Press coverage is often cited for being too London-centric and perhaps property news is too, especially when it comes to anti-money laundering. While high value properties in the Capital have been soft targets for criminals, it doesn’t mean to say money laundering via agents doesn’t happen in regional cities and towns across the country.
Prime Central London is more attractive to overseas fraudsters, while more provincial activity is more likely to be related to UK-based drugs supply and mortgage fraud. Jerry Walters, Founder.
Jerry Walters from FCS Compliance observes that out-of-London money laundering tends to have different motivations: “Although a slight generalisation, prime Central London is more attractive to overseas fraudsters, while more provincial activity is more likely to be related to UK-based drugs supply and mortgage fraud, rather than corruption or bribery.”
One train of thought as to why money laundering is gaining traction away from London is the growing prevalence of illegal substance trafficking. “Organised crime is not just confined to the Capital,” says Landmark Estate Agency Services’ Simon Birley. “With the rise of county drugs lines, criminals are spreading into other areas. This could lead to properties in new locations being targeted – criminals will look to buy in any area that serves their purpose when it comes to laundering money.”
Criminals are spreading into other areas. This could lead to properties in new locations being targeted. Organised crime is not just confined to the Capital. Simon Birley, Sales Manager, Landmark.
“Why wouldn’t someone laundering money not target a small High Street agency?,” says Christopher Keen at CDDcheck Ltd. “It is far easier to go undetected through a local estate agent than a well-known agency, mainly because they often lack the knowledge, training and solid customer due diligence processes to spot a potential suspicious transaction. For instance, they may take a manual ID and utility bill but the process sometimes stops there.”
If there is a business or trust involved in a straightforward purchase of a family home, care must be taken to understand the Ultimate Beneficial Ownership. Christopher Keen, Director CDDcheck.
John Dobson at SmartSearch shares the same concern regarding an over reliance on manual AML checks. “It tends to be the smaller, regional agents that are less likely to have electronic verification systems in place,” says John. “They are more vulnerable, with fraudsters confident in getting around their manual checking systems. Weaknesses may also be exacerbated if the agent has struggled to maintain their compliance programmes throughout the pandemic, especially with staff working from home and unable to meet clients in person. Criminals are now so sophisticated that they can create fake ID and references that cannot be identified by manual checks alone.”
The smaller, regional agents are less likely to have electronic verification systems in place. They are more vulnerable with their manual checking systems. John Dobson, CEO SmartSearch.
HIGH PROFILE PROPERTY CASES
Bath: the Davies family – Shane Davies, his wife Rihanna, mother Sheila and sister Tracey – had 16 houses and other assets worth more than £8 million seized. A National Crime Agency (NCA) investigation found the portfolio was likely bought as a result of mortgage fraud and the sale of controlled drugs.
The Midlands: three Saeed brothers from Wolverhampton – Abdul, Mohammed and Shabaz – together with Sukhjinder Kaur and Jasvir Singh, laundered proceeds of drug trafficking activities through a £1.7million+ property portfolio bought by Kaur-owned Lashman Estates Limited. A settlement agreement saw the portfolio seized by the NCA.
Leeds: cigar-puffing, celebrity schmoozer Mansoor Mahmood Hussain surrendered approximately £10 million of property to the NCA, having been suspected of laundering profits from drug trafficking through his property empire.
Would you spot a fake?
Convincing fakes are also a concern of Tony Machin at TrustID. He highlights that the experience and manpower at smaller, regional agents may misalign them with the complexity of money laundering – but that it doesn’t mean they should be ace crime fighters as well as property professionals. “There should be no expectation that agents are, or should become, experts on global identity documents – some of which, in our experience, can be forged pretty convincingly,” comments Tony. “Even agents making the necessary checks might not spot a fraudulent document.”
There should be no expectation that agents are, or should become, experts on global identity documents – some of which can be forged pretty convincingly. Tony Machin, CEO TrustID.
AML adding to the admin headache
John adds that it can be incredibly stressful for agents, particularly those with few members of staff and no dedicated compliance department – to ensure they are meeting their obligations and reducing risks. His thoughts dovetail with the understandable worries of agents.
A recent survey by Iamproperty showed that compliance remains a frustration among estate agents, with 95 per cent saying it adds hours to their admin time and that, on average, they are spending six hours per week catching up on paperwork outside of office hours.
“AML legislation is tightening and while it’s so important agents are making sure all property transactions are compliant, it’s getting more time consuming for them to do it,” says Ben Ridgway at Iamproperty. This is all while agents are saying that they are finding it more challenging to keep up with their growing workload.”
The regional red flags
Although approaches to money laundering are almost undistinguishable from region-to- region, there are some signs to look out for. “We are seeing instances where people are posing as homeowners to try and sell people’s properties, as well as the mystery buyer approach where they are in a hurry to purchase and want everything done yesterday,” says Thirdfort’s Steven Taylor.
We see people posing as homeowners to try and sell people’s properties, as well as the traditional mystery buyer approach where they are in a hurry to purchase. Stephen Taylor BDM, Thirdfort.
Agents can help themselves by being vigilant in branch. Steven’s watch list includes:
- looking for unusual transactions and transfers on bank statements
- exercising caution when a buyer is reluctant to share their personal information or submits details then requests they’re deleted instantly
- unusual pressure being applied on an agent to move quickly
- a request for over or undervalued properties
- transactions based in countries flagged as high risk for money laundering
- the use of multiple addresses by those behind the transaction
- selling a property on rapidly, especially to family members or acquaintances.
“Additionally, if there is a business or trust involved in a straight-forward purchase of a family home, care must be taken to understand the Ultimate Beneficial Ownership to gain a complete picture of the transaction, especially if any warning signs are present,” adds Steven.
Simon at Landmark also says regional agents need to scrutinise how the property transaction is being paid for, carefully looking for:
- if the customer is a corporate body
- if there is the use of private banking
- if anonymity is preferred if a person is not physically present
- if payment is made from third parties with no obvious association
- if the transaction involves nominee directors, nominee shareholders or shadow directors, or if a company formation is in a third country.
Is there a typical launderer profile?
While regional agents may dismiss the idea that a politically exposed person may buy a property because they’re in Preston, or that they’re not a target as their stock sells for less that the UK average, it doesn’t mean money laundering doesn’t happen outside of the capital. Granted, agents won’t be slipped a briefcase full of cash under the desk but a purchase that looks respectful on the surface may still harbour criminal intentions.
“Agents should be aware that UK-based criminal organisations do use corporate structures and Limited Liability Partnerships (LLPs),” adds Jerry. “Although they will be less complex than other set ups, they are still efficient enough to hide behind and provide anonymity.”
Likewise, agents cannot tell a criminal by an international accent, country of origin, surname, gender or background. In the case of Mansoor Mahmood Hussain (see high profile cases), Mr Hussain was described in court as ‘clean skin’ – a businessman free of convictions, acting as a professional money-launderer.
Christopher also highlights how regional money laundering can feel very familiar, which unwittingly catches agents out. “Criminals may buy a property using a third party or family member (often someone with no criminal record) as the legal owner. A property is either purchased on their behalf, or proceeds of crime are deposited into their bank account to make the purchase. This method allows criminals to avoid direct involvement in the money laundering process.”
Prevention is better than cure
Both John and Tony agree that digitising checks, introducing technology and then shouting about it should be top of the AML list for regional agents. “If an agency isn’t relying on any technology, those looking to commit money laundering may see them as a ‘soft-target’, whereas advertising the use of technology can in itself act as a strong deterrent,” says Tony.
Help yourself before others
“It’s important to note that the responsibility to comply with AML regs lies with the agent,” says Christopher. “There are multiple free and specialist resources within the industry, so there’s no excuse.”
As well as webinars and tutorials from HMRC itself, CDDCheck will shortly be offering a new online e-learning AML course, plus it offers advice, support and training to any agent needing to know more about regulations. At Landmark, there is free help, template policies and risk assessments, in addition to a monthly ‘compliance corner’ webinar.
Immediate in-house AML action points:
- Read HMRC’s AML guidelines for estate agents
- Register with the HMRC for full AML regulations and updates
- Appoint a Money Laundering Reporting Officer (MLRO)
- Train your staff to spot signs of illegal activity and money laundering
- Screen against politically exposed persons (PEPs) and sanction lists
- Enlist a third party to provide an extra layer of accountability via digital checks
Going digital to reduce the risk
“The switch to digital is long overdue for many agents who would save themselves time and money, and ensure criminals are kept out of the system”, says John’s SmartSearch colleague, Martin Cheek. “With the technology available today, it takes two seconds to carry out an individual search across multiple global databases, with just a name, address and date of birth. We have seen a significant rise in the number of agents switching to use our electronic verification platform since HMRC became the regulator for the industry – they have started to realise the importance of having an accurate, secure and reliable AML system.”
Products including Iamproperty’s Movebutler also provide agents with access to built-in risk assessment tools, comprehensive identity verification checks, full audit trails of AML checks and due diligence. The company has also partnered The Negotiator with an AML microsite on The Negotiator’s website – full of educational features, and guidance on money laundering and how to be compliant.
There’s also peace-of-mind that AML partners treat all companies as equals, no matter their stature or geographical location “Many providers, including TrustID, offer the same service level agreement to all businesses, ensuring AML compliance is quick and easy no matter what size the agency,” concludes Tony Machin.
FAILURE TO COMPLY: THE PUNISHMENT
From an official warning and hefty fines to immediate agency closure and even imprisonment, failure to comply with AML regs, train staff and complete customer due diligence can end an agency’s operation overnight. It’s also important to understand that both companies and individuals are liable and may be penalised.
A conviction of facilitating money laundering can result in an unlimited fine and/or up to 14 years in prison. Any action doesn’t take into account the reputational damage or stress on a business owner and its employees. Most agents are found guilty of a lack of policies and procedures, rather than money laundering itself. When taking action, HMRC will work to a specific fine scale, based on the agency size and the severity of the gaps in policies and procedures, or how much the agency has been found guilty of facilitating money laundering.