Money Laundering in Malta’s Property Market

Insights from the National Risk Assessment

A comprehensive 200-page report on Malta’s national risk assessment has revealed concerns about substantial money laundering activities within the property market. This assessment, conducted by a committee including the police and the Financial Intelligence Analysis Unit (FIAU), acknowledges that while the exact scale of money laundering in real estate remains unclear, the indications are troubling.

real-estate-malta-money-laundering2

In 2021, real estate assets frozen in Malta, related to financial crime investigations, amounted to approximately €44.6 million. This significant figure highlights the property market’s vulnerability to money laundering. The attractiveness of the real estate sector for criminals lies in its ability to facilitate the laundering of large sums in a single transaction. Additionally, investing in property for renovation and resale provides a facade for justifying illicit income.

Despite a €10,000 cap on cash transactions in property sales and other high-value items introduced by the government in 2021, loopholes remain. Notably, the regulations don’t cover cash used in construction, renovation, or property finishing, raising concerns about laundering through these channels.

The rental market too is not immune, as it can offer a guise of legitimate income for criminals.

Tax Evasion in Property Transactions

The report also sheds light on tax-related malpractices in property dealings:

  • Sellers and buyers often underreport property values to decrease tax liabilities.
  • In 2021, 32% of property transactions were flagged as potentially undervalued.
  • The Malta Tax and Customs Administration responds by appointing an independent architect for revaluation in such cases, leading to revised tax obligations based on these new valuations.

Analysis of suspicious property transaction reports by the FIAU primarily points to tax crimes, often involving at least one Maltese resident.

Trends and Licensing in the Property Market

real-estate-malta-money-laundering-estate-agents-licence

Regarding property purchases:

  • The rate of purchases by foreigners remained stable up to December 2021.
  • Maltese nationals constituted 98% of property deed holders.

The report also touches on the issue of estate agent licensing. A notable concern is the lack of enforcement against unlicensed agents, and the existing “vulnerabilities” within the licensing laws, especially with individuals occasionally acting as intermediaries in property sales.

In conclusion, while the full extent of money laundering through Malta’s property sector remains undetermined, the evidence points to significant risks, necessitating more stringent oversight and regulation to curb these illegal activities.