Estate agents complying with new anti-money laundering regulations introduced this week are unlikely to avoid falling foul of terrorists and criminal organisations, an expert claims.
Luca Primerano, head of strategy at anti-money laundering data security company FortytwoData, says any legislation that creates a more hostile environment for the funding behind terrorists and criminal gangs must be welcomed.
But he says the sophisticated technique that today’s terrorist and criminal organisations use to launder their money is “frightening” and while the new legislation is a step in the right direction strategically, “operationally the average company or financial institution is light years behind the techniques being employed by terrorist networks.”
Primerano says what he calls the “transactional ecosystems” within which criminals and terrorists hide their funds are so complex and vast that, manually, they can be near impossible to identify.
"Red flags and all-important anomalies can often only be identified through the analysis of billions of financial transactions and broader datasets in real time. This is beyond the limits of human intelligence, let alone conventional compliance, and can only be achieved through big data technologies that are enhanced by machine learning” he cautions.
"While lowering the cash payment threshold above which customer identification is required could be a deterrent for some criminals, without the ability to analyse and integrate billions of data points from multiple sources to detect criminal behaviours, this could result in an increased burden of false positives” he adds.
False positives are the results of investigations on perfectly legitimate customers, accounts or transactions that appear suspect but which, after an investigation, are innocent.
Earlier this week legislation came into effect which means that agents must apply customer due diligence to both contracting parties in a transaction.
A briefing for the industry from the National Association of Estate Agents says that firms will be permitted to rely on the due diligence carried out by any business subject to the regulations, while still holding ultimate responsibility for meeting the client due diligence requirements.
“This is relevant for sub-agents and on the issue of reliance and record keeping” says the NAEA.
As part of the legislation, any business or sole trader that receives cash payments in exchange for goods over 10,000 euros - lower than the previous 15,000 euros - must conduct customer due diligence.