The practice of families making a room in their houses available to visitors (especially guests from other countries) for accommodation has growth to a point that it has now become an investment vehicle for some people. People now invest millions of cedis in properties in prime locations for rental income. This practice has created a lot of jobs along the value chain, such as cleaning and laundering services, car rental services, property management services, estate brokers/ dealers (popularly known as agents). This practice has grown over time to become a global practice; with just a click one gets a home or room to rent.
There are a lot of companies offering vacation rental platforms that allow individuals to rent out their homes, apartments, or unique accommodations to travelers, making it easy, cost effective and memorable for the travelers to enjoy their stay. Companies like Airbnb, Booking.com, Vrbo, HomeAway, and TripAdvisor Rentals are prime examples where people rent out spare rooms.
With criminals always looking for new avenues to launder their ill-gotten funds, these vacation rental platforms become a targeted avenue due to the platforms’ vulnerability to money laundering. With the platform’s global reach, numerous transactions, lack of visibility and lack of standard regulation, criminals are attracted to this industry.
This article aims at throwing more light on the activities of criminals through the vacation rental platforms and how the impact of these activities could be minimized.
One way criminals are using vacation rental platforms to launder their dirty money is creating fake listings and reservations. Criminals may list a property which either doesn’t exist or is significantly misrepresented and book it themselves and/ or associates using illicit funds. The booking will appear as a legitimate transaction but in reality, the washing of the dirty money by making it appear as income from a legitimate source.
Another way criminals are leveraging the vacation rental platform to launder ill-gotten funds from stolen credit/ debit cards with the help of associate hosts. Once a booking or reservation is made on the vacation rental platform, such as Airbnb, booking.com and/or vrbo, an accompanying payment is made, even though no one actually ends up staying at the presumably rented out property. After the booking date passes and the host has received the payment from the vacation rental platform company, the host will return a percentage of the booking amount to the criminals. Another twist to this method is when some criminals end up setting up their own accounts on the vacation rental platform or even purchase hacked accounts to further launder dirty funds.
Advance fee payment option is another method used by criminals using the vacation rental platform an avenue to defraud people. This is particular with one vacation rental platform company operating in Ghana, where guests make bookings without payment until check-in time. The criminals would come up with all sorts of stories for you to send them money with the promise to pay you back once they check-in. Your guess is as good as mine, what will happen next.
Under or Overvaluation is another method used by criminals to further wash their dirty funds. Inflating rental prices allows criminals to move large amounts of money abroad through the platform. Once the payment for the overprice rental is made, the guest doesn’t need to occupy the property but wait for the check-in date and time to elapse for payment to be made to the host or homeowner by the vacation rental platform company.
The money laundering risks exposed to the vacation rental platform could be difficult, if not impossible, to manage, especially when there is a coalition between the host and the guest, but the following control measures can go a long way to reducing the exposure of the industry to the activities of criminals.
Vacation Rental Platforms like Airbnb, Booking.com, Vrbo must continuously reinforce their online security measures to detect and prevent fraudulent activities effectively. This can be done by implementing robust identity verification processes, AI-driven fraud detection, and real-time monitoring of user behavior and transactions. Face recognition technology should be introduced to march the identification presented by the host with the face of the host. More comprehensive background checks and tighter controls on the creation of accounts should be implemented.
Financial institutions which open bank accounts for hosts/ homeowners and/ or guests to receive and/ or make rental payment should do proper due diligence and KYC procedures to know what their customers do and what the accounts are being used for. Since data exist for the average annual rental income on the vacation rental platforms, it is easy to monitor the bank accounts of these customers and where there are deviations from the norm, investigation should be carried out. Continuous screening of customer names against the available sanctions list will help reduce the risk of money laundering financial institutions faced with vacation rental platforms.
There should be intentional education, training and awareness about the potential risks associated with sharing properties on vacation rental platforms. This will help host/ homeowners understand the potential consequences of unwittingly having their properties used for illegal activities and take proactive steps to safeguard their personal information.
Collaboration between vacation rental platform providers, financial institutions, and law enforcement should be encouraged. By sharing information and best practices, these stakeholders would be able to stay ahead of criminals who seek to exploit these platforms for fraud and money laundering.
In as much as money laundering through these vacation rental platforms is a growing concern as criminals continue to find new ways to manipulate modern technologies for illicit gain, vacation rental platforms have transformed the way we travel and stay globally.
Would you mind doing me a favor? Share this article with someone so that the awareness of money laundering and terrorist financing could be spread to avoid being used as a conduit by criminals.
If you require further information on this article, please contact Richieson @ [email protected].
