Tackling fraud in the current climate - what’s the reality for agents?

Property fraud is a significant risk for agents, particularly as fake IDs become increasingly prevalent, and the economic climate remains challenging. So how are agents responding?

Recent reports suggest that fraud now accounts for 41% of all crime in the UK, with fraud and money laundering costing the UK economy hundreds of billions of pounds each year.

Meanwhile, data from Cifas, the UK’s fraud prevention community, shows that identity fraud remains a key threat and the number of cases recorded has grown by 23% to over 277,000 in 2022.

Cifas analysis of identify fraud found that 2022 saw an increase in the use of synthetic identities to apply for products and services, with false documentation and identity packages becoming increasingly sophisticated.

This is all a major headache for estate agents, who face an ever-growing risk and compliance burden as a result.

All estate agencies have a legal and regulatory obligation to comply with fraud and anti-money laundering legislation. Property professionals may leave themselves open to criminal prosecution, regulatory fines, professional negligence claims and reputational damage if they do not conduct checks to the required standard. 

It’s a huge amount of work to stay compliant while keeping admin from skyrocketing. Collecting and verifying ID documents, verifying source-of-funds when acting for purchasers, and validating the Ultimate Beneficial Owner if a company is buying or selling are now all required by HMRC.

Manual v digital checks

Traditional or manual approaches to client due diligence involve the estate agent manually checking the client’s passport, identification or bank statement. However, such manual processes have significant drawbacks, both in terms of the risks of manually checking documents and the time it takes. 

Agents would naturally prefer to spend their time focused on sales, rather than compliance, which is why agencies are increasingly adopting digital tools to help stay compliant while reducing the time associated with fraud and AML checks.  

Forward-thinking agents know that relying on human judgement alone for Anti-Money Laundering (AML) is risky and are increasingly turning to technology to reduce the risks. 

Tech developments – such as AI, Open Banking, cryptographic and biometric verification, and real-time ongoing PEPs and sanctions monitoring – can help property businesses automate this collection. By adopting newer, more comprehensive digital tools, the industry can ensure that agents are both compliant and not bogged down in too much admin. 

Having the right controls

However, some risks remain. For instance, firms may become over-reliant on tech and fail to conduct due diligence properly.

Second, when agents use technology, they must read and review the results. After all, the best technology is of no use if people fail to check results properly. Third, agents must be familiar with the system to understand the results.

To mitigate these risks, agents can put controls in place. This includes training staff to demonstrate an understanding of how to input data into a system, the types of data used, what the outputs mean and how the system complies with regulations. 

As with most processes, the best approach is a combination of both traditional and digital methods.

By ensuring the correct training, whilst making the most of digital tools, property professionals can be confident they are compliant while reducing the admin burden. 

by Olly Thornton-Berry, Managing Director at Thirdfort and Polly Ogden Duffy, Managing Director at John D Wood & Co. estate agents