One of the most common methods of channelling illegally acquired money into legal flows is through the real estate sector. Money laundering often occurs via illegal construction, where the origin of funds used for building unlawful structures is not verified, according to the report “National Risk Assessment – Risk Assessment of Money Laundering”.
In 2024, ownership changed hands for 126,787 apartments, houses, commercial properties, agricultural and construction land, garages, and holiday homes, with a total value of €7.4 billion. The majority of these purchases were made in cash. Only one in ten properties was bought using a loan, according to official data from the Republic Geodetic Authority.
The situation with apartments is slightly better in favour of loans: in 2024, 22 percent of apartments in Serbia were purchased using housing loans, meaning that 78 percent of apartments sold last year were paid for in cash.
It is also a fact that many transactions occur outside the regulated real estate market.
According to another RGZ report, which focuses on partially regulated market transactions, data from the first half of 2024 indicate that there are around 4.97 million properties registered in the cadastre. However, it has been established that there are an additional 4.78 million properties not registered in the cadastre—of which a large portion, approximately 2.1 million, were illegally built and are still undergoing the legalisation process.
These types of properties are also frequently sold – and exclusively for cash.
Where cash is involved, there is always a heightened risk of abuse.
According to the National Risk Assessment of Money Laundering, the real estate sector has been classified as carrying the highest risk of money laundering since 2018.
The same risk level is noted in the 2024 assessment.
“A high volume of cash transactions, investments of dirty money, and its integration, along with the scale of activity linked to the real estate sector, mean it remains highly attractive for money laundering year after year,” states the report published by the Administration for the Prevention of Money Laundering in November 2024.
High-risk assessments were also assigned to intermediaries in property sales and rentals, as well as to notaries, due to their direct connection with the real estate sector.
“The risk assessment of money laundering in the real estate sector pointed to a growing threat related to a specific group of individuals who are not registered business entities – private individuals acting as investors. According to an analysis by the Tax Administration, if these individuals are not VAT-registered or have not declared construction activity with the Business Registers Agency, they typically seek to avoid tax payments,” notes the analysis published in late 2024 on the website of the Administration for the Prevention of Money Laundering.
These are individuals who, after constructing a building, sell residential or commercial space but fail to report the income from the sale to tax authorities, instead keeping the money without paying public dues, the report explains.
The risk of money laundering in the non-financial sector, particularly real estate, is further heightened given the large number of private individuals acting as VAT-registered investors and subsequently selling newly built properties.
The number of such individuals submitting VAT returns has been steadily increasing year by year.
Significant growth in transactions
“Between 2019 and 2023, there was a noticeable increase in transactions involving private individuals acting as investors in the construction of residential and non-residential buildings. The turnover achieved in 2023 was 46.94 percent higher than in 2019,” the report states.
The construction sector carries an increased risk of money laundering due to the possibility of paying for construction materials in cash.
“What also heightens the risk is the lack of sufficient legal regulation in this sector. Specifically, the VAT Law allows private individuals—investors—to register for the VAT system without being required to register as taxpayers or entrepreneurs,” the authors explain.
In other words, private individuals in the VAT system are not registered with the Business Registers Agency (APR) or any other relevant authority, but rather submit an application for VAT registration directly to the Tax Administration, in accordance with the VAT Law.
“These individuals are not required to file financial reports or open business bank accounts. All transactions related to construction (purchases of goods and services, as well as revenue from sales) are recorded via personal bank accounts. The Tax Administration only has access to the data stated in VAT and POPDV forms, making it difficult to identify high-risk taxpayers due to the lack of information on their business operations. Additionally, until May 2022, private individuals in the VAT system were not required to record sales through fiscal cash registers. With the introduction of electronic fiscalisation in Serbia, VAT-registered individuals must now be included in the eFiscalisation system. Given all of the above, it is necessary to conduct a comprehensive analysis of the legal framework, business practices, and oversight mechanisms for private individuals acting as investors, and to introduce an obligation for them to open a dedicated account and conduct their business exclusively through it. Furthermore, institutional responsibilities should be defined in line with the findings of this analysis.”
Three areas: Construction, property sales, and unlicensed building
The report identifies three segments within the real estate sector: investment in building construction, property sales, and construction without a building permit.
Updated analyses show that the threat level has not decreased. Individuals involved in criminal networks still choose the real estate sector to integrate illicit money, the report highlights.
Properties – mainly apartments – are largely bought and built with cash, while “the most common typology is money laundering without a predicate offence”.
According to the Law on the Ratification of the UN Convention against Transnational Organized Crime, a “predicate offence” refers to any criminal offence from which proceeds are derived and subsequently laundered into legal financial flows.
“A major money laundering risk has been identified in illegal construction, particularly under the offence of ‘construction without a building permit’ (Article 219a of the Criminal Code), as the origin of funds used for such building is not verified,” the report notes.
A typical example of money laundering is the investment of large sums of cash by a private individual in real estate construction, followed by the sale of the property and the concealment of the illicit origin of the funds invested.
“The market share of the construction sector, which includes investors in real estate, has been steadily growing, averaging 18 percent annually. A major contributor to the sector’s exposure to money laundering is its insufficient legal regulation. Private individual investors register in the VAT system without being registered as entrepreneurs, since they do not register with the competent authority but only apply to the Tax Administration under the VAT Law. They are not obliged to submit financial statements or open business accounts, and they are permitted to pay for construction materials in cash. These investors are not obliged entities under the Law on the Prevention of Money Laundering…”
They are, however, subject to Article 46 of the Law, which limits cash payments to amounts of €10,000 or more in dinar equivalent, monitored by the Market Inspection. Between 2021 and 2023, 18 violations of this provision were recorded.
The Tax Administration also carried out 23,937 inspections focused on the correct calculation of public revenues. Irregularities were found in 56 percent of cases, and proceedings were initiated.
Among private individuals engaged in the construction of residential and non-residential buildings and registered for VAT, around 10 percent of tax identification numbers (PIBs) are temporarily revoked each year.
This rate is roughly half in other sectors, averaging about five percent.
“All analysed data clearly indicate that perpetrators of criminal offences consider investing in the purchase or construction of real estate the most reliable way to launder money, preserve its value, and avoid scrutiny into its origin,” the report concludes.
Findings from prosecutors and courts
According to data from prosecutors and courts, in cases where an investigation was initiated in this sector, a total of €48,205,384 was invested, of which €2,768,379 came from organised criminal groups.
Based on an analysis of cases that have resulted in final convictions, it was found that the most common source of money integrated into the real estate sector from criminal activity was related to car trading.
“Money from illegal car trading was invested in real estate purchases totalling €4,704,100, while the most common predicate criminal offences in the real estate sector were violations under Article 136 of the Law on Banks (‘Anyone providing loans or issuing payment cards without a licence from the National Bank of Serbia, and not authorised by law to do so, shall be punished by imprisonment from three months to five years’) and usury under Article 217 of the Criminal Code,” the report states.
€1.9 million laundered through notaries
In the period analysed (1 January 2021 to 31 December 2023), 40 of the 648 individuals investigated for money laundering offences used the notary public sector, according to the report.
An analysis of completed criminal cases found that no notaries were convicted for money laundering.
However, the report highlights that the notary sector, as a reporting entity under the Law on the Prevention of Money Laundering and the Financing of Terrorism, was used in integrating dirty money into the real estate sector or for vehicle purchases via contracts that notaries certified and notarised.
“In total, 17 convicted individuals used the notary sector, and the amount laundered was €1,888,871. Given their role in the real estate sector, notaries must not overlook the possibility of identifying and reporting suspicious circumstances in a timely manner,” the report warns.
In examining money laundering cases, it was found that notaries not only certified property sale contracts but also loan agreements, including those transferring property ownership from borrower to lender if the loan was not repaid. In some cases, the same notary certified multiple such contracts, often involving the same individual as the lender. Despite this, not a single suspicious activity report was submitted by notaries in any of the money laundering cases where their services were used.
Real estate as an intermediary sector
During the analysed period, there were no criminal proceedings for money laundering in which the accused used real estate intermediaries.
“It cannot be concluded that intermediaries played an active role in money laundering cases or were aware of any connection to individuals involved in criminal networks. However, considering their largely passive role in the money laundering prevention system, it cannot be ruled out that they may have been linked to criminal actors – or at least not sufficiently aware of the importance of their responsibilities as reporting entities within this system,” the report notes.
(N1, 23.06.2025)
https://n1info.rs/biznis/od-prljavog-do-cistog-kako-se-pere-novac-kroz-gradnju-i-kupovinu-nekretnina/
