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‘Ukraine invasion is putting estate agents under greater AML scrutiny’

Leading AML tech supplier SmartSearch warns that the ongoing invasion of Ukraine by Russia means agents need to be much more on the ball when screening clients.

Collette Allen

aml smartsearch sanctions

Sanctions have been very much in the public eye since Russia invaded Ukraine.

The international strategy of putting pressure on Russia and its economy has seen a continuous escalation of sanctions, and the indications are that the UK, US, and EU will take further action.

Keeping pace with the ever-changing situation has presented those working in the property sector with onerous compliance challenges.

Gone are the days when it was enough to onboard a new client and ensure they were not flagged up on lists for global sanctions or PEPs (Politically Exposed Persons).

With the speed at which sanctions are being introduced, ongoing monitoring is now essential to ensure accurate identification of newly sanctioned individuals and entities with connections to Vladimir Putin’s regime.

Breaching sanctions

Any conveyancers or estate agents who still rely on old-fashioned paper checking methods, or who use electronic verification systems which do not provide monitoring and updates, are running the risk of breaching sanctions.

This is because they will not be getting alerts on new additions to sanctions or PEP lists and, as a result could fail to realise that a client or company that had been successfully screened initially, had subsequently been added to a sanctions or PEP list.

Failure to conduct proper sanctions due diligence is no longer something that can be dismissed as an unfortunate oversight, and the consequences of such failures are now more far-reaching than ever before.

Under the new Economic Crime (Transparency and Enforcement) Act 2022, breaches of financial sanctions are designated a strict liability civil offence that is punishable by fines of up to £1m.

Therefore, it is vital that conveyancers and estate agents take a proactive approach to ongoing screening to avoid inadvertently enabling anyone with assets frozen by sanctions to free up capital.

Ongoing screening

The sheer scale of the work involved in ensuring effective screening is demonstrated by the data-monitoring service at SmartSearch, which features over 1,100 worldwide sanctions and PEP lists.

This vast amount of intelligence is necessary given the increasingly widespread use of sanctions, and the potential implications this has for professionals in the UK.

In recent weeks, the headlines have featured a diverse range of new sanctions against individuals and entities by the UK, the US, and the EU. In addition, asset freezes by the British crown dependency of Jersey on more than £5.4bn of assets belonging to sanctioned Russian oligarch and Chelsea FC owner Roman Abramovich.

But not all recently announced sanctions have targeted Russia. In a separate move, the US government announced action against seven members of an Irish organised crime group connected to the Kinahan family for involvement in trafficking drugs and firearms, and also money laundering.

All of those sanctioned will have their US credit and debit cards blocked, any money they hold in US banks frozen, access to property owned in the US restricted, and they will be blocked from flying on US airlines.

With the use of sanctions as a punitive action now being embraced by governments, and given their complexity and far-reaching impact, it is arguably a suitable time for property professionals to review their monitoring procedures – including the use of electronic verification.

While this would require an investment on the part of estate agencies and conveyancing companies, it would add value by protecting these businesses from the financial and reputational damage that could be incurred as a result of breaching sanctions by failing to conduct effective due diligence.

Collette Allen, client services director at SmartSearch

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