Money Laundering Obligations And Property Professionals

Rahman Ravelli | View firm profile

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.

Endemic

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.

Penalties

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.

Obligations

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

Offences

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.

 

 

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