Editor’s Note
China is strengthening its anti-money laundering oversight by formally bringing real estate developers and agencies under a new regulatory framework. This move aims to enhance transparency and curb illicit financial flows within the property sector.
Anti-money laundering (AML) supervision in the real estate industry is undergoing a comprehensive upgrade. The Ministry of Housing and Urban-Rural Development and the People’s Bank of China recently jointly issued the “Administrative Measures for Anti-Money Laundering Work of Real Estate Practitioners” (hereinafter referred to as the “Measures”), formally bringing real estate development enterprises and intermediary agencies into the national AML regulatory system for the first time.
The “Measures” explicitly require real estate practitioners to strictly implement customer identification systems, completely preserve transaction records for at least ten years, and mandatorily report suspicious transactions. This is another important regulatory move in the AML work for specific non-financial sectors, following industries such as precious metals and gemstones.
Industry insiders analyze that as money laundering methods in the real estate sector become increasingly complex and diverse, the implementation of the new regulations will reshape the industry’s risk control system. While compliance costs for enterprises may increase in the short term, it will promote standardized market development in the long run. Meanwhile, closely related financial institutions such as banks also face new compliance challenges.
The “Measures” require real estate practitioners to strictly implement customer identification systems, have the right to terminate transactions with clients who refuse to provide identification, and must report suspicious transactions to the Anti-Money Laundering Monitoring and Analysis Center. Furthermore, the retention period for customer identity information and transaction records is explicitly set at no less than ten years.
He believes that by establishing mandatory systems for customer identification and suspicious transaction reporting, the new regulations effectively fill the regulatory gap in the real estate sector, which is a high-risk area for money laundering.
Regarding common money laundering techniques in real estate, Li Song, a lawyer at Yingke Law Firm in Beijing, summarized four major types: the “white glove” operation of splitting property purchases, loss-making but profit-making fake transactions, using real estate companies’ affiliated enterprises to launder money, and operations through shell companies. Notably, in recent years, these methods have shown new characteristics such as increased concealment, combined use of financial instruments, and more cross-border operations, posing higher demands on supervision.
Market analysts generally believe that the implementation of the “Measures” will have a profound impact on the industry. In the short term, it may drive up compliance costs. Zhang Bo, Dean of the 58 Anjuke Research Institute, stated that institutions need to add AML positions and upgrade information systems, significantly increasing human and technological investment. Taking a leading real estate company as an example, its financial personnel indicated that strictly implementing customer identity verification may extend transaction cycles and even lead to the loss of some sensitive clients.
Simultaneously, industry differentiation may further intensify. Industry insiders stated that small and medium-sized real estate developers and intermediary agencies with weak financial strength face greater compliance pressure, while leading companies, leveraging their resource advantages, are expected to expand their market share. Some regional intermediaries have already begun adjusting their business strategies.
In the long run, the new rules will accelerate market clearing. Wu Zewei believes that the clarification of AML obligations will force the industry towards standardized development, effectively curbing grey operations such as proxy home purchases and “white glove” schemes.
He explained that by verifying and retaining copies of identity documents for natural persons, legal persons, and unincorporated organizations, real estate practitioners can establish more comprehensive customer identity files, providing a solid foundation for subsequent transaction monitoring and risk assessment.
The upgrade in real estate AML supervision also impacts closely associated financial institutions.
According to the “Measures,” real estate practitioners need to report suspicious transactions to the China Anti-Money Laundering Monitoring and Analysis Center. As the core hub of fund flows, banks need to simultaneously strengthen monitoring of real estate company accounts and individual home purchase funds.
Notably, the new regulation extends the customer data retention period to ten years, far exceeding the previous five-year requirement. Another compliance officer at a joint-stock bank told reporters that this means banks need to retrospectively review the fund sources of existing mortgage clients. “The risk of historical violations being traced back has increased, and some banks may face pressure for compliance rectification.”
Cross-border fund flow supervision is also a key focus of this new regulation.
After the new regulations take effect, when handling cross-border remittances involving real estate, banks need to strengthen “Know Your Customer” (KYC) and “Know Your Business” (KYB) reviews to prevent abnormal fund flows.
Industry insiders stated that in recent years, China’s AML regulatory system is undergoing a transformation extending from the financial sector to the entire industrial chain. From the first “Anti-Money Laundering Law” in 2006 focusing on financial institutions to now covering non-financial sectors like real estate and precious metals, the continuous expansion of the regulatory scope reflects the upgrade of the prevention and control system. In June 2021, the central bank’s release of the “Anti-Money Laundering Law (Revised Draft for Public Comment)” first brought real estate practitioners into the regulatory purview, foreshadowing the introduction of these “Measures.”
Behind the regulatory upgrade is the evolution of criminal methods. Data from the Supreme People’s Procuratorate shows that in 2024, procuratorial organs prosecuted 2,741 people for money laundering crimes, nearly 20 times the number prosecuted in 2019. Among these, cases involving real estate for money laundering are prominent. A typical example is a case disclosed by the Tangshan City People’s Procuratorate, where criminals transferred illegal fundraising proceeds by purchasing properties and were ultimately prosecuted with the additional charge of money laundering. Industry insiders said that as financial sector supervision tightens, criminal channels are accelerating their shift to bulk transaction areas like real estate.
However, industry insiders believe the implementation of the new regulations also faces multiple challenges. On one hand, real estate transactions involve multiple parties, and information barriers may weaken regulatory effectiveness. On the other hand, some investors have begun turning to alternative channels like commercial real estate and parking spaces to circumvent supervision. An intermediary agency insider revealed to reporters that new evasion methods such as equity transfers and proxy holding agreements are emerging. Additionally, insufficient regulatory resources in third- and fourth-tier cities may also affect policy implementation.
Market participants expect that with the implementation of the “Measures,” local governments will successively issue supporting detailed rules. First-tier cities like Beijing and Shanghai are expected to take the lead in introducing more operational implementation plans, further refining review standards and execution processes.
