Estate agents are the first line of defence
The way in which money launderers are able to use the UK property market to clean their cash is by providing misleading or false information about their identity, income or other funds and their sources when purchasing a property.
While some will buy a property outright and sell it on to clean their cash, others will use more complicated schemes, for example, using false information to get a buy to let mortgage and then laundering the money through rent, or using fake details to take out the largest possible mortgage; the bigger the loan the more funds that can be laundered to service the debt.
Others will collude with third parties to significantly inflate the value, and then sell it back to themselves. Properties are also bought to facilitate other criminal activity - for example, to provide a base for drug production.
How can estate agents mitigate money laundering
As a regulated sector, estate agents are required - by law - to run a risk-based anti-money laundering programme. However, according to research, a quarter of estate agents in the UK are yet to register with HMRC, more than four years after they were legally obliged to comply.
Clearly, many estate agents are not taking their AML obligations seriously, however, this has serious consequences. Not only are agents that don’t comply helping aid money laundering - which is not only a crime in itself, but an enabler of serious organised crime - but they are also leaving themselves open to reputational damage, huge fines and even lifetime bans.
As a result of the lack of compliance from some estate agents, HMRC has been cracking down on the sector, with record-breaking fines levied over the past few years, including a £215,000 fine for Countrywide for failing to implement AML regulations properly, and fines in the £1000s for smaller firms that fail to register.
Therefore, it has never been more important for estate agents to have their AML processes in order. Here we look at what you need to do to comply:
1. Identification and Verification
The most important part of any anti-money-laundering procedure is Know Your Customer (KYC). This involves the identification and verification of every client - individual and corporate - so you know exactly who you are working with. If the client is a business, it is vital that you run Know Your Business (KYB) checks to check business identification data, consolidated financial information and shareholder and UBO details.
2. Screening and enhanced due diligence
Once the customer’s identity has been verified, you then need to assess the risk - if any - of doing business with that individual or business. To do this, you need to screen their details against sanctions and global watchlists, and perform PEP (Politically Exposed Person), SIP (Special Interest Person ), RCA (Relatives and Close Associates) and adverse media screening on them. You will also need to run KYC checks on all directors and UBOs of corporate customers.
If there are any matches, you will need to perform enhanced due diligence to ascertain if they are true matches, and if they are, if the risk means you cannot continue with the business relationship.
3. Anti-fraud checks
Once the KYC and screening is completed, you will need to complete fraud checks to ensure there is nothing suspicious going on with the customers’ bank accounts, phone records or IP addresses. By running their details against global fraud data lists you can check of any known fraudulent activities linked to them, any of their associates or any of their associated businesses.
4. Record keeping and ongoing monitoring
A key part of the AML process is record keeping and ongoing monitoring as these are evidence that the correct checks have been done, and that they are being regularly rechecked for any changes. Therefore, in addition to the initial checks, you will also need to continually monitor your client base for any changes to their risk and also ensure you have comprehensive records of all this activity to prove that you have met your obligations.
The easiest way to meet AML requirements is through electronic verification
Estate agents are busy, and AML checks are time-consuming and expensive, so it is easy to see how they often fall to the bottom of the pile. However, as explained earlier, not doing checks is not an option - not only is it illegal, but it could cost you and your business more than just your reputation.
The easiest, cheapest, quickest and most reliable way to meet your AML obligations is to use an electronic AML platform - ideally one that can verify clients, screen for sanctions and PEPs, run anti-fraud checks, manage the results and monitor them on an ongoing basis - all from one place.
While there are lots of solutions on the market that can offer one or more of these services, SmartSearch is the only KYC platform that also offers ongoing monitoring and manages the whole process from one place, and can even offer facial recognition and liveness technology for added security in remote working environments.
Furthermore, if you are yet to register with HMRC for AML purposes - or have, but have not kept full records up until now - you can establish a fully compliant position through SmartSearch’s unique batch upload service. SmartSearch is able to retrospectively check all your clients - past and present - host all results centrally, and check them on an ongoing basis, ensuring you are always audit-ready.
*Martin Cheek is managing director of SmartSearch