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AML warning: Financial criminals targeting smaller property firms

Anti-money laundering (AML) software provider SmartSearch is warning of a rise in financial crime, particularly targeting smaller property firms.

A survey of 500 AML-regulated UK companies found almost one in five property firms, such as estate agents, have seen a rise in criminals attempting to launder money or commit financial crime through their businesses in the past year.

Another 6% said they had been the victim of money laundering or financial crime in the past six months.

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In total, 4% of the regulated firms who took part in the survey, including legal and property businesses, had seen an increase in the number of attempts to commit crime through money laundering or financial crime.

Respondents were asked to choose from the terms: “We have seen a rise in money laundering and/or financial crime attempts in the past 12 months”; “our business has been a victim of money laundering and/or financial crime in the past six months," “we have not seen any change in the level of money laundering and/or financial crime attempts in our business."

The survey doesn't detail any specific issues but warning signs of money laundering through the property market, according to the Law Society, include:

  • Cash-only buyers
  • An unusual sale price
  • The buyer attempting to mislead a lender, for example by exaggerating the sale price
  • Payments from a number of different individuals or sources
  • Funds provided by one person and registration in another person’s name
  • Funds provided by unknown third parties
  • Transactions involving nominee companies or multiple owners
  • Sudden or unexplained changes in ownership
  • Direct payments between buyers and sellers

Businesses in the East Midlands and Northern Ireland were the most likely to come under increased attacks from financial criminals – where 63% and 71% respectively of firms had seen a rise in illegal activity. 

But other regions were only slightly less vulnerable - up to or more than half of the regulated firms in Wales (56%), Yorkshire (53%) and the West Midlands (50%) also had to deal with increased attempts at money laundering and financial crime.

Meanwhile, even in areas where firms were apparently least likely to find themselves under increased attack - the North East (33%) and Scotland (37%) – the issue still affected more than a third of those surveyed.

The size of companies was also a factor in their likelihood of being targeted. 

Firms of more than 500 employees were almost twice as likely (55%) to see an increase in criminal activity compared to those with less than 50 people (28%).

Despite the increased threat of financial crime, up to a quarter of the surveyed firms admitted that they still carried out manual checks on hard-copy documents such as passports and utility bills, while 16% were unaware of digital ID and digital AML solutions, despite electronic solutions being recommended in the 2020 Money Laundering and Terrorist Finance Act.

Martin Cheek, managing director of SmartSearch, said: “Governments can warn about financial crime, but these results show the reality of its threat.

“Not only is it very real, but the criminals behind it are increasingly active. These statistics should ring alarm bells for all regulated businesses – especially those which continue to rely on manual checks to onboard new individual customers and businesses.”

“We know that organised crime gangs can easily make convincing forgeries of ID documents. Digital solutions remain the most effective way for regulated firms to remain compliant, as well as avoiding the fines and reputational damage which breaches of the regulations can bring.

“Money laundering often involves the proceeds of the misery caused by some of the world’s worst crimes. These findings clearly show that investing in robust and ongoing electronic verification is the smartest way to help to prevent those crimes - and to keep regulated firms compliant.”

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