The latest International Monetary Fund (IMF) report on Montenegro for the current year sheds light on a notable uptick in real estate prices attributed to insufficiently monitored financial flows. According to the report, this underscores ineffective measures against money laundering and terrorism financing by real estate agents.
The IMF report suggests exploring additional measures, including bolstered oversight of real estate intermediaries. Veselin Dragaš, President of both the Association of Real Estate Agencies of Montenegro and the Real Estate Trading Group within the Chamber of Commerce, partially concurs with the IMF’s assessments. He underscores that real estate agencies offer brokerage services and aren’t mandated, nor authorized, to scrutinize the origin of funds used in property transactions.
Verification by FOJ
“Verification falls within the purview of financial institutions and governmental bodies like the Financial Intelligence Unit of the Montenegrin Ministry of the Interior (FOJ). Agencies are tasked with reporting suspicious transactions to the FOJ, as well as cash payments,” Dragaš informed Pobjeda.
He suggests that in unregulated markets, including real estate, the informal economy plays a significant role, providing fertile ground for money laundering.
“The real estate market could be regulated through legislation. Real estate brokerage is slated for regulation with the forthcoming Law on Real Estate Brokerage and Lease, which has been under development for the past four years. The draft law has undergone public consultation, awaiting feedback from various ministries and the Central Bank. The government is expected to adopt and submit the proposal to parliament for approval within the next month or two,” Dragaš explained regarding addressing real estate transactions to combat suspicious activities and money laundering.
He pointed out that globally, real estate is a well-known avenue for money laundering.
“While it’s true that over the past two years, Montenegro’s real estate market, along with the region’s, has been very active, witnessing significant money inflows and rising property prices, this isn’t solely due to inadequately monitored financial flows and money laundering. One of the main drivers for price hikes is inflation and currency depreciation. To safeguard their funds, many opt to invest in real estate, driving up demand from buyers and consequently, property prices,” Dragaš noted, highlighting that a substantial portion of transactions are conducted through banks.
“As most banks in Montenegro are European-owned, all international payments undergo scrutiny by correspondent banks, which conduct additional transaction checks,” Dragaš added.
