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.