“Societal impact of regulation and enforcement in the real estate sector unclear”

Between January 2020 and May 2022, Bob Hoogenboom, Professor of Forensic Business Studies at Nyenrode Business Universiteit, conducted three research projects on fraud, money laundering, and public-private partnerships in the Dutch real estate market. These projects have influenced the Dutch debate on the regulation of the real estate market, the quality of (self-)regulation, and the degree of cooperation and information sharing within the government and especially the public sector.

Hoogenboom conducted research in December 2020, commissioned by the Ministry of Justice, Confederation of Netherlands Industry and Employers (known as VNO-NCW), and the Royal Dutch Association of Civil-law Notaries (KNB), and the Dutch Association of Estate Agents and Appraisers (NVM) into the cooperation between notaries, estate agents/appraisers, and government agencies to prevent money laundering and fraud in real estate transactions. The result in a book called Samen [translated as: Together], in which he found that gatekeepers are not taken seriously enough by the government to prevent money laundering.

Complex

"Tackling money laundering and fraud in the real estate market is complex and so full of mutual dependencies that the government needs the cooperation of market participants. Over the last thirty years, this public-private partnership has grown strongly and often proved successful, but there are also all sorts of legal and bureaucratic barriers and other obstacles which sometimes prevent it from being optimal," Hoogenboom says. According to him, much is in order on paper (laws and regulations/policy), but not yet in practice. He continues: "Political, commercial, and organizational self-interest impede integral approaches of prevention and more strategic approaches to curbing crime levels. There is hardly any theoretical thinking or action in the organization of different forms of cooperation. Incidents dominate daily processes."

Rebellious commitment

With Samen, Hoogenboom drew attention to the ambiguous nature of self-regulation within the notarial profession. Although KNB does an excellent job in informing its members, individual notaries differ in their willingness to actually enforce anti-money laundering requirements. Hoogenboom showed that individual notary offices were rebellious (rebel involvement) in following the law in practice. This came up in the summer of 2021 due to fraud at the State Advocate. "The fraud led to controversies in parliament and society about the governance of the State Advocate, but especially the political responsibility of the state to work exclusively with one law firm," says Hoogenboom. The Minister of Justice wanted advice on the current nature and possible future of the legal basis.

Legal relation

Hoogenboom noted that the legal relationship between the State and the State Advocate, based on a government decision in 1965, is completely outdated and does not fit within modern standards of governance, (cyber)security, and a risk and control framework. "The legal relationship is wholly inadequate for a modern professional relationship. This is particularly difficult because the State Advocate has to deal with highly sensitive cases, such as MH17. I have advised the minister to restructure the legal relationship with the State Advocate," Hoogenboom said.

Approach to undermining

For the Regional Information and Expertise Center (RIEC) Rotterdam, Hoogenboom investigated the innovative working methods of real estate team Motus, which specifically focuses on tackling criminal misuse of (rental) properties for drugs, prostitution, weapons, and money laundering, among other things. Motus is a multidisciplinary team from the police, the municipality of Rotterdam, RIEC, the Public Prosecutor's Office, and the Dutch Tax Authorities. In his book Het spiegellabyrint van ondermijning en de Motus-methode [translated as: The mirror labyrinth of undermining and the Motus method], which was published in April 2022, he states that the approach to undermining gets stuck in the cart tracks of repression, insufficient innovation, and poor collaboration. "There needs to be more focus on prevention, creating barriers and increasing the resilience of citizens, businesses, and gatekeepers," Hoogenboom concludes. The book provides tools for improvements in the approach to undermining.