Money Laundering - agents against crime

Thursday 18 June 2015

Money laundering is always a hot topic for Estate Agents and that is always going to be the case. After all, Estate Agents are a very attractive proposition for criminal gangs. With property prices at an all-time high, the opportunity to launder vast amounts of money in just one transaction alone is astounding - we’re talking big numbers!

Through buying properties in the names of relatives, associates or through specialist financial service providers, crooks are able to launder money through chain transactions and use of false identities when buying and selling property.

We also need to remember that money laundering isn’t just about hiding money, it’s much more than that. With proceeds of the crime often going towards fronting much more brutal crimes with a very human element – such as people trafficking, terrorism, the sex industry and drugs. Together we need to put up a united front in challenging any suspicious activity so criminal gangs come to realise that NAEA agents will not be an easy win!

HMRC CAN PAY YOU A VISIT
Recently some of our members have reported that HMRC have been making unscheduled, but routine visits to check their compliance with anti-money laundering regulations and to check that they have the correct systems and procedures in place to combat money laundering.

We wholeheartedly support HMRC in conducting these checks and in the wider battle to fight the criminals. We also want to ensure that NAEA agents are the best in the business, but understand that with so many other priorities it’s easy to let your knowledge slip, and even the most diligent of agents need refreshers now and again. Therefore it seemed timely to do a roundup of some of the best advice we can offer around money laundering, including your duties, how to report suspicious activity and where to go for further information.

WHAT ARE THE SIGNS OF SUSPICIOUS ACTIVITY?
● Any activity which does not make professional or commercial sense or where clients appear uninvolved or uninterested in the process;
● Property prices that do not correspond with market value. An agent’s own experience of the market should indicate whether a property has been properly valued;
● Properties that have multiple owners or are owned by nominee companies – they may be an attempt to disguise the true owner and/or to confuse the audit trail;
● Purchases made without a property being viewed (not including auctions), or having only been viewed over the internet;
● Sudden or unexplained changes in ownership, or immediate resale (flipping) of property at a higher, artificially inflated value;
● A previously sold property which reappears on the market having been extensively renovated, without an obvious source of funding (run-down properties may be bought legally, but then renovated using criminal funds);
● Customer similarity (a group of purchasers with similar profiles purchasing new builds or off-plan). This can be an indicator of organised mortgage fraud (mortgage fraud for profit) or ‘flipping’;
• Inconsistent or weak reasons for paying cash; offering large amounts of cash as the means of payment for property purchases, deposits, rent, interest or fees;
● Use of cash coupled with a quick sale, or cash exchanges directly between seller and buyer, including cash deposit. (Criminals need to ‘place’ dirty money. This can be as simple as making some form of cash payment);
● Doubtful or unusual sources of funds. This includes unusual involvement of third parties, cash gifts, or large payments from private funds, particularly where the buyer appears to have a low income. This type of funding may be an attempt to disguise the true owner of the property;
● Poor explanation for the early redemption of previous mortgages, especially where there has been a penalty cost involved.

WHAT SHALL I DO IF I, OR A COLLEAGUE, SUSPECTS SUSPICIOUS ACTIVITY?

If you or a colleague identify suspicious behaviour, you should complete a National Crime Agency (NCA) Suspicious Activity Report (SAR) in line with the Proceed of Crime Act 2002.

HOW DO I COMPLETE THE FORM?
For SARs to be of maximum use to law enforcement they should contain all available Customer Due Diligence (CDD) information.

All information should be completed in the relevant fields. SAR glossary codes should be applied to allow quick identification of the reason for suspicion. Dates of birth are vital for identifying individuals correctly and all addresses should include postcodes. Accuracy is extremely important so information should be checked before submission.

It is good practice to open the SAR with a brief summary to illustrate the reasons for suspicion and provide a chronological sequence of events detailing the dates of any activity or transactions. If a SAR is of poor quality it prevents analysis from being completed.

More information on money laundering, glossary codes and guidance notes for Submitting a SAR can be found within the Regulated Sector section on the NCA website, at www.nationalcrimeagency.gov.uk

HOW ELSE CAN I HELP MYSELF?
• Regularly attending NAEA Regional Masterclasses is a great way to make sure you’re kept updated with the latest and even if you feel like you’re familiar with the regulations, it’s a great way to refresh your knowledge and Mark Hayward presents it in a way that’s entertaining and easy to understand.
• Attend one of Financial Crime Update courses
• Visit the NFoPP Regulation website for a wealth of information
• Familiarise yourself with the Proceeds of Crime Act 2002
• Refer to our Property Professional article from Issue 9. A digital version of this is available in the members’ area.