Incidence of AML Laws in Cross-Border Real Estate Transactions in Dominican Republic[1][2]

The conveyance or transmission of rights over real property in the Dominican Republic (DR) is governed by freedom of contract principles, coupled with the requirement of a notarized written document to satisfy statute of frauds considerations and a series of property transfer and registration processes and requirements established under the Tax and Real Property Registration Laws.

These requirements consist mostly of documents that the parties can produce, while matters related to money, its payment, or origin for purposes of closing real estate transactions were traditionally entrusted to financial entities.  On June 1, 2017, the DR enacted Law 155-17 Against Money Laundering and Terrorism Financing (AML Law or Law 155-17).[3]

At the outset, Law 155-17 designates “non-financial” persons obligated to participate in the prevention, evaluation, and mitigation of crime, a category that includes lawyers, notaries, real estate brokers, and other legal professionals.[4]  These persons are now bound by obligations similar to those of financial institutions[5] and are restrained by some prohibitions addressing practices that have occurred in cross-border real estate practice in the Dominican Republic.

From the regulatory side, it is inferred from article 33 of Law 155-17 that lawyers, notaries, and other legal professionals who perform real estate transactions for their clients in matters such as the “purchase, sale or renovation of real estate properties,” should perform client due diligence to get to know their client before accepting representation or assisting in such matters.[6]  Among the prohibitions for legal professionals, article 64(e) of Law 155-17 establishes that they may not “liquidate, pay or accept the liquidation or the payment in cash in any currency or in precious metals, in relation to the following operations: (i) Conveyance or transmission of rights over real estate properties for an amount in excess of one million Dominican pesos, (roughly US$21,000.00).” [7]

These provisions, which require a payment trail or evidence of payment other than cash, must now be considered in the negotiation of price and payment terms and conditions among parties conveying or transmitting real property rights and as part of organizing a real property closing.

Finally, Art. 64 of Law 155-17 prohibits notaries and registrars from processing real estate property transactions unless they receive, for purposes of conservation, “truthful evidence of the means of payment.”[8]  This provision means that the notary or registrar may reject undocumented real estate transaction payments and payments paid or received by unidentified persons and additional information may be requested as a way to satisfy AML law requirements and discharge their duties.

[1] Originally published in the American Bar Association’s Section of International Law publication “The Year in Review” 2017 for Cross Border Dominican Republic Real Estate Practice. To view or download the original publication, visit the web page in this link page 345.

[2]. Felipe Isa Castillo is a Partner, and Head of the Real Estate and Tourism & Foreign Investment Law Practice at Arthur & Castillo (AC Law).

[3]. Ley 155-17 Contra el Lavado de Activos y Financiamiento del Terrorismo [Law 155-17 Against Money Laundering and Terrorism Financing] (G.O. No. 10886); “Money laundering” is defined as “the process through which one person or organization transforms the monetary gains derived from a criminal or illegal activity in funds, that appear as originating from a legal source.” art. 2.

[4]. Id. art. 2, 33(e).

[5]. E.g. establishing programs and policies of evaluation, management and mitigation of risks, client due diligence, registry of data and duty to inform the authorities of suspicious activities, prohibited operations or transactions.

[6]. Law 155-17 art. 33(e)(1).

[7]. Id. art. 64(e).

[8]. Id. art. 64, ¶ II.

ABOUT THE AUTHOR: Dr. Felipe Isa Castillo is a Partner, Head of International Business, Foreign Investment & Real Estate at ACLAW, a law Firm in the Dominican Republic. He specializes in international business, foreign investment and real estate law (International Legal Studies LLM in Georgetown University Law Center & Masters in International Business in Universidad Pompeu Fabra in Spain) with more than 20 years of experience in International Business and Trade, Foreign Investment, Free Trade Zones and Cross Border Real Estate practice. Dr. Felipe Castillo is also a Certified Bankruptcy Conciliator and Liquidator and Legal Interpreter.

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Copyright 2018 Arthur & Castillo | Dominican Law

Disclaimer: This publication is not intended to provide legal advice or suggest a guaranteed outcome as individual situations will differ and the law may have changed since publication. For specific technical or legal advice on the information provided and related topics, please contact the author.