfer illicit value between parties.

DFlow through

Flow through refers to funds passing rapidly through accounts or intermediary entities and is not a red flag specifically indicated in this scenario involving a direct property purchase.

EInconsistencyCorrect

A student seeking to purchase an $800,000 home is inconsistent with the expected financial profile of a student, indicating that the source of funds may not align with the buyer's apparent income or occupation.

FTransaction speedCorrect

The buyer's desire to quickly complete the purchase of a high-value property is a transaction speed red flag, as urgency is often used to minimize scrutiny and due diligence in real estate money laundering schemes.

Concept tested: Real estate money laundering red flags identification

Source: https://www.fatf-gafi.org/en/publications/Methodsandtrends/Laundering-the-proceeds-of-crime-through-real-estate.html

Topics

#real estate red flags#money laundering typologies#transaction speed#property valuation

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