Estate agents warned about money laundering giveaways
Since the UK housing market erupted during the pandemic, demand and activity has shown no sign of dropping. However, the frantic speed at which the market is moving and the strain it has placed on the property industry means some standard checks and balances can be missed or overlooked, clearing the way for criminals to thrive, of whom the most common are money launderers.
To help agents avoid falling foul of money laundering, Credas Technologies, the anti-money laundering technology platform, has outlined all of the most prominent warning signs they should be looking out for from both buyers and sellers.
What is money laundering?
Money laundering is the process of turning large amounts of ‘dirty money’ - earned through criminal activity - into ‘clean money’ which has the appearance of coming from a legitimate source and cannot be traced back to any illegal actions. It is done by feeding dirty money through a legitimate business and a busy housing market where homes are easily and quickly bought and sold makes the ideal cleansing mechanism for launderers.
The warning signs
Instructions that feel too good to be true
If an agent wins an instruction that just feels too good to be true, it can be a warning sign that something isn’t right. If everything feels too easy - if the transaction is unusually large, or the seller appears happy to take a significantly lower amount for the property that a valuation suggests - it’s time to take a close look at what’s going on. It might be nothing. But it could be something.
Overseas buyers
Money launderers will often choose to conduct the activity outside of their native country. Therefore, it should be common practice for agents to carry out extra due diligence on any overseas clients.
Politically exposed clients
Agents should also conduct extra due diligence on any clients who can be considered politically exposed. Criminals will often prey on this exposure, using it to bribe or blackmail the person into helping them launder money through property purchases.
Cash only buyers
Agents must carry out additional due diligence when dealing with any cash only buyers in order to ensure that source of the money is legitimate and legal. It’s a huge amount of cash for a person to have, so where has it come from?
Strange funding sources
Even if the purchase isn’t cash only, the source of funding can still be suspicious. For example, if the money is being provided by one person but being registered is another’s name, that’s a red flag. If the funds are coming from a completely unknown third party, that’s another red flag; and if funds are coming from a number of different sources, that too needs looking into.
Unusual transaction parameters
If the buying transaction goes off the expected track in any way, it can be a laundering warning sign. If a home’s sale price is unusually high or low; if a buyer tries to mislead a lender about the value of a property; if the buyer and seller make direct payments between each other; and if there are an unusually large number of nominees or parties involved with the property or the purchase, agents should increase their due diligence and ensure everything is above board.
Unusual ownership records
If a property has changed ownership a lot, it’s worth examining closely. That’s because short-term ownership and sudden or unexplained changes in ownership are things commonly found in money laundering cases. Agents should cross-reference the ownership timelines and dates shown on the Title Register document in order to assess their validity.
Inconsistencies or hesitations
If a client is reluctant to provide information for the sale, it’s a big warning sign. As too are inconsistencies in the information when it’s provided. Both instances suggest that someone is trying to hide something or at least conceal the true motivations for the sale. The best thing an agent can do is work to verify every stakeholder’s identity before continuing with the transaction process.
Tim Barnett, CEO of Credas Technologies, said:
“With property professionals being so busy - in many cases overworked - since the housing market boom began in July 2020, criminals have pounced, seeing it as a great opportunity to slip through the gaps and launder their illegal incomes.
Strong due diligence is vital, but it can take up additional time and resources that many agents are struggling to find at the moment. It’s also fair to say that many agents don’t have a particularly vested interest in AML compliance due to the pressures of their own performance targets and our previous research found that the sector is one of the worst offenders in this respect.
But with HMRC increasing their AML activity within the sector and those falling foul being hit with hefty fines, it’s within everyone’s interest to ensure the property sector is focussed on preventing money laundering activities.
That’s why utilising a professional body to shoulder the AML burden can not only improve operational efficiency, but it will also provide complete peace of mind.”
