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Conveyancing report highlights emerging property sales risks

Cybersecurity and cryptocurrencies have been identified among the main risks facing conveyancers.

The latest Risk Agenda report from the Council for Licensed Conveyancers (CLC) said it is a matter of “when not if” a firm comes under a cyber attack, while questions over using cryptocurrencies to pay for property are becoming more common.

Its report said UK cryptoasset businesses are supervised by the Financial Conduct Authority (FCA) and must register with the City watchdog for anti-money laundering (AML) permissions, which may mitigate some risks.

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But the CLC warns: “Ultimately, the same principles apply to identifying source of funds and wealth irrespective of where funds originate from. 

“Currently we consider that the AML approach to transactions funded by cryptoassets to be similar to that of cash purchases. 

“We would therefore expect practices to adopt a risk-based approach and complete enhanced due diligence due to the high-risk nature of the transaction. Practices should take adequate measures to establish the source of funds and source of wealth. 

“The evidence required to verify the source of wealth should be considered on a case-by-case basis as what is sufficient in one case may not be sufficient in another. It is important that as much information as necessary is obtained in order to trace the funds and be satisfied that they are legitimate.”

The report said firms should consider whether they have the expertise required to handle such matters if it is outside their usual remit.

Sheila Kumar, CLC chief executive, said: “Today, the threats to clients’ assets are more sophisticated than ever and the challenges for lawyers have grown correspondingly. 

“Property transactions and probate issues are more complex, and lawyers have serious responsibilities to help combat fraud and money-laundering as well as ensuring that sanctioned individuals or businesses cannot get around the restrictions that the UK government or international community has placed on them. 

“The second of our annual Risk Agendas aims to help CLC-regulated lawyers meet the challenges of legal practice in the fast-changing world and to protect their clients. 

“Our unique approach – working with practices to identify and address risks before they crystallise as harms – is what we hold to be the most proportionate and effective approach to regulation and is successful in resolving the vast majority of non-compliance that we find.”

Other risk issues raised include digital identity checks, changes to professional indemnity insurance, complaints, conflicts of interest and aged balances.

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