Laws to regulate real estate fraud
The Ministry of Justice is conceptualising a set of rules to combat real estate fraud.
“We are at the initial stages of drafting these regulations,” Ali Sabry, Minister of Justice told the Business Times recently. The laws will protect unsuspecting investors and those who are prone to being cheated by fraudsters in the real estate industry, he added.
Compared to other systems, money laundering through real estate in both residential and commercial sectors can be easy, calling for little planning or expertise. Large sums of illegal funds can be hidden and integrated into the legitimate economy through real estate. Real estate and apartments in particular are a popular asset class for investment in Sri Lanka for those who may not be able to fully explain the source of their recent wealth, analysts say. "Businessmen and dealmakers with unexplained wealth are purchasing swankier properties in Colombo to profit from the boom. An important shift in the market may come when these speculative bets involve leverage,” HSBC’s "beyond Money" magazine has said.
The ministry is also finalising two separate pieces of legislation. The Proceeds of Crime Bill and some new amendments to the Money Laundering Act (MLA) will be introduced, Mr. Sabri added. This is done to be in line with global standards so that international benchmarks are met, he said.
The Proceeds of Crime Bill will identify the proceeds of the crime, managing these proceeds during the ongoing case and during the case and the ways of dealing with it after the case is concluded. “It is in the last stages of preparation,” Mr. Sabri said.
The MLA was last amended a decade ago and Sri Lanka must do some catching up. Mr. Sabri noted that MLA amendments are due before the end of next month.
All three pieces of legislation will strengthen the Financial Investigative Unit (FIU), operating under the Central Bank (CB).
Mr. Sabri added that most suggestions for all these legislations came from the FIU. It acts as the regulator for AntiMoney Laundering and Countering the Financing of Terrorism (AML/CFT) in the country. “They face many challenges when dealing with different areas of crimes and they needed an updated set of laws,” Mr. Sabri explained.