AML Red Flags in a Cash-Heavy Purchase
Omar, a broker in Abu Dhabi, is handling a AED 4.2 million villa purchase. The buyer, a company registered in a free zone, says the funds will come from 'an investor' and wants to pay AED 1.5 million in cash in three tranches, with the balance by bank transfer from a third-party account in another name. The buyer's authorised signatory resists providing beneficial ownership information, saying 'the company is the buyer, that's enough'. The buyer also asks Omar to prepare two invoices - one for the true price and one lower one 'for the bank'. Omar's firm has a written AML policy but no MLRO has been appointed.
1. Identify the AML red flags and Omar's obligations before proceeding.
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Red flags: large cash payments in tranches, third-party payer whose name does not match the buyer, opaque corporate structure, refusal to disclose beneficial ownership, and a request for a false lower invoice (invoice fraud and possible tax evasion). Omar must conduct customer due diligence: identify the legal entity, its beneficial owners (typically 25%+), the source of funds and source of wealth, and the purpose of the transaction. He must not proceed on anonymous or third-party funding without enhanced due diligence and explanation. He must refuse to create a false invoice - that is a criminal act. He should escalate to the firm's compliance function; because no MLRO is appointed, that itself is a control failure the firm must fix. A suspicious transaction report should be considered, and he must not tip off the buyer.
2. What should Omar do about the missing MLRO and the firm's AML policy gap, and can he complete the deal?
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The absence of an appointed MLRO is a structural breach of the firm's AML obligations; the firm must appoint one and document the reporting line before continuing high-risk business. Omar cannot complete the deal as structured: the cash tranches, third-party payer, and false invoice request cannot be remediated by paperwork alone. He should pause, complete CDD, obtain beneficial ownership and source-of-funds evidence, and if the buyer still refuses, decline the transaction and file a suspicious transaction report through the (to-be-appointed) MLRO or the firm's escalation route. He should keep records of the refusal and the reasons. Completing the deal on the current facts would expose him and the firm to money-laundering facilitation risk.