One of the common methods for injecting illegally obtained money into the legal economy is through the real estate sector. Money laundering frequently occurs via illegal construction, where the source of funds used for building unauthorized properties often goes unchecked, as highlighted in the report “National Risk Assessment – Risk Assessment of Money Laundering.”
In 2024, approximately 126,787 properties—including apartments, houses, business premises, agricultural and construction land, garages, and cottages—changed ownership, with a total market value of €7.4 billion. The majority of these transactions were paid in cash, while only about 10% were financed through loans. For apartments specifically, 22% were purchased with housing loans, leaving 78% paid for in cash.
A significant volume of transactions also occurs outside the officially regulated real estate market. According to data from the Republic Geodetic Institute, while around 4.97 million buildings are registered in the real estate cadastre, there are an additional estimated 4.78 million unregistered buildings. Notably, approximately 2.1 million of these unregistered structures were built illegally and are still undergoing legalization processes. Such properties are frequently traded, with payments almost exclusively made in cash, creating fertile ground for misuse.
The National Money Laundering Risk Assessment report has consistently identified the real estate sector as the highest-risk area for money laundering since 2018, a trend reaffirmed in the 2024 assessment. Factors contributing to this include the large cash flows circulating in real estate, the integration of illicit funds, and the overall scale of construction and property transactions.
Brokers and notaries directly involved in real estate transactions are rated as high-risk actors in money laundering schemes. A particular concern is posed by natural persons acting as investors who do not have formal economic entity status. According to the Tax Administration’s analysis, many such individuals avoid tax obligations by not registering construction activities or declaring income from sales, retaining proceeds without reporting to tax authorities.
Natural persons registered in the VAT system as investors in construction are increasing annually. From 2019 to 2023, their turnover rose by nearly 47%. However, the sector’s legal framework remains insufficient. These individuals are registered for VAT but are not required to register as entrepreneurs with business registries, nor to submit financial statements or open dedicated business accounts. Transactions related to construction are often managed through personal bank accounts, complicating the identification of suspicious activities. Until May 2022, these investors were also not required to use electronic fiscal registers, further obscuring financial transparency.
The report highlights three key segments of the real estate sector in relation to money laundering risks: construction of buildings, property sales, and illegal construction without permits. Illegal construction is a major risk factor, as laws are poorly enforced and the origins of investment funds remain unchecked. A typical laundering scheme involves a natural person investing large amounts of cash into constructing real estate, then selling the property and concealing the illicit origins of the funds.
Market growth in real estate construction averages 18% annually, with a growing share of natural person investors exposed to laundering risks due to insufficient legal regulation. Although Article 46 of the Law limits cash payments exceeding €10,000 (or equivalent in dinars), enforcement remains challenging. From 2021 to 2023, the Market Inspection found 18 violations related to cash transactions, while the Tax Administration conducted nearly 24,000 audits, discovering irregularities in over half of cases.
Criminal investigations reveal that between January 2021 and December 2023, money laundering cases involving real estate totaled €48.2 million, with organized crime groups accounting for nearly €2.8 million. The most common source of illicit funds is linked to criminal activities in the car trade, involving approximately €4.7 million invested in real estate. The leading predicate offenses include unauthorized lending and embezzlement.
Notaries play a significant role in laundering, having facilitated transactions totaling nearly €1.9 million linked to convicted individuals, although no notary has been convicted themselves. These professionals authenticate contracts for property sales, loan agreements, and ownership transfers, yet failed to report suspicious activities in these cases, despite their critical position as gatekeepers.
Real estate brokers, meanwhile, have not been formally implicated in money laundering cases, but their predominantly passive role raises concerns about potential unawareness or inadvertent complicity in criminal activities.
In conclusion, the real estate sector in Serbia remains a primary conduit for money laundering due to extensive cash transactions, weak legal oversight, and loopholes allowing natural persons to operate outside standard business regulations. Strengthening legal frameworks, increasing transparency, and enhancing supervision of all participants in real estate transactions are essential steps to mitigate these risks.
