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By Simon Luke

UK Country Manager, First AML


Avoiding the threat of fines: what’s often missed in the AML process

HMRC has fined estate agents over £500,000 for anti-money laundering (AML) breaches in the past two months. Yet despite property managers being aware of the threat of fines and reputational damage caused by money laundering, many are tossing compliance aside.

New data has revealed that 43% of real estate professionals don’t feel a need to update AML processes as they don’t think they’ll get fined or don’t care. This is ethically and financially alarming: property professionals are more willing to suffer short-term financial hits rather than invest in long-term cost-effective AML solutions.

This revelation comes as a further 42% of property managers are now considering cutting compliance costs in the face of recession.


Property managers must begin to think strategically and recognise that simply paying the fines is not a sustainable business practice. Why are so many property managers ignorant of AML regulations, when their purpose and benefit to society is so clear?

Not understanding the benefits of AML technology

Many real estate professionals are hesitant about whether software solutions can meet their obligations with the Money Laundering Regulations, and are not aware of the benefits that various AML/Client Due Diligence (CDD) platforms can give to their business once properly implemented.

With nearly half (48%) of property professionals witnessing instances of suspected money laundering over the past three years but not having the means or motivation to adequately address it, technology-assisted AML processes can unlock a host of benefits, both for the company using it and for the customers that they must screen. This includes reducing new client drop-offs, eliminating back and forth between employees and their customers, and creating a central repository for AML information that is audit-ready for regulators and supervisors.

Given that almost 60% of professionals in the sector are not confident in their AML processes, firms can further go further than a technology platform and engage a third-party to manage the CDD activities of customer identification, verification, and entity mapping to ascertain the ultimate beneficial owners of the companies that they work with. 

In turn, firms can focus on value-added work such as actually selling houses,  rather than the admin of chasing documents to meet their AML obligations. This will not only incentivise professionals in the industry but will also give them a platform to identify and flag fraudulent activity with ease.

Failing to highlight red flags

Red flags exhibited by clients are often missed due to a lack of AML knowledge and understanding. Such real estate red flags often missed can include:

  • money laundering through loans, where money launderers use these loans or mortgages to layer and integrate illicit funds into high-value assets such as real estate; or

  • businesses with complex structures or trusts with a confusing setup could be a sign of hiding the real buyer; or

  • an irregular sale price, when the purchase price is much higher or lower than expected.

With the right AML systems and understanding, real estate professionals can easily spot and flag this activity.

Not nurturing a culture of compliance

Technology alone isn’t enough. For companies to have a well-oiled and functioning AML programme they need to createa culture of compliance. Research suggests many property managers are doing the bare minimum when it comes to due diligence.

According to KPMG, “a poor culture of compliance has been identified in enforcement actions as a key cause of shortcomings in AML / CFT frameworks”.  Adhering to anti-money laundering or financial conduct regulations shouldn’t just happen because it’s something imposed on businesses - it should be a willing commitment for the betterment of society.

Ultimately, having a strong culture of compliance can ensure that property professionals not only have the right systems and controls in place to comply with AML regulations, but that they have ethical, moral reasons to do so.

The bottom line

The fact that property professionals are more willing to suffer retribution than invest in their AML processes is deeply concerning. With the global political climate as it stands and the UK’s long-standing reputation as a money laundering hub for bad actors, the real estate sector is at a crossroads.

While the economic outlook is looking tough, property professionals don’t have to take these short-term financial hits and ignore compliance because it's more financially convenient at the moment. It will be more cost-effective in the mid to long term to invest in a corporate AML strategy, including implementing technology support, team training on red flags and developing a culture of compliance from the top down.

*Simon Luke is UK Country Manager at First AML


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