Which red flag indicates high potential for money laundering in a real estate purchase?
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A. B. C. D.C
The red flag that indicates high potential for money laundering in a real estate purchase is when the purchaser is a nominee (answer A).
A nominee is a person or entity that is used to hold legal title to a property or asset on behalf of another person or entity. Nominees are often used in money laundering schemes to conceal the true ownership of the property or asset.
Nominees can be used in real estate transactions in a number of ways. For example, a money launderer might use a nominee to purchase a property with illicit funds, in order to conceal the true source of the funds. Alternatively, a money launderer might use a nominee to purchase a property with funds that have been laundered through other channels, such as shell companies or offshore accounts.
Other red flags listed in the answer choices may also be indicative of money laundering, but they are not as closely associated with real estate purchases as the use of nominees. For example:
A previous bankruptcy (answer B) may be a red flag for money laundering if the bankruptcy was used to conceal the proceeds of illicit activity. However, it is not necessarily related to real estate purchases specifically.
Owning a cash-intensive business (answer C) may be a red flag for money laundering if the business is being used to generate illicit funds. However, it is not necessarily related to real estate purchases specifically.
Not being a resident where the property is located (answer D) may be a red flag for money laundering if the purchaser is trying to conceal their identity or the true source of the funds used to purchase the property. However, it is not necessarily indicative of money laundering on its own, and may be more relevant in jurisdictions where non-residents are subject to additional scrutiny or restrictions when purchasing real estate.