MONEY LAUNDERING OBLIGATIONS AND PROPERTY PROFESSIONALS
With the housing market facing further scrutiny regarding money laundering, Aziz Rahman outlines what those working in the property sector must do to stay within the law.
A new watchdog to oversee the UK’s Anti Money Laundering (AML) regulations is to be created, placing more responsibilities on many working in property.
The Office for Professional Body Anti-Money Laundering Supervision (OPBAS) will tackle potential loopholes that offenders may be exploiting to disguise the origins of their wealth. Announcement of its creation comes as the latest version of the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 is introduced.
These new regulations have been devised in order to bring the UK in line with international standards. They include tougher standards of supervision and impose new responsibilities on, for example, estate agents; including how they carry out enhanced due diligence on customers and checks on their business’ vulnerability to money laundering.
OPBAS is, arguably, overdue. While many professional sectors can consider themselves vulnerable to money laundering, the property market is a unique case. Not only is property a major attraction for people looking to disguise the origins of wealth obtained through crime – there seems to have been a culture of risk running through the market. OPBAS scrutiny is expected to deter such risk.
For estate agents, mortgage advisors, solicitors, accountants, surveyors and any other professionals involved in the buying and selling of property, OPBAS has to be considered a timely reminder to make sure you are doing all you can to prevent money laundering. Failure to heed this reminder could prove costly.
We have regularly highlighted the money laundering dangers facing property professionals and have represented many who have come under investigation.
While we have been doing this, there has been mounting evidence to indicate that money laundering is endemic in the property market.
Just over two years ago, the National Association of Estate Agents (NAEA) – now known as NAEA Propertymark – attempted to persuade its members to each appoint a money laundering reporting officer and deputy. Yet soon afterwards, it had to admit that take up of this scheme had been low.
This may have been because estate agents thought that money laundering was not a problem in their business. Or maybe they felt that it was happening but was an issue they could safely ignore. Both stances are incredibly risky – for them and anyone else involved in property deals that may involve laundered money.
The Money Laundering Regulations (MLR), the Proceeds of Crime Act 2002 (POCA) and the Terrorism Act 2000 all stress that property professionals need to know the sources of the money being used to buy the properties they are responsible for. HM Revenue and Customs (HMRC) even published a 41-page document explaining how estate agencies can prevent money laundering – and save themselves from penalties under the MLR that include unlimited fines and up to two years in prison.
POCA makes it an offence for anyone in the regulated sector – which many property professionals are in - to fail to submit a report of suspected money laundering. Those dealing in property deal regularly with wealthy individuals. To avoid falling foul of POCA, they need to be able to recognise money laundering or at least be aware of the indicators that it is happening. And take the appropriate action.
I am not saying that money laundering is always obvious. But the fact remains that property professionals have responsibilities to do what they can to prevent it. The creation of OPBAS is just the latest proof that the authorities are taking an increasingly tough stance on money laundering: the people who are looking to commit it and the people who allow it to happen.
Legal advice is available for the property professional who feels that they lack either the knowledge of the law or the time to make sure they are fully compliant with their money laundering obligations.
Such advice must be taken: those working in property are legally obliged to reduce the risk of money laundering by devising and enforcing procedures to prevent it happening. HMRC expects identity checks to be made, due diligence to be carried out, money laundering responsibilities to be assigned to staff and comprehensive, up-to-date records kept of all such activities. To put it simply – Know Your Client.
Many working in property may feel they have more worthwhile activities to occupy themselves. But OPBAS, and the legislation and regulations that have preceded it since 2000, require such professionals to be vigilant – or pay the price. Money laundering prevention, therefore, has to be seen as worthwhile
POCA defines money laundering offences as:
* Concealing, disguising, converting or transferring criminal property which the person knows or suspects represents the proceeds of crime. (Section 327)
* Involvement in an arrangement which a person knows or suspects relates to criminal property. (Section 328)
* The acquisition, use or possession of criminal property.
The maximum prison sentence for money laundering is 14 years. Fines can be unlimited. An excessive workload is no defence. Neither is ignorance of the law. Everyone working in property must make the time to ensure they comply with the law.
POCA places a responsibility on those working in the regulated sector to submit a suspicious activity report (SAR) as soon as possible if they know, suspect or have reasonable grounds to know or suspect that a person is engaged in, or attempting, money laundering or terrorism financing.
The only way to reduce the chances of money laundering allegations being made against you is to make sure you know how to identify (or suspect) money laundering and how to report it. This involves thorough checks.
Identifying all parties to a deal and the genuine beneficiaries of it and satisfying yourself about the origins of the money involved are the steps the authorities expect property professionals to take.
Anything less can lead to serious legal problems if the authorities start investigating a deal that they suspect involved laundered money. With the new enforcement measures now announced, official scrutiny of the property sector can only increase.
If property professionals are unsure how to respond to this they have to take advice from legal experts. Otherwise, the costs could be great in terms of their finances, reputation and professional future.